EXHIBIT 10.34
STOCK PURCHASE AGREEMENT
among
XXXXXXXXX RAIL SERVICES LLC,
the Sellers party hereto,
and
MERIDIAN RAIL HOLDINGS CORP.
October 15, 2006
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of October
15, 2006, by and among Xxxxxxxxx Rail Services LLC, an Oregon limited liability
company ("Buyer"), Meridian Rail Holdings Corp., a Delaware corporation (the
"Company"), the Persons listed on the signature pages hereto under the heading
"Sellers" (collectively referred to herein as the "Sellers" and individually as
a "Seller") and Olympus Growth Fund IV, L.P. as the "Seller Representative".
Capitalized terms used and not otherwise defined herein have the meanings set
forth in Article XII.
WHEREAS, the Sellers collectively own (i) all of the issued and
outstanding capital stock of the Company as of the date hereof, which consists
of 33,392.43 shares of the Company's Common Stock, par value $0.01 per share
("Common") and 48,880 shares of the Company's Series A Preferred Stock, par
value $0.01 per share ("Preferred" and together with the Common, the "Shares")
and (ii) warrants currently exercisable to purchase 542.97 shares of Common and
794.80 shares of Preferred (the "Warrants"), which are collectively the only
outstanding equity securities of Company.
WHEREAS, upon the terms and subject to the conditions set forth
herein, Buyer desires to acquire from the Sellers, and the Sellers desire to
sell to Buyer, all of the Shares which are issued and outstanding and owned by
the Sellers as of the Closing Date.
WHEREAS, simultaneously with the Closing (as defined below), Buyer
will contribute a sufficient amount of cash to cancel the Warrants in exchange
for the cash payment provided for and on the terms and conditions herein.
NOW, THEREFORE, in consideration of the premises, representations and
warranties and mutual covenants contained herein and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Delivery of Estimates; Calculation of Estimated Common Purchase Price.
(a) At least two business days before the Closing Date, the Company
shall deliver to Buyer a certificate (the "Closing Payment Certificate"), which
Closing Payment Certificate shall be subject to the review and approval of the
Seller Representative, setting forth (i) its good faith estimate of the Cash On
Hand (such estimate is referred to as the "Estimated Cash on Hand"), (ii) its
good faith estimate of the Net Working Capital Amount (such estimate is referred
to as the "Estimated Net Working Capital Amount"), (iii) its good faith estimate
of the Pre-Closing Tax Amount (such estimate is referred to as the "Estimated
Pre-Closing Tax Amount"), (iv) the Aggregate Preferred Purchase Price and the
portion of the Aggregate Preferred Purchase Price to be delivered to each holder
of Preferred, (v) its good faith estimate of the Estimated Common Purchase Price
(as defined below), (vi) the Indebtedness Payoff Amount, (vii) the individual
Common Warrant Cancellation Payments (as defined below) to be delivered to each
holder of Warrants to purchase Common and the individual Preferred Warrant
Cancellation Payments (as defined below) to be delivered to each holder of
Warrants to purchase Preferred, as more fully set forth on Section 1.05 of the
Disclosure Schedules (such estimates are collectively referred to as the
"Estimated Warrant Cancellation Payments") and (viii) the aggregate amount of
Sellers' Expenses
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(such estimate is referred to as the "Estimated Sellers' Expenses"). Section
1.01(a) of the Disclosure Schedules sets forth a calculation of the amounts
described in this Section 1.01(a) and the payments to be made pursuant to
Section 1.03(b) based on information available as of the date of this Agreement
and certain assumptions as to items that cannot be determined until the Closing
Date.
(b) For purposes hereof, the "Estimated Common Purchase Price" means
an amount equal to (A) $227,500,000, plus (B) the Estimated Cash on Hand, minus
(C) the Indebtedness Payoff Amount, plus (D) the amount, if any, by which the
Estimated Net Working Capital Amount exceeds the Target Net Working Capital
Amount (such amount, if any, the "Closing Date Working Capital Increase
Amount"), minus (E) the amount, if any, by which the Target Net Working Capital
Amount exceeds the Estimated Net Working Capital Amount, minus (F) the Estimated
Pre-Closing Tax Amount, minus (G) the Aggregate Preferred Purchase Price, minus
(H) without duplication, the aggregate amount, if any, of Estimated Sellers'
Expenses (as detailed in the Closing Payment Certificate), minus (I) the
aggregate amount of the Estimated Warrant Cancellation Payments. The Estimated
Common Purchase Price shall be adjusted after Closing as set forth in Section
1.04 below.
1.02 Purchase and Sale of Shares.
(a) Purchase and Sale of Preferred. As of the Closing, upon the terms
and subject to the conditions set forth in this Agreement, each Seller shall
sell, assign, transfer and convey to Buyer, and Buyer shall purchase and acquire
from each Seller, all of the shares of Preferred held by such Seller as such
ownership is set forth on Section 1.02 of the Disclosure Schedules. The purchase
price to be paid by Buyer to each Seller for the shares of Preferred held by
such Seller shall consist of a payment at the Closing, by wire transfer of
immediately available funds to the account designated by such Seller at least
two business days before the Closing, of an amount of cash equal to the sum of
the Preferred Per Share Prices for all shares of Preferred held by such Seller
as of immediately prior to the Closing.
(b) Purchase and Sale of Common. As of the Closing, upon the terms and
subject to the conditions set forth in this Agreement, each Seller shall sell,
assign, transfer and convey to Buyer, and Buyer shall purchase and acquire from
each such Seller, all of the shares of Common held by such Seller as such
ownership is set forth on Section 1.02 of the Disclosure Schedules. The purchase
price to be paid by Buyer at the Closing to each Seller for the shares of Common
held by such Seller shall consist of a payment at the Closing, by wire transfer
of immediately available funds to the account designated by such Seller at least
two business days before the Closing, of an amount of cash equal to the product
of (x) the Estimated Common Purchase Price, multiplied by (y) the number of
shares of Common held by such Seller as of immediately prior to the Closing
divided by (z) the number of shares of Common issued and outstanding immediately
prior to the Closing. Such payment shall be subject to the Purchase Price
True-Up Holdback as described below.
1.03 The Closing; Payment for Shares, Indebtedness and Sellers' Expenses.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxxxxxx & Xxxxx LLP located
at 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx at 12:00 noon on November 7, 2006
(via facsimile, telephone, mail and other mutually acceptable means of
communication and delivery) or if any of the conditions to the Closing set forth
in Article II (other than those to be satisfied at the Closing) have not been
satisfied or waived by the party entitled to the benefit thereof then on the
second business day following satisfaction or waiver of all of the closing
conditions set forth in Article II (other than those to be satisfied at the
Closing) or on such other date as is mutually agreeable to Buyer and the Seller
Representative. The date on which the Closing shall occur is
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referred to herein as the "Closing Date." Except as otherwise provided in this
Agreement, all proceedings to be taken and all documents to be executed at the
Closing shall be deemed to have been taken, delivered and executed
simultaneously, and no proceeding shall be deemed taken nor documents deemed
executed or delivered until all have been taken, delivered and executed.
(b) Upon the terms and subject to the conditions set forth in this
Agreement, the parties hereto shall consummate the following transactions as of
the Closing:
(i) Buyer shall disburse (or cause such disbursement to be made)
the amount (without duplication) of the Aggregate Preferred Purchase Price,
the Estimated Warrant Cancellation Payments, the Estimated Sellers'
Expenses and the Estimated Common Purchase Price as set forth on the
Closing Payment Certificate and in accordance with the flow of funds
memorandum attached to the Closing Payment Certificate and as follows:
(A) Buyer shall deliver to each of the Sellers who are selling
Preferred, the Preferred Per Share Price in exchange for each share of
Preferred held by such Seller immediately prior to the Closing;
(B) Buyer shall deliver (on behalf of the Company in accordance
with Section 1.05) to each of the Sellers who are canceling Warrants
to purchase Preferred, its share of the Preferred Warrant Cancellation
Payments in exchange for canceling the Warrants to purchase Preferred
held by such Seller immediately prior to Closing;
(C) Buyer shall disburse an amount equal to (i) $1,000,000 plus
(ii) the Closing Date Working Capital Increase Amount (if any)
(collectively, the "Purchase Price True-Up Holdback") and the Escrow
Amount to U.S. Bank National Association, as the escrow agent (the
"Escrow Agent") by wire transfer of immediately available funds,
pursuant to instructions delivered to Buyer by the Escrow Agent to be
held pursuant to the Holdback Agreement;
(D) Buyer shall disburse an amount equal to the Seller
Representative Reserve to the Seller Representative by wire transfer
of immediately available funds, pursuant to instructions delivered to
Buyer by the Seller Representative to be held in accordance with
Section 10.05;
(E) after payment of the amounts set forth above, Buyer shall
deliver to each of the Sellers who are selling Common the
consideration specified in Section 1.02(b) in exchange for all shares
of Common held by such Seller immediately prior to Closing, minus such
Seller's Holdback Share of the sum of the Purchase Price True-Up
Holdback, and such Seller's Percentage Share of the Escrow Amount and
the Seller Representative Reserve;
(F) after payment of the amounts set forth above, Buyer shall
deliver (on behalf of the Company in accordance with Section 1.05) to
each of the Sellers who are canceling Warrants to purchase Common, its
share of the Common Warrant Cancellation Payments in exchange for
canceling the Warrants to purchase Common held by such Seller
immediately prior to Closing, minus such Seller's Holdback Share of
the sum of the Purchase Price True-Up Holdback, and such Seller's
Percentage Share of the Escrow Amount and the Seller Representative
Reserve;
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(G) Except as provided below in subsection (H) with respect to
bonuses to employees of the Company, Buyer shall pay, or cause to be
paid, on behalf of the Sellers and the Company, (i) the Estimated
Sellers' Expenses by wire transfer of immediately available funds to
accounts specified by the Seller Representative prior to the Closing
in the Closing Payment Certificate, and (ii) the Indebtedness Payoff
Amount in accordance with the terms of payoff letters with respect
thereto;
(H) Buyer shall contribute to the Company that portion of
Sellers' Expenses which represents the bonuses to be paid to certain
employees at the Closing and that portion of Sellers' Expenses which
represents the employer portion of any and all applicable federal,
state and local employer payroll-related Taxes, employer matching
contributions on 401(k) deferrals, FICA, Medicare and other employer
liabilities, obligations or payments with respect to such bonuses and
the Company shall withhold any applicable withholding Tax, which
amounts are required to be deducted and withheld pursuant to
applicable Tax law, before the Company remits the remaining amount of
such bonuses to the employees. The Company shall remit such
withholding Taxes to the appropriate Taxing authority;
(ii) Each Seller shall deliver to Buyer the certificates
representing the Shares held by such Seller, duly endorsed for transfer or
accompanied by appropriate transfer documents, and each holder of a Warrant
shall deliver to Buyer the Warrant Cancellation Agreement referenced in
Section 1.05 with respect to each Warrant held by such holder; and
(iii) Buyer, the Company and the Sellers shall make such other
deliveries as are required by and in accordance with Article II hereof.
1.04 Final Calculations.
(a) Determination. As promptly as possible, but in any event within 75
days after the Closing Date, Buyer will deliver to the Seller Representative a
consolidated balance sheet of the Company as of 11:59 p.m. (New York City time)
on the day immediately preceding the Closing Date and a reasonably detailed
statement (the "Closing Statement") setting forth Buyer's calculations of (i)
Cash on Hand, (ii) the Net Working Capital Amount, (iii) the Pre-Closing Tax
Amount, (iv) the Sellers' Expenses, (v) a recalculation of the Common Purchase
Price and (vi) a recalculation of the Common Warrant Cancellation Payments.
After delivery of the Closing Statement, the Seller Representative and its
accountants shall be permitted reasonable access to review the Company's and its
Subsidiaries' books and records and work papers related to the preparation of
the Closing Statement. The Seller Representative and its accountants may make
inquiries of Buyer, the Company and their respective accountants and officers
regarding questions concerning or disagreements with the Closing Statement
arising in the course of their review thereof, and Buyer shall use its, and
shall cause the Company and its Subsidiaries to use their, reasonable best
efforts to cause any such accountants and officers to cooperate with and respond
to such inquiries. If the Seller Representative has any objections to the
Closing Statement, the Seller Representative shall deliver to Buyer a written
statement setting forth its objections thereto (an "Objections Statement"). If
an Objections Statement is not delivered to Buyer within 60 days after delivery
of the Closing Statement, the Closing Statement shall be final, binding and
non-appealable by the parties hereto. The Seller Representative and Buyer shall
negotiate in good faith to resolve any objections set forth in the Objections
Statement (and all such discussions related thereto shall, unless otherwise
agreed by Buyer and the Seller Representative, be governed by Rule 408 of the
Federal Rules of Evidence (and any applicable similar state rule)), but if they
do not reach a final resolution within 15 days after the
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delivery of the Objections Statement, the Seller Representative and Buyer shall
submit such dispute for resolution to and by KPMG LLP (the "Independent
Auditor"). Each of Buyer and the Seller Representative agrees to execute, if
requested by the Independent Auditor, an engagement letter containing reasonable
and customary terms, including an indemnification against claims asserted by the
respective parties. The Seller Representative and Buyer shall use their
commercially reasonable efforts to cause the Independent Auditor to resolve all
such disagreements as soon as practicable. The resolution of the dispute by the
Independent Auditor shall be final, binding and non-appealable on the parties
hereto. The Independent Auditor shall act as an arbitrator to determine, based
upon the provisions of this Section 1.04(a), only the disputed items and the
determination of each amount of the disputed items shall be made in accordance
with the procedures set forth in Section 1.04(a) and, in any event, shall be no
less than the lesser of the amount claimed by either Buyer or the Seller
Representative, and shall be no greater than the greater of the amount claimed
by either Buyer or the Seller Representative. The Closing Statement shall be
modified if necessary to reflect such determination. The fees and expenses of
the Independent Auditor shall be allocated to be paid by Buyer, on the one hand,
and the Sellers (from the Purchase Price True-Up Holdback, to the extent the
Deficiency (if any) plus any such fees and expenses payable by the Sellers to
the Independent Auditor hereunder are less than or equal to the amount of funds
in the Purchase Price True-Up Holdback), on the other hand, based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party, as determined by the
Independent Auditor. The obligation of any Seller to pay such fees and expenses
to the Independent Auditor shall be several and limited to such Seller's
Holdback Share.
(b) Final Adjustment Amount. Without duplication, all amounts owed
based on the calculations in the Closing Statement shall be aggregated, and the
net amount (if any) owed by Buyer to the Sellers, on the one hand, or the
Sellers to Buyer, on the other hand, is referred to as the "Final Adjustment
Amount." The Final Adjustment Amount shall be calculated as an adjustment to
each of the Estimated Common Purchase Price and the Common Warrant Cancellation
Payments and the Common Purchase Price, as so adjusted, is referred to herein as
the "Final Common Purchase Price."
(c) Adjustments.
(i) Positive Adjustment. If the Final Common Purchase Price is
equal to or greater than the Estimated Common Purchase Price estimated at
Closing (such amount that is greater than the Estimated Common Purchase
Price shall be referred to as the "Excess"), Buyer shall pay to the Seller
Representative the Excess, if any, which shall be paid by the Seller
Representative to each Seller based on such Seller's Holdback Share, and
the Seller Representative, on behalf of the Sellers, and Buyer shall direct
the Escrow Agent to pay to such Sellers their Holdback Share of all funds
deposited and remaining in the Purchase Price True-Up Holdback.
(ii) Negative Adjustment. If the Final Common Purchase Price is
less than the Estimated Common Purchase Price estimated at Closing (such
amount that is less than the Estimated Common Purchase Price shall be
referred to as the "Deficiency") and the Deficiency is less than or equal
to the amount of funds deposited in the Purchase Price True-Up Holdback,
the Seller Representative, on behalf of the Sellers, and Buyer shall direct
the Escrow Agent to pay to Buyer the amount of the Deficiency from the
funds deposited and remaining in the Purchase Price True-Up Holdback and
direct that the balance of the Purchase Price True-Up Holdback (if any) be
paid to the Sellers in accordance with their Holdback Share.
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(iii) Other Adjustment. If the Deficiency is greater than the
amount of funds deposited in the Purchase Price True-Up Holdback (such
difference, the "Shortfall"), the Seller Representative, on behalf of the
Sellers, and Buyer shall direct the Escrow Agent to pay to Buyer all funds
deposited and remaining in the Purchase Price True-Up Holdback, and (x) at
the sole election of Buyer, Buyer shall be entitled to take all or any
portion of the Shortfall from the Escrow Amount and (y) the Sellers shall
pay the Shortfall to Buyer, or such portion of the Shortfall not received
by Buyer from the Escrow Amount to Buyer, with each Seller's obligation
being several and limited to such Seller's Holdback Share of the Shortfall.
(iv) Payment of the Adjustments. Payment of these adjustment
amounts shall be paid by delivery of immediately available funds to the
account designated by the recipient party(ies) (or if such payor is a
Seller, such Seller may, with the consent of Buyer, pay by certified check
or money order) within three business days of the date of final
determination. All such adjustments shall be deemed adjustments to the
Final Common Purchase Price for all Tax purposes.
(d) Enforcement. If any Seller does not pay the amounts required to be
paid to Buyer under Section 1.04(c)(iii) within the time frame specified under
Section 1.04(c)(iv) once such amounts are finally determined hereunder,
notwithstanding anything to the contrary in this Agreement, Buyer shall be
entitled to recover from such Seller all costs, fees and expenses, including
attorneys' fees, incurred in connection with any action brought by Buyer to
enforce payment of such amounts, and in any petition for appeal or appeals
therefrom or in bankruptcy, in addition to any other relief to which Buyer may
be entitled. If Buyer does not pay the amounts required to be paid to the
Sellers under Section 1.04(c)(iii) within the time frame specified under Section
1.04(c)(iv) once such amounts are finally determined hereunder, notwithstanding
anything to the contrary in this Agreement, the Seller Representative shall be
entitled to recover from Buyer all costs, fees and expenses, including
attorneys' fees, incurred in connection with any action brought by the Seller
Representative on behalf of the Sellers to enforce payment of such amounts, and
in any petition for appeal or appeals therefrom or in bankruptcy, in addition to
any other relief to which the Sellers may be entitled.
1.05 Warrants. Immediately prior to the Closing (and subject to the terms
and conditions hereof), the Company shall cause each holder of Warrants set
forth on Section 1.05 of the Disclosure Schedules attached hereto to cancel and
deliver to the Company for cancellation all Warrants held by such Person in
exchange for the Warrant Cancellation Payments to be made by the Company on the
Closing Date, in each case pursuant to an executed warrant cancellation
agreement substantially in the form of Exhibit A attached hereto (the "Warrant
Cancellation Agreements"). Buyer shall cause the Company to make such Warrant
Cancellation Payments concurrently with the consummation of the Closing. For
purposes hereof, the "Common Warrant Cancellation Payments" means an amount
equal to (i) the aggregate number of shares of Common subject to the Warrant,
times the aggregate amount the holders of the Warrant would have been entitled
to receive under Section 1.02(b) assuming the Warrant had been exercised as of
the Closing, minus (ii) the aggregate amount of the applicable exercise prices
per share of Common subject to such Warrant. For purposes hereof, the "Preferred
Warrant Cancellation Payments" means an amount equal to (i) the aggregate number
of shares of Preferred subject to the Warrant, times the aggregate amount the
holders of the Warrant would have been entitled to receive under Section 1.02(a)
assuming the Warrant had been exercised as of the Closing, minus (ii) the
aggregate amount of the applicable exercise prices per share of Preferred
subject to such Warrant. The Common Warrant Cancellation Payments and the
Preferred Warrant Cancellation Payments are referred to collectively herein as
the "Warrant Cancellation Payments." The Common Warrant Cancellation Payments
shall be subject to the Purchase Price True-Up Holdback as described herein.
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1.06 Termination of Agreements. Reference is hereby made to that certain
Stockholders Agreement of the Company, dated on or about November 23, 2004 (as
amended, modified or supplemented from time to time, the "Company Stockholders
Agreement"). Each of the Sellers, to the extent such Seller is a party to any of
the agreements and documents referenced in this Section 1.06, acknowledges and
agrees for the benefit of the other parties thereto and hereto that, upon
consummation of the Closing, all of such agreements and documents and all rights
and obligations of the parties under (i) the Company Stockholders Agreement and
(ii) all agreements and documents identified in the Disclosure Schedules as
terminating in connection with the Closing, shall each terminate without
obligation or liability to any party thereunder or hereunder. The Company hereby
acknowledges and agrees for the benefit of the other parties hereto that
effective upon the Closing the 2005 Management Bonus Plan will terminate and all
bonuses earned and accrued under those plans, including those listed on item 13
of Section 4.13(a) of the Disclosure Schedules, shall be paid out of Cash by the
Company at Closing. The parties hereto further acknowledge and agree that such
payment by the Company is payment in full, and as of the Closing the 2005
Management Bonus Plan shall be of no further force or effect, and neither the
Company nor the Sellers shall have any further obligations thereunder or any
continuing liability to any party thereto.
ARTICLE II
CONDITIONS TO CLOSING
2.01 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction (or Buyer's written waiver) of the following conditions as of the
Closing Date:
(a) The representations and warranties set forth in Articles III and
IV shall be true and correct at and as of the Closing Date as though then made
(without giving effect to any materiality or Material Adverse Effect qualifiers
contained in such representations and warranties and in the case of
representations and warranties that address matters as of particular dates which
shall be true and correct at and as of such particular dates), except where the
failure of such representations and warranties to be so true and correct would
not, individually or in the aggregate, have a Material Adverse Effect;
(b) The Company and the Sellers shall have performed in all respects
the covenants and agreements under Section 6.01(b)(xii) and 6.01(c) and in all
material respects all of the other covenants and agreements required to be
performed by them under this Agreement at or prior to the Closing;
(c) The applicable waiting periods, if any, under the HSR Act shall
have expired or been terminated;
(d) Since the date of this Agreement, there shall have been no
Material Adverse Effect;
(e) Since the date of this Agreement, there has been no new litigation
commenced or, to the Company's knowledge, threatened, against the Company or its
Subsidiaries other than which would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect;
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(f) No statute, rule, regulation, judgment, decree, ruling, injunction
or order shall have been enacted or entered and no action, suit or proceeding
shall have been instituted which restrains, enjoins, prohibits, invalidates or
otherwise prevents the consummation of the transactions contemplated hereby;
(g) All consents, approvals, filings, notices and waivers which are
set forth on Section 2.01(g) of the Disclosure Schedules shall have been
obtained;
(h) At or prior to the Closing, each Seller shall deliver to Buyer a
certificate in the form of U.S. Treasury Regulations Section
1.1445-2(b)(2)(iv)(A) or (B), as the case may be, or, at the option of the
Sellers, an affidavit, under penalties of perjury, stating that the Company is
not and has not been a United States real property holding corporation, dated as
of the Closing Date and in form and substance required under Treasury Regulation
Section 1.897-2(h) so that Buyer is exempt from withholding any portion of the
Purchase Price thereunder;
(i) The Wheelset Supply and Services Agreement dated November 9, 1999
shall be in full force and effect to the same extent such agreement was in
effect prior to the Closing (subject to among other things, for the avoidance of
doubt, the disclosures set forth in Section 2.01(i) of the Disclosure
Schedules);
(j) The existing Employment Agreements with each of Xxxx Xxxxxx and
Xxxxx Xxxxxxxxx, as amended and restated by the Employment Agreement Amendments,
executed prior to the date hereof and the Employment Agreement with Xxxxxxx
Xxxxxxx executed prior to the date hereof, shall have been duly authorized and
be in full force and effect against each of Xxxx Xxxxxx, Xxxxx Xxxxxxxxx and
Xxxxxxx Xxxxxxx;
(k) Buyer shall have received evidence reasonably satisfactory to it
that the following agreements of the Company have been terminated in connection
with the Closing: (i) the Advisory Services Agreement dated as of November 23,
2004 between the Company and Olympus Advisory Partners, Inc. and (ii) the
Company Stockholders Agreement dated as of November 23, 2004 among the Company
and the stockholders party thereto;
(l) Buyer shall have received, dated as of the Closing Date and
addressed to Buyer, substantially in the form of Exhibit B attached hereto an
opinion of Xxxxxxxx & Xxxxx LLP, legal counsel to Olympus Growth Fund IV, L.P.
("Olympus") and the Company; and
(m) The Company or the Seller Representative (on behalf of the
Sellers), as the case may be, shall have delivered to Buyer each of the
following:
(i) a certificate of the Company in a form reasonably
satisfactory to Buyer, dated as of the Closing Date, stating that the
preconditions specified in Sections 2.01(a) and (b), as they relate to the
Company have been satisfied;
(ii) a certificate of Olympus in a form reasonably satisfactory
to Buyer, dated as of the Closing Date, stating that the preconditions
specified in Sections 2.01(a) and (b), as they relate to Olympus have been
satisfied;
(iii) a certificate of each Seller other than Olympus in a form
reasonably satisfactory to Buyer, dated as of the Closing Date, stating
that the preconditions specified in Sections 2.01(a) and (b), as they
relate to such Seller have been satisfied, or, at the option of the
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Company, a certificate of the Company in a form reasonably satisfactory to
Buyer, dated as of the Closing Date, stating that, to the Company's
knowledge, the preconditions specified in Sections 2.01(a) and (b), as they
relate to such Seller have been satisfied;
(iv) copies of customary payoff letters from all holders of
Indebtedness for borrowed money to be paid at Closing as part of the
Indebtedness Payoff Amount in a form reasonably satisfactory to Buyer
(which payoff letters shall be attached to the Closing Payment
Certificate), and provide to Buyer recordable lien releases simultaneously
with the Closing;
(v) fully executed Warrant Cancellation Agreements which shall be
in full force and effect;
(vi) the Holdback Agreement fully executed by Sellers and the
Escrow Agent which shall be in full force and effect;
(vii) resignations effective as of the Closing Date from such
officers and directors of the Company and its Subsidiaries as Buyer shall
have requested in writing and delivered to the Company and the Seller
Representative not less than five days prior to the Closing Date;
(viii) a copy of the certificate of incorporation of the Company
(certified by the Secretary of State of Delaware) and a certificate of good
standing from the State of Delaware for the Company dated within fifteen
days of the Closing Date; and
(ix) certified copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement and the other agreements contemplated hereby,
and the consummation of the transactions contemplated hereby and thereby,
including termination of the agreements and documents identified in Section
1.06 above.
(n) The Sellers and the Company shall have delivered to Buyer such
other documents as Buyer may reasonably request for the purpose of facilitating
the consummation or performance of any of the transactions contemplated by this
Agreement, including, without limitation, the Shares and appropriate stock
powers.
If the Closing occurs, all closing conditions set forth in this Section 2.01
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by Buyer.
2.02 Conditions to the Sellers' and the Company's Obligations. The
obligations of the Sellers and the Company to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (or the written
waiver by the Seller Representative on behalf of the Sellers and the Company) of
the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article V shall be
true and correct at and as of the Closing as though then made (without giving
effect to any materiality or material adverse effect qualifiers contained in
such representations and warranties and in the case of those representations and
warranties that address matters as of particular dates which shall be true and
correct at and as of such particular dates), except where the failure of such
representations and warranties to be so true and correct would not, in the
aggregate, have a material and adverse effect on Buyer's ability to consummate
the transactions contemplated by this Agreement;
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(b) Buyer shall have performed in all material respects all the
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing;
(c) The applicable waiting periods, if any, under the HSR Act shall
have expired or been terminated;
(d) No statute, rule, regulation, judgment, decree, ruling, injunction
or order shall have been enacted or entered and no action, suit or proceeding
shall have been instituted which restrains, enjoins, prohibits, invalidates or
otherwise prevents the consummation of the transactions contemplated hereby;
(e) All consents and approvals which are set forth on Section 2.02(e)
of the Disclosure Schedules attached hereto shall have been obtained;
(f) The Seller Representative shall have received, dated as of the
Closing Date and substantially in the form of Exhibit C attached hereto an
opinion of Xxxxxx Xxxx LLP, legal counsel to Buyer and Guarantor;
(g) Buyer shall have delivered to the Seller Representative certified
copies of the resolutions duly adopted by Buyer's and the Guarantor's board of
directors (or its equivalent governing body) authorizing the execution, delivery
and performance of this Agreement and the other agreements contemplated hereby,
and the consummation of all transactions contemplated hereby and thereby; and
(h) Buyer shall have delivered to the Seller Representative a
certificate in the form reasonably satisfactory to the Seller Representative,
dated as of the Closing Date, stating that the preconditions specified in
Sections 2.02(a) and (b) have been satisfied.
If the Closing occurs, all closing conditions set forth in this Section 2.02
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by the Sellers and the Company.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF EACH SELLER
Except as disclosed in the disclosure schedules attached hereto (the
"Disclosure Schedules"), each Seller, solely for himself, herself or itself (on
a several and not joint basis), represents and warrants to Buyer as of the date
hereof and as of the Closing Date, as follows:
3.01 Organization and Standing. Each Seller that is an entity represents
and warrants that it is duly organized, formed or incorporated and is validly
existing and in good standing under the laws of the state of its incorporation
or organization.
3.02 Authority. Such Seller has all requisite legal capacity, power and
authority (including, if applicable, full organizational power and authority) to
execute and deliver this Agreement and to perform such Seller's obligations
hereunder.
3.03 Execution and Delivery; Valid and Binding Agreement. This Agreement
and the other Transaction Documents to which such Seller is a party has been
duly authorized, executed and delivered by such Seller. Assuming this Agreement
and the other Transaction Documents are the valid and binding
10
agreement of each of the other parties thereto, this Agreement and the
Transaction Documents to which such Seller is a party constitute a valid and
binding agreement of such Seller, enforceable against such Seller in accordance
with its terms, except as enforceability may be limited by bankruptcy laws,
other similar laws affecting creditors' rights and general principles of equity
affecting the availability of specific performance and other equitable remedies.
3.04 No Breach. Except for the applicable requirements of the HSR Act and
compliance with applicable federal and state securities laws, such Seller is not
subject to or obligated under any applicable law, or rule or regulation of any
governmental authority, or any material agreement or instrument, or any license,
franchise or permit, or its certificate of incorporation, its bylaws or similar
organizational documents if such Seller is a corporation or other entity, or
subject to any order, writ, injunction, judgment or decree, which would be
breached or violated in any material respect by such Seller's execution,
delivery or performance of this Agreement, the Transaction Documents or the
consummation of the transactions contemplated hereby.
3.05 Governmental Authorization. Except for the applicable requirements of
the HSR Act and compliance with applicable federal and state securities laws,
such Seller is not required to submit or obtain any notice, consent, approval,
authorization, report or other filing with any governmental or regulatory
authority in connection with the execution, delivery or performance by such
Seller of this Agreement, the Transaction Documents or the consummation of the
transactions contemplated hereby or thereby.
3.06 Ownership of Capital Stock. As of the date hereof, each Seller is the
record owner of, beneficially owns and has good title to the Shares and Warrants
set forth opposite such Seller's name on Section 4.04(a) of the Disclosure
Schedules, which Shares and Warrants constitute all of the Shares and Warrants
owned beneficially or held of record by such Seller. At Closing, and upon
termination of those agreements listed on Section 4.04 of the Disclosure
Schedules, such Seller shall transfer to, and Buyer will acquire, good title to
such Seller's Shares, free and clear of any liens or other restrictions on
transfer, other than applicable federal and state securities law restrictions
and those liens and restrictions listed on Section 3.06 of the Disclosure
Schedules which are being released at the Closing.
3.07 Litigation. There are no actions, suits or proceedings pending or, to
Seller's knowledge, threatened against or affecting such Seller at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau or agency, domestic or foreign, which
would adversely affect such Seller's performance under this Agreement, the
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby.
3.08 Brokers Fees. Such Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Disclosure Schedules (including, without
limitation, any schedule update), the Company represents and warrants to Buyer
as of the date hereof and as of the Closing Date, as follows:
4.01 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and the Company has all
11
requisite corporate power to own and operate its properties and to carry on its
businesses as now conducted. The Company is duly qualified to do business and is
in good standing in every jurisdiction in which its ownership of property or the
conduct of businesses as now conducted requires it to qualify, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has made available to
Buyer true and complete copies of the organizational documents of the Company as
currently in effect.
4.02 Subsidiaries. Except as set forth on Section 4.02 of the Disclosure
Schedules, neither the Company nor any of its Subsidiaries owns any stock,
partnership interest, joint venture interest or other equity ownership interest
in any other Person. Each Subsidiary of the Company is wholly owned by the
Company or another Subsidiary of the Company as indicated on Section 4.02 of the
Disclosure Schedules. Each Subsidiary of the Company identified on Section 4.02
of the Disclosure Schedules (i) is validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) has all requisite
corporate power and authority to carry on its businesses as now conducted and
(iii) is duly qualified to do business and is in good standing in every
jurisdiction in which its ownership of property or the conduct of its business
as now conducted requires it to qualify, except, in each case, where the failure
to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has made available to
Buyer true and complete copies of the organizational documents of each of its
Subsidiaries as currently in effect.
4.03 Authorization; Valid and Binding Agreement; No Breach.
(a) This Agreement and the other Transaction Documents have been duly
authorized, executed and delivered by the Company. Assuming that this Agreement
and the other Transaction Documents are the valid and binding obligation of each
of the other parties thereto, this Agreement and the other Transaction Documents
constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by bankruptcy
laws, other similar laws affecting creditors' rights and general principles of
equity affecting the availability of specific performance and other equitable
remedies.
(b) Except (i) as set forth on Section 4.03(b) of the Disclosure
Schedules, and (ii) for the applicable requirements of the HSR Act, the
execution, delivery and performance of this Agreement and the Transaction
Documents by the Company and each Subsidiary and the consummation of the
transactions contemplated hereby or thereby do not and will not (A) result in
any breach of or require any authorization, consent or approval by or notice to
any court, other governmental body or Person under the provisions of the
Company's or any of its Subsidiaries' certificate or articles of incorporation
or bylaws or equivalent organizational documents, or (B) result in any material
breach of, constitute a material default under, result in a material violation
of, result in the creation of any material lien, security interest, charge or
encumbrance (other than a Permitted Lien) upon any asset of the Company or any
of its Subsidiaries, or require any authorization, consent or approval by or
notice to any court, other governmental body or Person (1) under any indenture,
mortgage, lease or loan agreement or any Significant Contract to which the
Company or any of its Subsidiaries is bound, (2) under any law, statute or
regulation or (3) under any order, judgment or decree to which the Company or
any of its Subsidiaries is subject.
4.04 Capital Stock.
(a) Section 4.04(a) of the Disclosure Schedules sets forth, as of the
date of this Agreement, (i) the authorized and issued and outstanding shares of
each class of capital stock of the Company and its Subsidiaries, the name of
each record holder of such shares of the Company's capital
12
stock, and the number of shares of such class of the Company's or its
Subsidiaries' capital stock held by each such record holder and (ii) all
outstanding Warrants issued by the Company, the name of each record holder of
such Warrants and the class and number of shares of capital stock issuable upon
exercise of each such Warrant.
(b) All outstanding Shares of the Company and all outstanding shares
of capital stock of each of its Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable. Except for the Warrants
which will be cancelled in connection with the Closing and except as set forth
on Section 4.04(a) or 4.04(b)(i) of the Disclosure Schedules, there are no
outstanding (i) shares of capital stock of the Company or any of its
Subsidiaries, (ii) securities of the Company, whether debt or equity, or any of
its Subsidiaries convertible into or exchangeable for shares of capital stock of
the Company or any of its Subsidiaries or (iii) options, warrants or other
rights to acquire from the Company or any of its Subsidiaries, or other
obligations of the Company or any of its Subsidiaries to issue, any capital
stock or securities convertible into or exchangeable for capital stock of the
Company or any of its Subsidiaries (the items in clauses 4.04(b)(i), 4.04(b)(ii)
and 4.04(b)(iii) being referred to collectively as the "Company Securities").
There are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire or retire for value any Company
Securities.
4.05 Financial Statements.
(a) The Company has furnished Buyer with true and complete copies of
its (i) unaudited consolidated balance sheet as of July 1, 2006 (the "Latest
Balance Sheet"), and the related consolidated statement of income and cash flow
of the Company and its Subsidiaries for the six month period then ended (the
"Unaudited Financial Statements") and (ii) the audited consolidated balance
sheet as of December 31, 2005, and the related consolidated statement of income
and cash flow of the Company and its Subsidiaries for the fiscal year ended
December 31, 2005 (the "Audited Financial Statements" and, together with the
Unaudited Financial Statements, the "Financial Statements"). Except as set forth
on Section 4.05 of the Disclosure Schedules, such Financial Statements have been
based upon the information concerning the Company and its Subsidiaries contained
in the Company's and its Subsidiaries' books and records, and present fairly and
accurately in all material respects the financial condition and results of
operations of the Company and its Subsidiaries (taken as a whole) as of the
times and for the periods referred to therein and have been prepared in
accordance with GAAP consistently applied (which is subject to such exceptions
set forth on Schedule 4.05 of the Disclosure Schedules).
(b) To the Company's knowledge, neither the Company nor any of its
Subsidiaries is subject to any liability (other than any liability, together
with the liabilities arising from all related items or events, as would not
result in a Loss to the Company and its Subsidiaries in excess of $250,000)
arising out of events, transactions or actions or inactions arising prior to the
date hereof, except (i) liabilities under leases, licenses, contracts and
agreements which are not required to be disclosed on the Disclosure Schedules
arising out of or related to the transactions contemplated hereby, (ii)
liabilities reflected on the Latest Balance Sheet or liabilities which have
arisen after the date of the Latest Balance Sheet in the ordinary course of
business consistent with past practices and (iv) liabilities otherwise disclosed
on the Disclosure Schedules (including, without limitation, liabilities under
leases, licenses, contracts and agreements described in the Disclosure
Schedules). Notwithstanding the foregoing, this representation and warranty will
not apply to (and will exclude) any liability arising out of or related to
facts, events, transactions, actions or inactions, which are covered by,
addressed in or are of the same nature or subject matter as any liability which
is covered by or addressed in another representation or warranty set forth in
this Article IV. (By way of example, as to the foregoing sentence, pending and
threatened litigation is covered in the representations and warranties in
Section 4.11 and therefore all pending and threatened
13
litigation (regardless of whether such litigation is covered by the
representation and warranties in Section 4.11) is covered by Section 4.11 for
the purposes of the foregoing sentence and not this Section.)
4.06 Absence of Certain Developments. Since the date of the Latest Balance
Sheet, there has not been any Material Adverse Effect. Except as set forth on
Section 4.06 of the Disclosure Schedules or except as contemplated by this
Agreement, since the date of the Latest Balance Sheet, neither the Company nor
any Subsidiary of the Company has:
(a) mortgaged, pledged or subjected to any material lien, charge or
other encumbrance, any portion of its assets, except Permitted Liens;
(b) sold, assigned or transferred any material portion of its tangible
assets, except in the ordinary course of business;
(c) sold, assigned or transferred any Intellectual Property, except in
the ordinary course of business;
(d) forgiven or cancelled any material Indebtedness or suffered any
material extraordinary losses (whether or not covered by insurance), or
condemnation, taking or other similar proceedings, or waived any claims or
rights of material value (including any Indebtedness owed by any stockholder,
officer, director, employee or affiliate of the Company or any Subsidiary);
(e) redeemed or repurchased, directly or indirectly, any shares of
capital stock or declared, set aside or paid any dividends or made any other
distributions (whether in cash or in kind) with respect to any shares of its
capital stock;
(f) issued, sold or transferred any of its capital stock, securities
convertible into its capital stock or warrants, options or other rights to
acquire its capital stock;
(g) made any capital expenditures or commitments therefore in excess
of $250,000, except in the ordinary course of business;
(h) changed any of its accounting policies, practices or procedures,
including internal control procedures, except those changes required by GAAP;
(i) amended or modified its charter or bylaws;
(j) increased the salary of any senior management-level employee of
the Company or any of its Subsidiaries (i.e., Vice President or above) or
entered into any agreement with such senior management-level employee, except
for increases in salary in the ordinary course of business;
(k) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment which is reasonably expected to result in
more than $250,000 of liability to the Company, other than in the ordinary
course of business; or
(l) agreed in writing or, to the Company's knowledge, orally, to take
any of the foregoing actions.
14
4.07 Title to Properties.
(a) Except as set forth on Section 4.07(a) of the Disclosure
Schedules, the Company and its Subsidiaries own good title to, or hold pursuant
to valid and enforceable leases, all of the personal property shown to be owned
by them on the Latest Balance Sheet (except for such personal property sold or
disposed of subsequent to the date thereof in the ordinary course of business),
free and clear of all liens, security interests and other encumbrances, except
for Permitted Liens.
(b) Section 4.07(b)(i) of the Disclosure Schedules sets forth the
addresses of all land, together with all buildings, structures, improvements and
fixtures located thereon, and all easements and other rights and interests
appurtenant thereto, owned by the Company or its Subsidiaries (collectively, the
"Owned Real Property"). With respect to each parcel of Owned Real Property,
except as set forth in Section 4.07(b)(ii) of the Disclosure Schedules: (i) the
Company or one of its Subsidiaries has fee simple title thereto, free and clear
of all liens, security interests and other encumbrances, except Permitted Liens;
(ii) neither the Company nor any of its Subsidiaries has leased to any Person
the right to use or occupy such Owned Real Property or any portion thereof;
(iii) there are no outstanding options, rights of first offer or rights of first
refusal to purchase such Owned Real Property or any portion thereof; (iv) the
Company has received no written notice from any governmental agency of any
violation of any statute, law, ordinance, deed restriction, rule or regulation
with respect to the Owned Real Property; and (v) there is no pending or, to the
Company's knowledge, threatened litigation, condemnation proceeding, or
annexation proceeding affecting any of the Owned Real Property, and there are no
governmental assessments against any of the Owned Real Property other than those
that constitute Permitted Liens.
(c) The real property demised by the leases described on Section
4.07(c)(i) of the Disclosure Schedules (the "Leased Real Property") constitutes
all of the material real property leased by the Company and its Subsidiaries.
Except as set forth on Section 4.07(c)(ii) of the Disclosure Schedules, the
leases demising the Leased Real Property are in full force and effect, subject
to proper authorization and execution of such lease by the other party and the
limitations of bankruptcy laws, other similar laws affecting creditors' rights
and general principles of equity affecting the availability of specific
performance and other equitable remedies. The Company has made available to
Buyer true and complete copies of the leases demising the Leased Real Property.
Neither the Company nor any of its Subsidiaries is in payment default under any
such leases or any other default under any of such leases that would permit the
landlord to terminate such lease.
4.08 Tax Matters.
(a) Each of the Company and its Subsidiaries has filed all federal
Income Tax Returns and all other material Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all material respects.
All Taxes due and owing by the Company or any of its Subsidiaries (whether or
not shown on any Tax Return) have been paid. Except as set forth on Section
4.08(a) of the Disclosure Schedules, neither the Company nor any of its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return. There are no liens for Taxes (other than Taxes not yet
due and payable) upon any of the assets of the Company or any of its
Subsidiaries.
(b) Except as set forth on Section 4.08(b) of the Disclosure
Schedules, there is no material dispute or claim concerning any Tax liability of
the Company or any of its Subsidiaries either (i) claimed or raised by any Tax
authority in writing or (ii) as to which any of Sellers or any of the directors
and officers of the Company and its Subsidiaries has knowledge based upon
personal contact with any agent of such authority.
15
(c) Section 4.08(c) of the Disclosure Schedules lists (i) all federal,
state, local, and foreign Income Tax Returns filed with respect to the Company
or any of its Subsidiaries and (ii) all states in which sale or use Tax Returns
were filed with respect to the Company or any of its Subsidiaries, in each case
for taxable periods ended on or after December 31, 2003, and (iii) indicates
those Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Sellers have delivered to Buyer true and
complete copies of all federal Income Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by the Company or any
of its Subsidiaries since November 23, 2004. Neither the Company nor any of its
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency.
(d) Neither the Company nor any of its Subsidiaries is a party to or
bound by any tax allocation or sharing agreement. Neither the Company nor any of
its Subsidiaries (i) has been a member of an Affiliated Group filing a
consolidated federal Income Tax Return (other than a group the common parent of
which was the Company or Meridian Rail Acquisition Corp.) or (ii) has any
liability for the Taxes of any Person (other than the Company or any of its
Subsidiaries) under Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(e) Except as set forth in Section 4.08(e) of the Disclosure
Schedules, neither the Company nor any of its Subsidiaries will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any:
(i) change in method of accounting for a taxable period ending on
or prior to the Closing Date;
(ii) "closing agreement" as described in Internal Revenue Code
Section 7121 (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date;
(iii) intercompany transactions or any excess loss account
described in Treasury Regulations under Internal Revenue Code Section 1502
(or any corresponding or similar provision of state, local or foreign
income Tax law);
(iv) installment sale or open transaction disposition made on or
prior to the Closing Date; or
(v) prepaid amount received on or prior to the Closing Date.
(f) Neither the Company nor any of its Subsidiaries has distributed
stock of another Person, or has had its stock distributed by another Person, in
a transaction that was purported or intended to be governed in whole or in part
by Internal Revenue Code Section 355 or Internal Revenue Code Section 361.
(g) Any claim of breach of representation or warranty regarding Taxes
shall be made only under this Section 4.08 and shall not be made under any other
representation or warranty contained in this Agreement. For the avoidance of
doubt, (i) this Section 4.08(g) shall not apply to the covenants set forth under
Section 11.03 and (ii) representations and warranties regarding ERISA will not
be considered a representation or warranty regarding Taxes for the purposes of
this Section 4.08(g) and such
16
representations and warranties regarding ERISA shall be made only in Section
4.13 below and not this Section 4.08.
4.09 Contracts and Commitments.
(a) Except as set forth on Section 4.09(a) of the Disclosure
Schedules, neither the Company nor any of its Subsidiaries is party to any
written: (i) collective bargaining agreement or contract with any labor union;
(ii) pension, profit sharing, retirement, deferred compensation plan or other
material bonus plan, other than as described in Section 4.13(a) of the
Disclosure Schedules relating thereto; (iii) agreement for the employment of any
officer, individual employee or other individual on a full-time or consulting
basis with annual payments in excess of $100,000 which is not terminable on 60
or fewer days notice by the Company or any Subsidiary without liability for any
penalty or severance payment greater than $30,000; (iv) loan agreement or
indenture relating to Indebtedness; (v) stockholders agreement or other
agreement among the Company's stockholders governing voting of the Company's
equity securities; (vi) lease or agreement under which it is lessee of, or holds
or operates any personal property owned by any other party, for which the annual
rental exceeds $250,000 and which is not terminable on 60 or fewer days notice
by the Company or any Subsidiary without liability for any penalty greater than
$30,000; (vii) lease or agreement under which it is lessor of or permits any
third party to hold or operate any personal property, for which the annual
rental exceeds $250,000 and which is not terminable on 60 or fewer days notice
by the Company or any Subsidiary without liability for any penalty greater than
$30,000; (viii) contract or group of related contracts with the same party for
the purchase of products or services by the Company or any of its Subsidiaries
with such products and services having a selling price in excess of $250,000 and
which is not terminable on 60 or fewer days notice by the Company or any
Subsidiary without liability for any penalty greater than $30,000; (ix) contract
or group of related contracts with the same party for the sale of products or
services by the Company or any of its Subsidiaries with such products and
services having a selling price in excess of $250,000 and which is not
terminable on 60 or fewer days notice by the Company or any Subsidiary without
liability for any penalty greater than $30,000; (x) contract or agreement
containing covenants limiting the freedom of the Company or any Subsidiary of
the Company to compete in any line of business or with any Person which is not
terminable on 60 or fewer days notice by the Company or any Subsidiary without
liability for any penalty greater than $30,000; (xi) guarantees, letters of
credit, performance bonds and/or sureties issued by or on behalf of the Company
or any Subsidiary in connection with any customer contracts, proposals or
otherwise; or (xii) contract involving any commitment of suretyship, guaranty or
indemnification by the Company or any Subsidiary with respect to any side frames
or bolsters which could reasonably be expected to require payments by the
Company or any Subsidiary in excess of $100,000.
(b) The Company has made available to Buyer true and complete copies
of all contracts listed on Section 4.09(a) of the Disclosure Schedules (the
"Significant Contracts"). With respect to the Significant Contracts, except as
set forth on Section 4.09(b) of the Disclosure Schedules, (i) neither the
Company nor any of its Subsidiaries is in default under any such contract, and
(ii) to the Company's knowledge, no other party thereto, is in default under any
such contract, except, in each case, where such default would not, individually
or in the aggregate, have a Material Adverse Effect. Each Significant Contract
is a valid, binding obligation of the Company or its Subsidiaries and
enforceable in accordance with its terms, except as to the effect, if any, of
(a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (b) rules of law governing specific performance,
equitable relief and other equitable remedies. To the knowledge of the Company,
neither the Company nor any Subsidiary has received written notice of alleged
nonperformance, violation of or other noncompliance with respect to its
obligations under any of the Significant Contracts which alleged nonperformance,
violation or other
17
noncompliance is currently unresolved, nor any written notice that is currently
unresolved that any of the Significant Contracts may be totally or partially
terminated or suspended by any other party thereto.
(c) Section 4.09(c)(i) of the Disclosure Schedules contains a true and
complete list setting forth the ten largest suppliers (the "Major Suppliers")
and the ten largest customers (excluding scrap purchasers and intercompany
purchases) (the "Major Customers") of the Company or any Subsidiary, by dollar
amount for the six-month period covered by the Unaudited Financial Statements.
Since the Latest Balance Sheet, to the knowledge of the Company, no Major
Customer has cancelled or otherwise materially modified its agreement with the
Company or any Subsidiary in a manner adverse to the Company or any Subsidiary.
Except as set forth in Section 4.09(c)(ii) of the Disclosure Schedules, since
the Latest Balance Sheet, to the knowledge of the Company, no Major Supplier has
cancelled or otherwise materially modified its agreement with the Company or any
Subsidiary in a manner adverse to the Company or any Subsidiary.
4.10 Intellectual Property. Section 4.10(a) of the Disclosure Schedules
contains a list of all of the material registered Intellectual Property owned by
the Company or any of its Subsidiaries and used in the conduct of the businesses
of the Company and its Subsidiaries. Except as set forth on Section 4.10(b) of
the Disclosure Schedules or as would not, individually or in the aggregate, have
a Material Adverse Effect: (i) the Company or one of its Subsidiaries owns and
possesses all right, title and interest in and to, or possesses the valid and
enforceable right to use, the Intellectual Property used in the conduct of the
businesses of the Company and its Subsidiaries; (ii) since November 23, 2004,
and to the knowledge of the Company since January 1, 2003, neither the Company
nor any of its Subsidiaries has received any written notices of infringement or
misappropriation from any third party with respect to the Company or any
Subsidiary's use of any Intellectual Property; (iii) to the Company's knowledge,
no third party is infringing or misappropriating any registered Intellectual
Property owned by the Company or any of its Subsidiaries, and (iv) to the
Company's knowledge, neither the Company nor any of its Subsidiaries is
infringing any registered Intellectual Property owned by a third party.
4.11 Litigation. Except as set forth on Section 4.11(a) of the Disclosure
Schedules, there are no actions, suits or proceedings pending or, to the
Company's knowledge, threatened against the Company or any of its Subsidiaries,
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau or agency, domestic or
foreign, nor are there any that questions the validity of this Agreement, the
Transaction Documents or any action taken or to be taken by the Company or any
Subsidiary pursuant to this Agreement, the Transaction Documents or in
connection with the transactions contemplated hereby or thereby. Except as set
forth on Section 4.11(b) of the Disclosure Schedules, neither the Company nor
any of its Subsidiaries is subject to any outstanding judgment, order or decree
of any court or governmental body. Except as set forth on Section 4.11(c) of the
Disclosure Schedules, to the Company's knowledge, since November 23, 2004, there
have been no claims made, or any written threat of a claim received, against the
Company or any Subsidiary for liability arising out of the production or sale of
side frames or bolsters.
4.12 Governmental Consents, etc. Except as set forth on Section 4.12 of the
Disclosure Schedules, and except for the applicable requirements of the HSR Act,
no material permit, consent, approval or authorization of, or declaration to or
filing with, any governmental or regulatory authority is required in connection
with any of the execution, delivery or performance of this Agreement or the
Transaction Documents by the Company or the consummation by the Company of the
transactions contemplated hereby or thereby.
18
4.13 Employee Benefit Plans.
(a) Section 4.13(a) of the Disclosure Schedules contains a true and
complete list of (i) all employee benefit plans (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and (ii) all other material bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical and life
insurance, supplemental retirement, severance and other material benefit plans,
programs and arrangements, and all material retention, termination, severance or
other similar contracts or agreements maintained, contributed to or sponsored by
the Company or any Subsidiary for the benefit of any current or former employee,
officer or director of the Company or any Subsidiary (collectively, excluding
any Multiemployer Plan, the "Plans"). The Company and its Subsidiaries have
previously made available to Buyer a true and complete copy of each Plan or
summary Plan (or, in the case of any unwritten Plan, a description), as
currently in effect, and a true and complete copy of each of the following
documents, to the extent applicable, prepared in connection with each such Plan:
(A) a copy of each trust or other funding arrangement, (B) the three most
recently filed Internal Revenue Service Forms 5500, (C) the most recently
received Internal Revenue Service prototype opinion letter, and (D) the most
recently prepared actuarial report. Neither the Company nor any Subsidiary has
communicated to employees any intent to or has expressly or impliedly committed
to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required to bring the Plan into compliance
with applicable law. Each Plan that is intended to be qualified under Section
401(a) and/or 401(k) or 501(c)(9) of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), so qualifies, has received a favorable
prototype opinion letter from the Internal Revenue Service to such effect and
its trust is exempt from taxation under Section 501(a) of the Internal Revenue
Code. To the knowledge of the Company, except as set forth on Section 4.13(a) of
the Disclosure Schedules, no fact or event has occurred since the date of any
prototype opinion letter from the Internal Revenue Service which is reasonably
likely to affect adversely such favorable determination or such qualification or
to result in a filing under Rev. Proc. 2003-44 or any predecessor or successor
thereto that would be reasonably likely to result in material liability to the
Company. The Company and its Subsidiaries have timely paid all contributions,
premiums and expenses payable to or in respect of each Plan and workers'
compensation arrangement under the terms thereof and in accordance with
applicable law, including ERISA and the Internal Revenue Code, and to the extent
any such contributions, premiums or expenses are not yet due, the liability
therefor has been properly and adequately accrued on the Financial Statements in
accordance with GAAP.
(b) None of the Plans (i) is a Multiemployer Plan, or a pension plan
within the meaning of Section 4001(a)(15) of ERISA, (ii) is subject to Section
302 or Title IV of ERISA or Section 412 of the Internal Revenue Code, or (iii)
except as set forth on Section 4.13(b) of the Disclosure Schedules, provides or
promises to provide retiree medical or life insurance benefits, other than to
the extent required by Section 4980B(f) of the Internal Revenue Code, and
Sections 601 through 609 of ERISA or other similar laws.
(c) Except as set forth on Section 4.13(c) of the Disclosure
Schedules, with respect to each Plan, neither the Company, any Subsidiary nor
any ERISA Affiliate is currently liable for any material Tax, including, without
limitation, any material Tax under Section 4971, 4972, 4975, 4976, 4979, 4980 or
4980B of the Internal Revenue Code, and, to the knowledge of the Company, no
fact or event exists which could reasonably be expected to give rise to any such
material liability. Neither the Company, any Subsidiary nor any ERISA Affiliate
has incurred any material liability (which will not be satisfied prior to the
Closing) under, arising out of or by operation of Title IV of ERISA, including,
without limitation, any liability in connection with the termination or
reorganization of any employee pension benefit plan subject to Title IV of
ERISA. To the knowledge of the Company, no fact or event
19
exists which could reasonably be expected to give rise to any such material
liability. "ERISA Affiliate" is any trade or business whether or not
incorporated, which together with the Company would be deemed to be a "single
employer" within the meaning of Section 4001(b) of ERISA or Section 414 of the
Internal Revenue Code.
(d) No Plan subject to a funding requirement has been terminated at a
time when such Plan was not sufficiently funded.
(e) Except as set forth on Section 4.13(e) of the Disclosure
Schedules, and except as would not, individually or in the aggregate, have a
Material Adverse Effect, each Plan has been operated in compliance with its
terms and applicable laws, including, without limitation, ERISA and the Internal
Revenue Code.
(f) There are no actions, suits or claims (other than routine claims
for benefits in the ordinary course) pending or, to the knowledge of the
Company, threatened with respect to any Plan. With respect to the Plans, no
Plan, the Company or any Subsidiary is under audit or, to the knowledge of the
Company, investigation by the Internal Revenue Service, the U.S. Department of
Labor, the Pension Benefit Guaranty Corporation or any other federal or state
governmental agency, nor is any such audit or investigation pending or, to the
knowledge of the Company, threatened.
(g) Except as set forth on Section 4.13(g) of the Disclosure
Schedules, neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, either alone or in
combination with another event (whether contingent or otherwise) will (i)
entitle any current or former employee, consultant or director of the Company or
any Subsidiary to any increased or modified benefit or payment, including any
bonus payments, severance or change in control benefits; (ii) increase the
amount of compensation due to any such employee, consultant or director; (iii)
accelerate the vesting, payment or funding of any compensation, stock-based
benefit, incentive or other benefit; or (iv) result in any "parachute payment"
under Section 280G of the Internal Revenue Code (whether or not such payment is
considered to be reasonable compensation for services rendered).
(h) The Company and its Subsidiaries has workers compensation
insurance from a bona fide third party insurance carrier in amounts sufficient
to satisfy applicable workers compensation insurance requirements in the
jurisdictions where the Company and its Subsidiaries conduct business.
(i) Except as set forth on Section 4.13(i) of the Disclosure
Schedules, neither the Company nor any Subsidiary contributes to, nor has any
liability with respect to, any Multiemployer Plan.
4.14 Insurance. Section 4.14(a) of the Disclosure Schedules lists each
material insurance policy maintained by the Company and its Subsidiaries
identifying the name of the insurance carrier, type of coverage, policy limits
and deductibles for each such policy. All of such insurance policies are in full
force and effect, and to the Company's knowledge, neither the Company nor any
Subsidiary of the Company is in default with respect to its obligations under
any of such insurance policies, except where such default would not,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in Section 4.14(b) of the Disclosure Schedules, none of such insurance
policies will terminate or lapse by reason of any of the transactions
contemplated by this Agreement. All premiums covering all periods up to and
including the Closing have been paid, and to the knowledge of the Company, no
notice of cancellation or termination has been received with respect to any such
policy or binder. Since November 23, 2004, neither the Company nor any
Subsidiary has been refused any insurance with respect to its assets or
operations. True and complete copies of all policies have been made available to
Buyer.
20
4.15 Compliance with Laws. Except as set forth on Section 4.15 of the
Disclosure Schedules, the Company and its Subsidiaries are in compliance with
all applicable laws and regulations of foreign, federal, state, provincial and
local governments and all agencies thereof which affect the business, operations
or Owned Real Property or Leased Real Property of the Company or its
Subsidiaries and to which the Company or its Subsidiaries may be subject, and no
claim has been filed or commenced against any of them alleging any failure to so
comply, except with respect to compliance with where the failure to comply would
not, individually or in the aggregate, have a Material Adverse Effect; provided,
however, that with respect to compliance with applicable laws regarding bribes,
kickbacks, any other illegal payments to obtain or retain business or to receive
favorable treatment with regard to business, illegal contributions made to any
political party, political candidate or holder of governmental office and
compliance with the United States Corrupt Foreign Practices Act or any other
similar laws, statute, rule or regulation of any country, this representation
shall not be subject to the Material Adverse Effect qualifier.
4.16 Environmental, Health and Safety Matters. Except as set forth on
Section 4.16 of the Disclosure Schedules:
(a) The Company and each Subsidiary are, and since November 23, 2004
have been, in material compliance with all applicable Environmental
Requirements.
(b) Without limiting the generality of the foregoing, the Company and
each Subsidiary have obtained all permits, licenses and other authorizations
required under applicable Environmental Requirements ("Environmental Permits"),
and are in material compliance with such permits, licenses and authorizations. A
list of all material Environmental Permits owned or possessed by the Company or
its Subsidiaries is set forth on Section 4.16 of the Disclosure Schedules.
(c) Neither the Company nor any of its Subsidiaries has since November
23, 2004, received any written notice from any government entity, that alleges
that any of them is in material violation of Environmental Requirements or OSHA
rules or regulations, or has any material liability arising under applicable
Environmental Requirements or OSHA rules or regulations, including any material
investigatory, remedial or corrective obligation, relating to the Company, any
Subsidiary or their facilities, the subject of which is unresolved.
(d) To the knowledge of the Company, none of the following exists at
or under the Real Property: (1) underground storage tanks in violation of
Environmental Requirements, (2) friable or potentially friable
asbestos-containing material requiring abatement under Environmental
Requirements, (3) materials or equipment containing polychlorinated biphenyls in
violation of Environmental Requirements, or (4) unpermitted landfills, surface
impoundments, or disposal areas in violation of Environmental Requirements.
(e) Since November 23, 2004, neither the Company nor any Subsidiary
has treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any hazardous substance in material violation
of any Environmental Requirements.
(f) Since November 23, 2004, neither the Company nor any Subsidiary
has materially violated any Environmental Requirements at any real property
previously owned or operated by the Company or any Subsidiary.
(g) The Company and each Subsidiary possess all material manifests,
reports, policies, manuals, safety data sheets, hazard communications program
documents and all other material
21
records they are required to retain pursuant to any Environmental Requirements,
in the manner so required in all material respects.
(h) Neither the Company nor any of its Subsidiaries is in material
violation of any applicable OSHA rules and regulations.
(i) This Section 4.16 constitutes the sole and exclusive
representations and warranties of the Company with respect to any environmental,
health and safety matters, including without limitation any arising under
Environmental Requirements and OSHA.
(j) To the Company's knowledge, the environmental reports (the
"Vanguard Reports") delivered to the Company by Vanguard Environmental, Inc.
("Vanguard") (in 2005 and/or 2006) do not disclose any liability which would be
required to be disclosed on Section 4.16 of the Disclosure Schedules which is
not otherwise disclosed on such Section 4.16 of the Disclosure Schedule (or
otherwise set forth in any other environmental report listed thereon). The scope
of the Vanguard Reports do not contain a Phase II environmental investigation
(or the results of any soil or groundwater sampling done by Vanguard in
connection therewith).
4.17 Affiliated Transactions. Except as set forth on Section 4.17 of the
Disclosure Schedules and except for payments to be made in connection with the
Closing to the extent reflected in the Closing Statement, no officer, director,
stockholder or Affiliate of any of them or an Affiliate of the Company or any
Subsidiary is a party to any agreement, contract, commitment or transaction with
the Company or any of its Subsidiaries or has any interest in any property used
by the Company or its Subsidiaries.
4.18 Employees. Except as set forth on Section 4.18(a) of the Disclosure
Schedules, neither the Company nor any Subsidiary of the Company has experienced
any strike or material grievance, claim of unfair labor practices, or other
material collective bargaining dispute since November 23, 2004 that has not been
dismissed or settled. Except as set forth on Section 4.18(b) of the Disclosure
Schedules, to the Company's knowledge, no organizational effort is presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company or any of its Subsidiaries. Except as set forth on
Section 4.18(c) of the Disclosure Schedules, no collective bargaining agreements
are in effect with respect to the Company or any Subsidiary.
4.19 Brokerage. Except as set forth on Section 4.19 of the Disclosure
Schedule, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Company or any Subsidiary.
4.20 Governmental Licenses and Permits. Section 4.20 of the Disclosure
Schedules contains a list of all permits (temporary or otherwise), licenses,
authorizations and approval of federal, foreign, state and local governmental
entities and zoning bodies (collectively, the "Licenses") owned or possessed by
the Company or its Subsidiaries all of which are currently valid and in full
force and effect and no other permits, licenses, authorizations and approval of
federal, foreign, state and local governmental entities and zoning bodies are
required in the conduct of their respective businesses and operations or used by
the Company and its Subsidiaries in the conduct of their businesses, in each
case as of the date hereof, except, in each case, where the failure to obtain,
own, possess and/or use such other permits and licenses of governmental entities
would not, individually or in the aggregate, have a Material Adverse Effect. All
such licenses, permits, authorizations and approvals shall as of the Closing
Date be valid and in full force and effect and the consummation of the
transactions contemplated by this Agreement and the Transaction
22
Documents will not cause a material loss or adverse modification of, or require
any transfer, renewal or notice with respect to, any such Licenses.
4.21 Officers and Directors. Section 4.21 of the Disclosure Schedules lists
all officers and directors of the Company and its Subsidiaries.
4.22 Tangible Assets. The Company and its Subsidiaries own, or lease
pursuant to valid, binding and enforceable leases, all buildings, vehicles,
machinery, equipment, and other material tangible assets used in or necessary
for the conduct of its business as presently conducted. Taken as a whole, the
material tangible assets are in good operating condition and repair (subject to
normal wear and tear), and are suitable for the purposes for which they are
presently used.
4.23 Internal Controls. To the knowledge of the Company, the Company and
its Subsidiaries maintain a system of internal accounting controls intended to
provide reasonable assurance that: (i) there are no transactions of a material
nature, individually or in the aggregate, that have not been properly recorded
in the accounting records underlying the financial statements (other than those
disclosed in Section 4.05 of the Disclosure Schedules) and (ii) there are no
reportable conditions, including material weaknesses, in the design or operation
of internal controls that could adversely affect the Company's or any
Subsidiary's ability to initiate, record, process, and report financial data;
provided that the Company and its Subsidiaries make no representation or
warranty that such systems or internal accounting controls meet the standards of
companies subject to the Xxxxxxxx-Xxxxx Act of 2002, and such controls have not
been audited or certified (whether for the purpose of obtaining an SAS70 report
or otherwise) for purposes of compliance with the Xxxxxxxx-Xxxxx Act of 2002.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as disclosed in the Disclosure Schedules, Buyer represents and
warrants to the Company and the Sellers as of the date hereof and as of the
Closing Date, as follows:
5.01 Organization and Authority. Buyer is a limited liability company duly
organized and validly existing under the laws of the State of Oregon, with all
requisite power and authority and full legal capacity to execute and deliver
this Agreement and perform its obligations hereunder.
5.02 Authorization; Valid and Binding Agreement. This Agreement and the
other Transaction Documents have been duly authorized, executed and delivered by
Buyer. Assuming that this Agreement and the other Transaction Documents are
valid and binding obligations of the other parties thereto, this Agreement and
the other Transaction Documents constitute valid and binding obligations of
Buyer, enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy laws, other similar laws affecting creditors' rights and
general principles of equity affecting the availability of specific performance
and other equitable remedies.
5.03 No Breach. Buyer is not subject to or obligated under its
organizational documents, any applicable law, or rule or regulation of any
governmental authority, or any material agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction, judgment or
decree, which would be breached or violated in any material respect by Buyer's
execution, delivery or performance of this Agreement, the other Transaction
Documents or the consummation of the transactions contemplated hereby.
23
5.04 Governmental Consents, etc. Except for the applicable requirements of
the HSR Act, Buyer is not required to submit or obtain any notice, consent,
approval, authorization, report or other filing with any governmental or
regulatory authority in connection with the execution, delivery or performance
by it of this Agreement, the Transaction Documents or the consummation of the
transactions contemplated hereby or thereby. No material consent, approval or
authorization of any governmental or regulatory authority or any other party or
Person is required to be obtained by Buyer in connection with its execution,
delivery and performance of this Agreement, the Transaction Documents or the
consummation of the transactions contemplated hereby or thereby. Buyer is not
subject to any outstanding judgment, order or decree of any court or
governmental body.
5.05 Litigation. There are no actions, suits or proceedings pending or, to
Buyer's knowledge, threatened against or affecting Buyer at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau or agency, domestic or foreign, which would adversely
affect Buyer's performance under this Agreement or the consummation of the
transactions contemplated hereby.
5.06 Brokerage. Except as set forth on Section 5.06 of the Disclosure
Schedule, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Buyer.
5.07 Investment Representation. Buyer is purchasing the Shares for its own
account with the present intention of holding such securities for investment
purposes and not with a view to or for sale in connection with any public
distribution of such securities in violation of any federal or state securities
laws. Buyer is an "accredited investor" as defined in Regulation D promulgated
by the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"). Buyer acknowledges that it is informed as to the
risks of the transactions contemplated hereby and of ownership of the Shares.
Buyer acknowledges that the Shares have not been registered under the Securities
Act or any state or foreign securities laws and that the Shares may not be sold,
transferred, offered for sale, pledged hypothecated or otherwise disposed of
unless such transfer, sale, assignment, pledge, hypothecation or other
disposition is pursuant to the terms of an effective registration statement
under the Securities Act and are registered under any applicable state or
foreign securities laws or pursuant to an exemption from registration under the
Securities Act and any applicable state or foreign securities laws.
5.08 Financing. Buyer has (and at Closing will have) sufficient
unrestricted cash available, or commitments from reputable financial
institutions (true and complete copies of which are attached hereto as Exhibit
D), to enable Buyer to consummate the transactions contemplated by this
Agreement and to satisfy its obligations hereunder on and after the Closing
Date.
5.09 Tax Status. The Buyer's acquisition of the Shares will cause the
Company to become a member of the Affiliated Group of which the Buyer or an
Affiliate of the Buyer is a member.
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ARTICLE VI
COVENANTS
6.01 Conduct of the Business.
(a) From the date hereof until the Closing Date, except as otherwise
provided in or contemplated by this Agreement, the Company shall use its
commercially reasonable efforts to carry on its and its Subsidiaries' businesses
in the ordinary course of business (including collecting receivables and paying
payables) in all material respects and substantially in the same manner as
previously conducted unless Buyer shall have consented in writing (which consent
will not be unreasonably withheld or delayed); provided that, the foregoing
notwithstanding and except as provided in Section 6.01(c) below, the Company may
use all available Cash on Hand to repay the Indebtedness Payoff Amount and
Sellers' Expenses prior to the Closing.
(b) From the date hereof until the Closing Date, except as otherwise
provided for or contemplated by this Agreement, as set forth on Section 6.01(b)
of the Disclosure Schedules, as required by law or regulation or as consented to
in writing by Buyer (which consent will not be unreasonably withheld or
delayed), the Company shall not, and shall not permit any Subsidiary of the
Company to, (i) issue, sell or redeem any shares of its or any Subsidiary's
capital stock (other than the issuances of capital stock by the Company upon the
exercise of Warrants issued and outstanding as of the date hereof), (ii) issue,
sell or redeem any securities convertible into, or options with respect to,
warrants to purchase, or rights to subscribe for, any shares of its or any
Subsidiary's capital stock (other than redemptions paid in cash), (iii) effect
any recapitalization, reclassification, stock dividend, stock split or like
change in its capitalization or pay any dividend with respect to the Company's
capital stock (except for dividends in cash and dividends by the Subsidiaries to
other Subsidiaries or to the Company), (iv) amend its or any of its
Subsidiaries' certificate of incorporation or bylaws (or equivalent
organizational documents), (v) become legally committed to any new capital
expenditures requiring expenditures following the Closing Date in excess of
$250,000 in the aggregate, except for any expenditures pursuant to projects for
which work has already been commenced or committed or is otherwise contemplated
in the capital expenditure budget, (vi) sell, assign or transfer any portion of
its tangible assets except in the ordinary course of business, (vii) except in
the ordinary course of business consistent with past practice or as required by
any collective bargaining agreement or other written agreement in effect as of
the date hereof, grant any salary or wage increase to any officer of the Company
or its Subsidiaries, or modify or amend any Employee Benefit Plan in any manner
that increases the amount of the liability attributable to the Company or any
Subsidiary of the Company in respect of such Employee Benefit Plan, (viii)
except for new hires in the ordinary course of business and current employees in
the ordinary course of business, enter into any written employment agreement
with any of its or any Subsidiary's employees involving compensation in excess
of $50,000, (ix) decrease or eliminate any waiting time under the Old Plans (as
defined below), (x) decrease or eliminate any pre-existing condition exclusions
and actively-at-work requirements under the Old Plans, (xi) amend, terminate or
modify any Significant Contract (other than those set forth in subsection (xii)
below which shall be governed by that clause), except in the ordinary course of
business, excluding any ordinary course of business amendment, termination or
modification that materially and adversely impacts the Company or any
Subsidiary; (xii) amend, terminate or modify any agreement or contract with
Union Pacific, Xxxxxxx Wheels, or Kansas City Southern; (xiii) settle or
compromise a claim against any sellers or members under the Prior Acquisition
Agreement, or consent to a settlement claim with a third party regarding a claim
that could be or is subject to indemnity under the Prior Acquisition Agreement,
or amend, terminate or modify the Prior Acquisition Agreement; or (xiv)
authorize or enter into any agreement in furtherance of any of the foregoing.
25
(c) During the time period commencing immediately after 11:59 p.m.
(New York City time) on the day immediately preceding the Closing Date and
ending as of immediately prior to the Closing, the Company and its Subsidiaries
may only use its Cash on Hand to make the payments in respect of the
Indebtedness Payoff Amount, Sellers' Expenses and current liabilities set forth
in the Closing Statement and shall not make any other distributions or payments.
(d) From the date hereof until the Closing Date, except as consented
to in writing by the Buyer (which consent will not be unreasonably withheld or
delayed) or transfers to Affiliates, each Seller agrees not to transfer any
shares of the Company's capital stock; provided, however, in the case of a
transfer to an Affiliate, the Seller shall remain primarily liable for its
obligations and duties under this Agreement, including, without limitation, the
indemnification provisions, which provisions shall be governed and interpreted
as if the Seller had not made such transfer, the Percentage Share of such Seller
shall remain as it was on the date hereof and the proceeds received in respect
of Common, Preferred and the Warrants will be deemed to have been received by
such Seller rather than any transferee.
6.02 Access to Books and Records. From the date hereof until the Closing
Date, the Company shall provide Buyer and its authorized representatives
("Buyer's Representatives") with reasonable access at all reasonable times and
upon reasonable notice to the offices, properties, personnel, books and records
(including without limitation to all known environmental studies or similar
documentation of the Company and its Subsidiaries) of the Company and its
Subsidiaries in order for Buyer to have the opportunity to make such
investigation as it shall reasonably desire to make of the affairs of the
Company and its Subsidiaries. Each of Guarantor and Buyer acknowledges that it
and its representatives and advisors remain bound by the Confidentiality
Agreement, dated February 28, 2006, with the Company (the "Confidentiality
Agreement").
6.03 Regulatory Filings. The Company shall use commercially reasonable
efforts to make or cause to be made all material filings and submissions under
any laws or regulations applicable to the Company and its Subsidiaries for the
consummation of the transactions contemplated herein. The Company shall
coordinate and cooperate with Buyer in exchanging such information and
assistance as Buyer may reasonably request in connection with all of the
foregoing. The appropriate Sellers have made all filings under the HSR Act and
shall (i) use commercially reasonable efforts to make or cause to be made all
filings and submissions under the HSR Act and any other laws or regulations
applicable to them as may be required for the consummation of the transactions
contemplated herein, (ii) use commercially reasonable efforts to secure the
termination of any waiting periods under the HSR Act and (iii) shall be
responsible for the filing fees under the HSR Act and such other laws or
regulations as are applicable to it. Sellers shall coordinate and cooperate with
the Company and Buyer in exchanging such information and assistance as the
Company and Buyer may reasonably request in connection with all of the
foregoing.
6.04 Conditions. The Company and its Subsidiaries and the Sellers shall use
commercially reasonable efforts to, and the Sellers shall use their commercially
reasonable efforts to cause the Company and its Subsidiaries to, cause the
conditions set forth in Section 2.01 to be satisfied and to consummate the
transactions contemplated herein; provided that, notwithstanding anything in
this Agreement to the contrary, for the avoidance of doubt, the "commercially
reasonable efforts" of the Sellers (or any Seller), the Company (prior to
Closing) and/or any Subsidiary of the Company (prior to Closing) shall not
require any of them to make a material expenditure to any third party to satisfy
the conditions set forth in Section 2.01.
6.05 Notification.
26
(a) From the date hereof until the Closing Date, promptly upon
discovery thereof by the Company or the Seller Representative, and in any event,
prior to the Closing Date, the Company and the Seller Representative shall
disclose to Buyer in writing (i) any variances from the representations and
warranties contained in Article III and Article IV, as applicable, that
individually, or in the aggregate, would reasonably be expected to exceed
$1,000,000 (but that are not required to be disclosed pursuant to clause (ii)
hereof), in the form of updates and/or modifications to the Disclosure Schedules
(such update, a "Significant Update") and (ii) any variances, in the Company's
or the Seller Representative's good faith judgment, that would reasonably be
expected to permit the Buyer to refuse to close the transactions contemplated by
this Agreement pursuant to Section 2.01(a) (such update, an "MAE Update"). The
Company or the Seller Representative, as applicable, shall indicate in its
disclosure which items are Significant Updates and which items are MAE Updates.
(b) The disclosures set forth in a Significant Update shall amend and
supplement the appropriate schedules delivered on the date hereof and as of the
Closing Date and shall otherwise amend or modify the representations and
warranties contained in Article III and Article IV, provided that, subject to
Section 6.05(d), the delivery of any such Significant Update shall not prevent
Buyer from having any claim for indemnification pursuant to Section 9.02(a)(i)
or 9.02(a)(ii) against the Sellers or the Company for any such variance or
inaccuracy and the Buyer Indemnified Parties shall be entitled to such
indemnity.
(c) Within ten business days after delivery by the Company or the
Seller Representative of the disclosures pursuant to Section 6.05(a), or if
delivered less than ten business days prior to Closing, at any time up to
Closing, Buyer shall provide the Seller Representative with written notice if,
in the Buyer's good faith judgment, any one or any combination of the
Significant Updates permit the Buyer to refuse to close the transactions
contemplated by this Agreement pursuant to Section 2.01(a) (a "Claimed MAE
Update").
(d) Notwithstanding any provision in this Agreement to the contrary,
in the event that the Closing occurs, the Buyer shall be deemed to have accepted
the disclosures set forth in any MAE Update and/or Claimed MAE Update, and such
updates shall be deemed to have cured any misrepresentation or breach of
warranty that otherwise might have existed hereunder by reason of such variance
or inaccuracy, and Buyer shall not have any claim (whether for indemnification
or otherwise) against the Sellers or the Company for any such variance or
inaccuracy.
6.06 Exclusivity. Until the earlier of the Closing Date and the date that
this Agreement is terminated by its terms, Sellers will not, and will cause the
Company and its Subsidiaries not to, through any representative or otherwise,
solicit or entertain offers from, negotiate with or in any manner encourage,
discuss, or accept any proposal of any other Person relating to the acquisition
of (i) the shares of the Company or any Subsidiary or (ii) all or substantially
all of the assets or business, in whole or in part, of the Company and its
Subsidiaries, in each case whether directly or indirectly, through purchase,
acquisition, consolidation, or otherwise (other than sales or purchases of
inventory in the ordinary course), other than with Buyer, its Affiliates and
their representatives. The Company will promptly notify Buyer of any contact
between the Company or its representatives and any other Person regarding any
such offer or proposal or any related inquiry.
6.07 Tax Matters. Without the prior written consent of Buyer, neither the
Company nor any of its Subsidiaries shall make or change any Tax election,
change an annual accounting period, adopt or change any accounting method, file
any amended Tax Return, enter into any closing agreement, settle any Tax claim
or assessment relating to the Company or any of its Subsidiaries, surrender any
right to claim a refund of Taxes, consent to any extension or waiver of the
limitation period applicable to any Tax claim
27
or assessment relating to the Company or any of its Subsidiaries, or take any
other similar action relating to the filing of any Tax Return or the payment of
any Tax, if such election, adoption, change, amendment, agreement, settlement,
surrender, consent or other action would have the effect of increasing the Tax
liability of the Company or any of its Subsidiaries for any period ending after
the Closing Date or decreasing any Tax attribute of the Company or any of its
Subsidiaries existing on the Closing Date.
6.08 Non-Solicitation. For a period of eighteen months from and after the
Closing Date, each of the Sellers will not contact, approach or solicit for the
purpose of offering employment to or hiring (whether as an employee, consultant,
advisor, agent, independent contractor or otherwise) or actually hire any of the
Key Employees of the Company or any of its Subsidiaries; provided, however, that
the foregoing provision shall not (i) restrict any such Person from making any
general solicitation for employees or public advertising of employment
opportunities not specifically targeted at any such persons, (ii) preclude any
such Person from soliciting and/or hiring any Key Employee who has voluntarily
terminated his or her employment with the Company and its Subsidiaries at least
six months earlier or (iii) preclude any such Person from soliciting and/or
hiring any Key Employee at any time after such Key Employee's employment with
the Company and/or any of its Subsidiaries is terminated by the Company and/or
any such Subsidiary. For purposes hereof, "Key Employees" shall mean Xxxx
Xxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxxxx, Xxx Xxxxxxx and the
plant managers listed on Schedule 6.08. With respect to any Seller who is also
an employee of the Company, for the avoidance of doubt, the covenants set forth
in this Section 6.08 are in addition to, rather than in lieu of, any similar
covenant or agreement which is otherwise binding on such Seller.
6.09 Release of Claims. Each of the Company and Buyer releases and forever
discharges the Sellers and their officers, directors, shareholders and
Affiliates, from any and all actions, causes of action, suits, debts, accounts,
claims, contracts, demands, agreements, controversies, judgments, obligations,
damages and liabilities of any nature whatsoever, in law or in equity, whether
currently known or unknown, suspected or claimed, whether pursuant to contract,
statute or otherwise, in each case, arising out of events prior to the Closing
(other than, in the case of the Company's and Subsidiaries' officers and
directors, for breach of their fiduciary duty to the Company or its
Subsidiaries). Nothing herein shall deprive either the Company, the Sellers or
the Buyer of the right to pursue any remedy or otherwise to assert any claim
arising out of this Agreement, the Transaction Documents, or the transactions
contemplated hereby or thereby.
6.10 Withholding Obligations. The Company or its Subsidiaries, as
applicable, shall deduct and withhold from any consideration payable pursuant to
this Agreement to any employee receiving bonuses in connection with this
transaction such amounts as they are required to deduct and withhold with
respect to the making of such payments under applicable law. The Company shall
only pay over all amounts that are so withheld to the appropriate government
authority.
ARTICLE VII
COVENANTS OF BUYER
7.01 Access to Books and Records. From and after the Closing, Buyer shall,
and shall cause the Company to, provide the Seller Representative, the Sellers
and their authorized representatives with reasonable access at Seller's expense
(for the purpose of examining and copying) at all reasonable times and upon
reasonable notice to the books and records of the Company and its Subsidiaries
with respect to periods prior to the Closing Date and/or in connection with any
matter relating to or arising out of this Agreement or the transactions
contemplated hereby. Unless otherwise consented to in writing by the
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Seller Representative, Buyer shall not permit the Company or any of its
Subsidiaries, for a period of seven years following the Closing Date, to
destroy, alter or otherwise dispose of any of its books and records, or any
portions thereof, relating to periods prior to the Closing Date and/or matters
relating to this Agreement and the transactions contemplated hereby without
first giving at least thirty (30) days prior written notice to the Seller
Representative and offering to surrender to the Seller Representative such books
and records or such portions thereof. For purposes of the preceding sentence,
any notice from Buyer delivered in accordance with this Section 13.04 shall be
deemed to be implicit consent if not responded to in writing by the Seller
Representative within sixty (60) days.
7.02 Director and Officer Liability and Indemnification.
(a) After the Closing, Buyer shall cause the Company to continue to
indemnify and hold harmless each present and former director and officer of the
Company and its Subsidiaries against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities of
any nature whatsoever, incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to Closing, whether asserted or claimed prior to, at or after the
Closing (a "Proceeding"), to the fullest extent that the Company or any of its
Subsidiaries would have been permitted under applicable law and the certificates
of incorporation and by-laws of the Company and its Subsidiaries in effect on
the date hereof to indemnify such person (including the advancing of expenses as
incurred to the fullest extent permitted under applicable law); provided,
however, the person to whom such expenses are advanced provides an unsecured
undertaking to the Company to repay such advances if it is ultimately determined
that such person is not entitled to indemnification; and provided, further, that
any determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under applicable law
and/or the applicable certificate of incorporation and by-laws of the Company or
its Subsidiary providing such indemnity shall be made by independent counsel
selected by the Company and Buyer and reasonably acceptable to the indemnified
person; and provided, further, that such indemnification and advancement of
expenses shall not apply to any Proceeding (or part of any Proceeding) which is
first initiated by such person (other than in response to a third party claim,
in connection with an appeal or if another party has initiated a Proceeding on
the same matter previously), or any Proceeding by such person against the
Company, any Subsidiary or its directors, officers, employees or other persons
entitled to be indemnified by the Corporation.
(b) For a period of six years after the Closing, Buyer shall not, and
shall not permit the Company or any of its Subsidiaries to amend, repeal or
modify any provision in the Company's or such Subsidiary's certificate or
articles of incorporation or bylaws (or other organizational documents) relating
to the exculpation or indemnification of any officers and directors (unless
required by law), to the extent that such amendment, repeal or modification
would adversely affect the rights of directors or officers under Section
7.02(a).
(c) In the event that after the Closing Date, Buyer or the Company, or
their respective successors or assigns, (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then, and in each case, Buyer and the
Company shall use their reasonable efforts to make proper provision that the
successors and assigns of Buyer or the Company, as the case may be, honor the
indemnification and other obligations of such Persons under this Section 7.02.
29
7.03 Release of Claims. Each of the Sellers releases and forever discharges
the Company, its Subsidiaries and their officers, directors, shareholders and
Affiliates, from any and all actions, causes of action, suits, debts, accounts,
claims, contracts, demands, agreements, controversies, judgments, obligations,
damages and liabilities of any nature whatsoever, in law or in equity, whether
currently known or unknown, suspected or claimed, whether pursuant to contract,
statute or otherwise, in each case, arising out of events prior to the Closing,
including, without limitation, any claims with respect to the Shares or
Warrants. Nothing herein shall deprive any Seller of the right to pursue any
remedy or otherwise to assert any claim arising out of this Agreement, the
Transaction Documents, or the transactions contemplated hereby or thereby.
7.04 Regulatory Filings. Buyer has made all filings under the HSR Act and
shall (i) use commercially reasonable efforts to make or cause to be made all
filings and submissions under the HSR Act and any other laws or regulations
applicable to Buyer as may be required of Buyer for the consummation of the
transactions contemplated herein, (ii) use commercially reasonable efforts to
secure the termination of any waiting periods under the HSR Act and (iii) be
responsible for all filing fees under the HSR Act and such other laws or
regulations as are applicable to Buyer. Buyer shall coordinate and cooperate
with the Company in exchanging such information and assistance as the Company
may reasonably request in connection with all of the foregoing.
7.05 Conditions. Buyer shall use commercially reasonable efforts to cause
the conditions set forth in Section 2.02 to be satisfied and to consummate the
transactions contemplated herein, provided that, notwithstanding anything in
this Agreement to the contrary, for the avoidance of doubt, the "commercially
reasonable efforts" of Buyer shall not require it to make a material expenditure
to any third party to satisfy the conditions set forth in Section 2.02.
7.06 Contact with Customers and Suppliers. Prior to the Closing, Buyer and
Buyer's Representatives shall contact and communicate with the employees,
customers and suppliers of the Company and its Subsidiaries in connection with
the transactions contemplated hereby only with the prior written consent of the
Company.
7.07 Employee Benefits. For a period of 12 months following the Closing
Date, Buyer and its Affiliates shall provide each employee who was an employee
of the Company or any Subsidiary of the Company as of June 30, 2006 with base
compensation and target bonuses that are at least as favorable as that provided
immediately prior to June 30, 2006 and employee benefits that are substantially
similar in the aggregate as that provided by the Company as of June 30, 2006.
The structure of the bonus plan for such employees for the 2007 calendar year
shall be as set forth on Section 7.07 of the Disclosure Schedules.
Notwithstanding the preceding two sentences, to the extent that any such
employees are terminated for a reason other than "cause" during such 12-month
period, Buyer or its Affiliates shall provide such employees with severance pay
in an amount equal to up to eight weeks base compensation as provided in the
Company's severance policy in existence as of the date hereof; provided that in
the case of Xxxx Xxxxxx, Xxxxx Xxxxxxxxx and Xxxxxxx Xxxxxxx, Buyer or its
Affiliates will comply with the terms of such employee's employment agreements
with respect to any severance amounts that may become due and payable under the
terms of such agreement, if any. If Buyer or any of its Affiliates transfers any
employees of the Company or any Subsidiary to a New Plan (as defined below), for
eligibility and vesting purposes under such New Plan, each employee who is as of
the Closing Date an employee of the Company or any of its Subsidiaries shall be
credited with his or her years of service with the Company or such Subsidiary,
as applicable, except to the extent such credit would result in a duplication of
benefits. In such event, and without limiting the generality of the foregoing:
(i) each employee shall be immediately eligible to participate, without any
waiting time, in any and all employee benefit plans sponsored by
30
Buyer and its Affiliates for the benefit of employees (such plans, collectively,
the "New Plans") to the extent coverage under such New Plan replaces coverage
under a comparable employee benefit plan in which such employee participated
immediately before the Closing Date (such Plans, collectively, the "Old Plans"),
unless such waiting time applied under the Old Plans; and (ii) for purposes of
each New Plan providing medical, dental, pharmaceutical or vision benefits to
any employee, Buyer shall cause all pre-existing condition exclusions and
actively-at-work requirements of such New Plan to be waived for such employee
and his or her covered dependents (unless such exclusions or requirements
applied under the Old Plans), and (iii) Buyer shall cause any eligible expenses
incurred by such employee and his or her covered dependents during the portion
of the plan year of the Old Plan ending on the date such employee's
participation in the corresponding New Plan begins to be taken into account
under such New Plan for purposes of satisfying all deductible, coinsurance and
maximum out-of-pocket requirements applicable to such employee and his or her
covered dependents for the applicable plan year, as if such amounts had been
paid in accordance with such New Plan.
7.08 Letters of Credit. Concurrently with the Closing, Buyer will arrange
to replace all of the Company's letters of credit set forth on Section 7.08 of
the Disclosure Schedules to the extent such letters of credit are terminated at
or prior to the Closing in connection with the transactions contemplated hereby.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by the mutual written consent of Buyer and the Seller
Representative;
(b) by Buyer, (i) if there has been a violation or breach by the
Company or the Sellers of any covenant, representation or warranty contained in
this Agreement (without giving effect to any Significant Update or MAE Update)
which would prevent the satisfaction of any condition to the obligations of
Buyer at the Closing and such violation or breach has not been waived by Buyer
or cured by the Company or the Sellers within ten days after written notice
thereof from Buyer or (ii) if Buyer has been provided with any MAE Update;
(c) by the Seller Representative, if there has been a violation or
breach by Buyer of any covenant, representation or warranty contained in this
Agreement which would prevent the satisfaction of any condition to the
obligations of the Sellers at the Closing and such violation or breach has not
been waived by the Seller Representative or cured by Buyer within ten days after
written notice thereof by the Seller Representative (provided that the failure
of Buyer to deliver the consideration pursuant to Section 1.03 at the Closing as
required hereunder shall not be subject to cure hereunder unless otherwise
agreed to in writing by the Seller Representative); or
(d) by either Buyer or the Seller Representative if the Closing has
not occurred on or before November 14, 2006; provided that neither Buyer nor the
Seller Representative shall be entitled to terminate this Agreement pursuant to
this Section 8.01(d) if such Person's (or the Company's or any Seller's in the
case of the Seller Representative) knowing or willful breach of this Agreement
has prevented the consummation of the transactions contemplated hereby.
The party desiring to terminate this Agreement pursuant to clauses (b), (c) or
(d) of this Section 8.01 shall give written notice of such termination to the
other parties hereto.
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8.02 Effect of Termination. In the event of termination of this Agreement
by either Buyer or the Seller Representative as provided above, the provisions
of this Agreement shall immediately become void and of no further force and
effect (other than this Section 8.02, Section 7.06 and Article XIII and the
Confidentiality Agreement which shall survive the termination of this
Agreement), and there shall be no liability on the part of any of Buyer, the
Company, or the Sellers to one another, except for willful breaches of this
Agreement prior to the time of such termination.
ARTICLE IX
INDEMNIFICATION
9.01 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements set forth in this Agreement and in any
certificates delivered at the Closing in connection with this Agreement shall
survive the Closing until November 30, 2007 (the "Survival Period") and shall
thereafter be of no further force or effect. Notwithstanding the foregoing, (a)
the representations and warranties set forth in Sections 3.06, 4.04 and 4.08
(the "Fundamental Representations and Warranties") shall survive until sixty
days after the expiration of the longest applicable statute of limitations, or
if there is no applicable statute of limitations, six years after the Closing
Date and (b) any covenants of any party which by their terms are to be performed
or observed on or following the Closing (including, without limitation, the tax
indemnifications and covenants set forth in Section 11.03) shall survive the
Closing until fully performed or observed in accordance with their terms. Except
as expressly provided in the immediately preceding sentence, no claim for
indemnification hereunder may be made after the expiration of the applicable
survival period, provided, that the final resolutions of any claim for
indemnification pending as of the relevant date specified in this Section 9.01
shall survive until its final resolution; and provided, further that if events
or circumstances which are the basis for a claim for indemnification by a Buyer
Indemnified Party also constitute a basis for a claim for indemnification by the
Company or any Subsidiary against the sellers or members in the Prior
Acquisition Agreement, a Buyer Indemnified Party shall be entitled to preserve
its right to indemnification under this Agreement by submitting to the Seller
Representative a written notice of the basis for the claim at any time prior to
the expiration of any applicable survival period and such claim shall survive
until its final resolutions under this Agreement and the Prior Acquisition
Agreement.
9.02 Indemnification by the Sellers for the Benefit of Buyer.
(a) Subject to the provisions of Section 6.05(d) and this Article IX,
from and after the Closing, the Sellers, severally and not jointly, shall
defend, indemnify and hold harmless Buyer, the Company and its Subsidiaries,
each of its respective officers, directors, partners, members, employees,
agents, representatives, successors and permitted assigns, (collectively, the
"Buyer Indemnified Parties") against any actual losses, out-of-pocket costs,
dues, obligations, fees (including court costs and reasonable attorneys' fees
and expenses), expenses, liabilities or other damages (collectively, "Losses"),
which the Buyer Indemnified Parties suffer as a result of, arise out of, or in
connection with any actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees or
rulings relating to (i) any breach by the Company of any representation and
warranty of the Company contained in Article IV, the Disclosure Schedules or any
certificate delivered by or on behalf of the Company hereunder at or prior to
the Closing, (ii) any breach by any Seller of any representation and warranty of
such Seller contained in Article III or the Disclosure Schedules, (iii) any
breach of any covenant or agreement contained in this Agreement to be performed
or complied with by the Company at or prior to the Closing, (iv) any breach of
any covenant or agreement contained in this Agreement to be performed or
complied with by any Seller, or (v)(1) governmental penalties and fines
32
levied against the Company or its Subsidiaries with respect to the matters set
forth in items 4 and 5 of Section 4.11 of the Disclosure Schedules, (2) the
claims listed on items 1 and 2 of Section 4.11 of the Disclosure Schedules and
(3) subject to the cap on liability set forth in the EB Side Letter, item 26 of
Section 4.13(a) of the Disclosure Schedules. Subject to the other terms,
conditions and restrictions contained herein, each Seller shall be responsible
for paying such Seller's Percentage Share of any such Losses suffered by any
Buyer Indemnified Party. Notwithstanding the foregoing, however, the
representations, warranties, covenants and agreements contained in this
Agreement that relate specifically and solely to a particular Seller are the
obligations of that particular Seller only and the other Sellers shall not be
responsible therefore. This means that the particular Seller making any such
representation, warranty, covenant or agreement contained in this Agreement
shall be solely responsible for any Losses the Buyer Indemnified Parties suffer
as a result of any breach of any such representations, warranties, covenants and
agreements by such Seller.
(b) Notwithstanding any other provision in this Agreement to the
contrary, Sellers shall have no liability under Sections 9.02(a)(i)-(iv) above,
unless (i) the Loss with respect to such matter or series of related matters is
$30,000 or greater (the "Per Item Threshold"), it being understood such Losses
with respect to a matter or series of related matters may not be applied toward
satisfaction of the Deductible unless the Losses with respect to a matter or
series of related matters exceeds the Per Item Threshold (in which event,
subject to all of the other limitations and restrictions contained in this
Agreement, all Losses with respect to such matter or series of related matters
are indemnifiable hereunder and may be applied against the Deductible) and (ii)
the aggregate of all Losses for which the Sellers would be liable, but for this
section, exceeds on a cumulative basis $1,000,000 (the "Deductible"), and then
only to the extent such Losses exceed the Deductible; provided that the Sellers'
aggregate liability under Sections 9.02(a)(i)-(iv) shall in no event exceed an
amount equal to $10,000,000 (the "Cap"); provided further that (x) the Cap shall
not apply to Losses (and such Losses shall be disregarded in determining whether
the Cap has been reached) resulting from breaches of the Fundamental
Representations and Warranties, fraud, the willful breach of Sections 6.01(c),
6.08 and 7.03, indemnification payments made pursuant to Section 11.03 or the
indemnity obligations under Section 9.02(a)(v), and (y) the Deductible shall not
apply to Losses resulting from fraud, the willful breach of Sections 6.01(c),
6.08 and 7.03, to indemnification payments made under Section 11.03 or the
indemnity obligations under Section 9.02(a)(v). Except in the case of fraud, in
no event shall the aggregate liability of any Seller for all Losses claimed
under this Section 9.02 by the Buyer Indemnified Parties against such Seller
exceed such Seller's proceeds received in respect of Common, Preferred and the
Warrants. Notwithstanding any provision of this Agreement to the contrary, any
indemnity to Buyer arising from a breach of Section 1.04(c)(iii) shall not be
subject to the limits set forth in this Article IX.
(c) Notwithstanding anything to the contrary herein, for purposes of
the indemnities in this Section 9.02, each representation and warranty made by
any Seller or the Company is made without any qualifications or limitations as
to materiality (including, without limitation, any qualifications or limitations
made by reference to a Material Adverse Effect) and, without limiting the
foregoing, the words "material" and words of similar import shall be deemed
deleted from any such representation and warranty for such purpose.
(d) Notwithstanding any other provision in this Agreement to the
contrary, the Sellers shall not be liable to, or indemnify, the Buyer
Indemnified Parties for any Losses (i) to the extent that such Losses result
from actions taken by Buyer Indemnified Parties or the Company, its Subsidiaries
or any of their respective Affiliates from and after the Closing Date, (ii) that
are punitive, special, consequential, incidental, exemplary or otherwise not
actual damages, in the nature of lost profits, or any diminution in value of
property or equity, except solely to the extent actually owed to unrelated third
33
parties or (iii) related to any matter that was taken into account in and
resolved in writing as part of the resolution of the final determination of Net
Working Capital or the Pre-Closing Tax Amount pursuant to Section 1.04 hereof.
The Buyer Indemnified Parties shall not use "multiple of profits" or "multiple
of cash flow" or any similar valuation methodology in calculating the amount of
any Losses. Except as provided in Section 11.03, this Section 9.02 constitutes
the Buyer Indemnified Parties' sole and exclusive remedy for any and all Losses
or other claims relating to or arising from this Agreement and the transactions
contemplated hereby, provided that, notwithstanding anything to the contrary
contained in this Agreement, none of the foregoing limitations set forth in this
Section 9.02 shall apply or reduce any Buyer Indemnified Parties' right to
recover any Losses that such Buyer Indemnified Party may have at law or equity
based on the Sellers' fraudulent acts.
(e) The Buyer Indemnified Parties shall take, and shall cause the
Company and its Subsidiaries to use all commercially reasonable efforts to
mitigate all Losses upon and after becoming aware of any event which could
reasonably be expected to give rise to Losses.
(f) The Buyer Indemnified Parties shall not be entitled to recover any
Losses relating to any matter arising under one provision of this Agreement to
the extent that the Buyer Indemnified Parties had already recovered Losses with
respect to such matter pursuant to other provisions of this Agreement.
(g) Any indemnity payment under this Agreement shall be treated as an
adjustment to the Final Common Purchase Price for Tax purposes.
9.03 Indemnification by Buyer for the Benefit of the Sellers. From and
after the Closing Date, Buyer shall indemnify the Sellers and their officers,
directors, partners, members, employees, agents, representatives, successors and
permitted assigns (collectively, the "Seller Indemnified Parties") against any
Losses which the Seller Indemnified Parties suffer as a result of: (a) any
breach of any representation or warranty of Buyer under this Agreement or any
certificate delivered by or on behalf of Buyer hereunder, (b) any
non-fulfillment or breach of any covenant, agreement or other provision set
forth in this Agreement to be performed by Buyer and/or, from and after the
Closing, the Company or any of its Subsidiaries, and (c) any claim or suit
brought against any of the Seller Indemnified Parties at any time on or after
the Closing Date to the extent arising from actions taken by Buyer or a Company
or any of its Subsidiaries on or after the Closing Date other than any claim or
action by Buyer pursuant to Section 9.02 relating to any breach by any of the
Seller Indemnified Parties.
9.04 Manner of Payment. Any indemnification payment pursuant to this
Article IX shall be effected by wire transfer of immediately available funds
from the applicable indemnifying party to an account designated by each
applicable indemnified party within 7 days after the determination thereof.
9.05 Defense of Third Party Claims. Any Person making a claim for
indemnification under this Section 9.02 or Section 9.03 (an "Indemnitee") shall
notify the indemnifying party (an "Indemnitor") of the claim in writing promptly
after receiving notice of any action, lawsuit, proceeding, investigation, demand
or other claim against the Indemnitee (if by a third party), describing the
claim (including what provision of this Agreement the claim is being made
under), the amount thereof (if known and quantifiable) and the legal and factual
basis thereof in reasonable detail (such written notice, an "Indemnification
Notice"); provided that the failure to so notify an Indemnitor shall not relieve
the Indemnitor of its obligations hereunder except to the extent that (and only
to the extent that) such failure shall have caused the damages for which the
Indemnitor is obligated to be greater than such damages would have been had the
Indemnitee given the Indemnitor prompt notice hereunder. Any Indemnitor
34
shall be entitled to participate in the defense of such action, lawsuit,
proceeding, investigation or other claim giving rise to an Indemnitee's claim
for indemnification at such Indemnitor's expense, and at its option shall be
entitled to assume the defense thereof by appointing a reputable counsel
reasonably acceptable to the Indemnitee to be the lead counsel in connection
with such defense; provided that the Indemnitee shall be entitled to participate
in the defense of such claim and to employ counsel of its choice for such
purpose; provided however, that the fees and expenses of such separate counsel
shall be borne by the Indemnitee and shall not be recoverable from such
Indemnitor under this Article IX. If the Indemnitor shall control the defense of
any such claim, the Indemnitor shall be entitled to settle such claims; provided
that the Indemnitor shall obtain the prior written consent of the Indemnitee
(which consent shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other equitable relief
will be imposed against the Indemnitee or if such settlement does not expressly
and unconditionally release the Indemnitee from all liabilities and obligations
with respect to such claim. In all cases, the Indemnitee shall provide its
reasonable cooperation with the Indemnitor in defense of claims or litigation,
including by making employees, information and documentation reasonably
available. If the Indemnitor shall not assume the defense of any such action,
lawsuit, proceeding, investigation or other claim, the Indemnitee may defend
against such matter as it deems appropriate; provided that the Indemnitee may
not settle any such matter without the written consent of the Indemnitor (which
consent shall not be unreasonably withheld) if the Indemnitee is seeking or will
seek indemnification hereunder with respect to such matter.
9.06 Determination of Loss Amount. The amount of any Loss subject to
indemnification under Section 9.02, Section 9.03 or Section 11.03 shall be
calculated net of (i) any Tax Benefit actually received by the Indemnitee on
account of such Loss, (ii) any reserves for current accounts set forth in the
Closing Statement to the extent such reserves were increased since the Latest
Balance Sheet (to the extent not already covered by Section 9.02(d)(iii)) and
(iii) any Net Insurance Proceeds or other amounts under indemnification
agreements actually received by the Indemnitee on account of such Loss,
including without limitation that certain Stock Purchase Agreement dated
November 1, 2004 by and among the Company, certain of its Subsidiaries and the
sellers party thereto (the "Prior Acquisition Agreement"). If the Indemnitee
receives a Tax Benefit on account of such Loss after an indemnification payment
is made to it, the Indemnitee shall promptly pay to the Person or Persons that
made such indemnification payment the amount of such Tax Benefit at such time or
times as and to the extent that such Tax Benefit is realized by the Indemnitee.
For purposes hereof, "Tax Benefit" shall mean any refund of Taxes actually paid
or actual reduction in the amount of Taxes which otherwise would have been paid.
To the extent that a Tax Benefit could give rise to a refund of Taxes, the
Indemnitee shall take all reasonable steps to claim such a refund. The
Indemnitee shall use commercially reasonable efforts to seek recovery under all
insurance policies and/or indemnification agreements covering any Loss to the
same extent as they would if such Loss were not subject to indemnification
hereunder (which may, to the extent commercially reasonable, include commencing
litigation against the insurer or indemnifying parties under such
indemnification agreement); provided, however, (x) the Indemnitee shall obtain
the prior written consent of the Indemnitor (not to be unreasonably withheld)
before entering into any settlement of a claim under any indemnity agreement or
provision (including, without limitation, under the Prior Acquisition Agreement)
if the amount of such settlement does not fully satisfy all Losses relating to
or arising from such claim, and (y) once indemnity for any Loss is sought by a
Buyer Indemnified Party under any applicable indemnification provision of the
Prior Acquisition Agreement and such Loss remains unsatisfied for a period of
not less than 180 days, the Buyer Indemnified Party shall be entitled to pursue
indemnification under the provisions of this Agreement. The fees and expenses
incurred by the Company or any Subsidiary in using commercially reasonable
efforts to seek recovery under all insurance policies and/or indemnification
agreements covering any Loss, including under the Prior Acquisition Agreement,
shall be included in the definition of Losses under this Agreement. To the
extent indemnity is not available under
35
the Prior Acquisition Agreement for any reason, it shall in no way effect,
limit, reduce, diminish or modify in any way the indemnification obligations and
rights under this Agreement. In the event that an insurance or other recovery is
made by any Indemnitee with respect to any Loss for which any such Person has
been indemnified hereunder, then a refund equal to the aggregate amount of the
recovery shall be made promptly to the Person or Persons that provided such
indemnity payments to such Indemnitee. The Indemnitors shall be subrogated to
all rights of the Indemnitees in respect of any Losses indemnified by the
Indemnitors (including, without limitation, pursuant to all indemnification
rights and obligations arising under other agreements, including the Prior
Acquisition Agreement). For Tax purposes, the parties agree to treat all
payments made under this Article IX as adjustments to the Final Common Purchase
Price. "Net Insurance Proceeds" shall mean the value of the Insurance Proceeds
(defined below) in excess of the present value (discounted at the applicable
rate) of any material increase in the annual premiums on such insurance policy
against which the claim was made for the succeeding three-year period which was
directly related to the Loss. "Insurance Proceeds" include the insurance
recoveries that the Indemnitee in fact receives as a consequence of the
circumstances to which the Losses are related or from which the Losses resulted
or arose, excluding any amounts which are in effect self-insured whether through
retention amounts or otherwise.
9.07 Dispute Procedures. Each party hereto expressly and irrevocably
consents and submits to the jurisdiction and venue of any state or federal court
sitting in Multnomah County, Oregon, in any action or proceeding arising out of
or relating to this Agreement or the Transaction Documents and agrees that all
claims in respect of the action or proceeding may be heard and determined in
such court and to the appellate courts in connection with any appeal. The
parties expressly waive all defenses of lack of personal jurisdiction, improper
venue and forum non-conveniens with respect to such federal and state courts
sitting within Multnomah County, Oregon. The parties expressly consent to (i)
service of process being effected upon them by certified mail sent to the
addresses set forth in this Agreement and (ii) any final judgment rendered
against a party in any action or proceeding being enforceable in other
jurisdictions in any manner provided by law. The rendering of any decision
pursuant to this Section 9.07 will determine the allocation of the costs and
expenses of such litigation based upon the percentage which the portion of the
contested amount not awarded to each party bears to the amount actually
contested by such party. For example, if Buyer submits a claim for $1,000, and
if the applicable Seller(s) (or the Seller Representative, as the case may be)
contest only $500 of the amount claimed by Buyer, and if the court ultimately
resolves the dispute by awarding Buyer $300 of the $500 contested, then the
costs and expenses of litigation will be allocated 60% (i.e., 300 / 500) to the
Sellers and 40% (i.e., 200 / 500) to Buyer.
9.08 Escrow. Notwithstanding anything herein to the contrary with respect
to claims for indemnity under Section 9.02, the Buyer Indemnified Parties shall
first exhaust the Escrow Amount held by the Escrow Agent before proceeding to
recover an indemnification claim against the Sellers.
9.09 Termination of Indemnification. The obligations to indemnify and hold
harmless a party hereto in respect of a breach of representation, warranty,
covenant agreement shall terminate when the applicable representation or
warranty or covenant terminates pursuant to Section 9.01; provided, however,
that such obligations to indemnify and hold harmless shall not terminate with
respect to any item as to which the party to be indemnified shall have, prior to
the expiration of the applicable survival period, previously made a claim by
delivering any required written notice hereunder to the indemnifying party.
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ARTICLE X
SELLER REPRESENTATIVE
10.01 Designation. The Seller Representative is hereby designated by each
of the Sellers to serve as the representative of the Sellers with respect to the
matters expressly set forth in this Agreement to be performed by the Seller
Representative.
10.02 Authority. Each of the Sellers, by the execution of this Agreement,
hereby irrevocably appoints the Seller Representative as the agent, proxy and
attorney-in-fact for such Seller for all purposes of this Agreement (including
the full power and authority on such Seller's behalf (i) to consummate the
transactions contemplated herein; (ii) to pay such Seller's expenses incurred in
connection with the negotiation and performance of this Agreement (whether
incurred on or after the date hereof); (iii) to receive and disburse any funds
received hereunder or pursuant to the Holdback Agreement to such Seller and each
other Seller; (iv) to endorse and deliver any certificates or instruments
representing the Shares and execute such further instruments of assignment as
Buyer shall reasonably request; (v) to execute and deliver on behalf of such
Seller any amendment or waiver hereto; (vi) to take all other actions to be
taken by or on behalf of such Seller in connection herewith; (vii) to act for
such Seller with regard to matters pertaining to indemnification referred to in
this Agreement, including the power to compromise any indemnity claim on behalf
of such Seller and to transact matters of litigation, and to act for such Seller
under the Holdback Agreement; and (viii) to do each and every act and exercise
any and all rights which such Seller or the Sellers collectively are permitted
or required to do or exercise under this Agreement). Each of the Sellers agrees
that such agency and proxy are coupled with an interest, are therefore
irrevocable without the consent of the Seller Representative and shall survive
the death, incapacity, bankruptcy, dissolution or liquidation of any Seller. All
decisions and actions by the Seller Representative (to the extent authorized by
this Agreement) shall be binding upon all of the Sellers, and no Seller shall
have the right to object, dissent, protest or otherwise contest the same;
provided, however, that the Seller Representative shall not take any such action
where (x) any single Seller would be held solely liable for a Loss (without such
Seller's consent) or (y) such action materially and adversely affects the
substantive rights or obligations of one Seller, or group of Sellers, without a
similar proportionate effect upon the substantive rights or obligations of all
Sellers, unless each such disproportionately affected Seller consents in writing
thereto.
10.03 Authority; Indemnification. Each Seller agrees that Buyer shall be
entitled to rely on any action taken by the Seller Representative, on behalf of
such Seller, pursuant to Section 10.02 above (an "Authorized Action"), and that
each Authorized Action shall be binding on each Seller as fully as if such
Seller had taken such Authorized Action. Buyer agrees that the Seller
Representative, as the Seller Representative, shall have no liability to Buyer
for any Authorized Action, except to the extent that such Authorized Action is
found by a final order of a court of competent jurisdiction to have constituted
fraud or willful misconduct. Each Seller hereby severally, for itself only and
not jointly and severally, agrees to indemnify and hold harmless the Seller
Representative against all expenses (including reasonable attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the Seller Representative in connection with any action, suit or proceeding
to which the Seller Representative is made a party by reason of the fact it is
or was acting as the Seller Representative pursuant to the terms of this
Agreement or the Holdback Agreement and any expenses incurred by the Seller
Representative in connection with the performance of its duties hereunder.
10.04 Exculpation. The Seller Representative shall not have by reason of
this Agreement a fiduciary relationship in respect of any Seller, except in
respect of amounts received on behalf of such
37
Seller. The Seller Representative shall not be liable to any Seller for any
action taken or omitted by it or any agent employed by it hereunder or under any
other document entered into in connection herewith, except that the Seller
Representative shall not be relieved of any liability imposed by law for willful
misconduct. The Seller Representative shall not be liable to the Sellers for any
apportionment or distribution of payments made by the Seller Representative in
good faith, and if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any Seller to whom
payment was due, but not made, shall be to recover from other Sellers any
payment in excess of the amount to which they are determined to have been
entitled. The Seller Representative shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement. Neither the Seller Representative nor any agent
employed by it shall incur any liability to any Seller by virtue of the failure
or refusal of the Seller Representative for any reason to consummate the
transactions contemplated hereby or relating to the performance of its other
duties hereunder, except for actions or omissions constituting fraud or bad
faith.
10.05 Payment of Expenses.
The Sellers parties hereto acknowledge that $1,000,000 (the "Seller
Representative Reserve") of the amounts to be paid to Sellers pursuant to
Section 1.03(b)(i) shall be remitted by Buyer (on behalf of the Sellers) to the
Seller Representative or its designee in accordance with Sections 1.03(b)(i)(D),
1.03(b)(i)(E) and 1.03(b)(i)(F), and shall be held in a separate account of the
Seller Representative (the "Seller Representative Account"). The Seller
Representative Reserve may be utilized by the Seller Representative to cover
costs and expenses incurred, or payments made, by the Seller Representative in
performing its obligations, duties and rights as the Seller Representative
hereunder (including, without limitation, pursuant to Section 10.02(a)(vii)
above). In connection with the performance of its obligations, duties or rights
hereunder, the Seller Representative shall have the right at any time and from
time to time to select and engage, at the cost and expense of the Sellers,
attorneys, accountants, investment bankers, advisors, consultants and clerical
personnel, obtain such other professional and expert assistance, maintain such
records as the Seller Representative may deem necessary or desirable and incur
other out-of-pocket expenses. Any income earned from investments of the Seller
Representative Reserve shall be deposited in the Seller Representative Account.
In the discretion of the Seller Representative, any amounts on deposit in the
Seller Representative Account, including, without limitation, any income earned
from investments of funds in the Seller Representative Account, may be
distributed from time-to-time by the Seller Representative to each Seller in
accordance with their Percentage Share. The Seller Representative Reserve, after
payment of any amounts in accordance with this Section 10.05, shall be
distributed to each Seller in accordance with their Percentage Share as and when
determined by the Seller Representative. Notwithstanding anything contained in
this Agreement or elsewhere to the contrary, no Person or Persons other than the
Seller Representative shall (i) be entitled to exercise any of the rights or
powers of the Seller Representative hereunder, (ii) have any access whatsoever
to the Seller Representative Account or (iii) have any right to make a call or
demand upon any of the Sellers (including the Seller Representative) to
contribute any amounts to cover expenses or otherwise.
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS
11.01 Disclosure Generally. If and to the extent any information required
to be furnished in any schedule is contained in this Agreement or in any other
schedule (or updated schedule), such information shall be disclosed with
references to the applicable section of this Agreement, but nonetheless shall be
38
deemed to be included in all schedules (or updated schedules) (or sections
thereof) to the extent that it is reasonably apparent that such disclosure is
applicable to such other representations and warranties in which the information
is required to be included. The inclusion of any information in any schedule (or
updated schedule) shall not be deemed to be an admission or acknowledgment by
the Company or the Sellers, in and of itself, that such information is material
to or outside the ordinary course of the businesses of the Company and its
Subsidiaries.
11.02 Acknowledgment by Buyer.
(a) THE REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND THE SELLERS
SET FORTH IN THIS AGREEMENT AND THE TRANSACTION DOCUMENTS CONSTITUTE THE SOLE
AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS TO
BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND
BUYER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND
WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING, BUT NOT LIMITED
TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION OR PROJECTIONS,
RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY) ARE SPECIFICALLY
DISCLAIMED BY THE COMPANY AND THE SELLERS. The Company, the Subsidiaries and the
Sellers do not make or provide, and Buyer hereby waives, any warranty or
representation, express or implied, as to the quality, merchantability, fitness
for a particular purpose, conformity to samples, or condition of the Company's
or any of the Subsidiaries' assets or any part thereto. No claim shall be
brought or maintained by the Company, its Subsidiaries or Buyer or their
respective successors or permitted assigns against any officer, director or
employee (present or former) of the Company, its Subsidiaries, the Sellers, the
Seller Representative or any direct or indirect equity holder of the Sellers,
and no recourse shall be brought or granted against any of them, by virtue of or
based upon any alleged misrepresentation or inaccuracy in, or breach of any of
the representations, warranties or covenants of the Company and/or the Sellers
set forth or contained in, this Agreement or any certificate delivered
hereunder, except to the extent provided in this Agreement.
(b) In connection with Buyer's investigation of the Company and the
Subsidiaries, Buyer has received from or on behalf of the Company, the
Subsidiaries or the Sellers certain projections. Buyer acknowledges and agrees
that there are uncertainties inherent in attempting to make such estimates,
projections and other forecasts and plans, that Buyer is familiar with such
uncertainties, that Buyer is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all estimates, projections and other
forecasts and plans so furnished to it (including the reasonableness of the
assumptions underlying such estimates, projections and forecasts), and that,
except in the event of fraud by the Company or the Sellers, Buyer shall have no
claim against the Company, its Subsidiaries, the Sellers, the Seller
Representative or any direct or indirect equity holder of the Sellers with
respect thereto. Accordingly, neither the Company, the Subsidiaries nor the
Sellers make any representations or warranties whatsoever with respect to such
estimates, projections and other forecasts and plans (including the
reasonableness of the assumptions underlying such estimates, projections and
forecasts). Buyer agrees that none of the Sellers nor any other Person will have
or be subject to any liability to Buyer or any other Person resulting from the
distribution to Buyer, or Buyer's use of, any information regarding the Company
or any of the Subsidiaries or their respective businesses, including any
information, document or material made available to Buyer or its Affiliates in
management presentations or any other form in expectation of the transactions
contemplated by this Agreement.
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11.03 Tax Matters. In addition to Article IX, the following provisions
shall govern the allocation of responsibility as between Buyer and Sellers for
certain tax matters following the Closing Date:
(a) The Sellers, severally and not jointly, shall indemnify the
Company and its Subsidiaries and Buyer and hold them harmless from and against
(i) all Income Taxes and sales and use Taxes (or the non-payment thereof) of the
Company and its Subsidiaries for all taxable periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any taxable
period that includes (but does not end on) the Closing Date ("Pre-Closing Tax
Period"), (ii) any and all Income Taxes and sales and use Taxes of any member of
an affiliated, consolidated, combined, or unitary group of which the Company or
any of its Subsidiaries (or any predecessor of any of the foregoing) is or was a
member on or prior to the Closing Date, including pursuant to Treasury
Regulation Section 1.1502-6 or any analogous or similar state, local, or foreign
law or regulation, (iii) any and all Income Taxes and sales and use Taxes of any
person (other than the Company and its Subsidiaries) imposed on the Company or
any of its Subsidiaries as a transferee or successor, by contract or pursuant to
any law, rule or regulation, which Taxes relate to an event or transaction
occurring before the Closing and (iv) all costs and expenses incurred by the
Company, its Subsidiaries or Buyer in connection with review, negotiation and
preparation of any returns related to such Taxes; provided, however, that in the
case of clauses (i), (ii) and (iii) above, Sellers shall be liable only to the
extent that such Taxes are in excess of (x) any amount under indemnification
agreements actually received by the Buyer on account of such Loss, including
without limitation the Prior Acquisition Agreement and (y) any amount of such
Taxes taken into account in the determination of the Pre-Closing Tax Amount. All
indemnification payments made pursuant to this Section 11.03 shall be calculated
net of any Tax Benefit, as defined in Section 9.06. Subject to the other terms,
conditions and restrictions contained herein, each Seller shall be responsible
for paying such Seller's Percentage Share of any such Losses pursuant to this
Section 11.03.
(b) Straddle Period. In the case of any taxable period that includes
(but does not end on) the Closing Date (a "Straddle Period"), the amount of any
Income Taxes for the Pre-Closing Tax Period shall be determined based on an
interim closing of the books as of the close of business on the day before the
Closing Date (and for such purpose, the taxable period of any partnership or
other pass-through entity in which the Company or any of its Subsidiaries holds
a beneficial interest shall be deemed to terminate at such time).
(c) Responsibility for Filing Tax Returns.
(i) The Company shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Company and its Subsidiaries that
are filed after the Closing Date. The Company shall permit the Seller
Representative to review and comment on each such Tax Return relating to
taxable periods (i) ending on or before the Closing Date, (ii) with respect
to any Straddle Period, or (iii) in which Transaction Tax Benefits are or
may be realized, prior to the filing of such Tax Return, and the Company
shall make such revisions to such Tax Returns as are reasonably requested
by Seller Representative. The Company shall promptly provide copies of any
schedules, work papers, records and other materials used in the preparation
of each such Tax Return, including as relating to the method of computation
of separate taxable income or other relevant measure of income, as well as
any other materials reasonably requested by the Seller Representative. With
respect to Tax Returns that relate to Taxes for which the Sellers are
liable pursuant to Section 11.03(a), such returns shall be prepared,
subject to applicable law, consistent with the past practice of the Company
and its Subsidiaries and the Company shall not file such
40
return without the written consent of the Seller Representative, which
consent shall not be unreasonably withheld or delayed.
(ii) Neither the Buyer nor any of its Affiliates shall (or shall
cause or permit the Company or any of the Subsidiaries to) file, amend,
refile or otherwise modify any Tax Return relating in whole or in part to
the Company or any of the Subsidiaries with respect to any Pre-Closing Tax
Period (or with respect to any Straddle Period) without the written consent
of the Seller Representative, which consent shall not be unreasonably
withheld.
(d) Refunds and Tax Benefits. Any Tax refunds that are received by
Buyer or the Company and its Subsidiaries, and any amounts credited against
Taxes to which Buyer or the Company and its Subsidiaries become entitled
(including without limitation any such refunds, credits and other amounts
attributable to Transaction Tax Benefits), that relate to Tax periods or
portions thereof ending on or before the Closing Date and were not taken into
account in determining the Pre-Closing Tax Amount as finally determined pursuant
to Section 1.04 (provided, however, that if the Pre-Closing Tax Amount as so
determined is negative, the amount of Tax refunds and credits taken into account
in clause (ii) of the definition of Pre-Closing Tax Amount in excess of the
amount of liabilities taken into account in clause (i) of such definition shall
not be treated as taken into account for purposes of this Section 11.03(d)),
shall be for the account of Sellers, and Buyer shall pay over to Seller
Representative any such refund or the amount of any such credit within 15 days
after receipt or entitlement thereto. To the extent any management bonuses
included as current liabilities in Net Working Capital, as finally determined,
are not claimed as deductions in a Tax Return with respect to a period ending on
or before the Closing Date (the "Pre-Closing Tax Returns"), the Buyer shall pay
over to the Sellers an amount equal to the amount by which the Pre-Closing Tax
Amount would have been reduced if such management bonuses had been claimed as
deductions in a Pre-Closing Tax Return, which payment shall be made on or before
May 15, 2007.
(e) Tax Indemnification Procedures.
(i) After the Closing, the Buyer shall promptly notify Sellers in
writing of any demand, claim or notice of the commencement of an audit
received from any Tax authority or any other Person with respect to Taxes
for which the Sellers are liable pursuant to Section 11.03(a) of this
Agreement; provided, however, that a failure to give such notice will not
affect such rights to indemnification under Section 11.03(a), except to the
extent that the Sellers are actually prejudiced thereby. Such notice shall
contain factual information (to the extent known) describing the asserted
Tax liability and shall include copies of the relevant portion of any
notice or other document received from any Tax authority or any other
Person in respect of any such asserted Tax liability.
(ii) Payment of any amount due under Section 11.03(a) of this
Agreement shall be made within ten (10) days following written notice by
the Buyer that payment of such amounts to the appropriate Tax authority or
other applicable third party is due by the Buyer, provided that the Sellers
shall not be required to make any payment earlier than five (5) Business
Days before it is due to the appropriate Tax authority or applicable third
party. In the case of a Tax that is contested in accordance with the
provisions of Section 11.03(f) of this Agreement, payment of such contested
Tax will not be considered due earlier than the date a "final
determination" to such effect is made by such Tax authority or a court. For
this purpose, a "final determination" shall mean a settlement, compromise,
or other agreement with the relevant Tax authority, whether contained in an
Internal Revenue Service Form 870 or other comparable form,
41
or otherwise, or such procedurally later event, such as a closing agreement
with the relevant Tax authority, and agreement contained in Internal
Revenue Service Form 870-D or other comparable form, an agreement that
constitutes a "determination" under Section 1313(a)(4) of the Code, a
deficiency notice with respect to which the period for filing a petition
with the Tax Court or the relevant state, local or foreign tribunal has
expired or a decision of any court of competent jurisdiction that is not
subject to appeal or as to which the time for appeal has expired.
(iii) All amounts required to be paid pursuant to Section
11.03(a) shall be paid promptly in immediately available funds by wire
transfer to a bank account designated by the indemnified party.
(iv) Any payments required pursuant to Section 11.03(a) that are
not made within the time period specified in this section shall bear
interest at a rate and in the manner provided in the Code for interest on
underpayments of federal income tax.
(f) Tax Audits and Contests; Cooperation on Tax Matters.
(i) The Seller Representative shall control the conduct, through
counsel of its own choosing and at its own expenses, of any audit, claim
for refund, or administrative or judicial proceeding involving any asserted
Tax liability or refund with respect to the Company or any of the
Subsidiaries relating to Pre-Closing Tax Period, other than the taxable
periods that include but do not end on the Closing Date (any such audit,
claim for refund, or proceeding relating to an asserted Tax liability
referred to herein as a "Contest").
(ii) The Buyer shall have the right to participate in a Contest
at its own expense. Neither the Buyer nor the Company nor the Seller
Representative shall settle, compromise and/or concede a Contest without
the consent of the other party (which consent shall not be unreasonably
withheld or delayed) if such settlement, compromise and/or concession is
reasonably expected to have a material adverse effect on such other party.
If the Seller Representative fails to assume control of the conduct of any
such Contest within a reasonable period following the receipt by the Seller
Representative of notice of such Contest, the Buyer shall have the right to
assume control of such Contest and shall be able to settle, compromise
and/or concede such Contest in its sole discretion.
(iii) Buyer, the Company and its Subsidiaries and Sellers shall
cooperate fully, as and to the extent reasonably requested by the other
Party, in connection with the filing of Tax Returns pursuant to this
Section 11.03 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 that 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 its Subsidiaries and Sellers agree (A) to retain all books
and records with respect to Tax matters pertinent to the Company and its
Subsidiaries relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by Buyer or Sellers, any extensions 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 requests, the Company and its
Subsidiaries or Sellers, as the case may be, shall allow the other Party to
take possession of such books and records.
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(iv) Buyer 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).
(v) Buyer and Sellers further agree, upon request, to provide the
other Party with all information that either Party may be required to
report pursuant to Internal Revenue Code Section 6043, or Internal Revenue
Code Section 6043A, or Treasury Regulations promulgated thereunder.
(g) Tax-Sharing Agreements. All tax-sharing agreements or similar
agreements with respect to or involving the Company and its Subsidiaries shall
be terminated as of the Closing Date and, after the Closing Date, the Company
and its Subsidiaries shall not be bound thereby or have any liability
thereunder.
(h) Certain Taxes and Fees. All transfer, documentary, use, stamp and
registration Taxes, and all conveyance fees and recording charges (including any
penalties and interest) incurred in connection with the consummation of the
transactions contemplated by this Agreement shall be borne 50% by Buyer and 50%
by Sellers.
(i) Tax Treatment of Indemnification Payments. It is the intention of
the parties to treat any indemnification payment made under this agreement,
under this Section 11.03 and under Article IX, as adjustments to the Final
Common Purchase Price, and the parties agree to file their Tax Returns
accordingly.
(j) Tax Elections. The Buyer shall not, without the prior consent of
the Seller Representative (which may, in its sole and absolute discretion,
withhold such consent), make, or cause to permit to be made, any Tax election,
or adopt or change any method of accounting, or undertake any other
extraordinary action on the Closing Date, that would affect the Sellers or the
Company or any of the Subsidiaries prior to the Closing Date.
(k) Allocation of Transaction Tax Benefits. Notwithstanding anything
in this Agreement to the contrary, (i) the parties intend that the Sellers
receive the benefits of any Transaction Tax Benefits; (ii) to the extent that
any Transaction Tax Benefits are taken into account in a Tax year ending on the
Closing Date, the Sellers' liability for Taxes attributable to such Tax year
shall be determined after taking such Transaction Tax Benefits into account;
(iii) to the extent that any Transaction Tax Benefits are taken into account in
a Straddle Period, such Transaction Tax Benefits shall be allocated to the
portion of the Straddle Period ending on the Closing Date and the Sellers'
liability for Taxes attributable to the pre-closing portion of such Straddle
Period shall be determined after taking such Transaction Tax Benefits into
account; (iv) to the extent that Transaction Tax Benefits are taken into account
in a Tax year beginning after the Closing Date, any Tax refund or reduction in
Tax liability attributable to such Transaction Tax Benefits shall be paid to
Sellers pursuant to Section 11.03(d); and (v) to the extent that a Transaction
Tax Benefit can be carried back to a taxable period ending on or before the
Closing Date, the Company shall do so.
(l) Post-Closing Transactions not in Ordinary Course. The Buyer agrees
to report all transactions not in the ordinary course of business occurring on
the Closing Date after the Buyer's purchase of the Company's stock as occurring
on the day following the Closing Date to the extent permitted by Treasury
Regulation Section 1.1502-76(b)(1)(ii)(B) (and any similar provisions of state,
local, or foreign tax law).
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(m) Inconsistencies. To the extent of any inconsistency between this
Section 11.03 and Article IX, the provisions of this Section 11.03 shall
control.
11.04 Further Assurances. From time to time, as and when requested by any
party hereto and at such party's expense, any other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as the requesting party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.
11.05 Provision Respecting Representation of Company. Each of the parties
to this Agreement hereby agrees, on its own behalf and on behalf of its
directors, members, partners, officers, employees and Affiliates, that Xxxxxxxx
& Xxxxx LLP may serve as counsel to each and any of the Sellers, the Seller
Representative and their respective Affiliates (individually and collectively,
"Seller Group"), on the one hand, and the Company and its Subsidiaries, on the
other hand, in connection with the negotiation, preparation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, and that, following consummation of the transactions contemplated
hereby, Xxxxxxxx & Xxxxx LLP (or any successor) may serve as counsel to any
member of the Seller Group or any director, member, partner, officer, employee
or Affiliate of Seller Group, in connection with any litigation, claim or
obligation arising out of or relating to this Agreement or the transactions
contemplated by this Agreement notwithstanding such representation, and each of
the parties hereto hereby consents thereto and waives any conflict of interest
arising therefrom, and each of such parties shall cause any Affiliate thereof to
consent to waive any conflict of interest arising from such representation.
ARTICLE XII
DEFINITIONS
12.01 Definitions. For purposes hereof, the following terms, when used
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person.
For the purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, contract or otherwise.
"Affiliated Group" shall mean an affiliated group as defined in
Section 1504 of the Internal Revenue Code (or any analogous combined,
consolidated or unitary group defined under state, local or foreign income Tax
law) of which the Company is or has been a member.
"Aggregate Preferred Purchase Price" means the sum of the Preferred
Per Share Prices for all shares of Preferred issued and outstanding immediately
prior to the Closing.
"Cash on Hand" means, with respect to the Company and it Subsidiaries,
all cash, cash equivalents and marketable securities, as of 11:59 p.m. (New York
City time) on the day immediately preceding the Closing Date, net of any issued
but uncleared checks and drafts but including any deposits in transit.
"Company's Accounting Practices and Procedures" means the customary
accounting methods, policies, practices and procedures, including classification
and estimation methodology used by
44
the Company in the preparation of the Latest Balance Sheet, it being understood
that Section 4.05 of the Disclosure Schedules sets forth the extent that such
Company's Accounting Practices and Procedures are not prepared in accordance
with GAAP.
"EB Side Letter" means the Side Letter between the Buyer, the Company
and the Seller Representative, dated as of the date hereof.
"Employment Agreement Amendments" means each of the Amended and
Restated Employment Agreements, executed on or before the date hereof, between
the Company and each of Xxxx Xxxxxx and Xxxxx Xxxxxxxxx, as attached hereto as
Exhibit E.
"Environmental Requirements" shall mean all federal, state, local and
foreign statutes, regulations, and ordinances, all judicial and administrative
orders and determinations and all common law enacted and in effect on or prior
to the Closing Date concerning pollution protection of human health from
environmental hazards or the protection of the environment, including without
limitation all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or cleanup
of any hazardous materials, substances or wastes.
"Escrow Amount" means the amount of $3,000,000.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Holdback Agreement" means the Holdback and Escrow Agreement between
the Company, the Seller Representative, the Escrow Agent and the Buyer (in form
and substance substantially as Exhibit F attached hereto).
"Holdback Share" means a fraction, the numerator of which is the total
proceeds received by any Seller in respect of Common, and Warrants to purchase
Common held by such Seller, and the denominator of which is the sum of (i) the
Final Common Purchase Price and (ii) the Common Warrant Cancellation Payments
(expressed as a percentage). Section 1.02 of the Disclosure Schedule sets forth
the Holdback Share (if any) for each Seller (as the same may be amended from
time to time by the Seller Representative to reflect the actual stockholdings of
the Sellers as of the Closing Date).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Income Tax" means any federal, state, local, or foreign income Tax
measured by or imposed on net income.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Tax, including any
schedule or attachment thereto.
"Indebtedness" means, without duplication, the sum of (i) all
obligations of the Company and its Subsidiaries for borrowed money and any
accrued interest or prepayment premiums or fees related thereto, (ii) all other
indebtedness of the Company and its Subsidiaries evidenced by bonds, debentures,
notes or similar instruments, including all accrued and unpaid interest thereon,
(iii) all obligations of the Company and its Subsidiaries as lessee or lessees
under leases that have been recorded as capital leases in accordance with GAAP,
(iv) all payment obligations under any interest rate swap agreements or interest
45
rate hedge agreements to which the Company or any of its Subsidiaries is party
and (v) all guarantees of any of the foregoing. For the avoidance of doubt,
Indebtedness shall not include amounts owed under any (a) guarantees, letters of
credit, performance bonds, sureties and/or similar obligations of any kind or
nature issued by or on behalf of the Company or any of the Subsidiaries in
connection with any customer contracts or customer proposals, (b) accounts,
payables or loans of any kind or nature solely between and among the Company and
its Subsidiaries and (c) any liabilities included in the calculation of
Aggregate Preferred Purchase Price.
"Indebtedness Payoff Amount" means the amount required to repay all
Indebtedness of the Company and any Subsidiary outstanding as of immediately
prior to the Closing and any termination fees associated with termination of
Letters of Credit as set forth on Section 7.08 of the Disclosure Schedules.
"Intellectual Property" means patents, trademarks, service marks,
domain names, copyrights and registrations, applications for the registration of
any of the foregoing, and any trade secrets, confidential information, and
know-how.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.
"Material Adverse Effect" means any change, effect, event, occurrence,
state of facts or development (which may include the discontinuation of
relationships with Major Customers or Major Suppliers) that is materially
adverse to the current business, financial condition or results of operations of
the Company and its Subsidiaries taken as a whole or the ability of the Company
and its Subsidiaries or the Sellers to consummate the transactions contemplated
hereby; provided, however, that none of the following shall be deemed in
themselves, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be, a Material Adverse Effect: (a) any adverse change, effect, event,
occurrence, state of facts or development solely attributable to the
announcement or pendency of the transactions contemplated by this Agreement; (b)
any adverse change, effect, event, occurrence, state of facts or development
attributable to conditions affecting the industry in which the Company and its
Subsidiaries participate, the U.S. economy as a whole or the U.S. capital
markets in general or any foreign or state capital market in which the Company
and its Subsidiaries operate; or (c) the effect of any change arising in
connection with any "act of God" including weather, natural disasters and
earthquakes, hostilities, acts of war, sabotage or terrorism or military actions
or any escalation or material worsening of any such hostilities, acts of war,
sabotage or terrorism or military actions; provided, further, that current
business shall not include future prospects of the Company and its Subsidiaries.
"Multiemployer Plan" shall have the meaning set forth in Section 3(37)
or 4001(a)(3) of ERISA.
"Net Working Capital" means the result of (i) all current assets
(excluding Cash on Hand and any current or deferred Income Tax benefits or
assets) of the Company and its Subsidiaries minus (ii) all current liabilities
(excluding Indebtedness and any current or deferred Income Tax liabilities) of
the Company and its Subsidiaries, in each case determined in accordance with
GAAP, applied on a basis consistent with the Company's Accounting Practices and
Procedures; provided that, notwithstanding anything herein to the contrary, for
purposes of calculating "Net Working Capital", in no event will the
determination of "Net Working Capital" include (1) any amounts included in the
computation of the
46
Aggregate Preferred Purchase Price, (2) any intercompany accounts and/or (3) any
liability or obligation related to the Sellers' Expenses or any other liability
that otherwise reduces the Common Purchase Price.
"Net Working Capital Amount" means the Net Working Capital of the
Company and its Subsidiaries as of 11:59 p.m. (New York City time) on the day
immediately preceding the Closing Date.
"OSHA" means the Occupational Safety and Health Act, (29 U.S.C.
Section 651 et seq.) and the regulations thereunder as enacted and in effect on
or prior to the Closing Date.
"Percentage Share" means a fraction (based on estimates at Closing),
the numerator of which is the total proceeds received by any Seller in respect
of Common, Preferred and Warrants held by such Seller, and the denominator of
which is the sum of (i) the Final Common Purchase Price, (ii) the Aggregate
Preferred Purchase Price and (iii) the Warrant Cancellation Payments (expressed
as a percentage). Section 1.02 of the Disclosure Schedule sets forth the
Percentage Share for each Seller (as the same may be amended from time to time
by the Seller Representative to reflect the actual proceeds received and
stockholdings of the Sellers as of the Closing Date).
"Permitted Liens" means (i) any restriction on transfer arising under
applicable securities law, (ii) liens for current Taxes or other governmental
charges not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings by the Company and its
Subsidiaries; (iii) mechanics', carriers', workers', repairers' and similar
statutory liens arising or incurred in the ordinary course of business for
amounts which are not delinquent and which are not, individually or in the
aggregate, significant; (iv) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the Real
Property which are not violated by the current use and operation of the Real
Property or the operation of the business; (v) covenants, conditions,
restrictions, easements and other similar matters of record affecting title to
the Real Property which do not materially impair the occupancy or use of the
Real Property for the purposes for which it is currently used or proposed to be
used in connection with the Company's and its Subsidiaries' businesses; (vi)
liens arising under worker's compensation, unemployment insurance, social
security, retirement and similar legislation; (vii) purchase money liens and
liens securing rental payments under capital lease arrangements; (viii) liens of
lessors and licensors arising under lease agreements or license arrangements;
(ix) liens for any financing secured by such Real Property; (x) any material
survey matters and (xi) other recorded liens which do not exceed $30,000
individually or $100,000 in the aggregate.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Pre-Closing Tax Amount" means the excess of (expressed as either a
positive or negative number) (i) the unpaid income Tax liability of the Company
and any of its Subsidiaries for all Pre-Closing Tax Periods, over (ii) the
amount of income Tax payments made on or before the Closing Date by the Company
or its Subsidiaries (including estimated tax payments) that the Company and its
Subsidiaries will be entitled to recover after the Closing Date from any taxing
authority (as refunds, credits against current or future Tax liabilities, or
otherwise) with respect to Taxes for all Pre-Closing Tax Periods, in each case
(1) taking into account any Transaction Tax Benefits and/or any carry-backs of
such amounts (without duplication), (2) excluding any asset or liability related
to Taxes to the extent included in the determination of the Net Working Capital
Amount and (3) determined on the basis of the past practices of the Company and
its Subsidiaries with respect to the treatment of each item that impacts the
determination of the Pre-Closing Tax Amount. If the amount determined pursuant
to the preceding
47
formula is negative, the Pre-Closing Tax Amount shall be zero for purposes of
Article I of this Agreement.
"Preferred Per Share Price" means, with respect to a share of
Preferred, the Liquidation Value (as defined in the Company's Amended and
Restated Certificate of Incorporation) of such share plus all dividends on such
share that are accrued and unpaid as of the Closing Date, in each case as set
forth in the Closing Payment Certificate.
"Real Property" means the Leased Real Property and Owned Real
Property.
"Sellers' Expenses" shall mean all fees and expenses payable to the
Company's and Sellers' advisors in connection with the transactions contemplated
by this Agreement, bonuses paid to current employees arising solely as a result
of the transactions contemplated by this Agreement (including those under the
2005 Management Bonus Plan) and any and all federal, state and local employer
payroll-related Taxes, employer 401(k) contributions, FICA, Medicare and other
employer liabilities, obligations or payments attributable to the bonuses to be
paid to certain employees of the Company in connection with the Closing and
other related compensation, in each case to the extent unpaid as of the Closing
Date and not otherwise accounted for or accrued for in the calculation of Net
Working Capital; provided that, for the avoidance of doubt, in no event shall
"Sellers' Expenses" be deemed to include any fees and expenses to any Person to
the extent relating to Buyer's financing for the transactions contemplated
hereby.
"Subsidiary or Subsidiaries" means, with respect to any Person of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association or other business entity (other than
a corporation), a majority of partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof and
for this purpose, a Person or Persons owns a majority ownership interest in such
a business entity (other than a corporation) is such Person or Persons shall be
allocated a majority of such business entity's gains or losses or shall be or
control any managing director or general partner of such business entity (other
than a corporation).
"Target Net Working Capital Amount" means $39,000,000.
"Tax" or "Taxes" means any federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, real property gains, registration, value added, excise,
natural resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, special assessment, personal
property, capital stock, social security, unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or additional amounts in
respect of the foregoing.
"Tax Return" or "Tax Returns" means any return, report, information
return or other document (including schedules or any related or supporting
information) filed or required to be filed with any governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.
48
"Transaction Documents" means this Agreement, the Warrant Cancellation
Agreement, the Holdback Agreement and the other agreements entered into in
connection with the transactions contemplated hereby.
"Transaction Tax Benefits" means all Tax deductions, Tax refund
receivables, reduction in Tax liabilities and other Tax benefits for the Company
and its Subsidiaries related to the transactions contemplated hereby as may be
related to the payment of any portion of Indebtedness Payoff Amount, the
write-off of deferred financing costs, Sellers' Expenses, or to the cancellation
of Warrants, as described under Transaction Tax Benefits set forth on Section
12.01 of the Disclosure Schedules (it being understood that the amounts set
forth on Section 12.01 of the Disclosure Schedules are subject to adjustment).
12.02 Cross-Reference of Other Definitions. Each capitalized term listed
below is defined in the corresponding Section of this Agreement:
Term Section No.
---- -------------
Agreement Preamble
Audited Financial Statements 4.05(a)
Authorized Action 10.03
Buyer Preamble
Buyer Indemnified Parties 9.02(a)
Buyer's Representatives 6.02
Cap 9.02(b)
Claimed MAE Update 6.05(c)
Closing 1.03(a)
Closing Date 1.03(a)
Closing Date Working Capital Increase Amount 1.01(b)
Closing Payment Certificate 1.01(a)
Closing Statement 1.04(a)
Common Recitals
Common Warrant Cancellation Payments 1.05
Company Preamble
Company Securities 4.04(b)
Company Stockholders Agreement 1.06
Confidentiality Agreement 6.02
Contest 11.03(f)(i)
Deductible 9.02(b)
Deficiency 1.04(c)(ii)
Disclosure Schedules ARTICLE III
EB Side Letter 9.02(a)
Environmental Permits 4.16(b)
ERISA 4.13(a)
Escrow Agent 1.03(b)(i)(C)
Estimated Cash on Hand 1.01(a)
Estimated Common Purchase Price 1.01(b)
Estimated Net Working Capital Amount 1.01(a)
49
Estimated Sellers' Expenses 1.01(a)
Estimated Warrant Cancellation Payments 1.01(a)
Excess 1.04(c)(i)
Final Adjustment Amount 1.04(b)
Final Common Purchase Price 1.04(b)
Financial Statements 4.05(a)
Fundamental Representations and Warranties 9.01
Guarantor 13.14
Indemnitee 9.05
Indemnification Notice 9.05
Indemnitor 9.05
Independent Auditor 1.04(a)
Insurance Proceeds 9.06
Internal Revenue Code 4.13(a)
Key Elements 6.08
Latest Balance Sheet 4.05(a)
Leased Real Property 4.07(c)
Licenses 4.20
Losses 9.02(a)
MAE Update 6.05(a)
Major Customers 4.09(c)
Major Suppliers 4.09(c)
Net Insurance Proceeds 9.06
New Plans 7.07
Objections Statement 1.04(a)
Old Plans 7.07
Olympus 2.01(l)
Owned Real Property 4.07(b)
Per Item Threshold 9.02(b)
Plans 4.13(a)
Pre-Closing Tax Period 11.03(a)
Pre-Closing Tax Returns 11.03(d)
Preferred Recitals
Preferred Warrant Cancellation Payments 1.05
Prior Acquisition Agreement 9.06
Proceeding 7.02(a)
Purchase Price True-Up Holdback 1.03(b)(i)(C)
Securities Act 5.07
Seller(s) Preamble
Seller Group 11.05
Seller Indemnified Parties 9.03
Seller Representative Preamble
Seller Representative Account 10.05
Seller Representative Reserve 10.05
Shares Recitals
Shortfall 1.04(c)(iii)
Significant Contracts 4.09(b)
Significant Update 6.05(a)
Straddle Period 11.03(b)
50
Survival Period 9.01
the Company's knowledge 13.03
Tax Benefit 9.06
Unaudited Financial Statements 4.05(a)
Warrants Recitals
Warrant Cancellation Agreements 1.05
Warrant Cancellation Payments 1.05
ARTICLE XIII
MISCELLANEOUS
13.01 Press Releases and Communications. Prior to the Closing, no press
release or public announcement related to this Agreement or the transactions
contemplated herein, or any other announcement or communication to the
employees, consultants, customers or suppliers of the Company or any of its
Subsidiaries, shall be issued or made by any party hereto without the joint
approval of Buyer and the Seller Representative, except (i) those required by
law (in the reasonable opinion of counsel) in which case Buyer and the Seller
Representative shall have the right to review such press release, announcement
or communication prior to its issuance, distribution or publication and (ii)
subject to our review and reasonable comments thereto, the Buyer or its
affiliates making any filings or disclosures under the Securities Act or the
Exchange Act, or under the rules and regulations of any national securities
exchange on which such party's shares of capital stock are listed.
13.02 Expenses. Each of Buyer and the Sellers shall pay all of their own
expenses (including attorneys' and accountants' fees and expenses) in connection
with the negotiation of this Agreement, the performance of their obligations
hereunder and the consummation of the transactions contemplated by this
Agreement (whether consummated or not); provided that the Sellers shall be
responsible for all Sellers' Expenses not paid by the Company or Buyer at or
prior to the Closing or included as a reduction to the Purchase Price.
Notwithstanding the foregoing, Buyer acknowledges and agrees that (i) the
Company and its Subsidiaries have incurred certain of the costs and expenses of
the Sellers directly related to the transactions contemplated hereby in
connection with this Agreement and the transactions contemplated hereby and (ii)
to the extent not paid prior to the Closing, such costs and expenses shall be
included in the Sellers' Expenses and shall be taken into account for purposes
of determining the Estimated Common Purchase Price and the Final Common Purchase
Price payable pursuant to Article I) (and shall be paid by the Company, its
Subsidiaries or Sellers, or by Buyer on behalf of the Company or the Sellers
pursuant to Section 1.03(b)(i)). Except as provided in the preceding sentence,
Buyer shall not have any liability for any such costs or expenses of the Sellers
or the Company and its Subsidiaries after the Closing.
13.03 Knowledge Defined. For purposes of this Agreement, the term "the
Company's knowledge" or words of similar import as used herein shall mean the
actual knowledge of each of Xxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxxxxx, Xxxxxxx
Xxxxxxx, Xxxxx Xxxxxxx, Xxx Xxxxxxx, Xxxxx Xxxxxx, Xxx Herigot and Xxx Xxxxxxx.
13.04 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when personally delivered, one
day after deposit with Federal Express or similar reputable overnight courier
service or five days after being mailed by first class mail, return receipt
requested. Notices, demands and communications to each Seller shall, unless
another address is specified in writing,
51
be sent to the address indicated for such Seller on Section 13.04 of the
Disclosure Schedules attached hereto, and notices, demands and communications to
Buyer, the Company, and the Seller Representative shall, unless another address
is specified in writing, be sent to the addresses indicated below:
Notices to Buyer, or, following the Closing, the Company:
Xxxxxxxxx Rail Services LLC
Xxx Xxxxxxxxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxx LLP
000 XX Xxxxx Xxx., 00xx Xxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Notices to the Seller Representative and, prior to Closing, the
Company:
x/x Xxxxxxx Xxxxxx Xxxx XX, X.X.
Xxx Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: L. Xxxxx Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X Xxxxxxxxxx, P.C.
Tel: (000) 000-0000
Fax: (000) 000-0000
Notwithstanding the foregoing, any party may send any notice, request,
demand, claim, or other communication required or permitted hereunder to the
intended recipient at the address set forth above by personal delivery,
messenger service, ordinary mail and/or facsimile transmission; provided,
however, that no such notice, request, demand, claim, or other communication
will be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any party may change the address to which notices,
requests, demands, claims, and other communications required or permitted
hereunder are to be delivered by giving the other party(ies) notice in the
manner herein set forth.
52
13.05 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned or delegated by
Buyer without the prior written consent of the Seller Representative; provided
that, Buyer may assign this Agreement (a) to an Affiliate of Buyer without the
consent of the Seller Representative or (b) after the Closing, in connection
with a sale to a third party of all or substantially all of the assets or
business of the Company and its Subsidiaries, in each case whether directly or
indirectly, through purchase, acquisition, merger, consolidation, or otherwise.
Nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies or liabilities under or by reason of
this Agreement, other than sections which are specifically for the benefit of
Seller Indemnified Parties, holders of Warrants and amounts to which Sellers'
Expenses are owed as set forth in Article I, Section 6.09, Section 7.02, Section
7.03 Section 7.07, Article IX, Section 11.02, Section 11.05, Section 13.02 and
this Section 13.05), each of which is intended to be for the benefit of the
Persons covered thereby or to be paid thereunder and may be enforced by such
Persons.
13.06 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
13.07 References. The table of contents and the section and other headings
and subheadings contained in this Agreement and the exhibits hereto are solely
for the purpose of reference, are not part of the agreement of the parties
hereto, and shall not in any way affect the meaning or interpretation of this
Agreement or any exhibit hereto. All references to days or months shall be
deemed references to calendar days or months. All references to "$" or "dollars"
shall be deemed references to United States dollars. Unless the context
otherwise requires, any reference to a "Section," "Exhibit," or "Schedule" shall
be deemed to refer to a section of this Agreement, exhibit to this Agreement or
a schedule to this Agreement, as applicable. The words "hereof," "herein" and
"hereunder" and words of similar import referring to this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement.
13.08 No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any Person.
13.09 Amendment and Waiver. Any provision of this Agreement or the
schedules or exhibits may be amended or waived only in a writing signed by
Buyer, the Company and the Seller Representative. No waiver of any provision
hereunder or any breach or default thereof shall extend to or affect in any way
any other provision or prior or subsequent breach or default.
13.10 Specific Performance. Notwithstanding anything to the contrary
herein, Sellers agree that Buyer shall have the right, in addition to any other
rights and remedies existing in its favor, to enforce its rights and the
obligations of Sellers hereunder not only by an action or actions for damages
but also by an action or actions for specific performance, injunctive and/or
other equitable relief. Furthermore, Buyer agrees that the Sellers shall have
the right, in addition to any other rights and remedies existing in their favor,
to enforce their rights and the obligations of Buyer hereunder not only by an
action or actions for damages but also by an action or actions for specific
performance, injunctive and/or other equitable relief.
53
13.11 Complete Agreement. This Agreement and the documents referred to
herein (including the Confidentiality Agreement and the EB Side Letter) contain
the complete agreement between the parties hereto and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
13.12 Counterparts. This Agreement may be executed in multiple counterparts
(including by means of facsimile signature pages), any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same instrument.
13.13 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 13.13.
13.14 Guarantee. Subject to the terms and conditions of this Agreement, The
Greenbrier Companies, Inc. (the "Guarantor") will cause Buyer to perform its
pre-Closing and Closing obligations under this Agreement and will cause Buyer to
consummate the purchase transaction contemplated thereby and to pay the
Aggregate Preferred Purchase Price and the Common Purchase Price and all other
payments required to be made by Buyer under this Agreement as and to the extent
required by the Agreement. Subject to the terms and conditions hereof, Guarantor
waives (i) any and all defenses specifically available to a guarantor (other
than non-performance of any of Seller's obligations hereunder and other than
performance in full by Buyer), and (ii) any notices, including, without
limitation, any notice of any amendment of this Agreement or waiver or other
similar action granted pursuant to this Agreement.
13.15 Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of laws of any jurisdiction other than the State of Delaware.
13.16 Legal Representation. Each of the Sellers acknowledges and agrees
that the law firm of Xxxxxxxx & Xxxxx LLP is representing only the Company and
the Seller Representative with respect to the transactions contemplated hereby.
Each Seller understands that he, she or it is strongly encouraged to retain his
own attorney, account and other representatives to advise him, her or it with
respect to the transactions contemplated by this Agreement and the legal, tax,
accounting, financial and other impact thereon on such Seller.
* * * *
54
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the day and year first above written.
COMPANY:
MERIDIAN RAIL HOLDINGS CORP.
By: /s/ L. Xxxxx Xxxxxxxx
------------------------------------
Name: L. Xxxxx Xxxxxxxx
Title: Vice President
BUYER:
XXXXXXXXX RAIL SERVICES LLC
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Its: Manager
SELLER REPRESENTATIVE:
OLYMPUS GROWTH FUND IV, L.P.
By: OGP IV, LLC
Its: General Partner
By: /s/ L. Xxxxx Xxxxxxxx
------------------------------------
Name: L. Xxxxx Xxxxxxxx
Its: Member
GUARANTOR, solely with respect to
Section 13.14:
THE GREENBRIER COMPANIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Its: President, Chief Executive Officer
Signature Page to Stock Purchase Agreement
SELLERS:
OLYMPUS GROWTH FUND IV, L.P.
By: OGP IV, LLC
Its: General Partner
By: /s/ L. Xxxxx Xxxxxxxx
------------------------------------
Name: L. Xxxxx Xxxxxxxx
Its: Member
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P.
Its: General Partner
By: LJM, L.L.C.
Its: General Partner
By: /s/ Xxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Its: Member
RBS Equity Corporation, in its capacity
as an Equityholder of the Company and
not as a Lender under the Company's
Senior Credit Facility
By: /s/ Xxx Kantowits
------------------------------------
Name: Xxx Kantowits
Its: Managing Director
OCM Mezzanine Fund, L.P.
By: Oaktree Capital Management LLC
Its: General Partner
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Its: Managing Director
By: /s/ Xxx Xxxxx
------------------------------------
Name: Xxx Xxxxx
Its: Managing Director
Signature Page to Stock Purchase Agreement
CIT Lending Services Corporation
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxx
Its: Vice President
K&E Investment Partners,
L.P. - 2004-B DIF
By: K&E Investment Management, LLC
Its: General Partner
By: /s/ Xxxx Xxxxx
------------------------------------
Its: Manager
By: /s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------
Xxxxx Xxxxxxxxx
By: /s/ Xxxxxxx Xxxxxxx
------------------------------------
Xxxxxxx Xxxxxxx
By: /s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx
By: /s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx
Signature Page to Stock Purchase Agreement
