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AGREEMENT AND PLAN OF MERGERS
AMONG
THE XXXXX-X'XXXX COMPANY,
KROLL ELECTRONIC RECOVERY, INC.,
KER ACQUISITION, INC.
and
BCP/XXXX MERGER CORP.
Dated as of November 15, 1999
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ARTICLE I THE REORGANIZATION MERGER..............................................................................9
SECTION 1.01. THE REORGANIZATION MERGER.................................................................9
SECTION 1.02. REORGANIZATION EFFECTIVE TIME............................................................10
SECTION 1.03. EFFECT OF THE REORGANIZATION MERGER......................................................10
SECTION 1.04. ARTICLES OF INCORPORATION; CODE OF REGULATIONS...........................................10
SECTION 1.05. DIRECTORS AND OFFICERS...................................................................11
SECTION 1.06. EFFECT ON SECURITIES, ETC................................................................11
SECTION 1.07. DISSENTING SHARES........................................................................11
SECTION 1.08. TREATMENT OF COMPANY OPTIONS.............................................................12
ARTICLE II THE RECAPITALIZATION MERGER..........................................................................12
SECTION 2.01. THE RECAPITALIZATION MERGER..............................................................12
SECTION 2.02. RECAPITALIZATION EFFECTIVE TIME..........................................................13
SECTION 2.03. EFFECT OF THE RECAPITALIZATION MERGER....................................................13
SECTION 2.04. CERTIFICATE OF INCORPORATION; BY-LAWS....................................................13
SECTION 2.05. DIRECTORS AND OFFICERS...................................................................14
SECTION 2.06. EFFECT ON SECURITIES, ETC................................................................14
SECTION 2.07. DISSENTING SHARES........................................................................15
SECTION 2.08. TREATMENT OF OPTIONS, WARRANTS AND OTHER RIGHTS..........................................16
SECTION 2.09. SURRENDER OF SHARES OF NEW KROLL COMMON STOCK............................................16
SECTION 2.10. LOST, STOLEN OR DESTROYED CERTIFICATES...................................................18
SECTION 2.11. FURTHER ACTION...........................................................................18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................18
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.............................................19
SECTION 3.02. ARTICLES OF INCORPORATION AND CODE OF REGULATIONS........................................19
SECTION 3.03. CAPITALIZATION...........................................................................19
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT.....................................................21
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS...............................................21
SECTION 3.06. COMPLIANCE; PERMITS......................................................................22
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS........................................................23
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS.....................................................23
SECTION 3.09. NO UNDISCLOSED LIABILITIES...............................................................23
SECTION 3.10. ABSENCE OF LITIGATION....................................................................24
SECTION 3.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS............................................24
SECTION 3.12. LABOR MATTERS............................................................................26
SECTION 3.13. PROXY STATEMENT, SCHEDULE 13E-3 AND FORM S-4.............................................26
SECTION 3.14. RESTRICTIONS ON BUSINESS ACTIVITIES......................................................27
SECTION 3.15. ASSETS...................................................................................27
SECTION 3.16. MATERIAL CONTRACT DEFAULTS...............................................................28
SECTION 3.17. TAXES....................................................................................29
SECTION 3.18. ENVIRONMENTAL MATTERS....................................................................29
SECTION 3.19. BROKERS..................................................................................30
SECTION 3.20. INTELLECTUAL PROPERTY....................................................................30
SECTION 3.21. PRIVACY RIGHTS...........................................................................30
SECTION 3.22. YEAR 2000 MATTERS........................................................................31
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SECTION 3.23. INSURANCE................................................................................31
SECTION 3.24. NO RIGHTS PLAN...........................................................................31
SECTION 3.25. OPINION OF FINANCIAL ADVISOR.............................................................31
SECTION 3.26. SPECIAL COMMITTEE AND BOARD RECOMMENDATION...............................................32
SECTION 3.27. VOTE REQUIRED; STATE TAKEOVER STATUTES...................................................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
RECAPITALIZATION MERGER SUB...................................................................32
SECTION 4.01. ORGANIZATION AND GOOD STANDING...........................................................32
SECTION 4.02. CAPITALIZATION...........................................................................32
SECTION 4.03. AUTHORITY RELATIVE TO THIS AGREEMENT.....................................................33
SECTION 4.04. NO CONFLICT; REQUIRED FILINGS AND CONSENTS...............................................33
SECTION 4.05. ABSENCE OF LITIGATION....................................................................34
SECTION 4.06. PROXY STATEMENT; SCHEDULE 13E-3..........................................................34
SECTION 4.07. BROKERS..................................................................................34
SECTION 4.08. FINANCING ARRANGEMENTS...................................................................35
SECTION 4.09. NO PRIOR ACTIVITIES OF RECAPITALIZATION MERGER SUB.......................................35
SECTION 4.10. OGCL SECTION 1704.01.....................................................................35
SECTION 4.11. RECAPITALIZATION TREATMENT...............................................................35
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGERS...............................................................35
SECTION 5.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGERS...................................35
SECTION 5.02. CHANGES IN EMPLOYMENT ARRANGEMENTS.......................................................38
SECTION 5.03. SEVERANCE................................................................................39
SECTION 5.04. WARN.....................................................................................39
SECTION 5.05. NO SOLICITATION..........................................................................39
ARTICLE VI ADDITIONAL AGREEMENTS................................................................................41
SECTION 6.01. PROXY STATEMENT, SCHEDULE 13E-3 AND FORM S-4.............................................41
SECTION 6.02. COMPANY SHAREHOLDERS MEETING.............................................................42
SECTION 6.03. ACCESS TO INFORMATION; CONFIDENTIALITY...................................................42
SECTION 6.04. CONSENTS; APPROVALS; COMMERCIALLY REASONABLE EFFORTS.....................................43
SECTION 6.05. INDEMNIFICATION AND INSURANCE............................................................44
SECTION 6.06. NOTIFICATION OF CERTAIN MATTERS..........................................................46
SECTION 6.07. FURTHER ACTION...........................................................................46
SECTION 6.08. PUBLIC ANNOUNCEMENTS.....................................................................47
SECTION 6.09. CONVEYANCE TAXES.........................................................................47
SECTION 6.10. EMPLOYEE PLANS AND BENEFITS, ETC.........................................................47
SECTION 6.11. DISPOSITION OF LITIGATION................................................................48
SECTION 6.12. STOP TRANSFER ORDER......................................................................48
SECTION 6.13. CONFIDENTIALITY AGREEMENT................................................................48
ARTICLE VII CONDITIONS TO THE MERGERS...........................................................................48
SECTION 7.01. CONDITIONS TO OBLIGATION OF EACH OF THE PARTIES
TO EFFECT THE MERGERS....................................................................48
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF RECAPITALIZATION
MERGER SUB...............................................................................49
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SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATION OF THE KROLL PARTIES.................................50
ARTICLE VIII TERMINATION........................................................................................50
SECTION 8.01. TERMINATION..............................................................................50
SECTION 8.02. EFFECT OF TERMINATION....................................................................51
SECTION 8.03. EXPENSES; TERMINATION FEE................................................................52
ARTICLE IX GENERAL PROVISIONS...................................................................................52
SECTION 9.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS..............................52
SECTION 9.02. NOTICES..................................................................................53
SECTION 9.03. AMENDMENT................................................................................54
SECTION 9.04. WAIVER...................................................................................54
SECTION 9.05. HEADINGS; CONSTRUCTION...................................................................54
SECTION 9.06. SEVERABILITY.............................................................................55
SECTION 9.07. ENTIRE AGREEMENT.........................................................................55
SECTION 9.08. ASSIGNMENT...............................................................................55
SECTION 9.09. PARTIES IN INTEREST......................................................................55
SECTION 9.10. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE....................................56
SECTION 9.11. GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS..........................................56
SECTION 9.12. COUNTERPARTS.............................................................................56
SECTION 9.13. WAIVER OF JURY TRIAL.....................................................................56
EXHIBIT A Articles of Incorporation of the Surviving Holding Corporation
EXHIBIT B By-Laws of the Surviving Holding Corporation
SCHEDULE A Consents Required to be Obtained by the Company
SCHEDULE B Employees Not To Be Terminated
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AGREEMENT AND PLAN OF MERGERS
AGREEMENT AND PLAN OF MERGERS, dated as of November 15, 1999
(this "Agreement"), among The Xxxxx-X'Xxxx Company, an Ohio corporation (the
"Company"), Kroll Electronic Recovery, Inc., a Delaware corporation and a wholly
owned subsidiary of the Company ("New Kroll Holdings"), KER Acquisition, Inc.,
an Ohio corporation and a wholly owned subsidiary of Kroll Finance Company,
L.L.C. ("Reorganization Merger Sub"), and BCP/XXXX Merger Corp., a Delaware
corporation ("Recapitalization Merger Sub").
W I T N E S S E T H:
WHEREAS, the stockholders of Recapitalization Merger Sub seek
to acquire a controlling interest in the Company through a transaction to be
accounted for as a recapitalization; and
WHEREAS, in order to consummate such recapitalization, it is
necessary to effect a reorganization of the Company in which Reorganization
Merger Sub will merge with and into the Company (the "Reorganization Merger"),
with the shares of the Company being converted into a like number of shares of
New Kroll Holdings and the shares of Reorganization Merger Sub being converted
into shares of the Company, such that the Company will become an indirect wholly
owned subsidiary of New Kroll Holdings, which itself will become the entity
publicly held by the shareholders who previously held shares in the Company; and
WHEREAS, the recapitalization will involve a merger (the
"Recapitalization Merger" and, together with the Reorganization Merger, the
"Mergers") to be consummated immediately after consummation of the
Reorganization Merger and in which Recapitalization Merger Sub will merge with
and into New Kroll Holdings, with the shares of New Kroll Holdings (subject to
certain exceptions described in this Agreement) being converted into the right
to receive cash and the shares of Recapitalization Merger Sub being converted
into shares of New Kroll Holdings; and
WHEREAS, a Special Committee of the Board of Directors of the
Company has determined that the Mergers and the Cash Merger Consideration to be
paid in the Recapitalization Merger are fair to and in the best interests of the
Company's shareholders and has approved and has recommended the approval of this
Agreement to the Board of Directors of the Company; and
WHEREAS, the Boards of Directors of the Company, New Kroll
Holdings and Reorganization Merger Sub have approved the Reorganization Merger
upon the terms and subject to the conditions set forth herein and in accordance
with the applicable provisions of the General Corporation Law of the State of
Ohio (the "OGCL"); and
WHEREAS, the Boards of Directors of New Kroll Holdings and
Recapitalization Merger Sub have approved the Recapitalization Merger upon the
terms and subject to the conditions set forth herein and in accordance with the
applicable provisions of the General Corporation Law of the State of Delaware
(the "DGCL"); and
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WHEREAS, as an inducement to the parties to enter into this
Agreement, certain shareholders of the Company have entered into a Voting, Sale
and Retention Agreement dated the date hereof, pursuant to which, among other
things, they agree to accept disparate treatment in the Recapitalization Merger
on the basis provided in this Agreement (the "Voting, Sale and Retention
Agreement").
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
CERTAIN DEFINITIONS
For purposes of this Agreement, the term:
"1998 Balance Sheet" is defined in Section 3.09.
"Acquisition Agreement" is defined in Section 5.05(e).
"Acquisition Proposal" is defined in Section 5.05(a).
"Action" is defined in Section 6.05(b).
"Affiliate" means a Person that directly or indirectly,
through one or more intermediaries, Controls, is controlled by, or is under
common Control with, the first mentioned Person.
"Agreement" means this Agreement and Plan of Mergers.
"Alternative Transaction" is defined in Section 5.05(c).
"BCP LLC" means BCP/XXXX Acquisition Company L.L.C., a
Delaware limited liability company.
"Blue Sky Laws" means state securities laws, as amended.
"BMP" means Blackstone Management Partners III L.L.C.
"Board of Directors" means the Board of Directors of the
Company.
"Business Day" means any day other than a day on which banks
in New York, New York or Cincinnati, Ohio are required or authorized to be
closed.
"Cash Merger Consideration" is defined in Section 2.06(e).
"Certificate of Recapitalization Merger" is defined in
Section 2.02.
"Certificate of Reorganization Merger" is defined in
Section 1.02.
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"Chapter 1704" is defined in Section 3.04.
"Closings" means the closings of the Mergers.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means The Xxxxx-X'Xxxx Company, an Ohio corporation.
"Company Charter Documents" is defined in Section 3.02.
"Company Common Stock" means the Common Stock, par value $.01
per share, of the Company.
"Company Disclosure Schedule" is defined in Article III.
"Company Employee Plan" is defined in Section 3.11(a).
"Company IP" is defined in Section 3.20.
"Company IP License" is defined in Section 3.20.
"Company Options" is defined in Section 1.08(a).
"Company Permits" is defined in Section 3.06(b).
"Company Preferred Stock" is defined in Section 3.03.
"Company Right" is defined in Section 1.08.
"Company SEC Reports" is defined in Section 3.07(a).
"Company Shareholders Meeting" is defined in Section 3.13.
"Company Stock Option" is defined in Section 1.08.
"Company Stock Option Plans" is defined in Section 2.08(a).
"Company Warrant" is defined in Section 1.08.
"Confidentiality Letter" is defined in Section 6.03.
"Contingency Plans" is defined in Section 3.22(c).
"Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise.
"D&O Insurance" is defined in Section 6.05(d).
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"Debt Financing Letter" is defined in Section 4.08.
"DGCL" is defined in the sixth Whereas clause of this
Agreement.
"Dissenting Shares" is defined in Section 1.07(a).
"Dollars" or "$" means United States dollars.
"Employees" is defined in Section 6.10.
"Environmental Laws" means any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or other legally enforceable
requirements (including, without limitation, common law) of any foreign
government, the United States, or any state, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or of human
health, or employee health and safety.
"Environmental Report" means any report, study, assessment or
audit that addresses any issue of actual or potential noncompliance with, actual
or potential liability under or cost arising out of, or actual or potential
impact on the business of the Company or any of its Subsidiaries in connection
with, any Environmental Law or any proposed or anticipated change in or addition
to any Environmental Law relating to the Company or any of its Subsidiaries or
any entity for which any of them may be liable.
"Equity Financing Letter" is defined in Section 4.08.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" is defined in Section 3.11(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the SEC rules and regulations promulgated thereunder.
"Exchange Agent" is defined in Section 2.09(a).
"Expenses" is defined in Section 8.03(a).
"FCPA" means the Foreign Corrupt Practices Act.
"Financing Letters" is defined in Section 4.08.
"Form S-4" is defined in Section 3.13.
"GAAP" is defined in Section 3.07(b).
"Governmental Authority" is defined in Section 3.05(b).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as
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amended, and the rules and regulations promulgated thereunder.
"Indemnified Party (Parties)" is defined in Section 6.05(b).
"Information Security Group" means Xxxxx-X'Xxxx Information
Security Group, Inc., a California corporation.
"Insurance Policies" is defined in Section 3.23.
"Intellectual Property" shall mean all United States, state
and foreign intellectual property, including all (i)(a) patents, inventions,
discoveries, processes, designs, techniques, developments, technology and
related improvements and know-how; (b) copyrights and works of authorship in any
media, including computer programs, hardware, firmware, software, applications,
files, databases, documentation and related items; (c) trademarks, service
marks, trade names, brand names, corporate names, domain names, logos, trade
dress, the goodwill of any business symbolized thereby and all common-law rights
relating thereto; (d) trade secrets and other confidential or proprietary
documents, files, analyses, lists, ways of doing business and/or information;
and (ii) any and all registrations, applications and recordings related thereto.
"IP License" means a license, consent, royalty or other
agreement other than a Company IP License.
"Knowledge" means the actual knowledge of the executive
officers of the Company or Recapitalization Merger Sub, as the case may be,
without any special inquiry or investigation.
"Kroll Documents" means, collectively the Company Charter
Documents and the certificate of incorporation and by-laws, as amended through
the date hereof, of New Kroll Holdings and Reorganization Merger Sub.
"Kroll Finance Company LLC" means Kroll Finance Company,
L.L.C., a Delaware limited liability company and a wholly owned subsidiary of
New Kroll Holdings.
"Kroll Holdings" means Kroll Holdings, Inc., a Delaware
corporation.
"Kroll Parties" means collectively, the Company, New Kroll
Holdings and Reorganization Merger Sub.
"Lease" is defined in Section 3.15(c).
"Leased Properties" is defined in Section 3.15(b).
"Liens" is defined in Section 3.03(b).
"LLC Act" means the Delaware Revised Limited Liability Company
Act, 6 Del. C. Section 18-101, et seq., as amended from time to time.
"Management Options" is defined in Section 2.08(b).
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"Material Adverse Effect" means, when used in connection with
the Company or any of its Subsidiaries or Recapitalization Merger Sub, as the
case may be, any change, effect or circumstance that is or would reasonably be
expected to be materially adverse to the business, assets, liabilities,
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole or Recapitalization Merger Sub, as the case may be; provided,
however, that changes, effects or circumstances that result from or arise on
account of (A) any changes in economic, regulatory or political conditions
generally, (B) the United States securities markets, (C) this Agreement or the
transactions contemplated by this Agreement or (D) the effect of the public
announcement of the transactions contemplated hereby, including any effect on
current or prospective customers or employees of the Company, shall be excluded
from the definition of "Material Adverse Effect" and from any determination as
to whether a Material Adverse Effect has occurred or may occur.
"Material Contracts" is defined in Section 3.16.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants,
contaminants and radioactivity that is regulated pursuant to or could result in
liability under any Environmental Law.
"Mergers" is defined in the third Whereas clause of this
Agreement.
"New Kroll Holdings" is defined in the first paragraph of this
Agreement.
"New Kroll Holdings Common Stock" means the Common Stock,
without par value, of New Kroll Holdings.
"New Kroll Holdings Options" is defined in Section 1.08.
"New Kroll Holdings Right" is defined in Section 1.08.
"New Kroll Holdings Stock Option" is defined in Section 1.08.
"New Kroll Holdings Warrant" is defined in Section 1.08.
"Non-U.S. Monopoly Laws" means non-U.S. laws intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade.
"Note Purchase Agreement" is defined in Section 3.03.
"Notes" means the Senior Notes due 2004 issued pursuant to the
Note Purchase Agreement.
"O'Gara Shareholders" means Xxxxxx X. X'Xxxx and Xxxxxxx X.
X'Xxxx.
"Officer Employees" is defined in Section 6.05(c).
"OGCL" is defined in the fifth Whereas clause of this
Agreement.
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"Owned Properties" is defined in Section 3.15(b).
"Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act).
"Products" is defined in Section 3.22(b).
"Proxy Statement" is defined in Section 3.13.
"Real Properties" is defined in Section 3.15(b).
"Recapitalization Closing" is defined in Section 2.02.
"Recapitalization Closing Date" is defined in Section 2.02.
"Recapitalization Dissenting Shares" is defined in
Section 2.07.
"Recapitalization Effective Time" is defined in Section 2.02.
"Recapitalization Merger" is defined in the Third Whereas
clause of this Agreement.
"Recapitalization Merger Consideration" is defined in
Section 2.06(e).
"Recapitalization Merger Sub" is defined in the first
paragraph of this Agreement.
"Recapitalization Merger Sub Common Stock" is defined in
Section 2.06(a).
"Regulation S-X" means Regulation S-X promulgated by the SEC
under the Securities Act, the Exchange Act, the Public Utilities Holding Company
Act of 1935, Investment Company Act of 1940 and the Energy Policy and
Conservation Act of 1975, as such regulation may be amended.
"Remedial Action" means any action to (i) investigate, clean
up, remove or treat any Materials of Environmental Concern; or (ii) prevent the
release or threat of release of any Materials of Environmental Concern.
"Reorganization Closing Date" is defined in Section 1.02.
"Reorganization Effective Time" is defined in Section 1.02.
"Reorganization Merger" is defined in the second Whereas
clause of this Agreement.
"Reorganization Merger Sub" is defined in the first paragraph
of this Agreement.
"Reorganization Merger Sub Common Stock" means the Common
Stock, par value $.01 per share, of Reorganization Merger Sub.
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"Requisite Financing" is defined in Section 4.03.
"Retained Shares" is defined in Section 2.06(b).
"Retaining Shareholders" means Xxxxx Xxxxx and the other
shareholders of the Surviving Operating Corporation who are retaining shares of
Common Stock of New Kroll Holdings pursuant to the Voting, Sale and Retention
Agreement.
"Schedule 13E-3" is defined in Section 3.13.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the SEC rules and regulations promulgated thereunder.
"Series A Merger Consideration" is defined in Section 2.06(c).
"Series A Preferred Stock" is defined in Section 2.06(c).
"Series C-D Merger Consideration" is defined in
Section 2.06(d).
"Series C Preferred Stock" is defined in Section 2.06(d).
"Series D Preferred Stock" is defined in Section 2.06(d).
"Significant Subsidiary" means any Subsidiary that would be a
significant subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X and
the Information Security Group.
"Special Committee" is defined in Section 3.25.
"Subsidiary Documents" is defined in Section 3.02.
"Subsidiary" of the Company or any other Person means any
corporation, limited liability company, partnership, joint venture or other
legal entity of which the Company or such other Person, as the case may be
(either alone or through or together with any other Subsidiary), owns, directly
or indirectly, more than 50% of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such Person.
"Superior Proposal" is defined in Section 5.05(b).
"Surviving Holding Corporation" is defined in Section 2.01.
"Surviving Operating Corporation" is defined in
Section 1.01(b).
"Surviving Operating Corporation Common Stock" means the
Common Stock, par value $0.01 per share, of the Surviving Operating Corporation.
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"Systems" is defined in Section 3.22(b).
"Tax Return" means any return, declaration, report or similar
statement required to be filed with any Governmental Authority with respect to
any Taxes (including any attached schedules), including any information return,
claim for refund, amended return and declaration of estimated Tax.
"Taxes" means all United States federal, state, local or
foreign income, profits, estimated gross receipts, windfall profits,
environmental (including taxes under Section 59A of the Code), severance,
property, intangible property, occupation, production, sales, use, license,
excise, emergency excise, franchise, capital gains, capital stock, employment,
withholding, social security (or similar), disability, transfer, registration,
stamp, payroll, goods and services, value added, alternative or add-on minimum
tax, estimated, or any other tax, custom, duty or governmental fee, or other
like assessment or charge of any kind whatsoever, together with any interest,
penalties, fines, related liabilities or additions to tax they may become
payable in respect therefore imposed by any Governmental Authority, whether
disputed or not.
"Termination Fee" is defined in Section 8.03(b).
"Third Party" means a Person (or group of Persons) other than
Recapitalization Merger Sub or its Affiliates.
"Underwater Options" is defined in Section 2.08(b).
"Voting, Sale and Retention Agreement" is defined in the
seventh Whereas clause of this Agreement.
"WARN" means the Worker Adjustment and Retraining Notification
Act of 1988.
"Year 2000 Compliant" is defined in Section 3.22(b).
ARTICLE I
THE REORGANIZATION MERGER
Section 1.01. The Reorganization Merger.
(a) The Company has caused Kroll Holdings Inc., a Delaware
corporation and a wholly owned subsidiary of the Company, to declare and pay a
dividend of New Kroll Holdings Common Stock to the Company, such that the
Company owns directly all of the issued and outstanding shares of New Kroll
Holdings Common Stock, and Kroll Finance Company LLC will remain a wholly owned
subsidiary of New Kroll Holdings, and Reorganization Merger Sub will remain a
wholly owned subsidiary of Kroll Finance Company LLC.
(b) At the Reorganization Effective Time, and subject to and
upon the terms and conditions of this Agreement and the OGCL, Reorganization
Merger Sub shall be merged
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with and into the Company, the separate corporate existence of Reorganization
Merger Sub shall cease, and the Company shall continue as the surviving
corporation (hereinafter sometimes referred to as the "Surviving Operating
Corporation") under its present name.
Section 1.02. Reorganization Effective Time.
Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.01, as promptly as practicable (and in any event within two Business Days)
after the satisfaction or waiver of the conditions set forth in Article VII, the
parties hereto shall cause the Reorganization Merger to be consummated by filing
a certificate of merger as contemplated by the OGCL (the "Certificate of
Reorganization Merger"), together with any required related certificates, with
the Secretary of State of the State of Ohio, in such form as required by, and
executed in accordance with the relevant provisions of, the OGCL. The
Reorganization Merger shall become effective at the time of such filing or at
such later time, which will be as soon as reasonably practicable, specified in
the Certificate of Reorganization Merger (the "Reorganization Effective Time").
Prior to such filing, a closing shall be held at such time as may be agreed upon
by Recapitalization Merger Sub and the Company, at the offices of Xxxxxxx
Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless
another place is agreed to in writing by the parties hereto, for the purpose of
confirming the satisfaction or waiver, as the case may be, of the conditions set
forth in Article VII. The date of such closing is referred to herein as the
"Reorganization Closing Date".
Section 1.03. Effect of the Reorganization Merger.
At the Reorganization Effective Time, the effect of the
Reorganization Merger shall be as provided in this Agreement, the Certificate of
Reorganization Merger and the applicable provisions of the OGCL. Without
limiting the generality of the foregoing, and subject thereto, at the
Reorganization Effective Time (i) the Surviving Operating Corporation shall
possess all assets and property of every description, and every interest in the
assets and property, wherever located, and the rights, privileges, immunities,
powers, franchises and authority, of a public as well as a private nature, of
each of Reorganization Merger Sub and the Company and all obligations belonging
to or due to Reorganization Merger Sub or the Company, all of which shall be
vested in the Surviving Operating Corporation without any further act or deed;
and (ii) the Surviving Operating Corporation shall be liable for all the
obligations of Reorganization Merger Sub and the Company, including liability to
holders of Dissenting Shares.
Section 1.04. Articles of Incorporation; Code of Regulations.
(a) Articles of Incorporation. Except as provided in Section
6.05(a), unless otherwise determined by Reorganization Merger Sub prior to the
Reorganization Effective Time, at the Reorganization Effective Time, the
Articles of Incorporation of the Company, as in effect immediately prior to the
Reorganization Effective Time, shall be the Articles of Incorporation of the
Surviving Operating Corporation until thereafter amended as provided by the OGCL
and such Articles of Incorporation.
(b) Code of Regulations. Except as provided in Section
6.05(a), the Code of Regulations of the Company, as in effect immediately prior
to the Reorganization Effective
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Time, shall be the Code of Regulations of the Surviving Operating Corporation
until thereafter amended as provided by the OGCL, the Articles of Incorporation
of the Surviving Operating Corporation and such Code of Regulations.
Section 1.05. Directors and Officers.
(a) The directors of Reorganization Merger Sub immediately
prior to the Reorganization Effective Time shall be the initial directors of the
Surviving Operating Corporation, each to hold office in accordance with the
Articles of Incorporation and Code of Regulations of the Surviving Operating
Corporation, and the officers of the Company immediately prior to the
Reorganization Effective Time shall be the initial officers of the Surviving
Operating Corporation, in each case until their respective successors are duly
elected or until their earlier resignation, removal from office or death.
(b) At the Reorganization Effective Time, each director of any
company that is a Kroll Party or a Subsidiary of a Kroll Party who is not also a
director of Reorganization Merger Sub shall resign all such directorships and
the directors of Recapitalization Merger Sub shall become additional directors
or managers, as the case may be, of such Kroll Parties and their Subsidiaries.
Section 1.06. Effect on Securities, Etc.
At the Reorganization Effective Time, by virtue of the
Reorganization Merger and without any action on the part of Reorganization
Merger Sub, the Company or the holders of any securities of the Company:
(a) Conversion of Securities. Each share of Company Common
Stock (other than any such shares to be cancelled pursuant to Section 1.06(b)
and other than Dissenting Shares) issued and outstanding immediately prior to
the Reorganization Effective Time will be converted into one fully paid and
nonassessable share of New Kroll Holdings Common Stock. Each share of
Reorganization Merger Sub Common Stock issued and outstanding immediately prior
to the Reorganization Effective Time will be converted into one fully paid and
nonassessable share of Surviving Operating Corporation Common Stock.
(b) Cancellation. Each share of Company Common Stock held in
the treasury of the Company and each share of Company Common Stock owned by
Reorganization Merger Sub or any direct or indirect wholly-owned Subsidiary of
the Company immediately prior to the Reorganization Effective Time shall cease
to be outstanding and shall be canceled and retired, without payment of any
consideration therefor, and cease to exist.
Section 1.07. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Common Stock issued and outstanding immediately
prior to the Reorganization Effective Time, and held by a holder who has the
right to demand payment for and an appraisal of such shares in accordance with
Sections 1701.84 and 1701.85 of the OGCL (or any successor provision), who
perfects his demand for the fair cash value of his shares of Company Common
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Stock in accordance with the OGCL and, as of the Reorganization Effective Time
has neither effectively withdrawn nor lost his right to make such demand (such
shares of Company Common Stock, the "Dissenting Shares"), shall not be converted
into or represent a right to receive the shares of New Kroll Holdings Common
Stock pursuant to Section 1.06(a), but the holder thereof shall be entitled to
only such rights as are granted by the OGCL.
(b) Notwithstanding the provisions of Section 1.07(a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his right to make such demand, then as of the
Reorganization Effective Time or the occurrence of such event, whichever occurs
later, such dissenting holder's shares of Company Common Stock shall
automatically be converted into and represent only the right to receive the
shares of New Kroll Holdings Common Stock as provided in Section 1.06(a), or, to
the extent the Recapitalization Merger has been consummated, the Cash Merger
Consideration as provided in Section 2.06 without interest thereon, upon
surrender of the certificate or certificates representing such shares.
(c) The Company shall give Recapitalization Merger Sub (i)
prompt notice of any written demands for appraisal or payment of the fair cash
value of any shares of Company Common Stock, withdrawals of such demands and any
other instruments served pursuant to the OGCL received by the Company after the
date hereof and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal or the payment of the fair cash value of
any such shares under the OGCL. The Company shall not voluntarily make any
payment with respect to any demands for appraisal or the payment of the fair
cash value of any shares and shall not, except with the prior written consent of
Recapitalization Merger Sub, settle or offer to settle any such demands.
SECTION 1.08. Treatment of Company Options.
Upon and as of the Reorganization Effective Time and in
connection with the Reorganization Merger, each option to purchase shares of
Company Common Stock (each, a "Company Stock Option") granted under the
Company's stock option plans or any other stock plan or agreement of the
Company, each warrant to purchase shares of Company Common Stock (each, a
"Company Warrant") and each other right to purchase shares of Company Common
Stock (each a "Company Right" and, together with the Company Stock Options and
the Company Warrants, the "Company Options") shall be converted into an
equivalent option (each a "New Kroll Holdings Stock Option"), warrant (each, a
"New Kroll Holdings Warrant") and right (each, a "New Kroll Holdings Right" and,
together with the New Kroll Holdings Stock Options and New Kroll Holdings
Warrants, "New Kroll Holdings Options"), respectively, to purchase, on the same
terms and conditions (including any unsatisfied vesting conditions) mutatis
mutandis, shares of New Kroll Holdings Common Stock that the holder of such
Company Options would have been entitled to receive had such Company Option been
exercised prior to the Reorganization Effective Time. The Company and New Kroll
Holdings agree to take all corporate and other action as shall be necessary to
effectuate the foregoing, and the Company shall use its commercially reasonable
efforts to obtain, if required, the consent of each holder of a Company Option
as shall be necessary to effectuate the foregoing, subject to Section 5.01(q).
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ARTICLE II
THE RECAPITALIZATION MERGER
Section 2.01. The Recapitalization Merger.
(a) At the Recapitalization Effective Time, and subject to and
upon the terms and conditions of this Agreement and the DGCL, Recapitalization
Merger Sub shall be merged with and into New Kroll Holdings, the separate
corporate existence of Recapitalization Merger Sub shall cease, and New Kroll
Holdings shall continue as the surviving corporation (hereinafter sometimes
referred to as the "Surviving Holding Corporation") under the name "Xxxxx-X'Xxxx
Holdings, Inc."
Section 2.02. Recapitalization Effective Time.
Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.01, as promptly as practicable (and in any event within two Business Days)
after the satisfaction or waiver of the conditions set forth in Article VII, the
parties hereto shall cause the Recapitalization Merger to be consummated by
filing a certificate of merger as contemplated by the DGCL (the "Certificate of
Recapitalization Merger"), together with any required related certificates, with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with the relevant provisions of, the DGCL. The
Recapitalization Merger shall become effective at the time of such filing or at
such later time, which will be as soon as reasonably practicable, specified in
the Certificate of Recapitalization Merger (the "Recapitalization Effective
Time"). Prior to such filing, a closing (the "Recapitalization Closing") shall
be held at such time as may be agreed upon by Recapitalization Merger Sub and
the Company, at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, unless another place is agreed to in writing by the
parties hereto, for the purpose of confirming the satisfaction or waiver, as the
case may be, of the conditions set forth in Article VII. The date of such
closing is referred to herein as the "Recapitalization Closing Date".
Section 2.03. Effect of the Recapitalization Merger.
At the Recapitalization Effective Time, the effect of the
Recapitalization Merger shall be as provided in this Agreement, the Certificate
of Recapitalization Merger and the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the
Recapitalization Effective Time (i) the Surviving Holding Corporation shall
possess all rights, privileges, powers and franchises, both public and private,
and all of the property, real, personal, and mixed of each of New Kroll Holdings
and Recapitalization Merger Sub and all obligations belonging to or due to
Recapitalization Merger Sub or New Kroll Holdings, all of which shall be vested
in the Surviving Holding Corporation without any further act or deed; and (ii)
the Surviving Holding Corporation shall be liable for all the obligations of
Recapitalization Merger Sub and New Kroll Holdings.
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Section 2.04. Certificate of Incorporation; By-laws.
(a) Certificate of Incorporation. Unless otherwise determined
by Recapitalization Merger Sub prior to the Recapitalization Effective Time, at
the Recapitalization Effective Time, the Certificate of Incorporation of New
Kroll Holdings, as in effect immediately prior to the Recapitalization Effective
Time, shall be amended and restated so as to read in its entirety in the form
thereof set forth in Exhibit A and shall be the Certificate of Incorporation of
the Surviving Holding Corporation until thereafter amended as provided by the
DGCL and such Certificate of Incorporation; provided that the Certificate of
Incorporation shall conform in all respects to the requirements of Section
6.05(a); and provided further that without the prior written consent of the
Special Committee, which consent shall not be unreasonably withheld,
Recapitalization Merger Sub shall not make any change or amendment to Sections
C, D, E, F or G of Article Fourth of Exhibit A.
(b) By-Laws. The By-laws of Recapitalization Merger Sub, as in
effect immediately prior to the Recapitalization Effective Time, shall be the
By-laws of the Surviving Holding Corporation until thereafter amended as
provided in its Certificate of Incorporation and by the DGCL, and such By-laws
shall conform in all respects to the requirements of Section 6.05(a).
Section 2.05. Directors and Officers.
The directors of Recapitalization Merger Sub immediately prior
to the Recapitalization Effective Time shall be the initial directors of the
Surviving Holding Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-laws of the Surviving Holding Corporation,
and the officers of New Kroll Holdings immediately prior to the Recapitalization
Effective Time shall be the initial officers of the Surviving Holding
Corporation, in each case until their respective successors are duly elected or
until their earlier resignation, removal from office or death.
Section 2.06. Effect on Securities, Etc.
At the Recapitalization Effective Time, by virtue of the
Recapitalization Merger and without any action on the part of Recapitalization
Merger Sub, New Kroll Holdings or the holders of any securities of New Kroll
Holdings:
(a) Conversion of Common Stock of Recapitalization Merger Sub.
All shares of common stock of Recapitalization Merger Sub, par value $0.01 per
share ("Recapitalization Merger Sub Common Stock"), issued and outstanding
immediately prior to the Recapitalization Effective Time shall be converted into
an aggregate number of validly issued, fully paid and nonassessable shares of
New Kroll Holdings Common Stock equal to the quotient obtained by dividing (i)
the amount of cash contributed to the capital of Recapitalization Merger Sub
immediately prior to or concurrently with the consummation of the
Recapitalization Merger by (ii) the amount of Cash Merger Consideration per
share.
(b) Non-Conversion of Certain Shares of New Kroll Holdings
Common Stock. Each share of New Kroll Holdings Common Stock outstanding
immediately prior to the Recapitalization Effective Time that is then owned by
either BCP LLC or the Retaining Shareholders as "Retained Shares" in accordance
with the Voting, Sale and Retention Agreement
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shall not be converted and shall not be otherwise affected by the
Recapitalization Merger and shall remain outstanding as one share of New Kroll
Holdings Common Stock following the Recapitalization Effective Time.
(c) Conversion of Series A Conversion Shares. Each issued and
outstanding share of New Kroll Holdings Common Stock that is identified as a
"Series A Conversion Share" in the Voting, Sale and Retention Agreement shall be
converted into the right to receive .018 of a fully paid and nonassessable share
of 13% Cumulative Participating Preferred Stock, Series A (the "Series A
Preferred Stock"), of New Kroll Holdings (the "Series A Merger Consideration").
(d) Conversion of Series C and D Conversion Shares. Each
issued and outstanding share of New Kroll Holdings Common Stock that is
identified as a "Series C-D Conversion Share" in the Voting, Sale and Retention
Agreement shall be converted into the right to receive .009 of a fully paid and
nonassessable share of 9% Cumulative Participating Preferred Stock, Series C
(the "Series C Preferred Stock"), of New Kroll Holdings and .009 of a fully paid
and nonassessable share of 9% Cumulative Participating Preferred Stock, Series D
(the "Series D Preferred Stock"; the Series C Preferred Stock and the Series D
Preferred Stock are referred to herein as the "Series C-D Merger
Consideration").
(e) Conversion of All Other New Kroll Holdings Common Stock.
Each issued and outstanding share of New Kroll Holdings Common Stock outstanding
immediately prior to the Recapitalization Effective Time (other than
Recapitalization Dissenting Shares and those shares identified in clauses (b),
(c) and (d) of this Section 2.06 and such shares held by New Kroll Holdings or
any Subsidiary of New Kroll Holdings) shall be converted into the right to
receive $18 in cash (the "Cash Merger Consideration" and, together with the
Series A Merger Consideration and the Series C-D Merger Consideration, the
"Recapitalization Merger Consideration").
(f) Cancellation. Each share of New Kroll Holdings Common
Stock held in the treasury of New Kroll Holdings and each share of New Kroll
Holdings Common Stock owned by Recapitalization Merger Sub or any direct or
indirect wholly-owned Subsidiary of New Kroll Holdings immediately prior to the
Recapitalization Effective Time shall cease to be outstanding and shall be
cancelled and retired without payment of any consideration therefor, and cease
to exist.
SECTION 2.07. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of New Kroll Holdings Common Stock issued and outstanding
immediately prior to the Recapitalization Effective Time, and held by a holder
who has the right to demand payment for and any appraisal of such shares in
accordance with Section 262 of the DGCL (or any successor provision), who
perfects his demand for the appraisal of the fair value of his shares of New
Kroll Holdings Common Stock in accordance with the DGCL and, as of the
Recapitalization Effective Time, has neither effectively withdrawn nor lost his
right to make such demand (such shares of New Kroll Holdings Common Stock, the
"Recapitalization Dissenting Shares"), shall not be converted into or represent
a right to receive the Recapitalization Merger Consideration pursuant to Section
2.06(e), but the holder thereof shall be entitled to only such rights as are
granted by the DGCL.
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(b) Notwithstanding the provisions of Section 2.07(a), if any
holder of Recapitalization Dissenting Shares effectively withdraws or loses
(through failure to perfect or otherwise) his right to make such demand, then as
of the Recapitalization Effective Time or the occurrence of such event,
whichever occurs later, such dissenting holder's shares of New Kroll Holdings
Common Stock shall automatically be converted into and represent only the right
to receive the Cash Merger Consideration as provided in Section 2.06(e) without
interest thereon, upon surrender of the certificate or certificates representing
such shares.
(c) The Company or New Kroll Holdings, as the case may be,
shall give Recapitalization Merger Sub (i) prompt notice of any written demands
for appraisal of the fair value of any shares of New Kroll Holdings Common
Stock, withdrawals of such demands and any other instruments served pursuant to
the DGCL received by New Kroll Holdings after the date hereof and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal or the payment of the fair cash value of any such shares under the
DGCL. New Kroll Holdings shall not voluntarily make any payment with respect to
any demands for appraisal or the payment of the fair cash value of any shares
and shall not, except with the prior written consent of Recapitalization Merger
Sub, settle or offer to settle any such demands.
Section 2.08. Treatment of Options, Warrants and Other Rights.
(a) Each New Kroll Holdings Option which has an exercise price
per share that is equal to or greater than the Cash Merger Consideration (the
"Underwater Options") shall be cancelled as of the Recapitalization Effective
Time without consideration. Except with respect to certain New Kroll Holdings
Options held by certain management employees to be identified by
Recapitalization Merger Sub prior to the Recapitalization Effective Time (the
"Management Options"), each New Kroll Holdings Option (other than an Underwater
Option) shall (A) become fully vested and exercisable as of the Recapitalization
Effective Time, to the extent that it was not fully vested prior thereto, and
(B) be cancelled by New Kroll Holdings and the holder thereof shall receive at
the Recapitalization Effective Time or as soon as practicable thereafter from
New Kroll Holdings in consideration for such cancellation an amount in cash
equal to the product of (a) the number of shares subject to such New Kroll
Holdings Option and (b) the excess of the Cash Merger Consideration over the
exercise price per share issuable upon exercise of such New Kroll Holdings
Option, adjusted for applicable withholding taxes. Each of the Management
Options (other than Underwater Options) shall continue to be held by such
optionee pursuant to its existing terms and conditions (including any
unsatisfied vesting conditions). Recapitalization Merger Sub and the Company
agree to take all corporate or other action as shall be necessary to effectuate
the foregoing, and the Company shall use its commercially reasonable efforts to
obtain, if required, prior to the Reorganization Closing Date, such consent of
each holder of a New Kroll Holdings Option as shall be necessary to effectuate
the foregoing.
(b) As soon as practicable following the Reorganization
Effective Time, New Kroll Holdings shall provide to the record holders of New
Kroll Holdings Options appropriate notice of such holders' rights thereunder.
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Section 2.09. Surrender of Shares of New Kroll Common Stock.
(a) Prior to the Recapitalization Effective Time,
Recapitalization Merger Sub shall appoint a bank or trust company which is
reasonably satisfactory to New Kroll Holdings and Recapitalization Merger Sub to
act as the exchange agent (the "Exchange Agent") for the payment of the
Recapitalization Merger Consideration. All of the fees and expenses of the
Exchange Agent shall be borne by the Surviving Holding Corporation.
(b) Recapitalization Merger Sub shall, at or prior to the
Recapitalization Effective Time, provide the Exchange Agent with the full amount
of the Cash Merger Consideration, in immediately available funds, and New Kroll
Holdings shall deliver to the Exchange Agent a sufficient number of certificates
representing shares of Series A Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock necessary to pay the Series A Merger Consideration and
the Series C-D Merger Consideration for all of the shares of New Kroll Holdings
Common Stock entitled to the same pursuant to Sections 2.06(c) and 2.06(d),
respectively. The Exchange Agent shall invest the Cash Merger Consideration as
directed by New Kroll Holdings or the Surviving Holding Corporation, as the case
may be, on a daily basis. Any interest and other income resulting from such
investments shall be paid to the Surviving Holding Corporation.
(c) Promptly following the Recapitalization Effective Time,
the Surviving Holding Corporation shall instruct the Exchange Agent to mail, no
later than two Business Days after the Recapitalization Effective Time, to each
holder of record of a certificate representing shares of New Kroll Holdings
Common Stock converted upon the Recapitalization Merger pursuant to Section
2.06(c), (d) or (e), (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates shall
pass, only upon delivery of the certificates to the Exchange Agent and shall be
in such form and have such other provisions as Recapitalization Merger Sub or
the Surviving Holding Corporation may reasonably specify) and (ii) instructions
for use in effecting the surrender of the certificates. The Exchange Agent shall
accept such certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. Each holder of a
certificate or certificates representing shares of New Kroll Holdings Common
Stock converted upon the Recapitalization Merger pursuant to Section 2.06(c),
(d) or (e) may thereafter surrender such certificate or certificates to the
Exchange Agent, as agent for such holder, to effect the surrender of such
certificate or certificates on such holder's behalf for a period ending six
months after the Recapitalization Effective Time. Upon the due surrender of
certificates representing shares of New Kroll Holdings Common Stock that have
been converted into the right to receive the Recapitalization Merger
Consideration, the Surviving Holding Corporation shall cause the Exchange Agent
to pay the holder of such certificates in exchange therefor the applicable
Recapitalization Merger Consideration multiplied by the number of shares of New
Kroll Holdings Common Stock represented by such certificate that have been so
converted. Until so surrendered, each such certificate (other than certificates
representing Retained Shares and shares of New Kroll Holdings Common Stock held
by BCP LLC) shall represent solely the right to receive the applicable
Recapitalization Merger Consideration relating thereto.
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(d) If payment of the Recapitalization Merger Consideration in
respect of converted shares of New Kroll Holdings Common Stock is to be made to
a Person other than the Person in whose name a surrendered certificate is
registered, it shall be a condition to such payment that the certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the Person requesting such payment shall have paid any
transfer and other taxes required by reason of such payment in a name other than
that of the registered holder of the certificate or instrument surrendered or
shall have established to the satisfaction of the Surviving Holding Corporation
or the Exchange Agent that such tax either has been paid or is not payable.
(e) At and after the Recapitalization Effective Time, no
further transfer of shares of New Kroll Holdings Common Stock which have been
converted pursuant to this Agreement into Recapitalization Merger Consideration
shall be made, other than transfers of shares of New Kroll Holdings Common Stock
that have occurred prior to the Recapitalization Effective Time. In the event
that, after the Recapitalization Effective Time, certificates representing
shares of New Kroll Holdings Common Stock which have been converted pursuant to
this Agreement into Recapitalization Merger Consideration are presented to the
Surviving Holding Corporation, they shall be cancelled and exchanged for the
Recapitalization Merger Consideration provided in Section 2.06.
(f) The Cash Merger Consideration paid in the Recapitalization
Merger shall be net to the holder of shares of New Kroll Holdings Common Stock
without interest thereon, and shall be subject to reduction only for any
applicable United States federal or other back-up withholding or stock transfer
taxes payable by such holder.
(g) Promptly following the date which is six months after the
Recapitalization Effective Time, the Exchange Agent shall deliver to the
Surviving Holding Corporation all cash, certificates and other documents in its
possession relating to the transactions contemplated hereby, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a certificate
representing shares of New Kroll Holdings Common Stock (other than Retained
Shares and shares of New Kroll Holdings Common Stock held by BCP LLC) may
surrender such certificate to the Surviving Holding Corporation and (subject to
any applicable abandoned property, escheat or similar law) receive in
consideration therefor the aggregate Recapitalization Merger Consideration
relating thereto, without any interest thereon.
(h) None of Recapitalization Merger Sub, the Surviving Holding
Corporation or the Exchange Agent shall be liable to any holder of shares of New
Kroll Holdings Common Stock for any cash or securities delivered to a public
official pursuant to any abandoned property, escheat or similar law, rule,
regulation, statute, order, judgment or decree.
Section 2.10. Lost, Stolen or Destroyed Certificates.
In the event any certificates representing shares of New Kroll
Holdings Common Stock shall have been lost, stolen or destroyed, the Exchange
Agent shall deliver the Cash Merger Consideration, the Series A Merger
Consideration or the Series C-D Merger Consideration pursuant to Section 2.06,
as the case may be, in exchange for such lost, stolen or destroyed certificates
upon the making of an affidavit of that fact by the holder thereof; provided,
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however, that the Surviving Holding Corporation may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver an indemnity against any claim that
may be made against the Surviving Holding Corporation or the Exchange Agent with
respect to the certificates alleged to have been lost, stolen or destroyed.
Section 2.11. Further Action.
If, at any time after the Recapitalization Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to put the Surviving Holding Corporation in possession of all
assets and property of every description and every interest, wherever located,
and the rights, privileges, immunities, powers, franchises and authority, of a
public as well as of a private nature, of New Kroll Holdings and
Recapitalization Merger Sub, the Persons who were officers and directors of New
Kroll Holdings and Recapitalization Merger Sub immediately prior to the
Recapitalization Effective Time are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the written disclosure schedule
previously delivered by the Company to Recapitalization Merger Sub (the "Company
Disclosure Schedule") or the Company SEC Reports filed prior to the date hereof,
the Company for itself and for the Subsidiaries set forth below hereby
represents and warrants to Recapitalization Merger Sub as follows:
Section 3.01. Organization and Qualification; Subsidiaries.
Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and (with respect to U.S. Subsidiaries) in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted. Each of
the Company and its Subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and (with respect to U.S. Subsidiaries) are in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not reasonably be expected to
have a Material Adverse Effect. Section 3.01 of the Company Disclosure Schedule
sets forth a list of all Subsidiaries of the Company together with the
jurisdiction of incorporation of each such Subsidiary and the percentage of each
such Subsidiary's outstanding capital stock owned by the Company or another
Subsidiary of the Company.
Section 3.02. Articles of Incorporation and Code of
Regulations.
The Company has heretofore made available to Recapitalization
Merger Sub a complete and correct copy of its Articles of Incorporation and Code
of Regulations as amended
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through the date hereof (the "Company Charter Documents"), and has heretofore
made available to Recapitalization Merger Sub, the Articles of Incorporation and
Bylaws (or equivalent organizational documents) of each of its Significant
Subsidiaries, New Kroll Holdings and Reorganization Merger Sub (the "Subsidiary
Documents"). Such Company Charter Documents and Subsidiary Documents are in full
force and effect and no other charter or organizational documents are applicable
to or binding on the Company or its Significant Subsidiaries or New Kroll
Holdings or Reorganization Merger Sub. None of the Company, any of its
Significant Subsidiaries or Reorganization Merger Sub is in violation of any
provision of its Articles of Incorporation, Code of Regulations or By-laws or
equivalent organizational documents.
Section 3.03. Capitalization.
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Company Common Stock and 1,000,000 shares of Preferred
Stock, $.01 par value ("Company Preferred Stock"). As of October 31, 1999, (i)
22,259,940 shares of Company Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable (excluding shares which
are issued but not outstanding, none of which is entitled to vote) and were
issued free of preemptive or similar rights, (ii) no shares of Company Common
Stock were held by Subsidiaries of the Company, (iii) 1,899,980 shares of
Company Common Stock were issuable upon the exercise of Company Options then
outstanding, and (iv) no shares of Company Preferred Stock were issued and
outstanding. Since October 31, 1999, the Company has not issued or reserved for
issuance (i) any shares of capital stock or other voting securities of the
Company, except as a result of the exercise of Stock Options outstanding at
October 31, 1999 or (ii) any Stock Options. Since September 30, 1999, the
Company has not declared or paid any dividend or distribution in respect of any
of its capital stock and has not repurchased or redeemed any shares of capital
stock, and its Board of Directors has not resolved to do any of the foregoing.
(b) Neither the Company nor any of its Subsidiaries owns any
equity interest in any company or entity that is not a Subsidiary. All of the
outstanding shares of capital stock of each of the Company's Subsidiaries are
duly authorized, validly issued, fully-paid and nonassessable, and all such
shares are owned by the Company or another Subsidiary of the Company, free and
clear of all security interests, liens, claims, pledges, charges or other
encumbrances of any nature whatsoever ("Liens").
(c) New Kroll Holdings is a wholly owned subsidiary of the
Company as of the date hereof.
(d) Kroll Finance Company LLC is a single member limited
liability company formed under the LLC Act and is a wholly owned subsidiary of
New Kroll Holdings as of the date hereof.
(e) Reorganization Merger Sub is a wholly owned subsidiary of
Kroll Finance Company LLC as of the date hereof.
(f) Section 3.03(f) of the Company Disclosure Schedule sets
forth a complete and accurate list of all outstanding Company Options as of
October 31, 1999, which list sets
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forth the name of the holders thereof, the exercise price thereof, the number of
shares of Company Common Stock subject thereto and the expiration date thereof.
Except as set forth in Section 3.01, this Section 3.03 or Section 3.11, as of
October 31, 1999, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character binding on the Company or any of
its Subsidiaries relating to the issued or unissued capital stock of the Company
or any of its Subsidiaries or obligating the Company or any of its Subsidiaries
to issue, sell, repurchase, redeem or otherwise acquire any shares of capital
stock of, or other equity interests in, the Company or any of its Subsidiaries.
(g) (i) As of the date hereof, the only outstanding
indebtedness for borrowed money of the Company and its Subsidiaries is set forth
in Section 3.03(g)(i) of the Company Disclosure Schedule. (ii) The outstanding
indebtedness represented by or issued under each of (x) the outstanding Variable
Rate Demand Economic Development Revenue Bonds, Series 1986, the Loan Agreement
dated as of September 1, 1986 relating to X'Xxxx-Xxxx & Xxxxxxxxxx Armoring
Company Limited Partnership between County of Xxxxxx, Ohio and X'Xxxx-Xxxx &
Xxxxxxxxxx Armoring Company Limited Partnership and the related Amended and
Restated Letter of Credit Agreement dated as of September 1, 1997 by and between
X'Xxxx-Xxxx & Xxxxxxxxxx Armoring Company and Keybank National Association, (y)
the Company's outstanding notes payable which are owed to various banks and
former stockholders of the Company or companies acquired by the Company or its
Subsidiaries and (z) the Amended and Restated Credit Agreement between the
Company and Keybank National Association dated as of June 25, 1999 may be
prepaid, in each case, in full without penalty in accordance with the terms of
such agreements and such agreements may be terminated without penalty. (iii) The
$35 million aggregate principal amount of the Senior Notes due 2004 of the
Company, which a predecessor of the Company issued pursuant to a Note Purchase
Agreement dated as of May 30, 1997 (the "Note Purchase Agreement"), may be
prepaid, at the option of the Company, at the Make-Whole Premium (as defined in
the Note Purchase Agreement), which shall equal the amount set forth in Section
3.03(g)(ii) of the Company Disclosure Schedule, based on the assumption stated
therein.
Section 3.04. Authority Relative to this Agreement.
Each of the Kroll Parties has all necessary corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each of the Kroll Parties and
the consummation by each of the Kroll Parties of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
other than the adoption of this Agreement by each of the Kroll Parties'
shareholders in accordance with the OGCL or the DGCL, as the case may be, and
the Kroll Documents, and no other corporate proceedings on the part of any of
the Kroll Parties are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than the adoption of this Agreement by
the Company's shareholders in accordance with the OGCL and DGCL, as the case may
be, and, to the extent applicable, Chapter 1704 of the Ohio Revised Code
("Chapter 1704") and the Company Charter Documents and the filing and
recordation of the appropriate documents with respect to the Merger in
accordance with the OGCL and DGCL, as the case may be). The Board of Directors
of each of the Kroll Parties has approved this Agreement and has
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resolved to recommend that its shareholders or stockholders, as the case may be,
vote their shares in favor of the adoption of this Agreement. Each of the Kroll
Parties, respectively, has been advised that all of its directors and executive
officers intend to vote all of their shares in favor of the adoption of this
Agreement. This Agreement has been duly and validly executed and delivered by
each of the Kroll Parties and, assuming the due authorization, execution and
delivery hereof by Recapitalization Merger Sub, constitutes the legal, valid and
binding obligation of each of the Kroll Parties, enforceable against each of the
Kroll Parties in accordance with its terms, except to the extent limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance, or other laws
affecting the rights of creditors generally, and to the extent that the
availability of equitable remedies may be limited by equitable principles.
Section 3.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of
the Kroll Parties do not, and the performance of this Agreement by each of the
Kroll Parties will not, (i) conflict with or violate the Kroll Documents, (ii)
assuming that all consents, approvals and authorizations contemplated by clauses
(i) and (iii) of subsection (b) of this Section 3.05 have been obtained and all
filings described in such clauses have been made, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or
any of its Subsidiaries or by which any of their respective material properties
is bound or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or impair the Company's or any of its Subsidiaries' rights or alter the
rights or obligations of any Third Party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or alteration of rights
under or require the consent or approval of any Person under, or result in the
creation of a Lien on any of the properties or assets of the Company or any of
its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, joint venture, limited liability
or partnership agreement or other instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective material properties is bound or affected, except, in the
case of clauses (ii) and (iii) of this Section 3.05(a), for any conflict,
violation, breach, default, impairment, right or lack of consent or approval
that would not reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect or that would not reasonably be expected to prevent or
materially delay the ability of the Company to consummate the Mergers and the
transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by each of
the Kroll Parties does not, and the performance of this Agreement by each of the
Kroll Parties will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Federal, state or local court or
governmental or regulatory authority or agency, domestic or foreign (each, a
"Governmental Authority"), except (i) consents, approvals, authorizations or
permits, filings and notifications set forth in Section 3.05(b) of the Company
Disclosure Schedule, (ii) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not
prevent or materially delay consummation of the Mergers, or otherwise prevent or
materially delay any of the Kroll Parties from performing its material
obligations under this Agreement, or would not otherwise, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, or (iii)
consents, approvals, authorizations, permits,
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filings or notifications which have heretofore been obtained or made, as the
case may be, by the Company and are in full force and effect. The consummation
of the Mergers and the other transactions contemplated hereby will not result in
the lapse of any Company Permits (as defined below) or the breach of any
authorization or right to use any license, Company Permit or other right that
the Company or any of its Subsidiaries has from a Third Party, except where such
lapse or breach, either individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
Section 3.06. Compliance; Permits.
(a) Neither the Company nor any of its Subsidiaries has in the
last four years failed to comply with, or has been in the last four years in
breach of or is in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its Subsidiaries or by which any of their respective material properties is
bound or (ii) any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or its or any of their respective material properties is bound, except, in the
case of clauses (i) and (ii), for any such noncompliance, breach, conflict,
default or violation which has been waived or which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
To the Knowledge of the Company, neither the Company nor any of its Subsidiaries
has in the last four years received notice of (x) any violation of the Foreign
Corrupt Practices Act (the "FCPA") or (y) any material breach of the Company's
and its Subsidiaries' policies regarding the FCPA by any employees or agents of
the Company or its Subsidiaries. This Section 3.06(a) shall not apply to matters
relating to (i) employee benefits, which are covered by Section 3.11, (ii)
labor, which are covered by Section 3.12, (iii) Taxes, which are covered by
Section 3.17, (iv) Environmental Laws, which are covered by Section 3.18, and
(v) privacy, which are covered by Section 3.21.
(b) The Company and its Subsidiaries hold all domestic and
foreign permits, licenses, easements, variances, exemptions, consents,
certificates, orders and approvals from Governmental Authorities which are
material to the operation of the business of the Company and its Subsidiaries
taken as a whole as it is now being conducted (collectively, the "Company
Permits"), except where the failure to hold such Company Permits, individually
or in the aggregate, would not reasonably be expected, to have a Material
Adverse Effect.
Section 3.07. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents
required to be filed with the SEC since January 1, 1998 (all forms, reports and
documents filed by the Company with the SEC since January 1, 1998, are referred
to herein as the "Company SEC Reports"). No Subsidiary of the Company is
required to file any form, report, statement, schedule, registration statement
or other document with the SEC. The Company SEC Reports (i) complied as to form
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations thereunder, each
as in effect on the date so filed or amended, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement
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of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) Each of the audited and unaudited consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports as well as the draft dated November 13, 1999 of the
Company's unaudited financial statements for the quarter ended September 30,
1999, which has previously been delivered to Recapitalization Merger Sub were
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or in the Company SEC
Reports), and each fairly presents the consolidated financial position of the
Company and its Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments and do not contain all of
the footnote disclosures required by GAAP.
Section 3.08. Absence of Certain Changes or Events.
Since December 31, 1998, the Company and its Subsidiaries have
conducted business in the ordinary course and there has not occurred: (i) any
event, development or circumstance constituting, individually or in the
aggregate, a Material Adverse Effect; (ii) any amendment or change in the
Company Charter Documents; (iii) any damage to, destruction or loss of any asset
of the Company (whether or not covered by insurance) that, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect;
(iv) any material change by the Company in its accounting methods, principles or
practices (other than changes required by GAAP after the date of this Agreement;
(v) other than in the ordinary course of business, any sale of a material amount
of assets of the Company; or (vi) any material tax election, any material change
in method of accounting with respect to Taxes or any compromise or settlement of
any proceeding with respect to any material Tax liability.
Section 3.09. No Undisclosed Liabilities.
As of December 31, 1998, neither the Company nor any of its
Subsidiaries had any liabilities, contingent or otherwise, except liabilities
(a) adequately provided for in the Company's audited balance sheet (including
any related notes thereto) as of December 31, 1998 included in the Company's
Annual Report of Form 10-K for the year ended December 31, 1998 (the "1998
Balance Sheet"), or (b) that, had they been known to the Company at the time of
the preparation of the 1998 Balance Sheet, would not have been required under
GAAP to be reflected on the 1998 Balance Sheet or disclosed in the notes
thereto. Since December 31, 1998, the Company and its Subsidiaries have only
incurred liabilities (w) as set forth in the Company SEC Reports filed prior to
the date hereof, (x) in the ordinary course of business consistent with past
practice, or (y) in connection with this Agreement or the Merger or the other
transactions contemplated hereby (including the financing contemplated by the
Financing Letters) and which, in the case of clause (x) of this Section 3.09
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
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Section 3.10. Absence of Litigation.
Except for any action, suit or proceeding challenging the
transactions contemplated by this Agreement or seeking to delay or prevent the
consummation of either of the Mergers, this Agreement or the transactions
contemplated thereby and hereby, there are no suits, claims, actions,
proceedings or investigations pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries, or against or
involving any properties or rights of the Company or any of its Subsidiaries,
which is reasonably likely, individually or in the aggregate, to result in a
Material Adverse Effect. Section 3.10 of the Company Disclosure Schedule sets
forth as of the date of this Agreement the suits, claims, actions, proceedings
and investigations pending, or to the Knowledge of the Company, threatened
against the Company or any of its Subsidiaries which if adversely determined
would result in a liability to the Company in excess of $250,000. To the
Knowledge of the Company, neither the Company nor any of its Subsidiaries nor
any of their respective properties is or are subject to any order, writ,
judgment, injunction, decree, determination or award having, or which, insofar
as can be reasonably foreseen in the future, would reasonably be expected to
have a Material Adverse Effect or would prevent or delay the consummation of the
transactions contemplated by this Agreement and the Mergers. To the Knowledge of
the Company, no officer or director of the Company or any of its Subsidiaries
has been served with or otherwise has written notice of a written complaint
naming such officer or director as a defendant in any litigation commenced by
shareholders of the Company or any of its Subsidiaries with respect to the
performance of his or her duties as an officer and/or director of the Company or
any of its Subsidiaries under any federal or state law (including litigation
under federal and state securities laws) except for litigation relating to or
arising out of this Agreement and the transactions contemplated hereby. There
exist no indemnification agreements with any of the directors and officers of
the Company or its Subsidiaries with respect to any suits, claims, proceedings
or investigations pending, or to the best Knowledge of the Company, threatened
against such directors or officers except as contained in the charter and code
of regulations, or by-laws, as the case may be, of the Company and its
Subsidiaries, as the case may be.
Section 3.11. Employee Benefit Plans; Employment Agreements.
(a) The Company has made available to Recapitalization Merger
Sub copies of each of its Company Employee Plans and Section 3.11 of the Company
Disclosure Schedule sets forth a list of each such Company Employee Plan.
"Company Employee Plan" shall mean any "employee benefit plan" as defined in
Section 3(3) of ERISA and any other plan, policy, program, practice, agreement,
understanding or arrangement providing benefits to any current or former
director, officer, employee or consultant (or to any dependent or beneficiary
thereof), of the Company or any ERISA Affiliate, which are now, or were within
the past six years, maintained by the Company or any ERISA Affiliate, or under
which the Company or any ERISA Affiliate has any obligation or liability,
including all employment, severance, retirement, incentive, bonus, deferred
compensation, vacation, holiday, cafeteria, medical, disability, or stock-based
compensation plans, policies, programs, practices, agreements, understandings or
arrangements. "ERISA Affiliate" shall mean any entity (whether or not
incorporated) other than the Company that, together with the Company, is or was
a member of (i) a controlled group of corporations within the meaning of Section
414(b) of the Code; (ii) a group of trades or businesses under common control
within the meaning of Section 414(c) of the Code; or (iii) an affiliated service
group within the meaning of Section 414(m) of the Code.
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(b) With respect to each Company Employee Plan, the Company
has made available to Recapitalization Merger Sub, prior to the date hereof,
true and complete copies of (i) plan instruments and amendments, summary plan
descriptions, and summaries of material modifications (and written summaries of
any unwritten Company Employee Plans or modifications to Company Employee
Plans), (ii) to the extent annual reports on Form 5500 are required with respect
to any Company Employee Plan, the most recent annual report and attached
schedules for each Company Employee Plan as to which such report is required to
be filed, and (iii) where applicable, the most recent notification or
determination letter and actuarial reports.
(c) Neither the Company nor any ERISA Affiliate during the
past six (6) years has maintained, contributed to or had an obligation to
contribute to or maintain a Company Employee Plan subject to Title IV of ERISA
(including, without limitation, any "multiemployer plan" as defined in Section
3(37) of ERISA) or to Section 412 of the Code. No Company Employee Plan is a
"multiple employer plan" as described in Section 3(40) of ERISA or Section
413(c) of the Code. Neither the Company nor any ERISA Affiliate has incurred any
withdrawal liability under Title IV of ERISA that remains unsatisfied.
(d) Each Company Employee Plan is and has been operated in all
material respects in compliance with its terms and all applicable laws, except
where failure to do so, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect. The Company has made all
contributions required to be made by it up to and including the date hereof with
respect to each Company Employee Plan, except where failure to do so,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(e) (i) Each Company Employee Plan which is intended to be
qualified within the meaning of Code Section 401(a) has received a favorable
determination letter as to its qualification, and to the Knowledge of the
Company nothing has occurred, whether by action or failure to act, that could
reasonably be expected to cause the loss of such qualification; (ii) to the
Knowledge of the Company, no event has occurred and no condition exists that
would subject the Company or any of its Subsidiaries, either directly or by
reason of their affiliation with an ERISA Affiliate to any tax, fine, lien,
penalty or other liability imposed by ERISA, the Code or other applicable laws
and regulations that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect; (iii) for each Company Employee Plan
with respect to which a Form 5500 has been filed, no material change has
occurred with respect to the matters covered by the most recent Form 5500 since
the date thereof that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect; (iv) to the Company's Knowledge, no
"prohibited transaction" (as such term is defined in ERISA section 406 and Code
Section 4975) or "accumulated funding deficiency" (as such term is defined in
ERISA Section 302 and Code Section 412 (whether or not waived)) has occurred
with respect to any Company Employee Plan that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect; and
(v) no Company Employee Plan provides retiree welfare benefits and neither the
Company nor any of its Subsidiaries has any obligation to provide any retiree
welfare benefits other than as required by Section 4980B of the Code that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse
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Effect; and neither the Company nor any ERISA Affiliate has engaged in, or is a
successor or parent corporation to any entity that has engaged in, a transaction
described in Section 4069 or 4212(c) of ERISA that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(f) With respect to any Company Employee Plan, no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
are pending that, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect or, to the Knowledge of the Company,
threatened, and to the Knowledge of the Company, no facts or circumstances exist
that could reasonably be expected to give rise to any such actions, suits or
claims.
(g) No Company Employee Plan exists that could result in the
payment to any present or former employee of the Company or any of its
Subsidiaries of any money or other property or accelerate or provide any other
rights or benefits to any present or former employee of the Company or any of
its Subsidiaries as a result of the consummation of the transactions
contemplated by this Agreement or as a result of the termination of employment
of any such employee within a specified period of time after such consummation,
and there is no contract, plan or arrangement (written or otherwise) covering
any employee or former employee of the Company or any of its Subsidiaries that,
individually or collectively, would reasonably be expected to give rise to the
payment of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code.
Section 3.12. Labor Matters.
There are no strikes, slowdowns, work stoppages or lockouts
pending or, to the Knowledge of the Company, threatened, between the Company or
any of its Subsidiaries and any of their respective employees which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. To the
Knowledge of the Company, the Company and each of its Subsidiaries is in
compliance with all applicable laws, agreements, contracts, and policies
relating to employment, employment practices, wages, hours, and terms and
conditions of employment except for failures so to comply, if any, that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in
breach of any material collective bargaining agreement or other labor union
contract applicable to Persons employed by the Company or its Subsidiaries
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
Section 3.13. Proxy Statement, Schedule 13E-3 and Form S-4.
The information supplied or to be supplied by the Company for
inclusion in (i) the proxy statement to be sent to the shareholders of the
Company in connection with the meeting of the shareholders of the Company to
consider the adoption of this Agreement (the "Company Shareholders Meeting")
(such proxy statement as amended or supplemented is referred to herein as the
"Proxy Statement") will not, on the date the Proxy Statement (or any
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amendment thereof or supplement thereto) is first mailed to shareholders or at
the time of the Company Shareholders Meeting, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Shareholders Meeting
which has become untrue or misleading, (ii) the Statement on Schedule 13E-3
(such Statement, as amended or supplemented, is referred to herein as the
"Schedule 13E-3"), to be filed by the Company concurrently with the filing of
the Proxy Statement, will not, at the time it is first filed with the SEC, and
at any time it is amended or supplemented and at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and (iii) the Registration Statement on Form S-4 of
New Kroll Holdings to be filed with the SEC, to the extent required, by New
Kroll Holdings in connection with the issuance of New Kroll Holdings Common
Stock following the Reorganization Merger (such registration statement, as
amended or supplemented, the "Form S-4"), will not contain, at the time it is
first filed with the SEC, and at any time it is amended and supplemented or at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. The Proxy Statement, the Schedule 13E-3 and the Form S-4, if
required, shall comply as to form in all material respects with the requirements
of the Exchange Act. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by or on
behalf of Recapitalization Merger Sub which is contained or incorporated by
reference in, or furnished in connection with the preparation of, the Proxy
Statement, the Schedule 13E-3 or the Form S-4, if required.
Section 3.14. Restrictions on Business Activities.
To the Knowledge of the Company, there is no agreement,
judgment, injunction, order or decree binding upon the Company or any of its
Subsidiaries which has or would reasonably be expected to have the effect of
prohibiting or impairing the conduct of business by the Company or any of its
Subsidiaries as currently conducted by the Company or such Subsidiary, including
agreements that expressly limit the ability of the Company or any of its
Subsidiaries to compete in or conduct any line of business or compete with any
Person in any geographic area or during any period of time, except for any
prohibition or impairment as would, individually or in the aggregate, not
reasonably be expected to have a Material Adverse Effect.
Section 3.15. Assets.
(a) All material real property owned or leased by the Company
or any of its Subsidiaries and all material tangible personal property owned or
leased by the Company or any of its Subsidiaries is in sufficient condition to
enable the Company and its Subsidiaries to conduct business as now being
conducted, except where the failure of such property to be in such condition
would not reasonably be expected to have a Material Adverse Effect.
(b) Except where the failure to have good and valid title
would not interfere in
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any material respect with the conduct of the business of the Company and its
Subsidiaries as currently conducted, the Company and its Subsidiaries have good
and valid title to all of the (i) real property and interests in real property
indicated as being owned by the Company and its Subsidiaries in the financial
statements included in the Company SEC Reports, except for properties sold or
otherwise disposed of in the ordinary course of business (the "Owned
Properties"), and (ii) leasehold estates in all leased real properties that are
material to conduct the operation of the Company's and its Subsidiaries'
business taken as a whole, except leasehold interests (the "Leased Properties";
the Owned Properties and Leased Properties being sometimes referred to herein as
the "Real Properties") terminated in the ordinary course of business, in each
case free and clear of all Liens, easements, covenants and rights of way, except
for (i) Liens in connection with the acquisition of such Real Properties set
forth in Section 3.15(b)(i) of the Company Disclosure Schedule, (ii) Liens on
property being leased pursuant to Leases which are capitalized lease obligations
set forth in Section 3.15(b)(ii) of the Company Disclosure Schedule, (iii) Liens
for current Taxes which are not delinquent, or are being contested in good
faith, (iv) mechanics', workers', materialmen's and other like Liens arising in
the ordinary course of business, and (v) zoning ordinances, rights of way,
easements, licenses, reservations, covenants, conditions or restrictions on the
use of any of the Real Properties which do not, individually or in the
aggregate, materially interfere with the use of such real property.
(c) No consent or approval is required to be obtained under
any agreement by which the Company or any of its Subsidiaries has obtained a
leasehold interest in any Leased Property (each such agreement a "Lease"), and
no right of termination shall arise under any Lease nor does any landlord have
the right to increase the rent payable under any Lease, in each case in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby, except
to the extent that any of the foregoing, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries is
obligated under or bound by any option, right of first refusal, purchase
contract, or other contractual right to sell or dispose of any Owned Property or
any portions thereof or interests therein which property, portions and
interests, either individually or in the aggregate, are material to the Company.
Section 3.16. Material Contract Defaults.
To the Knowledge of the Company, neither the Company nor any
of its Subsidiaries is, or has received any notice that any other party is, in
default or unable to perform in any respect under any material contracts,
agreements, commitments, arrangements, Leases, licenses, policies or other
instruments to which it or any of its Subsidiaries is a party or by which it or
any of its Subsidiaries is bound ("Material Contracts"), except for those
defaults which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, and there has not occurred any event
that with the lapse of time or the giving of notice or both would constitute
such a default, except for those defaults which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
The Company is not a party to any Material Contract that is required to be
disclosed as an exhibit to the SEC Documents in accordance with the rules and
regulations of the SEC that has not been so
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disclosed. To the Knowledge of the Company, the Company has not received notice
of the termination of, or intent to terminate any contract, purchase order or
delivery order, except for such notices which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect and except
for termination of any such contract, purchase order or delivery order in
accordance with its terms.
Section 3.17. Taxes.
The reserves for Taxes as shown on the 1998 Balance Sheet are
sufficient for the payment of all accrued but unpaid Taxes of the Company and
each of its Subsidiaries, for all periods ending on or prior to December 31,
1998. All Tax Returns required to be filed by the Company and its Subsidiaries
have been filed when due in accordance with all applicable laws. To the
Knowledge of the Company, all such Tax Returns were correct and complete as
filed in all material respects in accordance with all applicable laws. All Taxes
shown to be due on such Tax Returns have been timely paid, withheld or remitted
to the appropriate taxing authority, the Company has made adequate provision in
accordance with GAAP for all Taxes not yet due and payable and, to the Knowledge
of the Company, there is no audit, dispute, claim, action, proceeding or
investigation pending or threatened with respect to any such Tax Returns or any
Taxes shown thereon. Neither the Company nor any of its Subsidiaries has
received any written notice of any deficiency with respect to the payment of any
Taxes. Neither the Company nor its Subsidiaries are party to, bound by or have
any obligation under, any tax sharing agreement or similar contract or
arrangement or any agreement that obligates it to make any payment computed by
reference to the Taxes, taxable income or taxable losses of any other person.
There are no Liens with respect to Taxes on any of the assets or properties of
the Company or any of its Subsidiaries other than with respect to Taxes not yet
due and payable. There is no contract, agreement, plan or arrangement by the
Company or any of its Subsidiaries covering any person that, individually or
collectively, would reasonably be expected to give rise to the payment of any
amount that would not be deductible by the Company or any of its Subsidiaries by
reason of Section 280G or Section 162(m) of the Code. The Company and its
Subsidiaries (i) are not, and have not been, a member of an affiliated group
filing a consolidated federal income Tax Return other than a group the common
parent of which is the Company, and (ii) have no liability for the Taxes of any
Person under Treasury Regulation 1.1502-6 (or any similar provision of state,
local or foreign law), or as a transferee or successor, by contract or
otherwise.
Section 3.18. Environmental Matters.
(a) Except as would not reasonably be expected to result in a
Material Adverse Effect, to the Knowledge of the Company: (i) the Company and
each of its Subsidiaries are in compliance with all applicable Environmental
Laws, and during all applicable statute of limitations periods have complied
with all applicable Environmental Laws; (ii) neither the Company nor any of its
Subsidiaries has, nor would reasonably be expected to have, any obligation to
undertake any Remedial Activity, at any property owned or leased by any of them
or at any other property; (iii) based on current production levels and current
production methods, and production levels and methods reasonably anticipated as
of the date hereof, there are no events, conditions, practices or plans of the
Company or any of its Subsidiaries, or legal requirements (in effect or
reasonably anticipated) that would reasonably be expected, during the
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next five years, to prevent the Company or any of its Subsidiaries from or
materially increase the burden on the Company or any of its Subsidiaries of,
complying with all applicable Environmental Laws: and (iv) neither the Company
nor any of its Subsidiaries has assumed or retained liability, whether by
contract or operation of law, under any Environmental Law or with respect to any
Materials of Environmental Concern.
(b) To the Knowledge of the Company, the Company has
furnished, or made available to Recapitalization Merger Sub, or to its
representatives, true and complete copies of all Environmental Reports in the
possession or control of the Company or of its Subsidiaries, or fairly described
to Recapitalization Merger Sub or to its representatives the contents of such
reports, other than reports the contents of which address matters that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
Section 3.19. Brokers.
None of the Company, its Subsidiaries or their respective
officers or directors or the Special Committee has employed any broker, finder
or financial advisor or otherwise incurred any liability for any brokerage fees,
commissions or financial advisors' or finders' fees in connection with the
transactions contemplated hereby, other than Bear, Xxxxxxx & Co. Inc. and J.
Xxxxxxx Xxxxxxx & Company, the fees and expenses of which shall be borne by the
Company. The Company has heretofore furnished to Recapitalization Merger Sub
complete and correct copies of all agreements between the Company and its
Subsidiaries and its financial advisors pursuant to which such firms would be
entitled to any payment relating to the transactions contemplated by the Mergers
and this Agreement.
Section 3.20. Intellectual Property.
To the Knowledge of the Company, (i) the Company and its
Subsidiaries own or have the right to use all Intellectual Property reasonably
necessary for the conduct of the business of the Company and its Subsidiaries
taken as a whole as currently conducted, except where the failure to own or
possess rights in any such Company Intellectual Property, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect;
(ii) the Intellectual Property owned, held or used by the Company ("Company IP")
is valid, enforceable and unexpired, and is free of all Liens, except where any
such failure to be valid, enforceable, unexpired or free of Liens would not
reasonably be expected to have a Material Adverse Effect; (iii) neither the
Company nor any of its Subsidiaries has received any notice with respect to any
alleged infringement or unlawful use by the Company or its Subsidiaries of any
intangible property right owned or alleged to be owned by others and, to the
Company's Knowledge, the Company IP does not infringe or otherwise impair the
Intellectual Property of any Third Party which would reasonably be expected to
have a Material Adverse Effect; (iv) the Company has taken reasonable steps to
protect and maintain the Company IP; (v) no party to a license, consent, royalty
or other agreement concerning Company IP (a "Company IP License") is, or is
alleged to be, in breach or default thereunder; and (vi) the transactions
contemplated by this Agreement shall not impair the rights of the Company under
any Company IP License, or cause any payments to be due thereunder.
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Section 3.21. Privacy Rights.
To the Knowledge of the Company, in the operation of its
business, the Company does not itself, nor does it assist third parties to,
violate the rights of any Person concerning confidential information or personal
privacy, as provided under applicable international, foreign, U.S. and state
laws, treaties, compacts or directives respecting wiretapping, eavesdropping,
trespass, surveillance, invasion of privacy or the obtaining of personal
information of any type (e.g., credit histories and motor vehicle records) in or
via any media (e.g., photography, computerized databases or the Internet),
except where the violations of such rights regarding confidential information or
personal privacy, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
Section 3.22. Year 2000 Matters.
(a) The disclosure under the heading "Year 2000 Issues"
contained in the Company' quarterly report on Form 10-Q for the quarter ended
June 30, 1999 is accurate in all material respects.
(b) The Company has taken reasonably necessary steps to ensure
that no interruption of the services it provides will occur as a result of the
Year 2000 issues. All computer hardware, software, databases, automated systems
and other computer and telecommunications equipment owned or licensed by the
Company or any of its Subsidiaries (collectively, "Systems"), and all products
designed, manufactured, distributed or sold by the Company or any of the
Subsidiaries ("Products"), can be used prior to, during and after the calendar
year 2000 A.D., and will operate during each such time period, either on a
stand-alone basis or by interacting or interoperating with third-party software
(assuming such third-party software is Year 2000 Compliant), without error
relating to the processing, calculating, comparing, sequencing or other use of
date-related data (the foregoing ability, "Year 2000 Compliant"), except as,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(c) With regard to any Systems or Products that are not Year
2000 Compliant, the Company has developed contingency plans to deal with any
disruption of its business that might arise as a result of the Year 2000 problem
("Contingency Plans"). Such Contingency Plans provide either for (i) putting
into place plans to modify such Systems or Products so that they will be Year
2000 Compliant, or (ii) replacing such Systems or Products with Year 2000
Compliant alternatives, in either case in a manner that is reasonably calculated
to avoid any material disruption or harm to the business or operations of the
Company or any of the Subsidiaries. The Company is actively pursuing the
achievement of such Contingency Plans in a technically competent manner and has
devoted adequate staffing and other reasonably necessary resources to implement
the Contingency Plans.
Section 3.23. Insurance.
Section 3.23 of the Company Disclosure Schedule contains a
list of all material fire and casualty, general liability, business interruption
and product liability and other insurance policies (collectively, "Insurance
Policies") maintained by the Company or any of its Subsidiaries. Such policies
are in effect as of the date of this Agreement. Such Insurance Policies are in
such amounts and cover such risks as are reasonably adequate for the conduct of
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the business of the Company and its Subsidiaries as currently conducted and the
value of their respective properties and assets on the date hereof.
Section 3.24. No Rights Plan.
Neither the Company nor any of its Subsidiaries has any rights
plan or similar preferred stock purchase plan or similar arrangement.
Section 3.25. Opinion of Financial Advisor.
The Board of Directors of the Company and the Special
Committee of the Board of Directors, which the Board of Directors specially
formed for the purpose of reviewing the Mergers and the transactions
contemplated by this Agreement (the "Special Committee") have received the
written opinion of Bear Xxxxxxx & Co. Inc., financial advisor to the Special
Committee and the Board of Directors, to the effect that in its opinion, as of
the date of this Agreement, the Cash Merger Consideration to be received in the
Recapitalization Merger by the holders of shares of New Kroll Holdings Common
Stock (other than the Retaining Shareholders and Affiliates of New Kroll
Holdings) is fair, from a financial point of view. A true and complete copy of
such opinion has been delivered to Recapitalization Merger Sub.
Section 3.26. Special Committee and Board Recommendation.
(a) The Special Committee has determined that the Mergers and
the Cash Merger Consideration to be paid to the shareholders of New Kroll
Holdings Common Stock in the Mergers are fair to and in the best interests of
the shareholders of the Company and has approved and has recommended the
approval of this Agreement to the Board of Directors of the Company. The Board
of Directors of the Company, at a meeting duly called and held on November 14,
1999, has (i) determined that this Agreement and the transactions contemplated
hereby, taken together, are fair to and in the best interests of the
shareholders of the Company, (ii) resolved to recommend that the holders of the
shares of Company Common Stock adopt this Agreement, and approve the Mergers and
the transactions contemplated hereby and (iii) approved the Voting, Sale and
Retention Agreement and the transactions contemplated thereby.
(b) By unanimous written consents, the Boards of Directors of
New Kroll Holdings (in accordance with Section 141(f) of the DGCL) and
Reorganization Merger Sub (in accordance with Section 1701.54 of the OGCL) have
(i) approved this Agreement and the transactions contemplated hereby (other than
those related to the Requisite Financing) and (ii) declared the advisability
thereof.
SECTION 3.27. Vote Required; State Takeover Statutes.
Under the OGCL and the Company's Articles of Incorporation the
affirmative vote at a special meeting at which a quorum is present of a majority
of the voting power of the Company in the election of directors represented at
such meeting in person or by proxy is the only vote required of the holders of
any class or series of the Company's capital stock necessary to adopt this
Agreement and to approve the Reorganization Merger, and the other transactions
contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RECAPITALIZATION MERGER SUB
Recapitalization Merger Sub hereby represents and warrants to
the Kroll Parties as follows:
Section 4.01. Organization and Good Standing.
Recapitalization Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority and governmental approvals would not, individually or
in the aggregate, reasonably be expected to prevent the consummation of the
Recapitalization Merger.
SECTION 4.02. Capitalization.
The authorized capital stock of the Recapitalization Merger
Sub consists solely of 1,000 shares of Recapitalization Merger Sub Common Stock,
all of which such shares of Recapitalization Merger Sub Common Stock are validly
issued and outstanding, fully paid and nonassessable and free of preemptive or
similar rights. No shares of Recapitalization Merger Sub Common Stock are
issuable upon the exercise or conversion of options, warrants or convertible
securities of any kind.
Section 4.03. Authority Relative to this Agreement.
Recapitalization Merger Sub has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, including all necessary power and authority to
obtain the financing necessary to pay the Cash Merger Consideration, fees and
expenses and as may be required to consummate all of the other transactions
contemplated by this Agreement and the Voting, Sale and Retention Agreement (the
"Requisite Financing"). The execution and delivery of this Agreement by
Recapitalization Merger Sub, and the consummation by Recapitalization Merger Sub
of the transactions contemplated hereby, including the Requisite Financing, have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Recapitalization Merger Sub are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby, including the Requisite Financing. This Agreement has been duly and
validly executed and delivered by Recapitalization Merger Sub and, assuming the
due authorization, execution and delivery hereof by the Kroll Parties,
constitutes the legal, valid and binding obligation of Recapitalization Merger
Sub, enforceable against Recapitalization Merger Sub in accordance with its
terms, except to the extent limited by bankruptcy, insolvency,
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moratorium, fraudulent conveyance or other laws affecting the rights of
creditors generally and to the extent that the availability of equitable
remedies may be limited by equitable principles.
Section 4.04. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by
Recapitalization Merger Sub do not, and the performance of this Agreement by
Recapitalization Merger Sub will not, (i) conflict with or violate the
Certificate of Incorporation or By-laws or other governing instrument of
Recapitalization Merger Sub, as the case may be, (ii) assuming that all
consents, approvals and authorizations contemplated by clauses (i) and (iii) of
Section 4.04(b) have been obtained and all filings described in such clauses
have been made, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Recapitalization Merger Sub or by which
Recapitalization Merger Sub or any of its material properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a Lien on any of the properties or assets of
Recapitalization Merger Sub pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument to
which Recapitalization Merger Sub is a party or by which Recapitalization Merger
Sub or any of its material properties is bound or affected, except, in the case
of clauses (ii) and (iii) of this Section 4.04(a), for any conflict, violation,
breach, default, impairment or right that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by
Recapitalization Merger Sub do not, and the performance of this Agreement by
Recapitalization Merger Sub will not, require any consent, approval,
authorization or permit of, or filing with any Governmental Authority, except
(i) for (A) applicable requirements, if any, of the Exchange Act, Blue Sky Laws,
the pre-merger notification requirements of the HSR Act, (B) filings and
consents under any Non-U.S. Monopoly Laws, (C) filings and consents as may be
required under any environmental, health or safety law or regulation pertaining
to any notification, disclosure or required approval triggered by the Merger or
the transactions contemplated by this Agreement, and (D) the filing and
recordation of the appropriate documents with respect to the Recapitalization
Merger in accordance with the DGCL, (ii) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not prevent or materially delay consummation of the
Recapitalization Merger, or otherwise prevent or materially delay
Recapitalization Merger Sub from performing its material obligations under this
Agreement, or, individually or in the aggregate, would not otherwise reasonably
be expected to have a Material Adverse Effect, or (iii) as to which any
necessary consent, approval, authorization, permit, filing or notification has
heretofore been obtained or made, as the case may be, by Recapitalization Merger
Sub and is in full force and effect.
Section 4.05. Absence of Litigation.
As of the date hereof, there are no claims, actions, suits,
proceedings or investigations pending or, to the Knowledge of Recapitalization
Merger Sub, threatened in writing against Recapitalization Merger Sub before any
court, arbitrator or administrative,
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governmental or regulatory authority or body, domestic or foreign, which seeks
to enjoin or otherwise challenges the consummation of the transactions
contemplated hereby or would materially and adversely affect the ability of
Recapitalization Merger Sub to timely consummate the transactions contemplated
by this Agreement.
Section 4.06. Proxy Statement; Schedule 13E-3.
The information supplied or to be supplied by or on behalf of
Recapitalization Merger Sub for inclusion (i) in the Proxy Statement will not,
on the date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to shareholders or at the time of the Company Shareholders
Meeting, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Shareholders Meeting which has become untrue or
misleading or (ii) the Schedule 13E-3, to be filed by the Company concurrently
with the filing of the Proxy Statement, will not at the time it is first filed
with the SEC, and at any time it is amended or supplemented and at the time of
the Company Shareholders Meeting, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing,
Recapitalization Merger Sub makes no representation or warranty with respect to
any information supplied by the Company which is contained or incorporated by
reference in, or furnished in connection with the preparation of, the Proxy
Statement or the Schedule 13E-3.
Section 4.07. Brokers.
None of Recapitalization Merger Sub or its officers or
directors has employed any broker, finder or financial advisor or otherwise
incurred any liability for any brokerage fees, commissions or financial
advisors' or finders' fees in connection with the transactions contemplated
hereby.
Section 4.08. Financing Arrangements.
Recapitalization Merger Sub has delivered to the Special
Committee and the Company complete and correct executed copies of letters (a)
committing Blackstone Capital Partners III Merchant Banking Fund L.P. to
contribute to BCP LLC cash equity in an aggregate amount equal to $224,000,000
less an amount equal to $18 times the aggregate number of (1) the Retained
Shares (as defined in the Debt Financing Letter), and (2) the number of
Converted Shares (as defined in the Debt Financing Letter), as described below,
plus an amount equal to the aggregate amount of the Transaction Costs (as
defined in the Debt Financing Letter) (the "Equity Financing Letter"), subject
to the terms and conditions stated therein, and (b) committing The Chase
Manhattan Bank, subject to the terms and conditions stated therein, to provide
senior debt financing to the Surviving Holding Corporation, consisting of a
$75,000,000 term loan and a $125,000,000 revolving credit facility and to
provide $150,000,000 of senior subordinated financing in connection with the
Recapitalization Merger (the "Debt Financing Letter", and together with the
Equity Commitment Letter, the "Financing Letters"), which Commitment
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Letters provide for all of the Requisite Financing, except as otherwise
expressly provided by Section 8.03(c). As of the date hereof, the Commitment
Letters provided to the Company are in full force and effect and have not been
amended in any material respect.
Section 4.09. No Prior Activities of Recapitalization
Merger Sub.
Recapitalization Merger Sub was incorporated on November 9,
1999. Except in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby, Recapitalization Merger Sub has no material properties or assets or
incurred any obligation or liability and has not engaged in any business or
activity of any type or kind whatsoever or entered into any agreement or
arrangement with any Person. Recapitalization Merger Sub has no Subsidiaries.
Section 4.10. OGCL Section 1704.01.
Other than by reason of this Agreement or the transactions
contemplated hereby or by the Voting Sale and Retention Agreement,
Recapitalization Merger Sub is not an "interested shareholder" of the Company,
as that term is defined in Section 1704.01 of Chapter 1704.
SECTION 4.11. Recapitalization Treatment.
As of the date hereof and based on information provided to it,
Recapitalization Merger Sub is satisfied that, assuming consummation of the
transactions contemplated by the Voting, Sale and Retention Agreement and
assuming consummation of the Mergers in accordance with this Agreement, the
Mergers should be able to be recorded as a recapitalization for financial
reporting purposes in accordance with applicable generally accepted accounting
principles and relevant requirements of the SEC.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGERS
Section 5.01. Conduct of Business by the Company Pending
the Mergers.
The Company covenants and agrees that, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement and the Recapitalization Effective Time, except as set forth
in Section 5.01 of the Company Disclosure Schedule, the Company shall conduct
its business and shall cause the businesses of its Subsidiaries (including with
respect to the collection of accounts receivable and the payment of accounts
payable) to be conducted only in, and the Company and its Subsidiaries shall not
take any action except in, the ordinary course of business consistent with past
practice; and the Company shall use its commercially reasonable efforts to
preserve substantially intact the business organization of the Company and its
Subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its Subsidiaries and to preserve the present
relationships of the Company and its Subsidiaries with customers, suppliers and
other Persons with which the Company and its Subsidiaries have significant
business relations. By
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way of amplification and not limitation, except as contemplated by this
Agreement, neither the Company nor any of its Subsidiaries shall, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement and the Recapitalization Effective Time, except as
set forth in Section 5.01 of the Company Disclosure Schedule, directly or
indirectly do, or propose or agree to do, any of the following without the prior
written consent of Recapitalization Merger Sub:
(a) amend or otherwise change the Kroll Documents;
(b) issue, sell, pledge, dispose of or encumber, or authorize
the issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest in the Company or any of its Subsidiaries (except for the
issuance of shares of Company Common Stock issuable upon the exercise of Stock
Options under the Company Stock Option Plans and Warrants outstanding on the
date hereof);
(c) sell, pledge, dispose of, mortgage, otherwise encumber or
subject to any Lien any assets of the Company or any of its Subsidiaries (except
for (i) sales of inventory and receivables in the ordinary course of business
consistent with past practice, (ii) dispositions of obsolete or worthless assets
and (iii) sales of immaterial assets on an arms-length basis having a fair
market value not in excess of $500,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly-owned Subsidiary of
the Company may declare and pay a dividend, or make advances, to its parent,
except that neither the Company nor its Subsidiaries may declare or pay any
intercompany cross border dividend, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iii) except as required by the terms of any security as in
effect on the date hereof and set forth in Section 5.01(d) of the Company
Disclosure Schedule, amend the terms or change the period of exercisability of,
purchase, repurchase, redeem or otherwise acquire any of the Company's
securities, including shares of Company Common Stock, or any option, warrant or
right, directly or indirectly, to acquire any such securities, or (iv) settle,
pay or discharge any claim, suit or other action brought or threatened against
the Company with respect to or arising out of a shareholder equity interest in
the Company;
(e) (i) (A) incur any indebtedness for borrowed money, except
for borrowings and reborrowing not in excess of $3,000,000 and borrowings and
reborrowings under the Company's existing credit facilities and intercompany
indebtedness, (B) issue or sell any debt securities (except intercompany debt
securities) or warrants or other rights to acquire any debt securities of the
Company or any of its Subsidiaries, (C) make any loans, advances (other than to
employees of and consultants to the Company for travel and other reasonable and
customary expenses incurred in the ordinary course of business consistent with
past practice) or capital contributions to, or investments in, any other Person,
other than to the Company or any direct or indirect Subsidiary of the Company or
(D) assume, guarantee (other than guarantees of
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obligations of the Company's Subsidiaries entered into in the ordinary course of
business consistent with past practice) or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person (other than
obligations of Subsidiaries and the endorsements of negotiable instruments for
collection in the ordinary course of business consistent with past practice), or
(ii) enter into or materially amend any contract, agreement, commitment or
arrangement to effect any of the transactions prohibited by this Section
5.01(e);
(f) except as set forth in Section 5.01(f) of the Company
Disclosure Schedule, increase the compensation or severance payable or to become
payable to its directors or executive officers or enter into any employment or
severance agreement with any new management employee of the Company or any of
its Subsidiaries, except for an agreement entered into in the ordinary course of
business consistent with past practice and providing for annual base
compensation not to exceed $250,000, or establish, adopt, enter into or amend
any collective bargaining agreement, Company Employee Plan, trust, fund, policy
or arrangement for the benefit of any current or former director, officer or
employee or any of their beneficiaries, except, in each case, as may be required
by law or in the ordinary course of business consistent with past practice;
(g) take any action to change any of the accounting policies
or procedures used by it (including procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable), except as required by a change in GAAP occurring after the date
hereof;
(h) make any material tax election or settle or compromise any
United States federal, state, local or non-United States material tax liability,
make or change any method of accounting with respect to any Tax, file any
amended Tax Return with respect to any material Tax or settle or compromise any
material federal, state, local or foreign Tax liability;
(i) pay, discharge or satisfy any claim, liability or
obligation in excess of $50,000 in any individual case or $300,000 in the
aggregate, other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Reports filed prior to the date of this
Agreement or incurred in the ordinary course of business;
(j) acquire or agree to acquire any assets, other than (i)
inventory or supplies in the ordinary course of business consistent with past
practice, (ii) active systems projects, (iii) furniture, fixtures and equipment
on order, (iv) machinery and equipment on order, (v) trademark filings, (vi)
information services group product development and (vii) capital expenditures
not to exceed in the year 1999 the sum of $820,000 minus capital expenditures
made during 1999 and $920,000 in the year 2000;
(k) pay, discharge or satisfy any material claims (including
claims of shareholders), liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction of (x) liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as in
effect on the date hereof, (y) claims settled or compromised to the extent
permitted by Section 5.01(i), or waive, release, grant, or transfer any rights
of material value or modify or change in
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any material respect any existing material license, lease, contract or other
document, other than in the ordinary course of business consistent with past
practice or (z) the Notes;
(l) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than the
Mergers);
(m) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or by
any other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof;
(n) close, shut down or otherwise eliminate any of its
facilities, except where such closure, shutdown or elimination is in the
ordinary course of business consistent with past practice or is of a facility
not material to the business or operations of the Company;
(o) amend or modify in any material respect or terminate any
material existing IP License or Company IP License, execute any new IP License
that would be material to the business of the Company and its Subsidiaries taken
as a whole, sell, license or otherwise dispose of, in whole or in part, any
material Company IP, and/or subject any material Company IP to any material Lien
other than license for any software developed by the Information Security Group
of the Company and other than any generally commercially available software;
(p) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
the Company's Affiliates, including any transactions, agreements, arrangements
or understandings with any Affiliate or other Person covered under Item 404 of
SEC Regulation S-K that would be required to be disclosed under such Item 404
other than such transactions of the same general nature, scope and magnitude as
are disclosed in the Company SEC Reports filed prior to the date of this
Agreement;
(q) pay or spend any amount of money, directly or indirectly,
in connection with the Company's agreement, pursuant to Sections 1.08 and 2.08,
to obtain the consent of each holder of a Company Option as shall be necessary
to effectuate the purposes of Sections 1.08 and 2.08; or
(r) authorize any of, or commit or agree to take any of, the
foregoing actions.
Section 5.02. Changes in Employment Arrangements.
Neither the Company nor any of its Subsidiaries shall adopt or
amend (except as may be required by law) any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any employee, director or former
director or employee or, other than increases for individuals (other than
officers and directors) in the ordinary course of business consistent with past
practice, increase the compensation or fringe benefits of any director, employee
or former director or employee or pay any benefit not required by any existing
plan, arrangement or agreement, except to the extent described in Section 5.02
of the Company Disclosure Schedule.
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Section 5.03. Severance.
Neither the Company nor any of its Subsidiaries shall
terminate any employee listed on Schedule B, grant any new or modified severance
or termination arrangement or increase or accelerate any benefits payable under
its severance or termination pay policies in effect on the date hereof, except
to the extent described in Section 5.03 of the Company Disclosure Schedule.
Section 5.04. WARN.
Neither the Company nor any of its Subsidiaries shall
effectuate a "plant closing" or "mass layoff", as those terms are defined in the
Worker Adjustment and Retraining Notification Act of 1988 ("WARN"), affecting in
whole or in part any site of employment, facility, operating unit or employee of
the Company or any subsidiary, without notifying Recapitalization Merger Sub or
its Affiliates in advance and without complying with the notice requirements and
other provisions of WARN.
Section 5.05. No Solicitation.
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, representative, advisor, Subsidiary or agent of the
Company or any of its Subsidiaries, (i) solicit, initiate, encourage or take any
action to knowingly facilitate (including by way of furnishing non-public
information concerning the Company or any of its Subsidiaries) any inquiries,
proposals or offers (whether or not in writing) from any Third Party regarding
an Alternative Transaction (any of the foregoing inquiries, proposals or offers
being referred to herein as an "Acquisition Proposal"), or (ii) enter into or
participate in any discussions or negotiations regarding any of the foregoing.
Nothing contained in this Agreement shall prevent the Board of Directors of the
Company from (A) furnishing information to a Third Party which has made an
Acquisition Proposal that is reasonably likely to constitute a Superior Proposal
not solicited in violation of this Agreement, or (B) subject to compliance with
the other terms of this Section 4.05, entering into or participating in
discussions or negotiations concerning an Acquisition Proposal that is
reasonably likely to constitute a Superior Proposal not solicited in violation
of this Agreement; provided, however, that the Board of Directors shall have
concluded in good faith, after receiving and considering the advice of its
outside legal counsel, that failing to participate in such discussions or
negotiations or furnishing such information is reasonably likely to cause the
Board of Directors to be in breach of its fiduciary duties to the shareholders
of the Company under the OGCL; provided, further, that prior to participating in
any such discussions or negotiations or to furnishing any such information, the
Company receives from such person an executed confidentiality agreement on terms
that are not materially less favorable to the Company than the Confidentiality
Letter, a copy of which shall be provided for informational purposes only to
Recapitalization Merger Sub; and provided, further, that the Board of Directors
shall not take any of the foregoing actions unless it provides Recapitalization
Merger Sub with contemporaneous notice thereof.
(b) For purposes of this Agreement, a "Superior Proposal"
means any of the
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transactions described in the definition of Alternative Transaction (with all of
the percentages included in the definition of such term raised to 50% for
purposes of this definition) with respect to which the Board of Directors of the
Company shall have concluded in good faith, after considering the advice of its
outside legal counsel and its financial advisor(s), (i) is reasonably capable of
being completed; (ii) represents a financially superior transaction for the
Company's shareholders (other than the Retaining Shareholders) to the Mergers
and the transactions contemplated by this Agreement; and (iii) which would, if
consummated, result in a transaction more favorable to the Company than the
Mergers and the transactions contemplated by this Agreement after taking into
account all pertinent factors deemed relevant by the Board of Directors under
the laws of the State of Ohio.
(c) For purposes of this Agreement, an "Alternative
Transaction" means any of (i) a transaction pursuant to which a Third Party
acquires or would acquire more than fifteen percent (15%) of the outstanding
shares of any class of equity securities of the Company or any of its
Significant Subsidiaries, whether from the Company or pursuant to a tender offer
or exchange offer or otherwise, (ii) a merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Significant Subsidiaries, (iii) any transaction pursuant to which any Third
Party acquires or would acquire control of assets (including for this purpose
the outstanding equity securities of Significant Subsidiaries of the Company and
securities of the entity surviving any merger or business combination involving
any of the Company's Significant Subsidiaries) of the Company, or any of its
Subsidiaries having a fair market value (as determined by the Board of Directors
of the Company in good faith) equal to more than fifteen percent (15%) of the
fair market value of, on a consolidated basis, the assets of the Company and its
Subsidiaries immediately prior to such transaction, or (iv) any other
transaction the consummation of which would or would reasonably be expected to
impede, interfere with, prevent or materially delay either of the Mergers or
which would or would reasonably be expected to materially dilute the benefits to
Recapitalization Merger Sub of the transactions contemplated hereby.
(d) The Company shall promptly notify Recapitalization Merger
Sub after receipt of any Acquisition Proposal, which notification shall include
the terms and conditions of such Acquisition Proposal and the identity of the
Person making it, or any material modification of or material amendment to any
Acquisition Proposal (and the terms of such modification or amendment), or any
request for information relating to the Company or any of its Subsidiaries in
connection with an Acquisition Proposal or for access to the properties, books
or records of the Company or any of its Subsidiaries by any Person that informs
the Board of Directors of the Company or such Subsidiary that it is considering
making, or has made, an Acquisition Proposal (including the identity of the
Person requesting such information or access, as the case may be).
(e) Except as expressly permitted by this Section 5.05,
neither the Board of Directors of the Company nor any committee thereof shall
withdraw or modify in any manner adverse to Recapitalization Merger Sub, the
recommendation by the Board of Directors of the adoption of this Agreement by
the shareholders of the Company. Notwithstanding the foregoing, in the event
that the Board of Directors receives an Acquisition Proposal and the Board of
Directors determines in good faith, after consultation with its financial and
legal advisors, that
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failure to do so is reasonably likely to cause the Board of Directors to be in
breach of its fiduciary duties to the shareholders of the Company under the
OGCL, the Board of Directors may (x) withdraw or modify in any manner adverse to
Recapitalization Merger Sub, the recommendation by such Board of Directors of
the adoption of this Agreement by the shareholders of the Company, or (y)
subject to this Section 5.05(e), terminate this Agreement (and concurrently with
or after such termination, if it so chooses, cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (an "Acquisition Agreement"), but only after the third Business Day
following Recapitalization Merger Sub's receipt of written notice advising
Recapitalization Merger Sub that the Board of Directors is prepared to accept a
Superior Proposal, and attaching the most current version of any such Superior
Proposal or any draft of an Acquisition Agreement.
(f) Nothing contained in this Section 5.05 shall prohibit the
Company from taking and disclosing to its shareholders a position, and making
related filings with the SEC, as required by Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to its shareholders if, in the good
faith judgment of the Board of Directors, after consultation with outside
counsel, failure to do so is reasonably likely to cause the Board of Directors
to be in breach of its obligations under any applicable law, rule or regulation.
(g) The Company shall immediately cease, and shall cause any
party acting on its behalf to cease, and cause to be terminated any existing
discussions or negotiations with any Third Party conducted heretofore with
respect to any of the foregoing and shall request any such parties in possession
of confidential information about the Company or its Subsidiaries that was
furnished by or on behalf of the Company or its Subsidiaries to return or
destroy all such information in the possession of any such party or in the
possession of any agent or advisor of any such party.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Proxy Statement, Schedule 13E-3 and Form S-4.
As promptly as practicable after the execution of this
Agreement, the Company shall prepare the Proxy Statement and the Schedule 13E-3,
and New Kroll Holdings shall prepare and file with the SEC the Form S-4, to the
extent required, in which the Proxy Statement will be included. Each of the
Company, New Kroll Holdings and Recapitalization Merger Sub shall cooperate with
each other in connection with the preparation of the Proxy Statement, the
Schedule 13E-3 and the Form S-4, to the extent required, including, but not
limited to, furnishing information required to be disclosed in the Proxy
Statement, the Schedule 13E-3 and the Form S-4, to the extent required. The
information provided and to be provided by Recapitalization Merger Sub, New
Kroll Holdings and the Company, respectively, for use in (i) (x) the Form S-4,
will, at the time the Form S-4 becomes effective and on the date of the Company
Shareholders Meeting, and (y) the Proxy Statement will, at the time the Proxy
Statement is filed with the SEC and on the date of the Company Shareholders
Meeting, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
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make the statements therein not misleading, and the Company and Recapitalization
Merger Sub each agree to correct any information provided by it for use in the
Proxy Statement which shall have become untrue or misleading in any material
respect and (ii) the Schedule 13E-3 to be filed with the SEC by the Company
concurrently with the filing of the Proxy Statement will, at the time it is
first filed with the SEC, and at any time it is amended or supplemented and at
the time of the Company Shareholders Meeting, not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. New Kroll Holdings will
use its reasonable efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing. The Company will
promptly notify Recapitalization Merger Sub of the receipt of any comments from
the SEC, of any request by the SEC for any amendment to the Proxy Statement, the
Schedule 13E-3 or the Form S-4 or for additional information. The Company will
permit Recapitalization Merger Sub to review and comment upon all filings with
the SEC, including the Proxy Statement, the Schedule 13E-3 and the Form S-4 and
any amendment thereto, and all mailings to the Company's shareholders in
connection with the Reorganization Merger, including the Proxy Statement, shall
be subject to the prior review and comment by Recapitalization Merger Sub. Each
of the Company and New Kroll Holdings agrees to use its reasonable efforts,
after consultation with Recapitalization Merger Sub, to respond as promptly as
reasonably practicable to any comments made by the SEC with respect to the Proxy
Statement, any preliminary version thereof filed by it and the Schedule 13E-3
(if required) and to cause the Proxy Statement to be mailed to the Company's
shareholders at the earliest practicable time after the Form S-4 is declared
effective under the Securities Act. For purposes of this Agreement, the Company
and Recapitalization Merger Sub hereby agree that statements made and
information in the Proxy Statement and the Schedule 13E-3 relating to the
Federal income tax consequences of the transactions herein contemplated to
holders of Company Common Stock that receive the shares of New Kroll Holdings
Common Stock in the Reorganization Merger and Cash Merger Consideration in the
Recapitalization Merger shall be deemed to be supplied by the Company and not by
Recapitalization Merger Sub.
Section 6.02. Company Shareholders Meeting.
The Company shall call the Company Shareholders Meeting as
promptly as reasonably practicable for the purpose of voting upon the adoption
of this Agreement and the approval of the transactions contemplated hereby and
the Company shall use its reasonable efforts to hold the Company Shareholders
Meeting as soon as reasonably practicable after the date on which the SEC
declares the Form S-4 effective. Subject to Section 5.05(e), the Company,
through its Board of Directors, will, as promptly as reasonably practicable
following the date of this Agreement, recommend to its shareholders the adoption
of this Agreement and the approval of the transactions contemplated hereby as
set forth in Section 3.26(a) and shall solicit from its shareholders proxies in
favor of the adoption of this Agreement and the transactions contemplated hereby
and shall take such other reasonable actions that are necessary or advisable to
secure the vote or consent of shareholders in favor of such adoption and
approval. Any such recommendation, together with a copy of the opinion referred
to in Section 3.25 shall be included in the Proxy Statement.
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Section 6.03. Access to Information; Confidentiality.
Upon reasonable notice and subject to restrictions contained
in confidentiality agreements to which the Company is subject (from which it
shall use commercially reasonable efforts to be released), the Company shall
(and shall cause its Subsidiaries to) (i) during the period after the execution
and delivery of this Agreement and prior to the Recapitalization Effective Time,
afford to the officers, employees, accountants, counsel and other
representatives of Recapitalization Merger Sub reasonable access to its
properties, books, contracts, commitments and records during normal business
hours, and (ii) during such period, furnish promptly to Recapitalization Merger
Sub all information concerning its business, properties and personnel as
Recapitalization Merger Sub may reasonably request, and shall make available to
Recapitalization Merger Sub for reasonable periods of time during normal
business hours the appropriate individuals (including attorneys, accountants and
other professionals) for discussion of the Company's business, properties and
personnel as Recapitalization Merger Sub may reasonably request.
Recapitalization Merger Sub shall keep such information confidential in
accordance with, and agrees to be bound by, the terms of the confidentiality
letter, dated August 3, 1999 (the "Confidentiality Letter"), between BMP and
Bear Xxxxxxx & Co. Inc. (on behalf of the Company).
Section 6.04. Consents; Approvals; Commercially Reasonable
Efforts.
(a) Each of the Company and Recapitalization Merger Sub shall
use its commercially reasonable efforts to obtain all consents, waivers,
approvals, authorizations or orders (including all consents, waivers, approvals,
authorizations and orders from all Governmental Authorities or other Third
Parties) and the Company and Recapitalization Merger Sub shall make all filings
(including all filings with any Governmental Authority) required in connection
with the authorization, execution and delivery of this Agreement by the Company
and Recapitalization Merger Sub and the consummation by them of the transactions
contemplated hereby. The Company and Recapitalization Merger Sub shall furnish
all information required to be included in the Proxy Statement, the Schedule
13E-3, the Form S-4 or for any application or other filing to be made pursuant
to the rules and regulations of any Governmental Authority in connection with
the transactions contemplated by this Agreement. Each of the Company and
Recapitalization Merger Sub shall make an appropriate filing of a notification
and report form pursuant to the HSR Act with respect to the transactions
contemplated hereby within ten Business Days after the date hereof and shall
promptly supply any additional information that may be requested pursuant to the
HSR Act. The Company and Recapitalization Merger Sub shall each use reasonable
commercial efforts to obtain early termination of the waiting period under the
HSR Act. In addition, the Company and Recapitalization Merger Sub shall each
promptly make any other filing that may be required under any Non-US Monopoly
Law or any other antitrust law or by any antitrust authority or any takeover
laws of jurisdictions outside of the United States.
(b) It shall be the sole responsibility and obligation of
Recapitalization Merger Sub and its Affiliates to obtain the Requisite Financing
(except as provided in Section 8.03(c)), and none of the Company, any of its
Subsidiaries or any of their respective current officers or directors shall have
any liability or obligation with respect thereto, except for such obligations as
the Company and its Subsidiaries undertake pursuant to documentation in
connection with the Requisite Financing to be authorized and entered into
following the Reorganization Merger.
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Subject to the preceding sentence, the Company agrees to provide, and will cause
its Subsidiaries and its and their respective officers, employees and advisers
(who shall incur no liability or obligation in doing so) to provide such
cooperation as is reasonably necessary in connection with the arrangement of any
financing to be consummated contemporaneously with or at or after the Closings
in respect of the transactions contemplated by this Agreement, including (i)
participation in meetings, due diligence sessions and road shows, (ii) the
preparation of offering memoranda, private placement memoranda, prospectuses and
similar documents, (iii) the execution and delivery of any commitment or
financing letters, underwriting or placement agreements, pledge and security
documents, other definitive financing documents, or other requested certificates
or documents and comfort letters and consents of accountants as may be
reasonably requested by Recapitalization Merger Sub and taking such other
actions as are reasonably required to be taken by the Company in the Financing
Letters; provided that it is expressly understood and agreed that the
authorization and approval for all activities to be taken pursuant to this
Section 6.04(b) and Section 6.04(c) shall be given by Recapitalization Merger
Sub or by the board of directors of New Kroll Holdings and the board of
directors of the Surviving Operating Company as such boards are constituted
immediately following the Reorganization Effective Time. Recapitalization Merger
Sub agrees that the payment of any fees by the Company in connection with any
Financing Letters, other than pursuant to Section 8.03, shall be subject to the
occurrence of the Closings. In addition, in conjunction with the obtaining of
any such financing, the Company agrees, at the reasonable request of
Recapitalization Merger Sub, to call for prepayment or redemption, or to prepay,
redeem and/or renegotiate, as the case may be, any then existing indebtedness of
the Company; provided that no such prepayment or redemption shall themselves
actually be made until contemporaneously with or after the Effective Time of the
Merger.
(c) The Company shall cooperate with any reasonable requests
of Recapitalization Merger Sub or the SEC relating to the recording of the
Mergers as a recapitalization for financial reporting purposes, including to
assist Recapitalization Merger Sub and its affiliates with any presentation to
the SEC with regard to such recording and to include appropriate disclosure with
regard to such recording in all filings with the SEC and all mailings to
shareholders made in connection with either of the Mergers. In furtherance of
the foregoing, the Company shall provide to Recapitalization Merger Sub for the
prior review of Recapitalization Merger Sub's advisors, and Recapitalization
Merger Sub shall provide to the Company for the prior review of the Company's
advisors, any description of the transactions contemplated by this Agreement
which is meant to be disseminated; provided that the Company shall always be
permitted to make such public statements and disclosures as are required by law
or the rules of any national securities exchange.
(d) Nothing in this Agreement shall be deemed to require the
Company to agree to, or proffer to, divest or hold separate any assets or any
portion of any business of the Company or any of its Subsidiaries.
Section 6.05. Indemnification and Insurance.
(a)The Certificate of Incorporation and By-laws of the
Surviving Holding Corporation shall contain the provisions with respect to
indemnification set forth in the Amended
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and Restated Certificate of Incorporation, as set forth in the form thereof set
forth in Exhibit A and the By-laws of New Kroll Holdings in the form thereof set
forth in Exhibit B, which provisions shall not be amended, modified or otherwise
repealed for a period of six years from the Recapitalization Effective Time in
any manner that would adversely affect the rights thereunder as of the
Reorganization Effective Time of individuals who at the Reorganization Effective
Time were directors, officers, employees or agents (or former directors,
officers, employees or agents) of the Company or any of its Affiliates or
predecessors, unless such modification is required after the Recapitalization
Effective Time by applicable law.
(b) The Surviving Holding Corporation shall, to the fullest
extent permitted under applicable law or under the Surviving Holding
Corporation's Certificate of Incorporation or By-laws, indemnify and hold
harmless, each present and former director or officer of the Company or any of
its Subsidiaries and their respective estates, heirs, personal representatives
successors and assigns (each, an "Indemnified Party", and collectively, the
"Indemnified Parties") against any costs or expenses (including reasonable fees
and expenses of counsel) as incurred, judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, (collectively, an "Action") (x) arising out of or pertaining to
the transactions contemplated by this Agreement, or (y) otherwise with respect
to any acts or omissions occurring at or prior to the Recapitalization Effective
Time, to the same extent as provided in the Company's Amended and Restated
Articles of Incorporation or Code of Regulations or any applicable contract or
agreement as in effect on the date hereof, in each case for a period of six
years after the date hereof. In the event of any such Action, (whether arising
before or after the Reorganization Effective Time) and subject to the specific
terms of any indemnification contract, (i) any counsel retained by the
Indemnified Parties for any period after the Recapitalization Effective Time
shall be reasonably satisfactory to the Surviving Holding Corporation, (ii)
after the Recapitalization Effective Time, the Surviving Holding Corporation
shall pay the reasonable fees and expenses of such counsel, promptly after
statements therefor are received, and (iii) the Surviving Holding Corporation
will cooperate in the defense of any such Action; provided, however, that in the
event any claim or claims for indemnification are made within such six year
period, all rights to indemnification in respect of any such claim or claims
shall continue until the disposition of any and all such claims; provided,
further, that: (i) promptly after receipt by an Indemnified Party of notice of
any such Action, the Indemnified Party shall, if a claim in respect thereof is
to be made against the Surviving Holding Corporation notify the Surviving
Holding Corporation in writing of this claim or the commencement of that Action;
(ii) the Surviving Holding Corporation shall be entitled to participate in the
defense of any such Action, and, to the extent it wishes, assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party or
Indemnified Parties, as the case may be; (iii) the Surviving Holding Corporation
shall not, in connection with any one such Action or separate but substantially
similar or related Actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all such
Indemnified Parties; provided that the Surviving Holding Corporation shall be
liable for the reasonable fees and expenses of a maximum of three separate firms
of attorneys only if there is an actual conflict of interest among (a) the
directors who are members of the purchasing group, (b) the members of the
Special Committee and (c) any other director or directors, such that one firm of
attorneys is required to
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represent each of the parties set forth in clauses (a), (b) and (c) of this
proviso to avoid such actual conflict of interest; (iv) no Indemnified Party may
settle any such Action, without the prior written consent of the Surviving
Holding Corporation (which consent shall not be unreasonably withheld or
delayed); and (v) the Surviving Holding Corporation shall not settle any such
Action, unless the Indemnified Party that is subject of such action is fully
released as a result thereof.
(c) The Surviving Holding Corporation shall honor and fulfill
in all respects the obligations of the Company pursuant to indemnification
agreements, if any, and employment agreements (the employee parties under such
agreements being referred to as the "Officer Employees") with the Company's
directors and officers existing at or before the Reorganization Effective Time.
(d) In addition, the Surviving Holding Corporation shall
maintain in effect for six years from the Recapitalization Effective Time
policies of directors' and officers' liability insurance containing terms and
conditions which are not less advantageous than any such policies maintained by
the Company prior to the Reorganization Effective Time (the "D&O Insurance"),
with respect to matters occurring up to and including the Recapitalization
Effective Time, to the extent available, and having the maximum available
coverage under any such D&O Insurance policies; provided that (i) the Surviving
Holding Corporation following the Recapitalization Merger shall not be required
to spend in excess of 150% of the annual aggregate premiums currently paid by
the Company for such insurance; provided, further, that if the Surviving Holding
Corporation following the Recapitalization Merger would be required to spend in
excess of such amount per year to obtain insurance having the maximum available
coverage under the D&O Insurance policies, the Surviving Holding Corporation
will be required to spend up to such amount to maintain or procure the maximum
amount of such (or similar) coverage that is available at that cost and (ii)
such policies may in the sole discretion of the Surviving Holding Corporation be
one or more "tail" policies for all or any portion of the full six year period.
(e) This Section 6.05 shall survive the consummation of the
Mergers, is intended to benefit the Indemnified Parties and the Officer
Employees, shall be binding on all successors and assigns of the Surviving
Holding Corporation and shall be enforceable by the Indemnified Parties.
Section 6.06. Notification of Certain Matters.
The Company shall give prompt notice to Recapitalization
Merger Sub, and Recapitalization Merger Sub shall give prompt notice to the
Company, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would reasonably be expected to cause any representation
or warranty of such party contained in this Agreement to be untrue or inaccurate
in any material respect, (ii) any failure of the Company or Recapitalization
Merger Sub, as the case may be, to materially comply with or satisfy, or the
occurrence or nonoccurrence of any event, the occurrence or nonoccurrence of
which would reasonably be expected to cause the failure by such party to
materially comply with or satisfy, any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any notice or other
communication from any Third Party alleging that the consent of such Third Party
is or may be
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required in connection with the transactions contemplated by this Agreement and
(iv) the occurrence of any event, development or circumstance which would be
reasonably likely to result in a Material Adverse Effect; provided, however,
that the delivery of any notice pursuant to this Section 6.06 shall not limit or
otherwise affect the remedies available hereunder to the party giving or
receiving such notice; and provided further that the failure to give such notice
shall not be a breach of covenant for the purposes of Section 7.02(b) or 7.03(b)
or affect the rights and remedies of the party obligated to give any notice
pursuant to clause (iii) of this Section 6.06 unless the failure to give such
notice results in material prejudice to the other party.
Section 6.07. Further Action.
Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto shall use their respective reasonable
commercial efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. Recapitalization Merger Sub shall use its commercially
reasonable efforts to cause the financing contemplated by the Debt Financing
Letter to be consummated.
Section 6.08. Public Announcements.
Recapitalization Merger Sub and the Company shall consult with
each other before issuing any press release or making any written public
statement with respect to either of the Mergers, the Voting, Sale and Retention
Agreement or this Agreement or the transactions contemplated thereby or hereby
and shall not issue any such press release or make any such public statement
without the prior consent of the other parties, which shall not be unreasonably
withheld or delayed, except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with the National
Association of Securities Dealers, Inc. The parties agree that the initial press
release or releases to be issued with respect to the transactions contemplated
by this Agreement shall be mutually agreed upon prior to the issuance thereof.
Section 6.09. Conveyance Taxes.
Recapitalization Merger Sub and the Company shall cooperate
with each other in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees and any similar
taxes which become payable in connection with the transactions contemplated
hereby that are required or permitted to be filed on or before the
Recapitalization Effective Time.
Section 6.10. Employee Plans and Benefits, etc.
The Surviving Holding Corporation shall, for a period of at
least two (2) years following the Recapitalization Effective Time, provide all
employees of the Company who were employed immediately prior to the
Recapitalization Effective Time and who continue to be
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employed during such two-year period, including those on vacation, pregnancy or
parental leave or other leave of absence, disability or temporary layoff (the
"Employees") employee benefits under plans, programs and arrangements which are
no less favorable in the aggregate than those provided pursuant to Company
Employee Plans (other than equity-based plans) to Employees immediately prior to
the Effective Time. Each benefit plan of the Surviving Holding Corporation shall
provide each Employee who was a participant under a comparable Company Employee
Plan in effect immediately prior to the Recapitalization Effective Time with:
(i) credit for all service with the Company or any Subsidiary of the Company
prior to the Recapitalization Effective Time for all purposes for which such
service was recognized under a comparable Company Employee Plan in effect
immediately prior to the Recapitalization Effective Time, including eligibility
and vesting (including acceleration thereof pursuant to the terms of the
applicable Company Employee Plan), including under any plans providing vacation
or severance benefits (provided, however, that no credit shall be given for
service that would result in duplication of benefits under any such benefit
plan); (ii) waiver of any and all pre-existing condition limitations (to the
extent such limitations did not apply to a pre-existing condition under a
comparable Company Employee Plans in effect immediately prior to the
Recapitalization Effective Time) and eligibility waiting periods under any group
health plans with respect to such participant and his or her eligible
dependents; and (iii) credit towards any deductibles, co-payments and similar
exclusions for expenses incurred with respect to each Employee prior to the
Recapitalization Effective Time. Prior to the Recapitalization Effective Time,
the Company shall, and thereafter, as appropriate, the Surviving Holding
Corporation shall take all such actions as shall be necessary to effectuate the
provisions of Section 1.06(c) hereof.
Section 6.11. Disposition of Litigation.
Subject to Section 5.05, the Company will consult with
Recapitalization Merger Sub with respect to any Action by any Third Party to
restrain or prohibit or otherwise oppose the Mergers and will resist any such
effort to restrain or prohibit or otherwise oppose the Mergers. Recapitalization
Merger Sub may participate in (but not control) the defense of any shareholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement at Recapitalization Merger Sub's sole cost and
expense.
Section 6.12. Stop Transfer Order.
The Company acknowledges the provisions of the Voting, Sale
and Retention Agreement with respect to transfers of record ownership of Shares
and agrees to notify the Company's transfer agent that there is a stop transfer
order with respect to all of the Subject Shares (as defined in the Voting, Sale
and Retention Agreement) and agrees not to take any action that would violate
the provisions of the Voting, Sale and Retention Agreement.
Section 6.13. Confidentiality Agreement.
Without the prior written consent of Recapitalization Merger
Sub, neither the Company nor any Subsidiary of the Company will waive or fail to
enforce any provision of any confidentiality or similar agreement which the
Company has entered into since July 1, 1999 in connection with a business
combination relating to the Company.
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ARTICLE VII
CONDITIONS TO THE MERGERS
Section 7.01. Conditions to Obligation of Each of the Parties
to Effect the Mergers.
The respective obligations of each party to effect the Mergers
shall be subject to the satisfaction at or prior to the Reorganization Effective
Time of the following conditions:
(a) Shareholder Adoption of Merger Agreement. This Agreement
shall have been adopted and the Reorganization Merger and the other transactions
contemplated hereby shall have been approved by the requisite shareholder vote
under applicable law and the Company's Articles of Incorporation;
(b) Antitrust. All waiting periods applicable to the
consummation of the Mergers under the HSR Act shall have expired or been
terminated, and all clearances and approvals required to be obtained in respect
of the Mergers prior to the Reorganization Effective Time under any Non-U.S.
Monopoly Laws shall have been obtained, except where the failure to have
obtained any such clearances or approvals with respect to any Non-U.S. Monopoly
Laws would not reasonably be expected to have a Material Adverse Effect on the
Kroll Parties or Reorganization Merger Sub;
(c) Injunction. There shall not be in effect any judgment,
decree or order of any Governmental Authority or court of competent
jurisdiction, or any other legal restraint or prohibition preventing the
consummation of either of the Mergers, that prohibits or makes illegal
consummation of either of the Mergers, provided, however, that the parties
hereto shall use their reasonable commercial efforts to have any such judgment,
decree or order or other legal restraint vacated; and
(d) Illegality. No statute, rule, regulation or order shall be
enacted, entered, enforced or deemed applicable to the Mergers which makes the
consummation of the Mergers illegal.
Section 7.02. Additional Conditions to Obligations of
Recapitalization Merger Sub.
The obligations of Recapitalization Merger Sub to effect the
Recapitalization Merger are also subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Kroll Parties as to themselves and the Company as to its other
Subsidiaries contained in this Agreement shall be true and correct (without for
this purpose giving effect to qualifications of materiality contained in such
representations and warranties) on and as of the Recapitalization Effective
Time, with the same force and effect as if made on and as of the
Recapitalization Effective Time, except (i) for those representations and
warranties which address matters only as of a particular date (which shall have
been true and correct as of such date) and (ii) where the
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failure of such representations or warranties, individually or collectively, to
be true and correct would not be reasonably likely to result in a Material
Adverse Effect, and Recapitalization Merger Sub shall have received a
certificate of the Company to such effect signed on behalf of the Company by its
Chief Executive Officer or Chief Financial Officer;
(b) Agreements and Covenants. The Kroll Parties shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Recapitalization Effective Time, and Recapitalization Merger Sub shall have
received a certificate to such effect signed on behalf of the Company by its
Chief Executive Officer or Chief Financial Officer;
(c) Consents Obtained. The licenses, permits, qualifications,
consents, waivers, approvals, authorizations set forth on Schedule A shall have
been obtained and made by the Company, except where the failure to receive such
licenses, permits, qualifications, consents, waivers, approvals, authorizations
or orders, individually or in the aggregate with all other such failures, would
not reasonably be expected to have a Material Adverse Effect on the Kroll
Parties or Recapitalization Merger Sub;
(d) Financing. The financing contemplated by the Debt
Financing Letter with respect to The Chase Manhattan Bank credit facility shall
have been completed on substantially the terms and conditions identified in such
Debt Financing Letter;
(e) Recapitalization. Recapitalization Merger Sub shall be
reasonably satisfied that the Mergers will be able to be recorded as a
recapitalization for financial reporting purposes in accordance with applicable
generally accepted accounting principle and relevant requirements of the SEC;
and
(f) Consummation of the Reorganization Merger. The
Reorganization Merger, and the transactions contemplated by this Agreement
relating thereto, shall have been consummated in accordance with the terms of
this Agreement and the OGCL.
Section 7.03. Additional Conditions to Obligation of the Kroll
Parties.
The obligation of the Kroll Parties to effect the Mergers is
also subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of Recapitalization Merger Sub contained in this Agreement shall be
true and correct in all respects (without for this purpose giving effect to
qualifications of materiality contained in such representations and warranties)
on and as of the Reorganization Effective Time, with the same force and effect
as if made on and as of the Reorganization Effective Time, except for those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct as of such date) and the Company
shall have received certificates to such effect signed on behalf of
Recapitalization Merger Sub by an authorized officer of Recapitalization Merger
Sub;
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(b) Agreements and Covenants. Recapitalization Merger Sub
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by
them on or prior to the Reorganization Effective Time, and the Company shall
have received certificates to such effect signed on behalf of Recapitalization
Merger Sub by an authorized officer of Recapitalization Merger Sub; and
(c) Financing. The Requisite Financing is reasonably expected
by the Company to be available simultaneously with the consummation of the
Mergers.
ARTICLE VIII
TERMINATION
Section 8.01. Termination.
This Agreement may be terminated and the Mergers may be
abandoned, in each case, at any time prior to the Reorganization Effective Time,
notwithstanding adoption thereof by the shareholders of the Company:
(a) by mutual written consent of Recapitalization Merger Sub
and the Company, in each case duly authorized by the Boards of Directors or a
duly authorized committee thereof; or
(b) by either Recapitalization Merger Sub or the Company if
the Mergers shall not have been consummated by April 30, 2000; provided,
however, that the right to terminate this Agreement under this Section 8.01(b)
shall not be available to any party whose breach of one or more representations
and warranties or failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Mergers to be consummated
on or prior to such date (it being understood that any such breach or failure by
any of the Kroll Parties shall be attributed to all of them for purposes of this
paragraph); or
(c) by either Recapitalization Merger Sub or the Company if a
court of competent jurisdiction or Governmental Authority shall have issued a
nonappealable final order, decree or ruling or taken any other nonappealable
final action having the effect of permanently restraining, enjoining or
otherwise prohibiting either of the Mergers; or
(d) by either Recapitalization Merger Sub or the Company if
the shareholders of the Company shall vote against adoption of this Agreement at
the Company Shareholders Meeting; or
(e) by Recapitalization Merger Sub, if, whether or not
permitted to do so by this Agreement, the Board of Directors of the Company or
the Company shall (x) (i) withdraw, modify or change its approval or
recommendation of this Agreement or the Mergers in a manner adverse to
Recapitalization Merger Sub, (ii) approve or recommend to the shareholders of
the Company an Alternative Transaction (other than by Recapitalization Merger
Sub or its Affiliates); or (iii) approve or recommend that the shareholders of
the Company tender their shares in any tender or exchange offer that is an
Alternative Transaction (other than by Recapitalization Merger Sub or its
Affiliates) or not recommend rejection thereof, (y) take any
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position or make any disclosures to the Company's shareholders permitted
pursuant to Section 5.05(f) which has the effect of any of the foregoing or (z),
in the case of the Board of Directors or any duly authorized committee thereof,
resolve to do any of the foregoing;
(f) by the Company, in accordance with Section 5.05(e) prior
to the Mergers, provided that the Company has complied with the provisions of
Section 5.05; and provided further that any such termination will not be
effective unless the Termination Fee pursuant to Section 8.03 shall have been
paid concurrently with such termination; or
(g) (i) by the Company, if Recapitalization Merger Sub
breaches any of its representations, warranties, covenants or agreements
contained in this Agreement the result of which breach is reasonably likely to
materially adversely affect Recapitalization Merger Sub's ability to consummate
the Recapitalization Merger and, with respect to any such breach that is
reasonably capable of being remedied, the breach is not remedied within 30 days
after the Company has furnished Recapitalization Merger Sub with written notice
of such breach or (ii) by Recapitalization Merger Sub, if the Company breaches
any of its representations, warranties, covenants or agreements contained in
this Agreement which would have a Material Adverse Effect or which is reasonably
likely to result in a failure of the condition in Section 7.02(a) or 7.02(b) to
be satisfied and, with respect to any such breach that is reasonably capable of
being remedied, the breach is not remedied within 30 days after Recapitalization
Merger Sub has furnished the Company with written notice of such breach.
Section 8.02. Effect of Termination.
In the event of the termination of this Agreement pursuant to
Section 8.01, this Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto or any of their respective Affiliates,
directors, officers or shareholders, except that (i) the Company or
Recapitalization Merger Sub may have liability as set forth in Section 8.03, and
(ii) nothing herein shall relieve the Company or Recapitalization Merger Sub
from liability for any willful breach of this Agreement.
Section 8.03. Expenses; Termination Fee.
(a) The Company shall (provided that Recapitalization Merger
Sub is not then in material breach of its obligations under this Agreement)
promptly following the termination of this Agreement in accordance with Section
8.01(d), but in no event later than one Business Day following written notice
thereof, together with reasonable supporting documentation, reimburse
Recapitalization Merger Sub in an aggregate amount of up to $1 million, for all
of its out-of-pocket expenses and fees (including fees payable to all banks,
investment banking firms and other financial institutions, and their respective
agents and counsel, and all fees of counsel, accountants, financial printers,
experts and consultants to Recapitalization Merger Sub and its Affiliates),
whether incurred prior to, concurrently with or after the execution of this
Agreement, in connection with the Mergers and the consummation of all
transactions contemplated by this Agreement, the Voting, Sale and Retention
Agreement and the financing of the transactions contemplated hereby
(collectively, the "Expenses").
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(b) In the event that this Agreement is terminated by
Recapitalization Merger Sub pursuant to Section 8.01(e) or by the Company
pursuant to Section 8.01(f), the Company shall pay to Recapitalization Merger
Sub by wire transfer of immediately available funds to an account designated by
Recapitalization Merger Sub on the next Business Day following such termination
an amount equal to $13 million (the "Termination Fee").
(c) If all of the following events have occurred:
(i) an Acquisition Proposal is commenced, publicly
disclosed, publicly proposed or otherwise communicated to the
Company at any time on or after the date of this Agreement and
prior to the termination of this Agreement and thereafter the
Company terminates this Agreement pursuant to Section 8.01(b)
or Section 8.01(d); and
(ii) thereafter, within twelve months of the date of
such termination, the Company enters into a definitive
agreement with respect to, or consummates, any such
Acquisition Proposal and the consideration to be received by
the shareholders of the Company upon consummation of such
Acquisition Proposal is valued in excess of $18 per share of
Company Common Stock;
then, the Company shall pay to BMP an amount equal to the Termination Fee, less
any amount previously paid or due to Recapitalization Merger Sub pursuant to
paragraph (a) of this Section 8.03 in respect of Expenses.
(d) Except as otherwise specifically provided herein, each
party shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby whether or not the Mergers are consummated.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Effectiveness of Representations, Warranties and
Agreements.
(a) The representations, warranties, covenants and agreements
in this Agreement and in any certificate delivered at the Closing pursuant
hereto shall terminate at the Recapitalization Effective Time or upon the
termination of this Agreement pursuant to Section 8.01, as the case may be,
except that the covenants and agreements set forth in Article I, Article II and
Section 6.05 and any other covenant or agreement in this Agreement which
contemplates performance after the Recapitalization Effective Time shall survive
the Recapitalization Effective Time for the time periods specified therein or,
if not so specified, indefinitely and those set forth in Section 8.03 shall
survive any termination indefinitely. The Confidentiality Letter shall survive
termination of this Agreement.
(b) Any disclosure made with reference to one or more Sections
of the Company Disclosure Schedule shall be deemed disclosed with respect to
each other section therein as to which such disclosure is relevant provided that
such relevance is reasonably apparent. Disclosure of any matter in the Company
Disclosure Schedule shall not be deemed an admission that such matter is
material.
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Section 9.02. Notices.
All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
if and when delivered personally or by overnight courier to the parties at the
following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address,
Person's attention or telecopy number for a party as shall be specified by like
notice):
(a) If to Recapitalization Merger Sub:
c/o Blackstone Management Partners III L.L.C.
000 Xxxx Xxxxxx
Xxxxx 00
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile No.: (212) 455- 2502
(b) If to the Company:
The Kroll O'Gara Company
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxx, Chairman
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
Confirm: (000) 000-0000
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With an additional copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: J. Xxxxxxx Xxxxxx, Esq.
Telecopy: (000) 000-0000
Section 9.03. Amendment.
This Agreement may be amended by the parties hereto at any
time prior to the Recapitalization Effective Time; provided, however, that,
after adoption of this Agreement by the shareholders of the Company, no
amendment may be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
Section 9.04. Waiver.
At any time prior to the Recapitalization Effective Time, any
party hereto may with respect to any other party hereto (a) extend the time for
the performance of any of the obligations or other acts of such party, (b) waive
any inaccuracies in the representations and warranties of such party contained
herein or in any document delivered pursuant hereto and (c) subject to the
proviso contained in Section 9.03, waive compliance of such party with any of
the covenants, agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby. No such extension or waiver shall be
deemed or construed as a continuing extension or waiver on any occasion other
than the one on which such extension or waiver was granted or as an extension or
waiver with respect to any provision of this Agreement not expressly identified
in such extension or waiver on the same or any other occasion.
Section 9.05. Headings; Construction.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. In this Agreement (a) words denoting the singular include the
plural and vice versa, (b) "it" or "its" or words denoting any gender include
all genders, (c) the word "including" shall mean "including without limitation,"
whether or not expressed, (d) any reference to a statute shall mean the statute
and any regulations thereunder in force as of the date of this Agreement or the
Effective Time, as applicable, unless otherwise expressly provided, (e) any
reference herein to a Section, Article, Paragraph or Schedule refers to a
Section, Article or Paragraph of or a Schedule to this Agreement, unless
otherwise stated, (f) when calculating the period of time within or following
which any act is to be done or steps taken, the date which is the reference day
in calculating such period shall be excluded and if the last day of such period
is not a Business Day, then the period shall end on the next day which is a
Business Day, (g) any reference to a party's "best efforts" or "commercially
reasonable efforts" shall not include any obligation of such party to pay, or
guarantee the payment of, money or other consideration to any third party or to
agree to the imposition on such party or its Affiliates of any condition
reasonably considered by such party to be materially burdensome to such party or
its Affiliates and (h) any reference to any of the Company and any of its
Subsidiaries shall include such company's predecessor or predecessors, as the
case may be.
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Section 9.06. Severability.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon a
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
Section 9.07. Entire Agreement.
This Agreement, the Confidentiality Letter and the letter
dated November 15, 1999 from Recapitalization Merger Sub to the Company
constitute the entire agreement and supersede all prior agreements and
undertakings both written and oral, among the parties, or any of them, with
respect to the subject matters hereof and thereof, except as otherwise expressly
provided herein or therein.
Section 9.08. Assignment.
This Agreement shall not be assigned by operation of law or
otherwise, except that all or any of the rights of Recapitalization Merger Sub
hereunder may be assigned to any direct wholly-owned Subsidiary of
Recapitalization Merger Sub; provided, however, that no such assignment shall
relieve Recapitalization Merger Sub of its obligations hereunder.
Section 9.09. Parties in Interest.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, including,
without limitation, by way of subrogation, other than pursuant to Section 6.05
(which is intended to be for the benefit of the Indemnified Parties and Officer
Employees and may be enforced by such Indemnified Parties and Officer
Employees).
Section 9.10. Failure or Indulgence Not Waiver; Remedies
Cumulative.
No failure or delay on the part of any party hereto in the
exercise of any right hereunder shall impair such right or be construed to be a
waiver of, or acquiescence in, any breach of any representation, warranty,
covenant or agreement herein, nor shall any single or partial exercise of any
such right preclude other or further exercise thereof or of any other right. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
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Section 9.11. Governing Law; Jurisdiction; Service of Process.
(a) This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York applicable to
contracts executed and fully performed within the State of New York, except to
the extent that any provision of the OGCL or the DGCL is applicable, in which
case such provision of the OGCL or DGCL, as the case may be, shall govern.
(b) Each of the parties hereto submits to the non-exclusive
jurisdiction of the state and federal courts of the United States located in the
City of New York, Borough of Manhattan with respect to any claim or cause of
action arising out of this Agreement or the transactions contemplated hereby.
Each of the parties agrees not contest such venue as an inappropriate venue or
forum or assert a claim of forum non conveniens as a basis to move such claim or
cause of action to another venue or forum.
(c) Any and all service of process and any other notice in any
action, suit or proceeding arising out of this Agreement shall be effective
against any party hereto if given personally or by registered or certified mail,
return receipt requested or by any other means of mail that requires a signed
receipt, postage prepaid, mailed to such party as provided in Section 9.02, or
by personal service with a copy of such process mailed to such party being
served by first class mail, or registered or certified mail, return receipt
requested, postage prepaid. Nothing contained herein shall be deemed to limit
the right of any party to serve process in any other manner permitted by law.
Section 9.12. Counterparts.
This Agreement may be executed in two or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
Section 9.13. Waiver of Jury Trial.
EACH OF RECAPITALIZATION MERGER SUB AND THE KROLL PARTIES
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
THE XXXXX-X'XXXX COMPANY
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Name: Xxxxx Xxxxxx
Title: Authorized Signatory
XXXXX ELECTRONIC RECOVERY, INC.
By: /s/ Xxxxxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxxxxx X. Xxxxxxxx
Title: Vice President
KER ACQUISITION, INC.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President
BCP/XXXX MERGER CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
65
The undersigned beneficial owner of Company Common Stock who is either a
Retaining Shareholder or who will receive Series A Consideration or Series C-D
Consideration as Merger Consideration in the Recapitalization Merger and will
not receive Cash Consideration for some or all the shares such holder owns, all
in accordance with Section 2.06 of the foregoing Agreement, by signing below
acknowledges and agrees to such treatment and to the provisions of Section 2.06
as it applies to the common stock such holder will hold immediately after the
Reorganization Merger and prior to the Recapitalization Merger:
SIGNATURE NAME OF NUMBER OF CONSIDERATION
BENEFICIAL SHARES AND APPLICABLE PARAGRAPH TO BE RECEIVED
OWNER OF SECTION 2.06 IN THE
RECAPITALIZATION
MERGER
/s/ Xxxxx X. Xxxxx Xxxxx X. Xxxxx 666,667.33; (b) 0; Retained Shares
------------------
/s/ Xxxxx X. Xxxxx Xxxxx X. Xxxxx 1,666,667.67; (d) 15,000 Series C
------------------ Preferred and
15,000 Series D
Preferred
66
The undersigned beneficial owner of Company Common Stock who is either a
Retaining Shareholder or who will receive Series A Consideration or Series C-D
Consideration as Merger Consideration in the Recapitalization Merger and will
not receive Cash Consideration for some or all the shares such holder owns, all
in accordance with Section 2.06 of the foregoing Agreement, by signing below
acknowledges and agrees to such treatment and to the provisions of Section 2.06
as it applies to the common stock such holder will hold immediately after the
Reorganization Merger and prior to the Recapitalization Merger:
SIGNATURE NAME OF NUMBER OF CONSIDERATION
BENEFICIAL SHARES AND APPLICABLE PARAGRAPH TO BE RECEIVED
OWNER OF SECTION 2.06 IN THE
RECAPITALIZATION
MERGER
/s/ Xxxxxx X. Xxxxx American
------------------- International Group, Inc. 1,111,111; (c) 20,000 Series A
Name: Xxxxxx X. Xxxxx Preferred
Title: Executive VP-CFO
67
The undersigned beneficial owner of Company Common Stock who is either a
Retaining Shareholder or who will receive Series A Consideration or Series C-D
Consideration as Merger Consideration in the Recapitalization Merger and will
not receive Cash Consideration for some or all the shares such holder owns, all
in accordance with Section 2.06 of the foregoing Agreement, by signing below
acknowledges and agrees to such treatment and to the provisions of Section 2.06
as it applies to the common stock such holder will hold immediately after the
Reorganization Merger and prior to the Recapitalization Merger:
SIGNATURE NAME OF NUMBER OF CONSIDERATION
BENEFICIAL SHARES AND APPLICABLE PARAGRAPH TO BE RECEIVED
OWNER OF SECTION 2.06 IN THE
RECAPITALIZATION
MERGER
/s/ Xxxxxxx Xxxxxxxxx Xxxxxxx Xxxxxxxxx 175,000; (b) 0; Retained Shares
68
The undersigned beneficial owner of Company Common Stock who is either a
Retaining Shareholder or who will receive Series A Consideration or Series C-D
Consideration as Merger Consideration in the Recapitalization Merger and will
not receive Cash Consideration for some or all the shares such holder owns, all
in accordance with Section 2.06 of the foregoing Agreement, by signing below
acknowledges and agrees to such treatment and to the provisions of Section 2.06
as it applies to the common stock such holder will hold immediately after the
Reorganization Merger and prior to the Recapitalization Merger:
SIGNATURE NAME OF NUMBER OF CONSIDERATION
BENEFICIAL SHARES AND APPLICABLE PARAGRAPH TO BE RECEIVED
OWNER OF SECTION 2.06 IN THE
RECAPITALIZATION
MERGER
/s/ Xxxxxxx X. Xxxxxxxxx Xxxxxxx X. Xxxxxxxxx 23,410; (b) 0; Retained Shares
------------------------
