EXCHANGE AGREEMENT
DATED AS OF APRIL 22, 1999
AMONG
399 VENTURE PARTNERS, INC.
XXXXXXX X. XXXXXXX, XX.
XXXXXXX-XXXXX, INC.
AND
XXXXXXX-XXXXX GROUP, INC.
TABLE OF CONTENTS
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Page
ARTICLE 1 CLOSING, REDEMPTION AND MANNER OF EXCHANGE.............................................. 3
1.1. Redemptions and Exchange of the Xxxxxxx Exchange Shares........................... 3
1.2. RCG3 Securities Exchanged for Xxxxxxx Exchange Shares............................. 3
1.3. Deliveries at Closing............................................................. 4
1.5. Time and Place of Closing......................................................... 4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES......................................................... 4
2.1. General Statement.................................................................. 5
2.2. Representations and Warranties of RCGI............................................. 5
2.2.1. Organization............................................................... 5
2.2.2. Power and Authority........................................................ 5
2.2.3. Execution and Delivery by RCGI............................................. 5
2.2.4. Authorization.............................................................. 5
2.2.5. Conflict................................................................... 6
2.2.6. Finder's Fees.............................................................. 6
2.2.7. Solvency................................................................... 6
2.2.8. Securities Law Matters..................................................... 7
2.2.9. Necessary Funds............................................................ 7
2.3. Representations and Warranties of Principal Stockholder............................ 7
2.3.1. Organization............................................................... 7
2.3.2. Good Standing.............................................................. 7
2.3.3. Power and Authority........................................................ 7
2.3.4. Execution and Delivery..................................................... 8
2.3.5. Ownership.................................................................. 8
2.3.6. Authorization.............................................................. 8
2.3.7. Conflict................................................................... 9
2.3.8. Subsidiaries............................................................... 9
2.3.9. Capitalization............................................................. 9
2.3.10. Financial Statements...................................................... 10
i
2.3.11. Absence of Liens.......................................................... 10
2.3.12. Tax Matters............................................................... 11
2.3.13. Absence of Changes........................................................ 12
2.3.14. Contracts................................................................. 13
2.3.15. Enforceability of Contracts............................................... 15
2.3.16. Permits................................................................... 15
2.3.17. Employee Benefit Plans.................................................... 15
2.3.18. List of Employees......................................................... 16
2.3.19. Union Representation and Labor Relations.................................. 17
2.3.20. Insurance................................................................. 17
2.3.21. Litigation and Claims..................................................... 17
2.3.22. Compliance with Law....................................................... 18
2.3.23. Environmental Matters..................................................... 18
2.3.24. Real Estate............................................................... 21
2.3.25. Intellectual Property..................................................... 22
2.3.26. Finder's Fees............................................................. 23
2.3.27. Assets.................................................................... 24
2.3.28. Product Warranty.......................................................... 24
2.3.29. Top Customers and Suppliers............................................... 24
2.3.30. No Undisclosed Liabilities................................................ 24
2.3.31. Limitation on Warranties.................................................. 25
2.3.32. Definition of Knowledge................................................... 25
2.4. Representations and Warranties of 399 Venture...................................... 25
2.4.1. Organization............................................................... 25
2.4.2. Power and Authority........................................................ 25
2.4.3. Execution and Delivery by 399 Venture...................................... 26
2.4.4. Authorization.............................................................. 26
2.4.5. Conflict................................................................... 26
2.4.6. Finder's Fees.............................................................. 26
ARTICLE 3 CONDUCT PRIOR TO THE CLOSING........................................................... 27
3.1. General........................................................................... 27
ii
3.2. Obligations of the Principal Stockholder.......................................... 27
3.3. Reserved.......................................................................... 29
3.4. Joint Obligations................................................................. 29
ARTICLE 4 CONDITIONS TO CLOSING.................................................................. 30
4.1. Conditions to Obligations of Principal Stockholder................................ 30
4.2. Conditions to RCGI's and 399 Venture's Obligations................................ 32
ARTICLE 5 CLOSING................................................................................ 33
5.1. Form of Documents................................................................. 34
5.2. The Company's Deliveries.......................................................... 34
5.3. RCGI's Deliveries................................................................. 34
5.4. The Principal Stockholder Deliveries.............................................. 34
5.5. 399 Venture Deliveries............................................................ 35
5.6. Other Transactions Occurring at the Closing....................................... 36
ARTICLE 6 POST CLOSING AGRE34ENTS
6.1. Post-Closing Agreements........................................................... 36
6.2. Confidentiality; Non Competition; Non-Solicitation................................ 36
6.2.1. Confidentiality............................................................. 36
6.2.2. Non-Competition............................................................. 36
6.2.3. Non Solicitation............................................................ 37
6.3. Further Assurances................................................................ 38
6.4. Transfer Taxes.................................................................... 38
6.5. Agreement to Defend and Indemnify................................................. 38
6.6. Registration and Legend........................................................... 39
6.7. Section 351 Transaction........................................................... 39
ARTICLE 7 INDEMNIFICATION........................................................................ 39
7.1. General........................................................................... 39
7.2. Certain Definitions............................................................... 39
7.2.1. Damages..................................................................... 39
7.2.2. Environmental Claim......................................................... 40
7.2.3. Indemnified Party........................................................... 40
iii
7.2.4. Indemnifying Party.......................................................... 40
7.2.5. Third Party Claim........................................................... 40
7.3. The Principal Stockholder's Indemnification Obligations........................... 41
7.4. Survival of Indemnification Obligations........................................... 43
7.5. Limitation on Indemnification Obligations......................................... 44
7.6. RCGI's Indemnification Covenants.................................................. 44
7.7. Indemnification Procedures........................................................ 45
7.8. Cooperation on Environmental Claims............................................... 47
7.8.1. RCGI's Rights to Remedial Action............................................ 47
7.8.2. The Principal Stockholder's Rights to Remedial Action....................... 47
7.8.3. Minimization of Remedial Action Costs and Disruption of Operation........... 48
7.9. Mitigation........................................................................ 48
7.10. Indemnification Exclusive Remedy.................................................. 48
ARTICLE 8 EFFECT OF TERMINATION/PROCEEDING....................................................... 49
8.1. General........................................................................... 49
8.2. Right to Terminate................................................................ 49
8.3. Certain Effects of Termination.................................................... 49
8.4. Remedies.......................................................................... 50
8.5. Right to Damages.................................................................. 50
8.6. Non-Solicitation.................................................................. 50
8.7. Confidentiality................................................................... 51
ARTICLE 9 MISCELLANEOUS.......................................................................... 51
9.1. Fees.............................................................................. 51
9.2. Publicity......................................................................... 51
9.3. Notices........................................................................... 52
9.4. Entire Agreement; Interpretation.................................................. 53
9.5. Non-Waiver........................................................................ 54
9.6. Counterparts...................................................................... 54
9.7. Severability...................................................................... 54
9.8. Binding Effect; Benefit........................................................... 54
9.9. Assignability..................................................................... 54
iv
9.10. Governmental Reporting........................................................... 54
9.11. Applicable Law................................................................... 55
9.12. Waiver of Trial by Jury.......................................................... 55
9.13. Consent to Jurisdiction.......................................................... 55
9.14. Amendments....................................................................... 55
9.15. Construction..................................................................... 55
Annex A Redemptions-Shares and Amounts
Annex B Exchange-Shares and Amounts
v
TABLE OF EXHIBITS
(not part of this Agreement)
Exhibit A - List of Stockholders
Exhibit B - Material Consents
Exhibit C - Company Release
Exhibit D - Principal Stockholder Release
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TABLE OF SCHEDULES
(not part of this Agreement)
2.3.2 Good Standing
2.3.5 Ownership
(a) Xxxxxxx Shares
(b) Encumbrances on Xxxxxxx Shares
2.3.6 Authorization
2.3.7 Conflict
2.3.9 Capitalization
2.3.10 Financial Statements
2.3.11 Absence of Liens
2.3.12 Tax Matters
2.3.13 Absence of Changes
2.3.14 Contracts
2.3.17 Employee Benefit Plans
2.3.18 List of Employees
2.3.19 Union Representations and Relations
2.3.20 Insurance
2.3.21 Litigation and Claims
2.3.22 Compliance with Law
2.3.23 Environmental Matters
2.3.24 Real Estate
2.3.25 Intellectual Property
2.3.27 Sufficiency of Assets; Assets of Affiliates; Inventory
2.3.28 Product Warranty
2.3.29 Customers and Suppliers
2.3.30 Undisclosed Liabilities
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TABLE OF DEFINED TERMS
(not part of this Agreement)
Defined Term Page
399 Venture ........................................................ 1
399 Venture Shares ................................................. 3
Affiliate .......................................................... 5
Agreement .......................................................... 1
Ancillary Documents ................................................ 4
Assets ............................................................. 9
Business ........................................................... 1
CERCLA ............................................................. 17
Claim Notice ....................................................... 43
Class A Common Stock ............................................... 3
Closing............................................................. 4
Closing Date ....................................................... 4
Code ............................................................... 10
Common Stock ....................................................... 1
Company...... ...................................................... 1
Company Release .................................................... 29
Company Software ................................................... 22
Compensation Plans ................................................. 14
Competing Business ................................................. 35
Contaminant ........................................................ 17
Contracts .......................................................... 14
control............................................................. 6
Court Order......................................................... 5
Debentures.......................................................... 1
Defending Party .................................................... 42
Employee Benefit Plans ............................................. 15
Encumbrance......................................................... 8
Environmental Claims ............................................... 38
Environmental Laws ................................................. 17
Environmental Permits .............................................. 18
Environmental Representations and Warranties ....................... 20
ERISA .............................................................. 14
ESOP ............................................................... 2
ESOP Trust ......................................................... 2
Financial Statements ............................................... 9
including .......................................................... 53
Indemnified Persons ................................................ 37
Intellectual Property .............................................. 21
IRS ................................................................ 15
Xxxxxxx Common Shares .............................................. 1
Xxxxxxx Exchange ................................................... 1
Xxxxxxx Exchange Shares ............................................ 1
Xxxxxxx Preferred Shares ........................................... 1
Xxxxxxx Redemption ................................................. 1
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Xxxxxxx Redemption Payment ......................................... 1
Xxxxxxx Redemption Shares .......................................... 1
Xxxxxxx Shares ..................................................... 1
Leased Premises .................................................... 20
Litigation Conditions .............................................. 44
Management Exchange ................................................ 2
Management Redemption .............................................. 2
Material Adverse Effect ............................................ 6
Material Consents .................................................. 26
Owned Premises ..................................................... 20
Pension Plans ...................................................... 14
Permits ............................................................ 14
Permitted Liens .................................................... 10
Preferred Stock .................................................... 1
Preferred Stockholders Agreement ................................... 30
Principal Stockholder .............................................. 1
Principal Stockholder Release ...................................... 31
Principal Stockholder's knowledge .................................. 18
Process Safety Management Claims ................................... 38
RCGI ............................................................... 1
RCGI Indemnitee .................................................... 39
RCGI Indemnitees ................................................... 39
RCGI Shares ....................................................... 3
Real Estate ........................................................ 20
Registration Rights Agreement ...................................... 30
Release ............................................................ 18
Remedial Action .................................................... 18
Requirements of Law ................................................ 5
Return ............................................................. 10
Returns ............................................................ 10
Reverse Stock Split ................................................ 2
Rollover Investors ................................................. 2
Securities Act ..................................................... 6
Securities Holders Agreement ....................................... 30
Series A Debenture ................................................. 1
Series A Preferred Stock ........................................... 3
Series B Debenture ................................................. 1
Series B Preferred Stock ........................................... 3
Stockholder Indemnity .............................................. 42
Subsidiary ......................................................... 8
Tax ................................................................ 10
Taxes .............................................................. 10
Trademarks ......................................................... 21
Transportation Claims .............................................. 38
Welfare Plans ...................................................... 14
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EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT ("Agreement") is made and entered into as of April
22, 1999 among 399 VENTURE PARTNERS, INC., a Delaware corporation ("399
Venture"), XXXXXXX-XXXXX, INC. (the "Company"), XXXXXXX-XXXXX GROUP, INC., a
Delaware corporation ("RCGI"), and XXXXXXX X. XXXXXXX, XX. (the "Principal
Stockholder"), an individual.
R E C I T A L S
A. The Company is engaged in the manufacture or purchase and sale (through
wholesale and retail channels) of crop production inputs and services (the
"Business").
B. RCGI desires to acquire the Company by acquiring all the outstanding
shares of common stock, $.01 par value (the "Common Stock"), and all the
outstanding Series B Cumulative Convertible Preferred Stock, $.01 par value (the
"Preferred Stock"), of the Company.
C. As of the date hereof, 399 Venture owns (i) a Series A Subordinated
Convertible Debenture of the Company in the initial principal amount of
$14,250,000 (the "Series A Debenture") and (ii) a Series B Subordinated
Convertible Debenture of the Company in the initial principal amount of
$7,956,630, (the "Series B Debenture", the Series A and Series B Debentures
together, the "Debentures"). 399 Venture desires to exchange the Debentures
(together with accrued interest thereon) for certain shares of the equity
securities of RCGI.
D. As of the date hereof, the Principal Stockholder and his Affiliates own
(i) 43,579 shares (the "Xxxxxxx Common Shares") of the outstanding Common Stock
and 6,000 shares of the outstanding Preferred Stock (the "Xxxxxxx Preferred
Shares," and together with the Xxxxxxx Common Shares and the Xxxxxxx Preferred
Shares, the "Xxxxxxx Shares"). Each Xxxxxxx Preferred Share is convertible into
5.5555 shares of Common Stock. The Company and Xxxxxxx desire that at the
Closing the Company shall redeem 8,677.151 Xxxxxxx Common Shares and 2,700
Xxxxxxx Preferred Shares (collectively, the "Xxxxxxx Redemption Shares") at a
price per common equivalent of $285 in cash for an aggregate redemption payment
of $6,747,988 (the "Xxxxxxx Redemption Payment"). Such redemption is referred to
in this Agreement as the "Xxxxxxx Redemption." Immediately following the Xxxxxxx
Redemption, the Principal Stockholder and his Affiliates will own the aggregate
number of shares of Common Stock and Preferred Stock set forth opposite such
stockholder's name on Exhibit A-2 (collectively, the "Xxxxxxx Exchange Shares").
At the Closing of the transactions contemplated by this Agreement, the Principal
Stockholder and his Affiliates shall transfer to RCGI the Xxxxxxx Exchange
Shares in exchange for the respective numbers of shares of Series A Preferred
Stock, Series B Preferred Stock and Class A Common Stock (as defined herein) of
RCGI set forth on Exhibit A-2. The foregoing exchange is referred to in this
Agreement as the "Xxxxxxx Exchange."
E. As of the date hereof, each stockholder of the Company designated as a
rollover investor on Exhibit A-3 (collectively, the "Rollover Investors") owns
of record the aggregate number of shares of Common Stock set forth opposite each
such Rollover Investor's name on Exhibit A-3 and Exhibit A-4. Concurrently with
the Xxxxxxx Redemption, the Company shall redeem from each Rollover Investor for
$285 per share in cash the number of shares of Common Stock set forth opposite
each such Rollover Investor's name on Exhibit A-3. The foregoing redemption is
referred to in this Agreement as the "Management Redemption." In addition,
pursuant to a Securities Purchase and Holders Agreement of even date herewith
concurrently with the Xxxxxxx Exchange, each Rollover Investor shall transfer to
RCGI the number of shares of Common Stock set forth opposite each such Rollover
Investor's name on Exhibit A-4 in exchange for the respective numbers of shares
of Series A Preferred Stock, Series B Preferred Stock and Class A Common Stock
(as defined herein) of RCGI set forth opposite each such Rollover Investor's
name on Exhibit A-4. The foregoing exchange is referred to in this Agreement as
the "Management Exchange."
F. As of the date hereof, certain other stockholders of the Company hold in
the aggregate 2,498 shares of Common Stock (other than the ESOP Shares, as
defined below), all of which the Company shall redeem at a price per share of
$285 in cash. As of the date hereof, certain option holders of the Company hold
the numbers of options to purchase Common Stock set forth beside each such
option holder's name on Exhibit B-1, and pursuant to a Securities Purchase and
Holders Agreement, concurrently with the Management Exchange, each such option
be exchanged for the options to acquire shares of capital stock of RCGI set
forth opposite such option holder's name on Exhibit B-1. The foregoing exchange
is referred to in this Agreement as the "Option Exchange."
G. The Rollover Investors, RCGI and the Company have agreed pursuant to a
Securities Purchase and Holders Agreement, dated as of the date hereof, to
effect the Management Redemption, the Management Exchange and the Option
Exchange.
H. On the date hereof, the trust (the "ESOP Trust") established by the
Company's Employee Stock Ownership Plan (the "ESOP") holds of record 10,097.732
shares of Common Stock. In connection with the transactions contemplated by this
Agreement, immediately after the consummation of the transactions described in
Recitals B through G above, the Company will effect a reverse stock split with
respect to its Common Stock of 11,000 to 1 (the "Reverse Stock Split"),
resulting in a payment of $2,877,853.62 by the Company to the ESOP Trust as a
payment of cash in lieu of fractional shares.
I. In connection with the Reverse Stock Split, the Company shall also pay
in cash an aggregate amount equal to $648,795 to the holders of options
exercisable for shares of Common Stock set forth on Exhibit B-2 (representing
payment of cash in lieu of fractional interests, less the exercise price
applicable thereto, and before withholding of amounts pursuant to the Company's
usual payroll practices).
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A G R E E M E N T S
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowle ged, the parties agree as follows:
ARTICLE 1
Closing, Redemption and Manner of Exchange
1.1. Redemptions and Exchange of the Xxxxxxx Exchange Shares. On the terms
and subject to the condition contained in this Agreement, at the Closing:
(a) the Xxxxxxx Redemption shall occur and the Principal Stockholder
shall surrender to the Company for redemption, free and clear of all
Encumbrances, the Xxxxxxx Redemption Shares and the Company shall pay the
Principal Stockholder the Xxxxxxx Redemption Payment;
(b) the Xxxxxxx Exchange shall occur and the Principal Stockholder
shall deliver to RCGI the Xxxxxxx Exchange Shares, free and clear of all
Encumbrances, in exchange for the number and kind of securities of RCGI set
forth opposite on Exhibit A-2 (the "RCGI Shares");
(c) 399 Venture shall transfer the Debentures to RCGI, free and clear
of all Encumbrances, in exchange for 222,704.75 shares (the "399 Venture
Shares") of Series A Preferred Stock (as defined).
1.2. RCGI Securities Exchanged for Xxxxxxx Exchange Shares. The Xxxxxxx
Exchange Shares shall be exchanged for the number and kind of securities set
forth on Exhibit A-2, which shall consist of shares of (i) 12% Series A Senior
Cumulative Compounding Preferred Stock, $.01 par value, of RCGI (the "Series A
Preferred Stock"); (ii) Series B Junior Preferred Stock, $.01 par value, of RCGI
(the "Series B Preferred Stock"); and (iii) Class A Common Stock, par value $.01
per share (the "Class A Common Stock"), of RGCI. For purposes of valuation
pursuant to this Agreement, the Series A Preferred Stock shall be valued at its
liquidation value; the Series B Preferred Stock shall be valued at its
liquidation value; and Class A Common Stock shall be valued at $1.00 per share.
1.3. Deliveries at Closing. The following deliveries shall be made at
Closing:
(a) the Principal Stockholder shall (i) deliver to the Company
certificates evidencing the Xxxxxxx Redemption Shares, in proper form for
redemption, and (ii) deliver to RCGI certificates evidencing the Xxxxxxx
Exchange Shares duly endorsed in blank, or accompanied by valid stock powers
duly executed in blank, in proper form for transfer;
(b) 399 Venture shall deliver to RCGI the Debentures with an
assignment form duly endorsed in blank, in proper form for transfer;
-3-
(c) RCGI shall deliver (i) to the Principal Stockholder, certificates
representing the RCGI Shares and (ii) to 399 Venture, certificates representing
the 399 Venture Shares; and
(d) the Company shall pay the Principal Stockholder the Xxxxxxx
Redemption Payment by wire transfer to such account as the Principal Stockholder
shall designate by written notice delivered to the Company and RCGI not later
than three days prior to the Closing Date.
1.4. Time and Place of Closing. The transactions contemplated by this
Agreement and the Ancillary Documents shall be consummated (the "Closing") at
the offices of Dechert Price & Xxxxxx, New York, New York on a date and at a
time agreed upon by the Principal Stockholder, 399 Venture, the Company and
RCGI, but in no event later than the third business day after the conditions set
forth in Article IV have been satisfied or, if permitted by applicable law,
waived. The date on which the Closing occurs in accordance with the preceding
sentence is referred to in this Agreement as the "Closing Date."
ARTICLE 2
Representations and Warranties
2.1. General Statement. The parties make the representations and warranties
to each other which are set forth in this Article II. All such representations
and warranties shall survive the Closing to the extent contemplated by Article
VII (and none shall merge into any instrument of conveyance).
2.2. Representations and Warranties of RCGI. RCGI represents and warrants
to the Principal Stockholder and 399 Venture as follows:
2.2.1 Organization. RCGI is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation.
2.2.2 Power and Authority. RCGI has full corporate power and authority to
execute, deliver and perform its obligations under this Agreement and each other
agreement, instrument, document and certificate to be executed and/or delivered
pursuant to this Agreement (collectively, the "Ancillary Documents") by RCGI.
2.2.3 Execution and Delivery by RCGI . The execution and delivery of this
Agreement by RCGI, the execution and delivery of the Ancillary Documents
executed and/or delivered by it and the performance by RCGI of its obligations
under this Agreement and the Ancillary Documents to which it is a party have
been duly authorized and approved by all requisite corporate action. This
Agreement has been duly executed and delivered by RCGI and, assuming the valid
authorization, execution and delivery of this Agreement by the other parties
hereto, constitutes the legal, valid and binding obligation of RCGI, enforceable
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of
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general application relating to or affecting creditors' rights and to general
equity principles. Each of the Ancillary Documents executed and delivered by
RCGI, assuming the valid authorization, execution and delivery thereof by the
other party or parties thereto, if any, will be a legal, valid and binding
obligation of RCGI, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general equity
principles.
2.2.4 Authorization. Except for (a) filings under Environmental Permits as
may be necessary to reflect the change of control of the Company contemplated
hereby and (b) such consents, authorizations, orders, approvals, filings or
registrations the failure of which to be obtained or made would not prevent the
consummation of any of the transactions contemplated hereby, no consent,
authorization, order or approval of, or filing or registration with, any person,
including any governmental authority or other regulatory agency, is required for
or in connection with the execution and delivery of this Agreement by RCGI, the
execution and delivery of any Ancillary Document to be executed or delivered by
RCGI or the consummation by RCGI of the transactions contemplated hereby or
thereby.
2.2.5 Conflict.
2.2.5.1. Assuming the receipt of all necessary consents and approvals and
the filing of all necessary documents as described in Section 2.2.4, neither the
execution and delivery of this Agreement or any of the Ancillary Documents to
which it is a party nor the consummation of any of the transactions contemplated
hereby or thereby nor compliance with or fulfillment of the terms, conditions
and provisions hereof or thereof will result in a breach of the terms,
conditions or provisions of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default),
an event of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under (1) the charter or by-laws of RCGI, (2)
any note, instrument, mortgage, lease, franchise or financial obligation or any
other agreement or instrument to which RCGI is a party or any of its properties
is subject or by which RCGI or any of its assets may be bound or affected, (3)
any judgment, order, award or decree of any foreign, federal, state, local or
other court or tribunal and any award in any arbitration proceeding ("Court
Order") to which RCGI is a party or by which it is bound or (4) any foreign,
federal, state or local laws, statutes, regulations, rules, codes or ordinances
enacted, adopted, issued or promulgated by any governmental body ("Requirements
of Law") affecting RCGI, other than, in the case of clauses (2), (3) and (4)
above, any such breaches, defaults or rights that, individually or in the
aggregate, would not prevent the consummation of any of the transactions
contemplated hereby.
2.2.6. Finder's Fees. Neither RCGI nor any of its Affiliates has dealt with
any person, firm or entity entitled to a broker's commission, finder's fee,
investment banker's fee or similar payment for arranging the transactions
contemplated hereby or by the Ancillary Documents or introducing the parties to
each other, for which the Company or the Principal Stockholder could become
liable or obligated. As used in this Agreement, an "Affiliate" is any
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person or entity which controls is controlled by or is under common control with
another person or entity, the term "control" meaning the power, direct or
indirect, to direct or cause the direction of management and policies of a
person or entity through voting securities, contract or otherwise.
2.2.7. Solvency. Assuming the accuracy of the Principal Stockholder's
representations and warranties, immediately after giving effect to the
consummation of the transactions contemplated hereby and by the Ancillary
Documents and the incurrence of any indebtedness herewith or therewith, the
assets of the Company will exceed its liabilities. In connection with the
consummation of the transactions contemplated hereby and by the Ancillary
Documents and the incurrence of any indebtedness herewith or therewith, RCGI
does not intend that the Company would incur, and does not believe that the
Company will incur, debts that would be beyond the Company's ability to pay as
such debts mature.
2.2.8. Securities Law Matters.
(a) RCGI is acquiring the Xxxxxxx Shares and the Debentures for its
own account for investment and with no present intention of distributing or
reselling the Xxxxxxx Shares or any part thereof in any transaction which would
constitute "distribution" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Neither the Company nor any person acting on its behalf has
offered to sell or sold any shares of the securities of the Company by any form
of general solicitation such as would violate Rule 502(c) promulgated under the
Securities Act.
2.2.9. Necessary Funds. RCGI has received the necessary financing
commitments required to finance its obligations in connection with the Closing
and, based upon information provided by RCGI to the Principal Stockholder, to
provide for currently anticipated working capital needs of the Company as of
Closing.
2.3. Representations and Warranties of the Principal Stockholder. The
Principal Stockholder represents and warrants to RCGI and to 399 Venture that:
2.3.1. Organization. Each of the Company and its Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation.
2.3.2. Good Standing. Each of the Company and its Subsidiary is duly
qualified to transact business and is in good standing as a foreign corporation
in the jurisdictions set forth on Schedule 2.3.2 of the Disclosure Schedules,
which jurisdictions are the only jurisdictions wherein the character of the
properties owned or leased or the nature of the activities conducted by each of
them makes such qualification necessary, except where the failure to so qualify,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. For purposes of this Agreement, "Material Adverse
Effect" means a material adverse effect on the business, properties, assets or
liabilities, results of operations or financial condition of the Company taken
as a whole, other than changes relating to or resulting from (a) the public
disclosure of the transactions contemplated by this Agreement or (b) any
condition or matter
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described in the Disclosure Schedules that is specifically identified as
potentially involving a Material Adverse Effect.
2.3.3. Power and Authority. The Company has full corporate power and
authority to execute, deliver and perform its obligations under this Agreement,
and the Company has full corporate power and authority to execute, deliver and
perform its obligations under the Ancillary Documents to be executed and
delivered by the Company.
2.3.4. Execution and Delivery.
(a) This Agreement has been duly executed and delivered by the
Principal Stockholder and, assuming the valid authorization, execution and
delivery of this Agreement by the other parties hereto, constitutes the legal,
valid and binding obligation of the Principal Stockholder, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors' rights and to general equity principles.
(b) The execution and delivery of this Agreement by the Company and
the performance by the Company of its obligations under this Agreement have been
duly authorized and approved by all requisite corporate action. This Agreement
has been duly executed and delivered by the Company and, assuming the valid
authorization, execution and delivery of this Agreement by the other parties
hereto, constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.
(c) Each Ancillary Document executed and delivered by the Company or
the Principal Stockholder, as the case may be, assuming the valid authorization,
execution and delivery by the other party or parties thereto, if any, will be
duly authorized, executed and delivered and will be a legal, valid and binding
obligation of the Company or the Principal Stockholder, as the case may be,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.
2.3.5. Ownership. Schedule 2.3.5(a) of the Disclosure Schedules contains a
complete, discrete list of all Xxxxxxx Shares, including the name of the record
holder, the certificate number, and the number and type of securities issued
thereunder. Except as disclosed in Schedule 2.3.5(b) of the Disclosure
Schedules, the Xxxxxxx Shares are free and clear of any Lien, and the Principal
Stockholder has full legal right, power and authority to enter into this
Agreement, surrender the Xxxxxxx Shares in exchange for the Purchase Price and
to perform the Principal Stockholder's obligations hereunder, in each case
without the need for the consent of any other person or entity.
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2.3.6. Authorization. Except as set forth in Schedule 2.3.6 of the
Disclosure Schedules and except for (a) filings under Environmental Permits as
may be necessary to reflect the change of control of the Company contemplated
hereby, and (b) such consents, authorizations, orders, approvals, filings or
registrations the failure of which to be obtained or made would not reasonably
be expected to have a Material Adverse Effect or would not prevent the
consummation of any of the transactions contemplated hereby, no consent,
authorization, order or approval of, or filing or registration with, any person,
including any governmental authority or other regulatory agency, is required for
or in connection with the execution and delivery of this Agreement by the
Company or the Principal Stockholder, the execution and delivery of any
Ancillary Documents to which the Company or the Principal Stockholder is a
party, as the case may be, and the consummation by the Company or the Principal
Stockholder and their Affiliates of the transactions contemplated hereby or
thereby.
2.3.7. Conflict. Assuming the receipt of all necessary consents and
approvals and the filing of all necessary documents as described in Section
2.3.6, except as set forth in Schedule 2.3.7 of the Disclosure Schedules,
neither the execution and delivery of this Agreement or any of the Ancillary
Documents or the consummation of any of the transactions contemplated hereby or
thereby nor compliance with or fulfillment of the terms, conditions and
provisions hereof or thereof will result in a breach of the terms, conditions or
provisions of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default), an event
of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation or imposition
of any lien, claim, charge, security interest, mortgage, pledge, easement,
conditional sale or other title retention agreement, defect in title or other
restrictions of a similar kind ("Encumbrance") upon any of the Xxxxxxx Shares or
any of the assets of the Company, under (1) the charter or by-laws of the
Company, (2) any note, instrument, mortgage, lease, franchise or financial
obligation or any other agreement or instrument to which the Principal
Stockholder, the Company is a party or by which the Company or any of its assets
may be bound or affected, (3) any Court Order to which Principal Stockholder or
the Company is a party or by which the Principal Stockholder or Company is
bound, (4) any Requirements of Law affecting Principal Stockholder or the
Company or (5) any Permits, other than, in the case of clauses (2), (3), (4) and
(5) above, any such breaches, defaults, rights or Encumbrances that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect or would not prevent the consummation of any of the
transactions contemplated hereby.
2.3.8. Subsidiaries. The Company directly or indirectly, does not own any
of the stock of, or any other interest in, any other corporation, partnership or
business entity other than Conetoe Chemical, a North Carolina corporation (the
"Subsidiary").
2.3.9. Capitalization. The authorized capital of the Company consists of
350,000 shares of Common Stock, of which 72,409.732 shares are issued and
outstanding, and
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50,000 shares of Preferred Stock, of which 6,000 shares are issued and
outstanding. There are 11,831 options to acquire Common Stock issued and
outstanding.
Except as described above in this Section 2.3.9 or as set forth in Schedule
2.3.9 of the Disclosure Schedules, there are no shares of capital stock of any
other class authorized, issued or outstanding. All of the issued and outstanding
shares of capital stock of the Subsidiary owned by the Company have been validly
issued, are fully paid and nonassessable, are owned beneficially and of record
by the Company, and were not issued in violation of the terms of any agreement
or other understanding binding upon the Company. All of the issued and
outstanding shares of capital stock of the Company have been validly issued, are
fully paid and non-assessable and were not issued in violation of the terms of
any agreement or other understanding binding upon the Company. The Xxxxxxx
Shares are owned beneficially and of record by the Principal Stockholder or his
Affiliates. Except as set forth in Schedule 2.3.9 of the Disclosure Schedules,
the Principal Stockholder owns all the Xxxxxxx Shares free and clear of all
encumbrances or restrictions on transfer. Except as set forth on Schedule 2.3.9
of the Disclosure Schedules, neither the Company nor the Principal Stockholder
is a party to any voting trust, proxy or other voting agreement or understanding
with respect to the voting capital stock of the Company. Except as set forth on
Schedule 2.3.9(a) of the Disclosure Schedules or as provided in the Ancillary
Documents, there are no outstanding subscriptions, options, warrants, purchase
rights (including preemptive rights), calls, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock of the Company obligating the Company to issue, sell, transfer or
otherwise dispose of any securities of any kind. The capital stock of the
Company was issued in compliance with the applicable federal and state
securities laws.
2.3.10. Financial Statements. Schedule 2.3.10 of the Disclosure Schedules
contains copies of the audited consolidated balance sheets, statements of
earnings and statements of cash flows (together with any supplementary
information thereto) of the Company as of and for the fiscal years ended
December 31, 1996, 1997 and 1998. The financial statements described in the
preceding sentence are referred to herein as the "Financial Statements." The
Financial Statements are derived from the books and records of the Company and
have been prepared in conformity with GAAP and present fairly in accordance with
GAAP, in all material respects, the financial position of the Business, as of
the dates thereof and the results of operations and cash flows of the Business,
for the periods covered by said statements, except as disclosed in Schedule
2.3.10 of the Disclosure Schedules. The Financial Statements as of and for the
fiscal year ended December 31, 1998 comply with the requirements of Regulation
S-X promulgated under the Securities Act.
2.3.11. Absence of Liens. Except as set forth on Schedule 2.3.11 of the
Disclosure Schedules and except for assets disposed of in the ordinary course of
business, the Company has valid title to or a valid leasehold in, or a
contractual or common law right to use, each item of equipment, machinery,
inventory, tools and other tangible personal property reflected on the Financial
Statements and used in the conduct of the Business ("Assets") free and clear of
any Encumbrances, except for the following: (a) liens for Taxes and other
governmental charges
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and assessments which are not yet due and payable, (b) liens of landlords and
liens of carriers, warehousemen, mechanics and materialmen and other like liens
arising in the ordinary course of business for sums not yet due and payable, (c)
liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, and (d) other liens or imperfections on
Assets which are not material in amount or do not materially detract from the
value of or materially impair the existing use of the Assets affected by such
lien or imperfection (collectively, "Permitted Liens").
2.3.12. Tax Matters.
(a) As used in this Agreement the term (i) "Taxes" means all federal,
state, provincial, local, foreign and other income, sales, use, ad valorem,
value added, transfer, withholding, payroll, real property or other taxes, fees,
assessments or similar charges of any kind, together with any interest and any
penalties, with respect thereto; (ii) the term "Tax" means any one of the
foregoing Taxes; (iii) the term "Code" means the Internal Revenue Code of 1986,
as amended; and (iv) the term "Returns" means all returns, declarations,
reports, statements, and other documents required to be filed in respect of
Taxes (the term "Return" meaning any one of the foregoing Returns).
(b) The Company has no Tax liability for any taxable period or portion
thereof ending on or before December 31, 1998, other than accrued but unpaid
Taxes due for the year ending December 31, 1998 reflected on the Financial
Statements for the year ending December 31, 1998 for which adequate reserves
have been established in accordance with generally accepted accounting
principles. Except as described in Schedule 2.3.12 of the Disclosure Schedules,
(i) there have been filed on a timely basis, all material Returns required to be
filed by or on behalf of the Company; (ii) no extension of time within which to
file any such Return has been requested or granted; (iii) there are no unpaid
Tax assessments, notifications of intention to examine or waivers of the
applicable statutes of limitation with respect to material Tax liabilities of
the Company; and (iv) the Company has not been notified in writing of any Return
filing obligation or proposed Tax liability by any taxing authority with which
it does not file Returns.
(c) Except as described in Schedule 2.3.12 of the Disclosure
Schedules, (i) with respect to all amounts in respect of Taxes imposed upon the
Company, or for which the Company is liable to taxing authorities, with respect
to all taxable periods or portions of periods ending on or before the Closing
Date, all applicable Tax laws have been complied with in all material respects,
all amounts required to be paid to taxing authorities as shown on Returns filed
with such authorities on or before the date hereof have been paid, all amounts
required to be paid to taxing authorities after the date hereof and on or before
the Closing Date to be shown on Returns to be filed with such authorities will
timely be paid; (ii) there are no ongoing examinations by any taxing authority
of the Company; (iii) there is currently in effect no consent agreement
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under section 341(f) of the Code, private ruling concerning Taxes from any
taxing authority, or closing agreement concerning Taxes with any taxing
authority that could affect the Tax liability of the Company for any period
after the Closing Date; (iv) neither the Company is required to make any
adjustments under section 481 of the Code (or any comparable provision of state,
local or foreign law) by reason of a change of accounting method; and (v) the
Company is not a partner in any entity considered to be a partnership for U.S.
federal income tax purposes.
(d) Except as provided under Treas. Reg. section 1.1502-6 (or any
similar provision of state, local or foreign law) and except as described in
Schedule 2.3.12 of the Disclosure Schedules, the Company has no liability for or
any obligation to pay Taxes of any other person as a transferee or successor, by
contract, or otherwise.
(e) This Section 2.3.12 contains the exclusive representations and
warranties of the Principal Stockholder with regard to the subject matter
addressed herein.
2.3.13. Absence of Changes. Since December 31, 1998, there has been no
change, event or circumstance which, individually or in the aggregate, has had a
Material Adverse Effect. Except as set forth on Schedule 2.3.13 of the
Disclosure Schedules, since December 31, 1998, the Company has conducted the
Business only in the ordinary course. Without limiting the generality of the
foregoing, since December 31, 1998 (except with regard to Section 2.3.13(h)),
except as set forth in Schedule 2.3.13 of the Disclosure Schedule:
(a) the Company has not made or authorized any additions to or sold,
leased, transferred or assigned any assets or properties, tangible or
intangible, with a fair market value of more than $250,000, except in the
ordinary course of its business;
(b) the Company has not mortgaged, pledged or subjected to any
Encumbrance (except Permitted Liens) any of its assets or properties (whether
tangible or intangible) other than in the ordinary course of its business;
(c) no party (including the Company) has accelerated, terminated, made
material modifications to or canceled any agreement referred to in Section
2.3.14 or any other material agreement, contract, lease, license or Permit to
which the Company is a party or by which any of them is bound;
(d) the Company has not made or authorized any material capital
expenditures in excess of the budgeted amount for capital expenditures
previously provided by the Company;
(e) the Company has not discharged or satisfied any Encumbrance or
paid any material obligation or material liability (fixed or contingent) other
than in the ordinary course of business;
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(f) there has been no change made or authorized in the charter or
bylaws (or similar governing documents) of the Company and the Company has not
merged with or into or consolidated with any other entity, or voluntarily or
involuntarily dissolved or liquidated or changed or agreed to change in any
manner the rights of its outstanding capital stock;
(g) the Company has not purchased, redeemed, issued, sold or otherwise
acquired or disposed of any of its capital stock or any evidence of indebtedness
or other of its securities, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange or exercise) any of its
capital stock or any evidence of indebtedness or other of its securities;
(h) since September 30, 1998 the Company has neither declared or paid
any dividend nor made any distribution to any stockholder of the Company,
including any extraordinary distribution, on account of such stockholder's
ownership of any shares of capital stock of the Company, other than the payment
of dividends payable on the Preferred Stock in the ordinary course of business,
and such payments have not, on an annualized basis, exceeded an aggregate amount
of $1.2 million;
(i) the Company has not granted any increase in the compensation
payable or to become payable to any of its directors or officers, except for
normal annual increases in the ordinary course of business consistent with past
practice, or entered into any other transaction with any of its directors or
officers other than reimbursement of reasonable business expenses incurred in
the ordinary course of business;
(j) the Company has not adopted, amended, modified or terminated any
bonus, profit-sharing, incentive, severance or other plan, contract or
commitment for the benefit of any of its directors and officers or any other
employee or group of employees (or taken any such action with respect to any
other Employee Benefit Plan), except in the ordinary course of its business;
(k) the Company has not made any change in its method of accounting;
(l) the Company has not entered into any transactions with any
Affiliate, except in the ordinary course of business as described in Schedule
2.3.13 of the Disclosure Schedule;
(m) the Company has not changed or modified in any material respect
its existing credit, collection and payment policies, procedures and practices
with respect to accounts receivable and accounts payable;
(n) the Company has not suffered any damage, destruction, loss or
claim, whether or not covered by insurance, in excess of $500,000; and
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(o) the Company has not entered into any agreement or arrangement with
respect to, or otherwise committed to, any of the foregoing.
2.3.14. Contracts. Schedule 2.3.14 of the Disclosure Schedules contains a
listing of the following undischarged written (or, to the knowledge of the
Principal Stockholder, oral) contracts, agreements, leases and other instruments
to which the Company is a party:
(a) agreements for the employment for any period of time whatsoever,
or in regard to the employment, or restricting the employment, including any
termination, severance or change in control agreements of any employee of the
Company who earns more than $75,000 per year;
(b) consulting agreements where the payment thereunder is in excess of
$100,000 per year and which have an unexpired term in excess of one year;
(c) collective bargaining agreements;
(d) contracts or arrangements providing for bonuses, options, deferred
compensation or stock appreciation rights;
(e) leases or subleases, either as lessee or sublessee, lessor or
sublessor, of personal property, where the lease or sublease provides for an
annual rent in excess of $100,000 and has an unexpired term in excess of one
year;
(f) service agreements affecting any of the assets of any of the
Company where the charges are reasonably expected to be in excess of $100,000
and which has an unexpired term as of the date hereof in excess of one year;
(g) loan agreements, promissory notes, indentures, bonds, security
agreements, guarantees or obligations for borrowed money or other instruments
involving Indebtedness in an amount in excess of $100,000;
(h) any partnership, joint venture or other similar agreement or
arrangement;
(i) any agreement containing any covenant or provision prohibiting the
Company from engaging in any line or type of business (except for such
agreements which shall not apply to the Company upon Closing) or competing with
any person;
(j) any agreement under which it has advanced or loaned any amount to
any of its directors, officers and employees outside the ordinary course of its
business;
(k) any agreement under which a sale of any of the Real Estate that is
material to the operation of the Business is pending;
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(l) any indemnification agreement by the Company running to any person
that involves, individually or in the aggregate, a contingent liability of the
Company of $100,000 or more, other than in connection with customer contracts,
agreements entered into in the ordinary course of business or with respect to
directors or executive officers of the Company;
(m) any long-term or continuing agreements or arrangements with
respect to discounts or allowances or extended payment terms that provide for
the receipt or expenditure following the date hereof of more than $500,000,
other than purchase orders and sales orders in the ordinary course of business;
or
(n) any other agreements that provide for the receipt or expenditure
following the date hereof of more than $500,000, other than purchase orders and
sales orders in the ordinary course of business.
2.3.15. Enforceability of Contracts. All agreements, leases, subleases,
licenses and other instruments described in Section 2.3.14 and Schedules 2.3.24
and 2.3.25 (collectively, "Contracts") are valid and in full force and effect,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors' rights and to general
equity principles. No default (or an event which would, with the passage of time
or the giving of notice or both, constitute a default) by the Company has
occurred thereunder and, to the Principal Stockholder's knowledge, no default
(or an event which would, with the passage of time or the giving of notice or
both, constitute a default) by the other contracting parties has occurred
thereunder, which default, individually or in the aggregate with other defaults,
would reasonably be expected to have a Material Adverse Effect.
2.3.16. Permits. The Company holds, owns or possesses all licenses,
permits, registrations and government approvals (other than Environmental
Permits, which are exclusively provided for in Section 2.3.23) which are
required in order for them to conduct their respective businesses as conducted
immediately prior to the date of this Agreement (collectively, the "Permits"),
except where the failure to possess such Permits, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
All Permits have been duly obtained and are in full force and effect. The
Company is in compliance with the terms and conditions of the Permits in all
material respects. There are no proceedings pending or, to the knowledge of the
Principal Stockholder, threatened seeking to revoke, cancel, suspend or
adversely modify any of the Permits.
2.3.17. Employee Benefit Plans.
(a) Schedule 2.3.17 of the Disclosure Schedules contain a true and
complete list of each (i) employee pension benefit plan (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (collectively, the "Pension Plans"), (ii) employee welfare benefit
plan (as defined in Section 3(1) of ERISA) (collectively, the "Welfare Plans")
and (iii) bonus, deferred compensation, and severance plan which does not
constitute a Welfare Plan (collectively, the "Compensation Plans") maintained,
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contributed to or required to be contributed to by the Company for the benefit
of employees of the Company. The Pension Plans, the Welfare Plans and the
Compensation Plans sometimes are referred to herein collectively as the
"Employee Benefit Plans".
(b) All Employee Benefit Plans comply in all material respects with
ERISA, the Code (including the requirements of Code section 401(a) to the extent
any Pension Plan is intended to conform to that section) and other Requirements
of Law. A favorable determination as to the qualification under Code section
401(a) of each of the Pension Plans intended to be qualified under such section
has been made by the Internal Revenue Service ("IRS") or a request for a
favorable determination has been or will be filed within the remedial amendment
period applicable thereto.
(c) Neither the Company nor any Affiliate of the Company (as
determined under Code Section 414(b), (c), (m) or (o) of the Code) has taken any
action, nor has any event occurred, that has resulted or will likely result in
any liability under Section 302(c) or Title IV of ERISA, including any
withdrawal liability with respect to any "multiemployer plan" as defined in
Section 4001(a) of ERISA, which liability could reasonably be expected to become
a liability of RCGI or any Affiliate of RCGI (including, but not limited to, the
Company) following the Closing.
(d) RCGI and 399 Venture have received the most recent actuarial
report with respect to each Employee Benefit Plan that is a defined benefit
pension plan, as defined by Section 3(35) of ERISA. The information was supplied
to the actuary by the Company for use in preparing those reports and was
complete and accurate in all material respects and the Principal Stockholder has
no knowledge that the conclusions expressed in those reports are incorrect.
(e) This Section 2.3.17 contains exclusive representations and
warranties of the Principal Stockholder with respect to employee benefit
matters. The preceding sentence shall, however, not be construed to limit RCGI's
and 399 Venture's ability to rely on the relevant provisions of Sections 2.3.10,
2.3.11, 2.3.13(c), 2.3.13(i), 2.3.14(c) or 2.3.21 with respect to employee
benefit matters. The Principal Stockholder has furnished to RCGI and 399 Venture
(1) the amount of any contingent withdrawal liability to which the Company or
RCGI could become subject by reason of a transaction described in ERISA Section
4204 and (2) the amount of any withdrawal liability that would be incurred under
ERISA Section 4201 et seq. in the event of a complete withdrawal on the Closing
Date from any multiemployer plan, as defined in ERISA Section 4001(a), to which
the Company could reasonably expect to be required to contribute after Closing,
whether by reason of this Agreement or operation of law.
2.3.18. List of Employees. Schedule 2.3.18 of the Disclosure Schedules
contains a list of all employees of the Company as of the date hereof, whose
annual salaries exceed $75,000 and said list correctly reflects their employer,
base salaries, dates of employment and positions.
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2.3.19. Union Representation and Labor Relations. There is no labor strike,
dispute, slow-down or work stoppage actually pending or, to the knowledge of the
Principal Stockholder, threatened, against or involving the Company, other than
disputes with individual employees in which the liability of the Company is not
reasonably expected to exceed $100,000. Except as set forth on Schedule 2.3.19
of the Disclosure Schedules, none of the employees of the Company is covered by
any collective bargaining agreement, and no collective bargaining agreement is
currently being negotiated by any of the Company. There is no request for union
representation pending or, to the Principal Stockholder's knowledge, overtly
threatened against the business of the Company which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 2.3.19 of the Disclosure Schedules, the Company
has no labor negotiations in process with any labor union or other labor
organization. The Company is not, and has not been in the last three years,
engaged in any grievance or unfair labor practice that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect. There
is not, and in the last three years there has been no, charge pending or, to the
knowledge of the Principal Stockholder, threatened against the Company alleging
unlawful discrimination in employment practices before any court or agency that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, and there is no charge of or proceeding with regard to
any unfair labor practice against the Company pending before the National Labor
Relations Board.
2.3.20. Insurance. Schedule 2.3.20 of the Disclosure Schedules contains a
description of all policies of fire, liability, workers' compensation and other
forms of insurance providing insurance coverage to or for any of the Company,
and the name of the owner of each such policy. All such policies are outstanding
and in full force and effect. All premiums with respect thereto have been paid
when due and no notice of cancellation or termination has been received with
respect to any such policy. There is no default with respect to any provision
contained in any such policy, nor has there not been any failure to give any
notice or present any claim under any such policy in a timely fashion or in the
manner or detail required by the policy. Except as set forth in Schedule 2.3.20
of the Disclosure Schedules, there are no outstanding claims under such
policies. Except as set forth in Schedule 2.3.20 of the Disclosure Schedules,
the Company has not been refused any insurance coverage, nor has its coverage
been limited by any insurance carrier to which it has applied for insurance or
with which it has carried insurance during the last five years, except where
such coverage has been obtained from an alternative source under commercially
reasonable terms. Except as disclosed in Schedule 2.3.20 of the Disclosure
Schedules, on and after May 31, 1998, all products liability and general
liability policies maintained by or for the benefit of the Company have been
"occurrence" policies and not "claims made" policies. All such policies and the
coverage provided thereunder will continue to be in full force and effect
through the Closing Date.
2.3.21. Litigation and Claims. Except as set forth on Schedule 2.3.21 to
the Disclosure Schedules, there is no litigation, action, suit, claim or
proceeding (including arbitration proceedings) or investigation pending, in law
or in equity, and there are no proceedings, reviews or governmental
investigations before any commission or other administrative authority, pending
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or, to the Principal Stockholder's knowledge, threatened and no notice,
citation, summons or order (including arbitration orders or awards) has been
served upon and no penalty has been assessed against the Company, or any of its
officers, directors or Affiliates, with respect to or affecting the present or
former operations, business, products, sales practices or financial condition of
the Company or with respect to or affecting the Xxxxxxx Shares or the Principal
Stockholder's rights thereto which, if decided adversely to such entity or
person, would reasonably be expected to have a Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby.
2.3.22. Compliance with Law. Except as set forth on Schedule 2.3.22 to the
Disclosure Schedules, the Company is not in violation of, or delinquent with
respect to, any Requirements of Law (except for Environmental Laws, as to which
Section 2.3.23 applies) to which the property, assets, personnel or business
activities of the Company are subject. Except as set forth on Schedule 2.3.22 to
the Disclosure Schedules, no investigation, review, inquiry or proceeding by any
governmental body with respect to the Company is pending or, to the knowledge of
the Principal Stockholder, threatened.
2.3.23. Environmental Matters.
(a) For the purpose of this Agreement:
(i) "Contaminant" means any waste, pollutant, hazardous substance,
contaminant, extremely hazardous substance, hazardous material, toxic
substance, or hazardous waste, as such terms are defined under any
Environmental Laws, including, without limitation: (i) asbestos or
asbestos-containing material; (ii) polychlorinated biphenyls; (iii) any
radioactive waste or material; or (iv) any petroleum or petroleum-derived
substance or waste;
(ii) "Environmental Laws" means any federal, provincial, state, local,
or foreign law, rule or regulation, ordinance, code, permit, order, decree,
common law or civil code principle or other binding determination of any
governmental authority directed to, addressing or imposing liability or
standards of conduct with respect to: protection of the environment;
Releases or threatened Releases of Contaminants into the environment;
occupational and public safety and health; transportation of goods; or the
manufacture, processing, distribution, use, treatment, storage, disposal,
or handling of Contaminants, in each case as in effect as of the date
hereof (including the reauthorization, reissuance, redesignation or
renaming thereof). Environmental Laws include, without limitation, the
Clean Air Act, as amended (42 U.S.C. 7401 et seq.); the Clean Water Act, as
amended (33 U.S.C. 1251 et seq.); the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended (42 U.S.C.
9601 et seq.); the Resource Conservation and Recovery Act of 1976, as
amended (42 U.S.C. 6901 et seq.); the Toxic Substances Control Act, as
amended (15 U.S.C. 2601 et seq.); the
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Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.);
the Occupational Health and Safety Act, as amended (29 U.S.C. 651 et seq.);
the Hazardous Materials Transportation Act, as amended (49 U.S.C. 1801 et
seq.); and any corresponding state statutes and any regulations adopted by
the United States Environmental Protection Agency, the United States
Occupational, Health and Safety Administration or the United States
Department of Transportation or the states pursuant to any of the above;
(iii) "Environmental Permits" means all material licenses, permits,
registrations, governmental approvals, agreements and consents and other
authorizations which are required under Environmental Laws to operate the
Business as currently conducted;
(iv) "Release" means release, spill, emission, leaking, pumping,
injection, deposit (including the placement of contaminated media on or
offsite for any purpose), disposal, discharge, dispersal, escape, leaching,
or migration into or presence in the environment; and
(v) "Remedial Action" means actions required under CERCLA or any other
Environmental Laws to (i) clean up, remove, treat, remediate, or in any
other way address Contaminants in the environment; (ii) prevent the Release
or threatened Release or minimize the further Release of Contaminants;
(iii) investigate and determine if a remedial response is needed and to
design such a response; or (iv) perform post-remedial investigation,
monitoring, operation, maintenance, and care relating thereto.
(vi) "Principal Stockholder's knowledge" means, for purposes of this
Section 2.3.23, the actual knowledge as of the date hereof or as of the
Closing Date (as the case may be), after due inquiry, of the Principal
Stockholder, Xxxxxxxx X. Xxxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx
Xxxxx, and Xxxx Xxxxxx.
(b) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, (i) the Company holds and is in
compliance with all Environmental Permits required under all applicable
Environmental Laws as of the date hereof in connection with the Business, and
all of such Environmental Permits are in full force and effect, except for such
permits which the Company's failure to hold would not reasonably be expected to
have a Material Adverse Effect, and (ii) the Company are not and, for the past
five years, have not been in violation of any Environmental Law, except for such
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect and except for such past violations
which have been fully settled, corrected or otherwise resolved.
(c) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, no Real Estate or any other
property for which
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the Company has or may have legal obligations is currently subject to any
pending or threatened investigation by, order from or written agreement with any
governmental entity or third party respecting: (i) any violation of any
Environmental Law; (ii) any Remedial Action; or (iii) any claim of Damage
arising from the Release or threatened Release of a Contaminant into the
environment.
(d) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, the Company is not a party to or
subject to any pending or threatened judicial or administrative proceeding,
order, judgment, decree, or settlement alleging a violation of or liability or
obligation under any Environmental Law, the enforcement of which, the compliance
with, or the ongoing obligations of which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect, except such
orders, judgments, decrees, or settlements as have been fully resolved according
to the terms thereof.
(e) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, there have been no Releases or
threatened Releases at any of the Real Property during the periods of time that
such Real Property was owned or operated by the Company, except for such
Releases or threatened Releases which, individually or in the aggregate, have
not and would not reasonably be expected to have a Material Adverse Effect.
(f) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, the Real Estate is free from any
underground storage tanks for which Remedial Action or Actions are required by
any Environmental Law, except for such Remedial Actions which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
(g) To the Principal Stockholder's knowledge, the Company has provided
RCGI and 399 Venture access to all environmental reports and data prepared by or
on behalf of the Company that disclose material environmental conditions or
material violations of Environmental Law at the Real Estate.
(h) Other than post-Closing filings under Environmental Permits that
may be necessary to reflect the change of control of the Company contemplated
hereby, neither the execution and delivery of this Agreement or any of the
Ancillary Documents nor the consummation of any of the transactions contemplated
hereby or thereby nor compliance with or fulfillment of the terms, conditions
and provisions hereof or thereof will result in a breach of the terms,
conditions or provisions of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default),
an event of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation or imposition
of any Encumbrance upon any of the Xxxxxxx Shares or any of the assets of the
Company, under any Environmental Permit, other than any such breaches, defaults,
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rights or Encumbrances that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect or would not prevent
the consummation of any of the transactions contemplated hereby.
(i) This Section 2.3.23 (collectively, the "Environmental
Representations and Warranties") contains the exclusive representations and
warranties of the Principal Stockholder with regard to Environmental Laws,
Environmental Permits and any other environmental matters in this Agreement.
2.3.24. Real Estate. (a) The Company owns interests in real estate
identified in Schedule 2.3.24 of the Disclosure Schedules (the "Owned
Premises"). With respect to each such parcel of owned real property:
(i) the Company has good and marketable title to the parcel of real
property, free and clear of any Encumbrance, easement, covenant or other
restriction, except for Permitted Liens, Encumbrances, easements, covenants
and other restrictions of record which do not affect materially and
adversely the current use, occupancy or marketability of title, of the
property subject thereto;
(ii) there are no pending or, to the knowledge of the Principal
Stockholder, threatened condemnation, expropriation, eminent domain or
other similar proceedings, lawsuits or administrative actions relating to
the property which materially and adversely affect the current use or
occupancy thereof;
(iii) except as set forth in Schedule 2.3.24 of the Disclosure
Schedules, there are no outstanding written or, to the knowledge of the
Principal Stockholder, oral rights, agreements, options or rights of first
refusal to purchase the parcel of real property, or any portion thereof or
interest therein, which have been granted to any other person; and
(iv) to the knowledge of the Principal Stockholder, there are no
parties (other than the Company) in possession of or holding any rights to
take possession of any parcel of real property set forth on Schedule 2.3.24
of the Disclosure Schedules, other than tenants under any leases disclosed
in Schedule 2.3.24 of the Disclosure Schedules who are in possession of
space to which they are entitled and other than any parties holding rights,
the exercise of which would not materially and adversely affect the current
use or occupancy of the real property subject thereto.
(b) The Company leases or subleases interests in real estate
identified in Schedule 2.3.24 of the Disclosure Schedules (the "Leased
Premises"; and, together with the Owned Premises, the "Real Estate"). With
respect to each such parcel of leased or subleased real property, except as set
forth in Schedule 2.3.24 of the Disclosure Schedules, the Company is the lessee
of each of the Leased Premises, and no party other than the Company has any
right to
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possession, occupancy or use of any of the Leased Premises. A copy of each lease
relating to the Leased Premises has been made available to RCGI and 399 Venture,
together with all amendments and modifications thereto and subordination,
attornment or non-disturbance agreements in respect thereof.
2.3.25. Intellectual Property.
(a) Each material (i) trademark, service xxxx, slogan, trade name,
trade dress and the like (collectively, and together with the associated
goodwill of each, "Trademarks") held by the Company exclusively in connection
with the Business, including information regarding each registration and pending
application to register any such Trademarks; (ii) patent on and pending
application to patent any technology or design used exclusively in connection
with the Business; (iii) registration of and application to register any
copyright held by the Company exclusively in connection with the Business; and
(iv) license of rights in Trademarks, patents, copyrights, unpatented
formulations and know-how, whether to or by the Company, is listed in Schedule
2.3.25 of the Disclosure Schedules. The scheduled rights are referred to herein
collectively as the "Intellectual Property."
(b) To the Principal Stockholder's knowledge, the patents, Trademark
registrations and copyright registrations for all Intellectual Property are
valid and in full force, are held of record in the Company's name free and clear
of all Encumbrances (other than liens or imperfections which are not material in
amount and do not materially detract from the value of or materially impair the
existing use of the patents, Trademark registrations and copyright registrations
affected by such lien or imperfection), and are not the subject of any
outstanding injunction, judgment, order, decree, ruling or charge, or any
pending or, to the Principal Stockholder's knowledge, threatened action, suit,
investigation, charge, complaint, claim, demand or cancellation or reexamination
proceedings or any other proceeding challenging their extent, validity,
legality, enforceability, use or ownership of the item. All fees or other costs
necessary for maintaining the same in full force and effect, including but not
limited to maintenance fees, annuities and renewal fees, which are due and
payable on or prior to the Closing Date have been paid. The Company is the
applicant of record in all patent applications, and applications for Trademark
and copyright registration for all Intellectual Property, and except as set
forth in Schedule 2.3.25 of the Disclosure Schedules, to the Principal
Stockholder's knowledge, no opposition, extension of time to oppose,
interference, rejection, or refusal to register has been received in connection
with any such application.
(c) Schedule 2.3.25 of the Disclosure Schedules identifies each item
of Intellectual Property that any third party owns or licenses as licensee and
that the Company uses pursuant to license, sublicense, agreement or permission.
With respect to each item of Intellectual Property required to be so identified
in the Disclosure Schedules, the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement or permission.
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(d) None of the trade secrets, know-how, or other confidential or
proprietary information of the Company has been disclosed to any person unless
such disclosure was, in respect of the Business, made pursuant to a
confidentiality agreement, except for any such disclosures which would not
reasonably be expected to have a Material Adverse Effect.
(e) The Company owns, licenses or has a right to use all material
computer hardware, software and data processing systems used in connection with
the operation of the Business (collectively, the "Company Software") which are
listed in Schedule 2.3.25 of the Disclosure Schedules. There are no material
malfunctions with respect to the Company Software as currently used by the
Company. Except as set forth in Schedule 2.3.25 of the Disclosure Schedules, to
the knowledge of the Principal Stockholder, Company Software owned by the
Company is capable of accurately processing, calculating, manipulating, storing,
and exchanging date/time data from, into, and between the twentieth and
twenty-first centuries, including, without limitation, the years 1999 and 2000
and any leap year calculations, provided that all other information technology
used in combination with such Company Software properly exchanges date/time data
with such Company Software.
(f) (i) To the Principal Stockholder's knowledge, no other firm,
corporation, association or person claims the right to use on or in connection
with similar or closely related goods and in the United States, any xxxx which
is identical or confusingly similar to any of the Trademarks; (ii) there are no
pending or, to the knowledge of the Principal Stockholder, threatened claims of
any third party (other than a licensor of Intellectual Property to the Company)
asserting ownership rights in any of the Intellectual Property; (iii) there are
no pending or, to the knowledge of the Principal Stockholder, threatened claims
that the use by the Company of any Intellectual Property infringes any right of
any third party; and (iv) to Seller's knowledge, no third party is infringing
any of the rights of the Company in any of the Intellectual Property, in each
case, except for matters not reasonably expected to have a Material Adverse
Effect.
(g) This Section 2.3.25 contains the exclusive representations and
warranties of the Principal Stockholder with regard to the subject matter
addressed herein. The preceding sentence shall, however, not be construed to
limit RCGI's or 399 Venture's ability to rely on the relevant provisions of
Sections 2.3.13(a), 2.3.13(c), 2.3.13(k), 2.3.14(i) or 2.3.14(l).
2.3.26. Finder's Fees. With the exception of Xxxxxxxxx, Xxxxxx & Xxxxxxxx,
neither the Principal Stockholder nor the Company nor any of their Affiliates
has dealt with any person, firm or entity entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment for arranging the
transactions contemplated hereby or by the Ancillary Documents or introducing
the parties to each other for which RCGI, the Company or 399 Venture could
become liable or obliged.
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2.3.27. Assets
(a) Sufficiency of Assets. Except as set forth in Schedule 2.3.27 of
the Disclosure Schedules, the assets owned or leased by the Company or which the
Company have a contractual right to use, together with the Company's
Intellectual Property, include all of the assets used in or otherwise necessary
for the conduct of the Business as currently conducted. Except as set forth in
Schedule 2.3.27 of the Disclosure Schedules, the Assets are in good condition
and repair in all material respects, subject to normal wear and tear. To the
knowledge of the Principal Stockholder, no additional assets, including
following the Closing, additional Intellectual Property, accounts receivable or
fixed assets, will be necessary in order to operate the Business on a
stand-alone basis as currently operated.
(b) Inventory. The inventory of the Company is of a quality and
quantity which is usable or saleable in the ordinary course of its business
consistent with the Company's past experience and practice, except to the extent
of the reserve for inventory writedown reflected in the Financial Statements.
Since the Financial Statement date, the inventory of the Company has been
replenished in a normal and customary manner consistent with past practices.
Except as set forth in Schedule 2.3.27 of the Disclosure Schedule, no inventory
is held on consignment by or for the Company.
2.3.28. Product Warranty. Except as set forth in Schedule 2.3.28 of the
Disclosure Schedules, the Company has not made written (or, to the knowledge of
the Principal Stockholder, oral) warranties with respect to the quality or
absence of defects of its products which it has sold and which are in force as
of the date hereof.
2.3.29. Top Customers and Suppliers. Schedule 2.3.29 of the Disclosure
Schedules sets forth a complete and correct list of the top 10 customers and top
10 suppliers by dollar volume of the Company, taken as a whole, during the
fiscal year ended December 31, 1998. Except as set forth in Schedule 2.3.29 of
the Disclosure Schedules and except in the ordinary course, to the knowledge of
the Principal Stockholder, none of such customers or suppliers intends to cease
doing business with the Company or to significantly reduce the general level of
business it is currently doing with the Company.
2.3.30. No Undisclosed Liabilities. Except for liabilities and obligations
(a) set forth in the consolidated balance sheet (including notes thereto)
included in the Financial Statements at and for the Company's fiscal year ended
December 31, 1998, (b) described or identified in Schedule 2.3.30 of the
Disclosure Schedules, or (c) incurred in the ordinary course of business since
December 31, 1998 and reflected as a liability on the books of account of the
Company, the Company is not subject to any indebtedness, obligation or liability
(contingent or otherwise). Notwithstanding the foregoing, no representation and
warranty is made pursuant to this Section 2.3.30 with respect to any matter that
is specifically addressed by another representation or warranty contained in
this Section 2.3 or any certificate delivered pursuant hereto.
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2.3.31. Limitation on Warranties. Neither the Principal Stockholder nor the
Company makes any representations or warranties except as set forth herein or in
any Ancillary Document. RCGI and 399 Venture acknowledge that they have
conducted an independent investigation of the financial condition, assets,
liabilities, properties and projected operations of the Company (including with
respect to environmental matters) in making their determination as to the
propriety of the transaction contemplated by this Agreement, and in entering
into this Agreement, have relied solely on the results of said investigation and
on the representations and warranties of the Principal Stockholder expressly
contained in this Agreement. The Principal Stockholder shall be deemed to have
made a misrepresentation with respect to or breach of the representations and
warranties in this Agreement with respect to any tax matter, employee benefit
matter, environmental matter or intellectual property matter only if such matter
breaches Section 2.3.12 (in the case of tax matters), 2.3.17 (in the case of
employee benefit matters), 2.3.23 (in the case of environmental matters) or
2.3.25 (in the case of intellectual property matters) of this Agreement,
respectively (it being understood that the other representations and warranties
in this Agreement shall not apply to such matters).
2.3.32. Definition of Knowledge. Except as otherwise provided herein, for
the purposes of this Agreement, the knowledge of the Principal Stockholder shall
be deemed to be limited to (and the phrases "the Principal Stockholder's
knowledge", "knowledge of the Principal Stockholder" or words of similar import
mean) the actual knowledge as of the date hereof or as of the Closing Date (as
the case may be) of, the Principal Stockholder, Xxxxxxxx X. Xxxxx, Xxxxxxx
Xxxxxxxx, Xxxxxx Xxxxx, Xxxxxx Zolonick, Xxxx Xxxxxx and Xxx Xxxx, each after
due inquiry.
2.4. Representations and Warranties of 399 Venture. 399 Venture represents
and warrants to the Principal Stockholder that
2.4.1. Organization. 399 Venture is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation.
2.4.2. Power and Authority. 399 Venture has full corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Ancillary Documents to be executed and/or delivered pursuant to
this Agreement by 399 Venture.
2.4.3. Execution and Delivery by 399 Venture. The execution and delivery of
this Agreement by 399 Venture, the execution and delivery of the Ancillary
Documents to which it is a party and the performance by 399 Venture of its
obligations under this Agreement and the Ancillary Documents to which it is a
party have been duly authorized and approved by all requisite corporate action.
This Agreement has been duly executed and delivered by 399 Venture and, assuming
the valid authorization, execution and delivery of this Agreement by the other
parties hereto, constitutes the legal, valid and binding obligation of 399
Venture, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general equity principles.
Each of the Ancillary Documents executed and delivered by 399 Venture, assuming
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the valid authorization, execution and delivery thereof by the other party or
parties thereto, if any, will be a legal, valid and binding obligation of 399
Venture, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general equity principles.
2.4.4. Authorization. No consent, authorization, order or approval of, or
filing or registration with, any person, including any governmental authority or
other regulatory agency, is required for or in connection with the execution and
delivery of this Agreement by 399 Venture, the execution and delivery of the
Ancillary Documents to which 399 Venture is a party and the consummation by 399
Venture of the transactions contemplated hereby or thereby.
2.4.5. Conflict. Neither the execution and delivery of this Agreement or
any of the Ancillary Documents executed and delivered by 399 Venture nor the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will result in a breach of the terms, conditions or provisions of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default), an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of rights
under (1) the charter or by-laws of 399 Venture (2) any note, instrument,
mortgage, lease, franchise or financial obligation or any other agreement or
instrument to which 399 Venture is a party or any of its properties is subject
or by which 399 Venture or any of its assets may be bound or affected, (3) any
Court Order to which 399 Venture is a party or by which it is bound or (4) any
Requirements of Law affecting 399 Venture, other than, in the case of clauses
(2), (3) and (4) above, any such breaches, defaults or rights that, individually
or in the aggregate, would not prevent the consummation of any of the
transactions contemplated hereby.
2.4.6. Finder's Fees. With the exception of Xxxxxxxxx, Lufkin & Xxxxxxxx,
neither 399 Venture nor any of its Affiliates has dealt with any person, firm or
entity entitled to a broker's commission, finder's fee, investment banker's fee
or similar payment for arranging the transactions contemplated hereby or by the
Ancillary Documents or introducing the parties to each other, for which RCGI,
the Company or the Principal Stockholder could become liable or obligated.
ARTICLE 3
Conduct Prior to the Closing
3.1. General. 399 Venture, the Principal Stockholder and RCGI shall have
the rights and obligations with respect to the period between the date hereof
and the Closing Date which are set forth in the remainder of this Article III.
3.2. Obligations of the Company and the Principal Stockholder . The
following are the obligations of the Company and the Principal Stockholder:
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3.2.1. The Company shall, and the Principal Stockholder shall cause the
Company to, give to RCGI's and 399 Venture's officers, employees, and other
authorized representatives and financing sources reasonable access during normal
business hours to all of the properties, books, Returns, contracts, documents,
insurance policies, records and personnel of or with respect to the Company that
relate to the Business and shall furnish to RCGI and 399 Venture and such
persons as RCGI and 399 Venture shall designate to the Company such documents
and copies of documents and all information as RCGI and 399 Venture or such
persons may at any time and from time to time reasonably request. In furtherance
of the foregoing, the Company shall, and the Principal Stockholder shall cause
the Company to, provide RCGI and 399 Venture and their financing sources and
their respective agents and representatives with full access to any and all of
its management personnel, accountants, representatives, premises, properties,
contracts, commitments, books, records and other information during regular
Business hours, and shall furnish such financial and operating data,
projections, forecasts, business plans, strategic plans and other data relating
to the Business as RCGI and 399 Venture and their financing sources and its
agents and representatives shall reasonably request; provided, however, that
neither the Company nor the Principal Stockholder be required to violate any
obligation of confidentiality to which the Principal Stockholder or the Company
is subject or to waive any privilege which any of them may possess in
discharging their obligations pursuant to this Section 3.2.1. The Company shall,
and the Principal Stockholder shall cause the Company to, use its reasonable
best efforts to cause its officers, employees, consultants, agents, accountants
and attorneys to cooperate fully with RCGI and 399 Venture, their financing
sources, agents and representatives in connection with the financing of the
transactions contemplated hereby, including the preparation of any offering
documents related thereto. RCGI and 399 Venture agree that such investigation
shall be conducted in such a manner as not to interfere unreasonably with the
operations of the Company.
3.2.2. The Company shall and the Principal Stockholder shall use reasonable
efforts (and RCGI and 399 Venture shall cooperate with the Company) to cause the
Company to, obtain the approvals, authorizations, exemptions, waivers and
consents to the consummation of the transactions contemplated hereby under or
with respect to (a) each contract, lease, agreement, Permit, Environmental
Permit, and other instrument and (b) each foreign, federal, state or local
governmental approval, in each case, which is enumerated in Exhibit B attached
hereto (collectively, the "Material Consents"); provided, however, that such
action shall not include any requirement of the Principal Stockholder or the
Company to expend money, commence or participate in any litigation or offer or
grant any accommodation (financial or otherwise) to any third party.
3.2.3. The Company shall, and the Principal Stockholder shall cause the
Company to, carry on the Business in the ordinary course of business, except as
expressly permitted by this Agreement.
3.2.4. The Company and the Principal Stockholder, as the case may be, shall
give prompt written notice to RCGI and 399 Venture in the event any of their
respective
-26-
representations and warranties are discovered to be untrue as of the
time made or in the event the Company or the Principal Stockholder determines
that such representations and warranties shall be untrue as if made at and as of
the Closing Date. Except as set forth in Section 9.4, no disclosure by the
Principal Stockholder pursuant to this Section 3.2.4 shall be deemed to amend or
supplement the Disclosure Schedules or to cure any misrepresentation or breach
of warranty.
3.2.5. Without the prior written consent of RCGI and 399 Venture, the
Company shall not, and the Principal Stockholder shall cause the Company not to,
other than in the ordinary course of business, as explicitly contemplated by
this Agreement or the Ancillary Documents or as set forth in Schedule 3.2.5 of
the Disclosure Schedules:
(a) amend its certificate of incorporation or by-laws, partnership
agreements or other organizational documents;
(b) make any change in the authorized capital stock of the Company or
issue any shares of stock of any class or issue or become a party to any
subscriptions, warrants, rights, options, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock of the Company, or to other equity securities of the Company, or
grant any stock appreciation or similar rights;
(c) institute any material increase or otherwise materially change the
compensation payable to or to become payable to any employee, officer or agent
of the Company;
(d) incur or commit to incur any capital expenditures not set forth in
Schedule 3.2.5(d) of the Disclosure Schedules or not included with the Company's
capital spending plan for its current fiscal year in excess of $2,500,000 in the
aggregate;
(e) sell, transfer or otherwise dispose of any asset or property
(including sales or transfers to Affiliates), except for sales of inventory and
for transfers of cash in payment of the liabilities of the Company;
(f) enter into any lease, contract or commitment which, if taken prior
to the date hereof, would be required to be disclosed in Schedule 2.3.14 of the
Disclosure Schedules;
(g) take any action or omit to take any action which will result in a
violation of any applicable law which, if taken prior to the date hereof, would
be required to be disclosed in Schedule 2.3.22 of the Disclosure Schedules;
(h) prepay any material obligation which, if taken prior to the date
hereof, would be required to be disclosed in Schedule 2.3.13 of the Disclosure
Schedules; or
(i) borrow any money;
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(j) take any action to change accounting policies or procedures
(including procedures with respect to revenue recognition, payments of accounts
payable and collection of accounts receivable) except as required by GAAP; or
(k) enter into any agreement to do any of the foregoing.
3.2.6. The Company shall, and the Principal Stockholder shall use his best
efforts as a stockholder to cause the Company to, use its best efforts, subject
to the requirements of applicable law, to take all action necessary to effect
the Reverse Stock Split and shall ensure that all agreements, certificates and
other documents delivered or received by the Company in connection with the
Reverse Stock Split are in form and substance satisfactory to RCGI and to 399
Venture, prior to such delivery or receipt.
3.2.7. The Company shall, and the Principal Stockholder shall use his best
efforts as a stockholder to cause the Company to, use its best efforts to ensure
that the Company effects the Xxxxxxx Redemption and the Management Redemption on
the terms contemplated by this Agreement and shall ensure that all agreements
certificates and other documents delivered or received by the Company in
connection with such redemptions are in form and substance satisfactory to RCGI
and 399 Venture, prior to such delivery or receipt.
3.3. Reserved.
3.4. Joint Obligations. The following shall apply with equal force to 399
Venture, the Principal Stockholder, and RCGI:
3.4.1. Subject to the terms and conditions of this Agreement, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate the transactions contemplated hereby and by the
Ancillary Documents as soon as practicable.
3.4.2. RCGI and IMC Global filed on February 3, 1999 with the Federal Trade
Commission and the Antitrust Division of the Department of Justice the
notifications and other information required to be filed under the HSR Act with
respect to the transactions contemplated hereby and by the IMC Agreement. Each
of RCGI, 399 Venture, and Principal Stockholder warrants that all information
supplied by such party in connection with such filings was, as of the date
filed, true and accurate in all material respects and in material compliance
with the requirements of the HSR Act and any such rules and regulations. RCGI,
399 Venture and the Principal Stockholder shall each make available to the other
such information as each of them may reasonably request relative to the
Company's business, assets and property as may be required of each of them in
connection with the filing of any additional information requested by such
agencies under the HSR Act.
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ARTICLE 4
Conditions to Closing
4.1. Conditions to Obligations of the Company and the Principal
Stockholder. The obligations of the Company and the Principal Stockholder to
close the transactions contemplated hereby and by the Ancillary Documents is
subject to the fulfillment or, if permitted by applicable law, waiver by the
Company and the Principal Stockholder of all of the following conditions on or
prior to the Closing Date:
4.1.1. The representations and warranties made by each of RCGI and 399
Venture (i) that are qualified as to materiality shall be true and correct on
and as of the Closing Date as though made or given on and as of the Closing Date
(except to the extent such representations specifically relate to an earlier
date) and (ii) that are not qualified with respect to materiality shall be true
in all material respects on and as of the Closing Date as though made or given
on and as of the Closing Date (except to the extent such representations
specifically relate to an earlier date), except in each case for changes therein
(x) specifically permitted or contemplated by this Agreement or the Ancillary
Documents, (y) consented to in writing by RCGI or 399 Venture, or (z) breaches
of representations and warranties (other than any representation or warranty in
Sections 2.2.1, 2.2.2, 2.2.3, 2.2.4, 2.2.5(1), 2.4.1, 2.4.2, 2.4.3 and 2.4.4)
that are not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect.
4.1.2. There shall not have been any breach by RCGI or by 399 Venture in
the performance of any of their respective covenants and agreements herein which
shall not have been remedied or cured (it being understood that RCGI or 399
Venture, as the case may be, shall be given a reasonable opportunity to remedy
or cure any such breach), other than breaches which are not reasonably expected
to have a material adverse effect on their abilities to perform their respective
obligations under this Agreement and the Ancillary Documents to which either of
them is a party.
4.1.3. No action, suit or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation.
4.1.4. The Company shall have executed and delivered a release in a form
attached hereto as Exhibit C (the "Company Release").
4.1.5. The Principal Stockholder shall have received evidence satisfactory
to him of 399 Venture's investment in RCGI (in addition to the exchange of the
Debentures for the 399 Venture Shares) of (i) $10,000,000 through the purchase
from RCGI of a subordinated note, and (ii) $26,771,525 in exchange for (A)
251,799.25 shares of Series A Preferred, (B) 400,000 shares
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of Class A Common, and (C) 1,191600 shares of Class B Common Stock, par value
$.01 per share, of RCGI.
4.1.6. RCGI shall have received the financing contemplated by Section
2.2.9.
4.1.7. 399 Venture shall have delivered the Debentures to RCGI.
4.1.8. All conditions to the closing contemplated under the Stock Purchase
Agreement (the "IMC Agreement") dated as of January 21, 1999 among IMC Global
Inc., a Delaware corporation, the Vigoro Corporation, a Delaware corporation, as
amended pursuant to an amendment dated as of April 13, 1999, shall have been
satisfied or waived.
4.1.9. The Preferred Stockholder Agreement, in the form agreed to by the
parties hereto (the "Preferred Stockholders Agreement"), dated as of the date of
the Closing, among 399 Venture and certain individuals shall have been executed
and delivered by 399 Venture.
4.1.10. The Registration Rights Agreement, in the form agreed to by the
parties thereto (the "Registration Rights Agreement"), dated as of the date of
the Closing, among 399 Venture, RCGI, the Principal Stockholder and the other
parties thereto shall have been executed and delivered by RCGI and 399 Venture.
4.1.11. The Securities Purchase and Holders Agreement, in the form agreed
by the parties thereto (the "Securities Holders Agreement"), dated as of the
date of the Closing, among RCGI, 399 Venture, the Principal Stockholder and the
additional signatories thereto, shall have been executed and delivered by RCGI
and 399 Venture.
4.1.12. An employment agreement between the Principal Stockholder and RCGI,
in form and substance satisfactory to the parties thereto (the "Xxxxxxx
Employment Agreement"), shall have been executed and delivered by RCGI.
4.1.13. The termination agreement in the form attached hereto as Exhibit E
(the "Termination Agreement" shall have been executed by 399 Venture and
delivered to the Principal Stockholder.
4.2. Conditions to RCGI's and 399 Venture's Obligations. The obligation of
RCGI and 399 Venture to close the transactions contemplated hereby and by the
Ancillary Documents is subject to the fulfillment or, if permitted by applicable
law, waiver by RCGI and 399 Venture of all of the following conditions on or
prior to the Closing Date:
4.2.1. The representations and warranties made by each of the Company and
the Principal Stockholder (i) that are qualified as to materiality shall be true
and correct on and as of the Closing Date as though made or given on and as of
the Closing Date (except to the extent such representations specifically relate
to an earlier date) and (ii) that are not qualified with
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respect to materiality shall be true in all material respects on and as of the
Closing Date as though made or given on and as of the Closing Date (except to
the extent such representations specifically relate to an earlier date), except
in each case for changes therein (x) specifically permitted or contemplated by
this Agreement or the Ancillary Documents, (y) consented to in writing by RCGI
or 399 Venture, or (z) breaches of representations and warranties (other than
any representation or warranty in Sections 2.3.1, 2.3.3, 2.3.4, 2.3.5 and 2.3.9)
that are not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect.
4.2.2. There shall not have been any breach by the Principal Stockholder or
the Company in the performance of any of their respective covenants and
agreements herein which shall not have been remedied or cured (it being
understood that the Company and the Principal Stockholder, as the case may be,
shall be given a reasonable opportunity to remedy or cure any such breach),
other than breaches which are not reasonably expected to have a Material Adverse
Effect.
4.2.3. The Principal Stockholder or the Company shall have procured all
Material Consents.
4.2.4. No action, suit or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect materially and adversely the right of RCGI to own the
Xxxxxxx Shares and to control the Company, (D) affect materially and adversely
the right of the Company to own its assets and to operate its business (and no
such injunction, judgment, order, decree, ruling or charge shall be in effect)
or (E) otherwise would reasonably be expected to have a Material Adverse Effect.
4.2.5. The Principal Stockholder shall have executed and delivered a
release in a form attached hereto as Exhibit D (the "Principal Stockholder
Release").
4.2.6. RCGI shall have received the financing contemplated by Section
2.2.9.
4.2.7. The Principal Stockholder shall have delivered the Xxxxxxx
Redemption Shares to the Company for the Xxxxxxx Redemption.
4.2.8. The Principal Stockholder shall have delivered the Xxxxxxx Exchange
Shares to RCGI for exchange.
4.2.9. All conditions to the closing contemplated under the IMC Agreement
shall have been satisfied or waived.
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4.2.10. Since September 30, 1998, the Company shall have made no
distributions to any stockholder of the Company, including any extraordinary
distribution, on account of such stockholder's ownership of any shares of
capital stock of the Company, other than the payments of dividends payable on
the Preferred Stock in the ordinary course of business, such payments not to
exceed an aggregate annual amount of $1.2 million.
4.2.11. The Securities Holders Agreement shall have been executed and
delivered by the Company and the Principal Stockholder.
4.2.12. The Preferred Stockholder Agreement shall have been executed and
delivered by the Principal Stockholder.
4.2.13. The Registration Rights Agreement shall have been executed and
delivered by the Principal Stockholder and the Company.
4.2.14. The Xxxxxxx Employment Agreement shall have been executed and
delivered by the Principal Stockholder.
4.2.15. No Material Adverse Effect shall have occurred nor shall any event
or circumstance which could reasonably be expected to have a Material Adverse
Effect have occurred.
4.2.16. The Termination Agreement shall have been executed by the Principal
Stockholder and the Company and delivered to RCGI.
ARTICLE 5
Closing
5.1. Form of Documents. At the Closing, the parties shall deliver the
documents, and shall perform the acts, which are set forth in this Article V.
5.2. The Company's Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Section 4.1, the Company shall deliver to the Principal
Stockholder the Xxxxxxx Redemption Amount by wire transfer of immediately
available funds.
5.3. RCGI's Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Section 4.2, RCGI shall execute and/or deliver to the
Principal Stockholder all of the following:
5.3.1. Certificates representing the RCGI Shares.
5.3.2. A certificate of good standing of RCGI, issued not earlier than ten
(10) days prior to the Closing Date by the Secretary of State of Delaware.
5.3.3. An incumbency certificate with respect to the officers of RCGI
executing this Agreement, and any RCGI Ancillary Document delivered hereunder,
on behalf of RCGI.
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5.3.4. A certified copy of resolutions of RCGI's board of directors,
authorizing the execution, delivery and performance of this Agreement, and any
other document delivered by RCGI hereunder.
5.3.5. A closing certificate executed by the President of RCGI (or any
other authorized officer of RCGI), on behalf of RCGI, as to the matters
described in Sections 4.1.1 and 4.1.2 and stating that all documents to be
executed and delivered by RCGI at the Closing have been executed and delivered
by duly authorized officers of RCGI.
5.3.6. Certified copies of the charter and by-laws of RCGI.
5.4. The Principal Stockholder's Deliveries. Subject to the fulfillment or
waiver of the conditions set forth in Section 4.1, the Principal Stockholder
shall execute or deliver all of the following:
5.4.1. Deliveries to RCGI:
(i) Certified copies of the charter and by-laws of the Company.
(ii) Certificate of good standing of the Company issued not earlier
than ten (10) business days prior to the Closing Date by the Secretary of
State of Delaware.
(iii) Certificates representing the Xxxxxxx Exchange Shares, in each
case duly endorsed in blank or with duly executed stock powers attached.
(iv) A closing certificate executed by the Principal Stockholder and
the President of the Company, as to the matters described in Sections 4.2.1
and 4.2.2. and stating that all documents to be executed by the Company and
delivered at the Closing have been executed and delivered by duly
authorized officers of the Company;
(v) The written resignations, effective as of the Closing Date, of the
directors of the Company (other than the Principal Stockholder and Xxxxxxxx
X. Xxxxx).
(vi) The minute books and stock records of the Company.
(vii) A legal opinion in a form agreed to by the parties hereto.
(viii) An incumbency certificate with respect to the officers of the
Company executing this Agreement, and any Ancillary Document delivered
hereunder, on behalf of the Company.
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5.4.2. Deliveries to the Company:
(i) The Xxxxxxx Redemption Shares.
5.5. 399 Venture Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Section 4.2, 399 Venture shall execute and/or deliver to
the Principal Stockholder all of the following:
5.5.1. A certificate of good standing of 399 Venture, issued not earlier
than five (5) days prior to the Closing Date by the Secretary of State of
Delaware.
5.5.2. An incumbency certificate with respect to the officers of 399
Venture executing this Agreement, and any Ancillary Document delivered
hereunder, on behalf of 399 Venture.
5.5.3. A closing certificate executed by the President of 399 Venture (or
any other authorized officer of 399 Venture), on behalf of 399 Venture, as to
the matters described in Sections 4.1.1 and 4.1.2 and stating that all documents
to be executed and delivered by 399 Venture at the Closing have been executed
and delivered by duly authorized officers of 399 Venture.
5.6. Other Transactions Occurring at the Closing. In addition to the
deliveries to be made at the Closing pursuant to Sections 5.2 and 5.3:
5.6.1. The Company will execute and deliver the Company Release.
5.6.2. The Principal Stockholder will execute and deliver the Principal
Stockholder Release.
5.6.3. RCGI will deliver certificates representing the 399 Venture Shares
to 399 Venture.
5.6.4. 399 Venture will deliver the Debentures to RCGI.
ARTICLE 6
Post Closing Agreements
6.1. Post Closing Agreements. From and after the Closing, the parties shall
have the respective rights and obligations which are set forth in the remainder
of this Article VI.
6.2. Confidentiality; Non Competition; Non-Solicitation.
6.2.1. Confidentiality. From and after the Closing, the Principal
Stockholder shall, and shall cause his representatives and agents to, keep
confidential and not disclose to any other person (other than his legal and
financial advisors and accountants) or use for their own
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benefit or the benefit of any other person, any information regarding the
business and affairs of the Company or its Subsidiary. The obligation of the
Principal Stockholder under this Section 6.2 shall not apply to information
which: (i) is or becomes generally available to the public without breach of the
commitment provided for in this Section 6.2; (ii) was otherwise available to the
Principal Stockholder on a non-confidential basis; or (iii) is required to be
disclosed by law, order or regulation of a court or tribunal or government or
disclosures necessary to implement the provisions of this Agreement or the
Ancillary Documents; provided, however, that, in the case of clause (iii) above,
the Principal Stockholder shall provide RCGI and 399 Venture as much advance
notice of the possibility of such disclosure as practical so RCGI may attempt to
stop such disclosure or obtain a protective order concerning such disclosure.
6.2.2. Non-Competition.
(a) In consideration of the benefits of this Agreement to the
Principal Stockholder and in order to induce RCGI to enter into this Agreement,
the Principal Stockholder hereby covenants and agrees that from and after the
Closing and until the later of (i) the third anniversary of the Closing Date and
(ii) one (1) year after the termination of the Principal Stockholder's
employment by the Company, the Principal Stockholder shall not, and shall cause
any employee or Affiliate not to, directly or indirectly, as a partner,
stockholder, director, consultant, joint venturer, investor or in any other
capacity, engage in, or own, manage, operate or control, or participate in the
ownership, management, operation or control of, any business or entity which
engages anywhere in the United States of America in (x) the sale of crop
production inputs and services at retail or (y) the sale of the crop production
inputs set forth in Schedule 6.2.2 at wholesale (a "Competing Business");
provided, however, that nothing herein shall prohibit the Principal Stockholder
from (i) owning not more than 5.0% of any class of securities of a publicly
traded entity in a Competing Business, (ii) acquiring and following such
acquisition, actively engaging in, any business enterprise partially engaged in
a Competing Business, so long as not more than 20% of the fair market value of
such business, as determined in good faith by the Principal Stockholder and
certified to RCGI by the Principal Stockholder, is attributable to such
Competing Business, or (iii) acquiring, and following such acquisition, actively
engaging in, any business enterprise partially engaged in a Competing Business,
provided that if more than 20% of the fair market value of such business, as
determined in good faith by the Principal Stockholder and certified to RCGI by
the Principal Stockholder, is attributable to such Competing Business, then such
business shall divest itself of the subsidiary, division, group, franchise or
segment which engages in such Competing Business as soon as practicable after
the date of such acquisition, and provided, further, that with respect to any
purchase intended to be accounted for as a pooling of interests under GAAP or
treated for federal income tax purposes as a tax-free reorganization, no such
divestiture shall be required until, in the reasonable opinion of the acquiror,
such divestiture would no longer endanger the accounting of such acquisition as
a pooling of interests under GAAP or the treatment for federal income tax
purposes of such acquisition as a tax-free reorganization.
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6.2.3. Non Solicitation. From the date hereof until the later of (i) the
third anniversary of the Closing Date and (ii) one (1) year after the
termination of the Principal Stockholder's employment by the Company, the
Principal Stockholder shall not, without prior written approval of RCGI,
directly or indirectly, solicit for employment any current officer, senior
manager, general manager, sales or technical employee of the Company; provided,
however, that the foregoing shall not prevent the Principal Stockholder, or any
of his Affiliates from hiring any such person (i) who contacts the Principal
Stockholder or his Affiliates on his or her own initiative without solicitation
from any of the Principal Stockholder or his Affiliates, (ii) in connection with
general employment advertisements published in magazines, journals, newspapers
and other publications that are not targeted at the Company or any of the
Company's employees or (iii) who has been discharged by the Company prior to any
such solicitation.
6.2.4. The Principal Stockholder acknowledges that given the nature of the
Business the covenants contained in this Section 6.2 contain reasonable
limitations as to time, geographic area and scope of activity to be restrained,
and do not impose a greater restraint than is necessary to protect and preserve
for the benefit of RCGI the goodwill of the Company and to protect the
legitimate business interests of the Company. If, however, this Section 6.2 is
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too long a period of time or over too large a geographic
area or by reason of its being too extensive in any other respect or for any
other reason it will be interpreted to extend only over the longest period of
time for which it may be enforceable and/or over the largest geographic area as
to which it may be enforceable and/or to the maximum extent in all other aspects
as to which it may be enforceable, all as determined by such court and in such
action.
6.2.5. The Principal Stockholder agrees that RCGI's remedies at law for any
breach or threat of breach by the Principal Stockholder of the provisions of
this Section 6.2 will be inadequate, and that RCGI shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this Section
6.2 and to enforce specifically the terms and provisions hereof, in addition to
any other remedy to which RCGI may be entitled at law or equity. In the event of
litigation regarding this Section 6.2, the prevailing party in such litigation
shall, in addition to any other remedies that prevailing party may obtain in
such litigation, be entitled to recover from the other party all reasonable
legal fees and out-of-pocket expenses incurred by such party in enforcing or
defending its rights hereunder.
6.3. Further Assurances. The parties shall execute such further documents,
and perform such further acts, as may be reasonably necessary to transfer and
convey the Xxxxxxx Shares to Purchaser, on the terms herein contained, and to
otherwise comply with the terms of this Agreement and consummate the
transactions contemplated hereby and by the Ancillary Documents.
6.4. Transfer Taxes RCGI and the Principal Stockholder shall each pay, and
shall indemnify the other party against, 50 percent of any sales Tax, use Tax,
stamp Tax, stock transfer Tax or other similar Tax imposed on the transactions
contemplated by this Agreement.
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6.5. Agreement to Defend and Indemnify. Without prejudicing its right to
indemnification under Article VII hereof, RCGI acknowledges and accepts as
contract rights (and agrees to cause the Company to honor in accordance with
their terms) the provisions of the Company's charter and/or by-laws or other
organizational documents as in effect on the date hereof with respect to
indemnification of officers, directors, employees and agents of each of them
(collectively, "Indemnified Persons") (including provisions relating to
contribution, advancement of expenses and the like), and agrees that, for a
period of six years after the Closing Date, indemnity provisions of the charter
and by-laws or other organizational documents of the Company, to the extent the
Company is still in existence, shall not be modified or amended except as
required by law, unless such modification or amendment expands the rights of the
Indemnified Persons to indemnification (including with respect to contribution,
advancement of expenses and the like).
6.6. Registration and Legend. RCGI agrees and understands that the Xxxxxxx
Shares have not been, and will not be, registered under the Securities Act or
the securities laws of any state and that the Xxxxxxx Shares may be sold or
disposed of only in one or more transactions registered under the Securities Act
and applicable state securities laws or as to which an exemption from the
registration requirements of the Securities Act and applicable state securities
laws is available. RCGI acknowledges and agrees that no person has any right to
require the Principal Stockholder to cause the registration of any of the
Xxxxxxx Shares. The certificates representing the Xxxxxxx Shares shall contain a
legend similar to the following and other legends necessary or appropriate under
applicable state securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
A REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS WITH RESPECT TO SUCH SHARES IS EFFECTIVE OR UNLESS THE
COMPANY IS IN RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO IT TO
THE EFFECT THAT SUCH SHARES MAY BE SOLD WITHOUT REGISTRATION UNDER THE
ACT AND SUCH LAWS.
6.7. Section 351 Transaction. The parties hereto intend that the
transactions contemplated by this Agreement regarding the transfer of securities
or cash to RCGI in exchange for RCGI Shares shall be treated as transfers under
Section 351 of the Code. None of the parties hereto will take a position on
their respective tax returns that is inconsistent with such treatment.
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ARTICLE 7
Indemnification
7.1. General. From and after the Closing, the parties shall indemnify each
other as provided in this Article VII. All payments made by RCGI, the Company or
Principal Stockholder, as the case may be, under this Article VII shall be
treated as adjustments to the value of the property exchanged pursuant to
Section 1.2 for all tax purposes.
7.2. Certain Definitions. As used in this Agreement, the following terms
shall have the indicated meanings:
7.2.1. "Damages" shall mean all losses, damages (including, with respect to
Environmental Claims, costs of Remedial Actions), awards, fines, penalties,
deficiencies, judgments, costs, expenses and fees (including reasonable
attorneys' fees, accountants' fees, court costs and all other reasonable
expenses incurred in investigating or defending any litigation or proceeding,
commenced or threatened), resulting from, arising out of or incident to any of
the indemnifiable items in this Article VII. Damages, however, shall be net of:
(i) any federal, state, or local income tax benefits actually realized by the
Indemnified Party as a result of the matter for which indemnification is sought
offset by any additional tax burden actually suffered by the Indemnified Party
as a result of the matter giving rise to indemnification; provided that no
Indemnified Party shall be required solely for the purpose of realizing a
benefit to take any tax position that could have an adverse effect on such
Indemnified Party if taken; and provided, further, that the Indemnified Party
shall not be required to disclose its (or its Affiliates) tax returns, work
papers or other information with respect to the preparation of such returns, but
shall be required to disclose the foregoing only to a nationally recognized
accounting firm that agrees to disclose only its conclusions to the Indemnifying
Party that accrues to or is realized by the Indemnified Party in respect of the
matter for which a claim is asserted; (ii) any proceeds received by the
Indemnified Party from any separate indemnification or contribution from or
against any person or entity; and (iii) insurance proceeds or coverage pursuant
to any insurance (including title insurance) held by the Indemnified Party or
its Affiliates and covering the event for which indemnification is sought or
insurance proceeds recovered from any other person or entity by the
Indemnifiable Party (less any costs, expenses, premium increases or taxes
incurred in connection therewith).
7.2.2. "Environmental Claim" shall mean any Third Party Claim arising under
any Environmental Law; provided that Environmental Claims shall not include any
enforcement actions by any government agency following the Closing Date with
respect to, or related to compliance of the Business on or prior to the Closing
Date with "process safety management regulations" (as defined under 29 C.F.R.
1910.119) ("Process Safety Management Claims") or state or federal laws or
regulations concerning the transportation of hazardous materials
("Transportation Claims").
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7.2.3. "Indemnified Party" shall mean, with respect to a particular matter,
a party hereto seeking indemnification from another party hereto pursuant to
this Article VII.
7.2.4. "Indemnifying Party" shall mean, with respect to a particular
matter, a party against whom indemnification under this Article VII is sought by
an Indemnified Party.
7.2.5. "Third Party Claim" shall mean any claim, action, suit, proceeding,
investigation, judicial or administrative order, or like matter which is
asserted, requested or threatened by, or initiated at the request of, a person
other than the parties hereto and their Affiliates, their successors and
permitted assigns, against any Indemnified Party.
7.3. The Principal Stockholder's Indemnification Obligations. The Principal
Stockholder shall indemnify, defend and hold harmless RCGI, 399 Venture, the
officers, directors, shareholders, employees and Affiliates thereof and their
successors and permitted assigns (each referred to in this Agreement as an "RCGI
Indemnitee" and, collectively, the "RCGI Indemnitees") against and from all
Damages sustained or incurred, by any RCGI Indemnitee, as a result of or arising
out of:
7.3.1. any inaccuracy in or breach of any representation and warranty made
by the Principal Stockholder in Section 2.3 or in any Ancillary Document
delivered by the Principal Stockholder or the Company to RCGI or 399 Venture in
connection herewith;
7.3.2. any breach by the Principal Stockholder or the Company of, or
failure of the Principal Stockholder or the Company to comply with, any of the
covenants or obligations under this Agreement or in any Ancillary Document to be
performed by the Principal Stockholder or the Company;
7.3.3. any inaccuracy in or breach of any of the Environmental
Representations and Warranties, whether made pursuant to this Agreement or in
the certificate delivered to RCGI pursuant to Section 5.4.1(iv);
7.3.4. any Environmental Claim solely to the extent that such Environmental
Claim is associated with, arises from, or relates to (a) conditions existing
prior to the Closing Date on the Real Estate, (b) conditions existing prior to
the Closing Date on real estate (other than the Real Estate) formerly owned,
leased or operated by the Company or any of their predecessors, (c) the
operation of the Business or the operation of the businesses of any Company
predecessor prior to the Closing Date or (d) the offsite disposal,
transportation, recycling or Release or threatened Release of any Contaminants
as a result of the Company's operations, or those of their predecessors, before
the Closing Date, in each case, including Environmental Claims for a Release or
threatened Release of any Contaminant on, in, at, to, beneath or from the Real
Estate before the Closing Date (whether or not such Environmental Claim also
constitutes a breach of the Environmental Representations and Warranties);
provided that RCGI's activities (including communications), other than those
activities required by Environmental Law, have not directly or indirectly
triggered or caused to be ripened such Environmental Claim (it being understood
that
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RCGI Indemnitees' right to indemnification under this Section 7.3.4 shall not be
nullified or limited by RCGI Indemnitees' compliance with Environmental Laws,
including the conduct of investigations, in connection with facility operations,
expansion or closure activities or the sale of the Business or other reasonable,
good faith activities in connection with the operation of the Business in the
ordinary course);
7.3.5. any inaccuracy in or breach of any representation or warranty made
by the Principal Stockholder in Section 2.3.30 or in respect thereof under the
certificate delivered to RCGI pursuant to Section 5.3.4.
7.3.6. Notwithstanding the foregoing provisions of this Section 7.3:
(a) the Principal Stockholder shall be required to indemnify and hold
harmless RCGI Indemnitees pursuant to Sections 7.3.1 through 7.3.5 only to the
extent that the aggregate amount of Damages incurred by RCGI Indemnitees
pursuant to Sections 7.3.1 through 7.3.5 exceeds $2,000,000 (it being understood
that such $2,000,000 shall constitute a "deductible" for which the Principal
Stockholder bears no indemnification responsibility and that such "deductible"
shall be separate from and independent of any other such "deductible" set forth
in this Agreement);
(b) the Principal Stockholder shall be required to indemnify and hold
harmless RCGI Indemnitees under this Section 7.3 only to the extent that the
aggregate amount required to be paid by the Principal Stockholder pursuant to
this Section 7.3 does not exceed $5 million.
(c) Notwithstanding the foregoing the limitations contained in clauses
(a) and (b) of this Section 7.3.6 shall not apply to any Damages: (i) sustained
or incurred by any RCGI Indemnitee as a result of or arising out of any breach
of any representation or warranty in Section 2.3.1, Section 2.3.3, Section
2.3.4, or Section 2.3.9; (ii) sustained or incurred by any RCGI Indemnitee as a
result of or arising out of any breach of or failure to comply with any covenant
or obligation in Articles I, VI, VII or IX; or (iii) resulting or arising from
an intentional or willful breach by the Company or the Principal Stockholder of
any representation or warranty in Section 2.3 or any covenant under this
Agreement or any Ancillary Document to which the Principal Stockholder or the
Company is party which, in each case, would constitute common law fraud.
7.3.7. Notwithstanding any other provision of this Agreement, the Company
shall be required to indemnify and hold harmless RCGI Indemnitees pursuant to
this Section 7.3 with the same force and effect as if the Company were the
Principal Stockholder; provided, however, that (i) the Company shall not be
required to make any payments under this Section 7.3 until the aggregate amount
paid by the Principal Stockholder under such Section shall equal $5 million and
(ii) the Company shall be required to indemnify and hold harmless RCGI
Indemnitees under this Section 7.3 only to the extent that the aggregate amount
required to be paid by the Company pursuant to this Section 7.3 does not exceed
$6 million.
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7.3.8. In addition to the foregoing indemnification provisions of this
Section 7.3, the Principal Stockholder shall indemnify, defend and hold harmless
RCGI, 399 Venture, the Company, and the officers, director, shareholders,
employees and Affiliates thereof and their successors and permitted assigns from
and against (i) any claims by the ESOP, the ESOP Trust, or any ESOP participant
or beneficiary of any such participant, for any payments following the Closing
Date in connection with the Reverse Stock Split other than the payment of
$2,877,853.62 specified in Recital H hereof (it being understood that the
Principal Stockholder shall also be entitled to apply the $118,274 deposited in
escrow by the Company plus any additional amounts deposited in escrow by the
Rollover Investors towards any amounts payable under this clause (i)); (ii) any
claim for any excise tax or penalty imposed under any provision of applicable
law, including but not limited to ERISA or the Code by any governmental agency,
including but not limited to the Internal Revenue Service or the United States
Department of Labor; (iii) any payments in excess of $9,622,021.99 in the
aggregate (inclusive of amounts deposited by the Rollover Investors into escrow
for the benefit of the ESOP Trust) made or required to be made in cash to
stockholders of the Company (other than the ESOP or the ESOP Trust) on account
of (A) shares of the Company and options to purchase shares of Common Stock
redeemed by the Company pursuant to the transactions contemplated by this
Agreement, and (B) any payment made or required to be made by the Company to the
Rollover Investors (including the Principal Stockholder) on account of shares of
Common Stock and options to purchase shares of Common Stock which are being
redeemed by the Company pursuant to the Management Redemption. The Principal
Stockholder's indemnification obligations hereunder shall not be subject the
limitations set forth in Section 7.3.6. Notwithstanding the foregoing, the
Principal Stockholder shall have no obligation to any person or entity to pay,
reimburse or be responsible for any legal, accounting or financial advisory
fees, costs or disbursements, including the cost of any appraisal of shares of
Common Stock held by the ESOP or the ESOP Trust prior to the Reverse Stock
Split, incurred by or on behalf of the ESOP or the ESOP Trust or any of their
respective officers, directors or trustees in connection with the sale,
cancellation or redemption of any shares of Common Stock held by the ESOP or the
ESOP Trust, whether in connection with the Reverse Stock Split or otherwise.
7.4. Survival of Indemnification Obligations. The indemnification provided
for in Section 7.3 shall terminate 18 months after the Closing Date (and no
claims shall be made by any RCGI Indemnitee under Section 7.3 thereafter),
except that the indemnification by the Principal Stockholder (and, subject to
Section 7.3.7, by the Company) shall continue as to:
(i) the covenants of the Principal Stockholder set forth in Article I
or Article VI shall survive for the periods of time set forth therein or,
if no period of time is set forth, such covenants shall survive
indefinitely;
(ii) claims for indemnification for breaches of representations and
warranties set forth in Section 2.3.12 with respect to matters occurring on
or after September 15, 1994, which survive until the expiration of the
applicable statute of limitations (it being understood that indemnification
for claims related to breaches of representations and warranties set forth
in Section 2.3.12 to the extent attributable to matters occurring prior to
September 15, 1994 shall terminate 18 months after the Closing Date);
(iii) claims for indemnification under Sections 7.3.3, and 7.3.4 which
shall survive until the fifth anniversary of the Closing Date (it being
understood that indemnification for any such claims to the extent
attributable to circumstances or events occurring prior to September 15,
1994 shall terminate 18 months after the Closing Date);
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(iv) the indemnification obligation under Section 7.3.8 relating in
any way to claims for payments to the ESOP or the ESOP Trust, or any
participant or beneficiary claiming benefits under the ESOP or the ESOP
Trust, or to the proposed or asserted imposition of any taxes or penalties
asserted by any governmental agency in respect of the ESOP or the ESOP
Trust, shall survive until the 90th day following the close of any
applicable statute of limitations with respect to such claims; and
(v) any Damages of which any RCGI Indemnitee has notified the
Principal Stockholder or the Company, as the case may be, in accordance
with the requirements of Section 7.7 on or prior to the date such
indemnification would otherwise terminate in accordance with this Section
7.4, as to which the obligation of the Principal Stockholder or the
Company, as the case may be, shall continue until the liability of the
Principal Stockholder or the Company, as the case may be, shall have been
determined pursuant to this Article VII, and the Principal Stockholder or
the Company, as the case may be, shall have reimbursed all RCGI Indemnitees
for the full amount of such Damages that are payable in accordance with
this Article VII.
7.5. Limitation on Indemnification Obligations. In the event that the
Principal Stockholder or the Company, as the case may be (the "Defending Party")
is conducting any defense against a Third Party Claim for which an RCGI
Indemnitee has sought indemnification under Section 7.3, expenses incurred by
the Defending Party in connection therewith, including legal costs and expenses,
shall constitute RCGI Indemnitee Damages for purposes of determining the maximum
aggregate amount to be paid by the Defending Party pursuant to Section 7.3.
7.6. RCGI's Indemnification Covenants. RCGI shall indemnify, defend and
hold harmless the Principal Stockholder and his respective Affiliates,
successors and assigns (individually, a "Stockholder Indemnitee" and,
collectively, the "Stockholder Indemnities"), against and from all Damages
sustained or incurred by any Stockholder Indemnitee as a result of or arising
out of or by virtue of:
7.6.1. any inaccuracy in or breach of any representation and warranty made
by RCGI to the Principal Stockholder herein or in any Document delivered to the
Principal Stockholder by RCGI in connection herewith;
7.6.2. any breach by RCGI of, or failure by RCGI to comply with, any of the
covenants or obligations under this Agreement or any Document to be performed by
RCGI, unless the Principal Stockholder had waived or consented to such breach or
failure as of the Closing Date; or
7.6.3. any Environmental Claim solely to the extent that such Environmental
Claim is associated with, arises from or relates to (a) conditions arising on
the Real Estate on or after the Closing Date, (b) the operation of the Company
on or after the Closing Date or (c) the offsite disposal, transportation,
recycling, Release or Threatened Release of any Contaminants as
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a result of the Company's operations on or after the Closing Date, in each case,
including Environmental Claims for a Release or threatened Release of any
Contaminant on, in, at, to, beneath or from the Real Estate on or after the
Closing Date.
7.7. Indemnification Procedures.
7.7.1. An Indemnified Party shall give prompt written notice to the
Indemnifying Party of the assertion of any claim for indemnification (a "Claim
Notice"). Each Claim Notice shall set forth, with reasonable specificity, the
facts and circumstances of any such claim for indemnification or Third Party
Claim and the grounds for which indemnification is sought and shall include in
such Claim Notice (if then known) the amount or the method of computation of the
amount of such claim, and a reference to the provision of this Agreement or any
other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; provided, however, that a Claim Notice
in respect of any action at law or suit in equity by or against a third Person
as to which indemnification will be sought shall be subject to the provisions of
Sections 7.7.3.
7.7.2. After the giving of any Claim Notice, the amount of indemnification
to which an Indemnified Party shall be entitled under this Article VII shall be
determined: (i) by the written agreement between the Indemnified Party and the
Indemnifying Party; (ii) by a final judgment or decree of any court of competent
jurisdiction; or (iii) by any other means to which the Indemnified Party and the
Indemnifying Party shall agree. The judgment or decree of a court shall be
deemed final when the time for appeal, if any, shall have expired and no appeal
shall have been taken or when all appeals taken shall have been finally
determined. The Indemnified Party shall have the burden of proof in establishing
the amount of Damages suffered by it.
7.7.3. (a) In order for a party to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
Third Party Claim, the Indemnified Party must notify the Indemnifying Party in
writing, and in reasonable detail, of the Third Party Claim within 20 days after
receipt by such Indemnified Party of written notice of the Third Party Claim.
Thereafter, the Indemnified Party shall deliver to the Indemnifying Party,
within 10 business days after the Indemnified Party's receipt thereof, copies of
all notices and documents (including court papers) received by the Indemnifying
Party relating to the Third Party Claim. Notwithstanding the foregoing, should a
party be physically served with a complaint with regard to a Third Party Claim,
the Indemnified Party must notify the Indemnifying Party with a copy of the
complaint within 10 business days after receipt thereof and shall deliver to the
Indemnifying Party within seven business days after the receipt of such
complaint copies of notices and documents (including court papers) received by
the Indemnified Party relating to the Third Party Claim. Failure to notify the
Indemnifying Party shall not relieve the Indemnifying Party of its indemnity
obligation, except to the extent the Indemnifying Party is actually prejudiced
in its defense of the action by such failure. Subject to attorney-client
privilege, the parties hereto agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any such legal
proceeding, claim or demand. Except as hereinafter provided in this Section 7.7,
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the Indemnified Party shall not, and the Indemnifying Party shall, have the
right using counsel reasonably acceptable to the Indemnified Party to contest,
defend, litigate or settle any such Third Party Claim which involves (and
continues to involve) solely monetary damages; provided that the Indemnifying
Party shall have notified the Indemnified Party in writing of its intention to
do so within 90 days of the Indemnified Party having given notice of the Third
Party Claim to the Indemnifying Party and provided further that (i) the
Indemnifying Party expressly agrees in such notice to the Indemnified Party
that, if the Third Party Claim is adversely determined, the Indemnifying Party
shall have an obligation to indemnify against such Third Party Claim; (ii) the
defense of such Third Party Claim by the Indemnifying Party will not, in the
reasonable opinion of the Indemnified Party, reasonably be likely to have a
Material Adverse Effect; and (iii) the Indemnifying Party shall diligently
address the Third Party Claim (the conditions set forth in clauses (i), (ii) and
(iii) being collectively referred to as the "Litigation Conditions"). The
Indemnified Party shall have the right to participate, and to be represented by
counsel at its own expense, in any such contest, defense, litigation or
settlement conducted by the Indemnifying Party, provided that the Indemnified
Party shall be entitled to reimbursement therefor if the Indemnifying Party
shall lose its right to contest, defend, litigate and settle the Third Party
Claim.
(b) The Indemnifying Party shall not be entitled, or shall lose its
right, to contest, defend, litigate and settle the Third Party Claim if the
Indemnified Party shall give written notice to the Indemnifying Party of any
objection thereto based upon the Litigation Conditions. The Indemnifying Party,
if it shall have assumed the defense of any Third Party Claim as provided in
this Agreement, shall not consent to a settlement of, or the entry of any
judgment arising from, any such Third Party Claim, enter into any compromise or
settlement which commits the Indemnified Party to take, or to forbear to take,
any action or which does not provide for a complete release by such third party
of the Indemnified Party without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed).
Notwithstanding the foregoing, the Indemnified Party shall have the right to
pay, settle or compromise any such Third Party Claim, provided that, in such
event, the Indemnified Party shall waive any right to indemnity therefor.
(c) If an Indemnified Party is entitled to indemnification against a
Third Party Claim, and the Indemnifying Party fails to accept a tender of, or
assume the defense of, a Third Party Claim pursuant to this Section 7.2, or if,
in accordance with Section 7.2.3(b), the Indemnifying Party shall not be
entitled, or shall lose its right, to contest, defend, litigate and settle such
a Third Party Claim or if such Third Party Claim involves equitable or other
non-monetary relief, the Indemnified Party shall have the right to contest,
defend and litigate such Third Party Claim; provided that the Indemnifying Party
shall have the right to participate in, and to be represented by counsel (at its
own expense) in any such contest, defense, litigation or settlement conducted by
the Indemnified Party. The Indemnified Party, if it shall have assumed the
defense of any Third Party Claim as provided in this Agreement, shall not
consent to a settlement of, or the entry of any judgment arising from, any such
Third Party Claim, enter into any compromise or settlement which commits the
Indemnifying Party to take, or to forbear to take, any action (other
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than the payment of money) without the prior written consent of the Indemnifying
Party (which consent shall not be unreasonably withheld or delayed).
7.7.4. In any case where an Indemnified Party recovers from third Persons
any amount in respect of a matter with respect to which an Indemnifying Party
has indemnified it pursuant to this Article VII, such Indemnified Party shall
promptly pay over to the Indemnifying Party the amount so recovered (after
deducting therefrom the full amount of the expenses incurred by it in procuring
such recovery), but not in excess of the sum of (i) any amount previously so
paid by the Indemnifying Party to or on behalf of the Indemnified Party in
respect of such matter and (ii) any amount expended by the Indemnifying Party in
pursuing or defending any claim arising out of such matter.
7.8. Cooperation on Environmental Claims
7.8.1. RCGI's Rights to Remedial Action. In addition to the provisions of
Section 7.7, if any claim for indemnification is sought against the Principal
Stockholder with respect to any Environmental Claim, the resolution of which
involves or includes Remedial Action at Real Estate owned, leased, or operated
by the Company at the time such Remedial Action is to be conducted, RCGI may, in
its discretion, elect to assume full control over any Remedial Action in
connection with any such claim. Upon such election, RCGI shall: (i) after the
Principal Stockholder gives reasonable notice, permit representatives of the
Principal Stockholder (including the Principal Stockholder's advisors and
consultants) to visit and inspect from time to time any properties to which the
Environmental Claim relates; (ii) after the Principal Stockholder gives
reasonable notice, allow the Principal Stockholder to enter on such properties
from time to time for the purpose of conducting such environmental tests as the
Principal Stockholder may reasonably desire with respect to the Environmental
Claim; all during normal business hours and at the Principal Stockholder's
expense; and (iii) prior to submission to any government agency, provide the
Principal Stockholder with a reasonable opportunity to review and approve, which
approval shall not be unreasonably withheld, all proposals, reports,
submissions, data, correspondence, or other documents. RCGI may, at its
discretion, elect to allow the Principal Stockholder to assume full control over
Remedial Action upon providing written notice to the Principal Stockholder of
such election and upon providing the Principal Stockholder with sufficient
opportunity to assume such control. In the event that RCGI shall refuse to
cooperate as set forth in this Section 7.8.1 and Section 7.8.2 with respect to
the taking of a Remedial Action with respect to an Environmental Claim, the
Principal Stockholder shall have no further liability to RCGI with respect to
the Environmental Claim.
7.8.2. The Principal Stockholder's Rights to Remedial Action. If RCGI
elects to allow the Principal Stockholder to assume full control over Remedial
Actions pursuant to Section 7.8.1, RCGI shall: (i) provide the Principal
Stockholder with access to the Real Estate at all reasonable times to enable the
Principal Stockholder to perform such Remedial Action; provided that unless
required by a final government order, the Principal Stockholder shall not
undertake a Remedial Action or other action in settlement of a claim that would
materially and adversely
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affect RCGI's or the Company's operations at the Real Estate unless consented to
by RCGI; (ii) furnish the Principal Stockholder with such relevant records,
information, reports, studies, data, and cost estimates in RCGI's or the
Company's possession; and (iii) attend such conferences, proceedings, hearings,
trials, or appeals regarding any Remedial Action or any Environmental Claim as
the Principal Stockholder shall reasonably request with sufficient advance
notice. For any Principal Stockholder performed Remedial Actions, the Principal
Stockholder shall: (i) provide RCGI with reasonable advance notice to allow RCGI
to attend any conferences, proceedings, hearings, trials, or appeals regarding
any Remedial Action; and (ii) prior to submission to any government agency,
provide RCGI with a reasonable opportunity to review and approve, which approval
shall not be unreasonably withheld, all proposals, reports, submissions, data,
correspondence, or other documents.
7.8.3. Minimization of Remedial Action Costs and Disruption of Operation.
(a) The Principal Stockholder and RCGI Indemnitees agree to use their
best efforts to minimize costs of Remedial Actions and minimize disruption of
operations with respect to Environmental Claims, and, in deciding among various
alternative courses of remedial action, due consideration shall be given to
minimization of costs and the minimization of interference with the ongoing
operations and to the prompt resolution of the Environmental Claim; provided,
however, that if any Remedial Action subject to indemnification hereunder is
reasonably expected to have a Material Adverse Effect, the Principal Stockholder
shall compensate RCGI and/or the Company therefor. and provided further, that
any amount paid by the Principal Stockholder pursuant to this Section 7.8.3
shall be credited toward the amount payable by the Principal Stockholder
pursuant to Section 7.3.6(b) and shall be subject to the payment limitation of
such section.
(b) RCGI will make available its employees at each site and equipment
and other fixed assets purchased hereunder and located at such site to assist in
the remediation work to the extent such employees and equipment are reasonably
capable of doing such work and permitted to do so under Environmental Law;
provided, however, that no such employee shall be required to assist in the
remediation effort if to do so will materially diminish such employee's
availability to perform and be utilized for such employee's normal job purpose
or would otherwise materially interfere with RCGI's operations.
7.9. Mitigation. Each of the parties agrees to take all reasonable steps
(taking into account the nature of the event or condition, and the other demands
on the time and attention of the officers of each respective party) to mitigate
their respective Damages upon and after becoming aware of any event or condition
which could reasonably be expected to give rise to any Damages that are
indemnifiable hereunder; provided that such mitigation shall not interfere with
or disrupt in any material respect the business or operations of a party.
7.10. Indemnification Exclusive Remedy. Except to the extent remedies
cannot be waived as a matter of law and except for injunctive relief pursuant to
Section 6.2, if the Closing occurs, indemnification pursuant to the provisions
of this Article VII shall be the exclusive remedy of the parties for any
misrepresentation or breach of any representation, warranty, agreement or
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covenant contained herein or in any Ancillary Document (other than the Preferred
Stockholders Agreement, the Securities Holders Agreement, the Registration
Rights Agreement and the Xxxxxxx Employment Agreement) (it being understood
that, without limiting the generality of the foregoing, (a) no action in tort or
strict liability may be maintained by any Indemnified Party, (b) the only action
which may be asserted by any Indemnified Party with respect to any Environmental
Claim shall be a contract action to enforce, or to recover Damages pursuant to,
this Article VII, and (c) each of the Principal Stockholder and RCGI, for itself
and the other RCGI Indemnitees or Stockholder Indemnitees, as the case may be,
hereby waives any and all statutory rights, including rights of contribution or
indemnification that any of them might otherwise be entitled to under any
federal, state or local law (including Environmental Laws (including CERCLA)).
ARTICLE 8
Effect of Termination/Proceeding
8.1. General. The parties shall have the rights and remedies with respect
to the termination and/or enforcement of this Agreement which are set forth in
this Article VIII.
8.2. Right to Terminate. Anything to the contrary herein notwithstanding,
this Agreement and the transactions contemplated hereby may be terminated at any
time prior to the Closing:
8.2.1. by the mutual written consent of RCGI and the Principal Stockholder;
8.2.2. by prompt notice given in accordance with Section 9.3, by either of
such parties if the Closing shall not have occurred at or before 11:59 p.m. on
June 30, 1999 and provided that the right to terminate this Agreement under this
Section 8.2.2 shall not be available to any party whose failure to fulfill any
of its obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or prior to the aforesaid date; or
8.2.3. by RCGI or the Principal Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued a final and non-appealable order, decree or ruling permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby.
8.3. Certain Effects of Termination. In the event of the termination of
this Agreement by either the Principal Stockholder or RCGI as provided in
Section 8.2:
8.3.1. each party, if so requested by the other party, will return promptly
every document furnished to it by the other party (or any subsidiary, division,
associate or Affiliate of such other party) in connection with the transactions
contemplated hereby, whether so obtained before or after the execution of this
Agreement, and any copies thereof (except for copies of documents publicly
available) which may have been made, and will use reasonable efforts to cause
its representatives and any representatives of financial institutions and
investors and others to
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whom such documents were furnished promptly to return such documents and any
copies thereof any of them may have made; and
This Section 8.3 and Section 8.7 shall survive any termination of this
Agreement.
8.4. Remedies. Notwithstanding any termination right granted in Section
8.2, in the event of the nonfulfillment of any condition to a party's closing
obligations, in the alternative, such party may elect to do one of the
following:
8.4.1. proceed to close despite the nonfulfillment of any closing
condition, it being understood that consummation of the Closing shall be deemed
a waiver of a breach of any representation, warranty, agreement or covenant or
of such party's rights and remedies with respect thereto to the extent that such
party shall have knowledge of such breach and the Closing shall nonetheless
occur;
8.4.2. decline to close, terminate this Agreement as provided in Section
8.2, and thereafter seek damages to the extent permitted in Section 8.5; or
8.4.3. seek specific performance of the obligations of the other party,
each party hereby agreeing that in the event of any breach by such party of this
Agreement, remedies at law for any such breach will be inadequate, and that such
non-breaching party shall be entitled to enforce specifically the terms and
provisions hereof, in addition to any other remedy to which such non-breaching
party may be entitled at law or equity.
8.5. Right to Damages. If this Agreement is terminated pursuant to Section
8.2, neither party hereto shall have any claim against the other except as set
forth in Section 8.4 or, if the circumstances giving rise to such termination
were caused by the other party's willful failure to comply with a material
covenant set forth herein, such termination shall not be deemed or construed as
limiting or denying any legal or equitable right or remedy of said party.
8.6. Non-Solicitation. If this Agreement is terminated, neither RCGI nor
399 Venture nor any of their Affiliates will, for a period of one year
thereafter, without the prior written approval of the Company, directly or
indirectly solicit, induce or attempt to persuade any person who is an employee
of the Company on the date hereof or at any time hereafter that precedes such
termination, to terminate his or her employment with the Company. Each of 399
Venture and RCGI agrees that the Company's remedies at law for any breach or
threat of breach by RCGI or 399 Venture, as the case may be, of the provisions
of this Section 8.6 will be inadequate, and that the Company shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Section 8.6 and to enforce specifically the terms and provisions hereof, in
addition to any other remedy to which the Company may be entitled at law or in
equity. It is the intent and understanding of each party hereto that if, in any
action before any court or agency legally empowered to enforce this Section 8.6,
any term, restriction, covenant or promise in this Section 8.6 is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
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covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency.
8.7. Confidentiality. (a) 399 Venture shall, and shall cause its
representatives and agents to, keep confidential and not disclose to any other
person (other than its legal and financial advisors and accountants) or use for
their own benefit or the benefit of any other person, any information regarding
the business and affairs of the Company. The obligation of 399 Venture and its
representatives and agents under this Section 8.7 shall not apply to information
which: (i) is or becomes generally available to the public without breach of the
commitment provided for in this Section 8.7; (ii) was otherwise available to 399
Venture on a non-confidential basis; or (iii) is required to be disclosed by
law, order or regulation of a court or tribunal or government or disclosures
necessary to implement the provisions of this Agreement or the Ancillary
Documents; provided, however, that, in the case of clause (iii) above, 399
Venture shall provide the Principal Stockholder and the Company as much advance
notice of the possibility of such disclosure as practicable so the Principal
Stockholder and the Company may attempt to stop such disclosure or obtain a
protective order concerning such disclosure. Notwithstanding anything contained
in the foregoing, the parties hereto expressly acknowledge and agree that the
representations, covenants, and other agreements of 399 Venture and Citicorp
Venture Capital, Ltd. contained in this Section 8.7 apply only to 399 Venture
and Citicorp Venture Capital, Ltd. and not to any of its affiliates or
shareholders, including, without limitation, Citibank, N.A., Citicorp or
Citigroup.
ARTICLE 9
Miscellaneous
9.1. Fees. Each party hereto shall bear all fees and expenses incurred by
such party in connection with, relating to or arising out of the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including financial
advisors', attorneys', accountants' and other professional fees and expenses;
provided, however, that Company shall pay such fees and expenses incurred by the
Company prior to the Closing Date.
9.2. Publicity. Except as otherwise required by law or applicable stock
exchange rules, press releases and other publicity concerning this transaction
shall be made only with the prior agreement of the Principal Stockholder, the
Company and RCGI (and in any event, the Principal Stockholder and RCGI shall use
all reasonable efforts to consult and agree with each other with respect to the
content of any such required press release or other publicity); provided,
however, that the foregoing shall not preclude communications or disclosures
necessary to implement the provisions of this Agreement.
9.3. Notices. All notices required or permitted to be given hereunder shall
be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three business days after being deposited in the United
States mail, postage prepaid, registered or certified mail, return receipt
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requested. Notices delivered by hand, by facsimile, or by nationally recognized
private courier shall be deemed given on the first business day following
receipt; provided, however, that a notice delivered by facsimile shall only be
effective if such notice is also delivered by hand, or deposited in the United
States mail, postage prepaid, registered or certified mail, on or before two
business days after its delivery by facsimile. All notices shall be addressed as
follows:
If to the Company or the Principal Stockholder:
Xxxxxxx X. Xxxxxxx, Xx.
Xxxxxxx-Xxxxx, Inc.
00 Xxxxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxxxxx X. Xxxxx
Xxxxxxx-Xxxxx, Inc.
00 Xxxxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Fax (000) 000-0000
If to RCGI or 399 Venture:
c/o 399 Venture Partners, Ltd
000 Xxxx Xxxxxx, 00xx Xxxxx, Xxxx 4
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. XxXxxxxxxx
Fax: (000) 000-0000
with a copy to:
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
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and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 9.3.
9.4. Entire Agreement; Interpretation. This Agreement and the Ancillary
Documents constitute the entire agreement between the parties and shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal representatives, successors and permitted assigns. Articles, titles and
headings to sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement. The Disclosure Schedules and Exhibits referred to herein shall
be construed with and as an integral part of this Agreement to the same extent
as if they were set forth verbatim herein. Any amendments, or alternative or
supplementary provisions, to this Agreement must be made in writing and duly
executed by an authorized representative or agent of each of the parties hereto.
Neither the specification of any dollar amount in any representation or warranty
contained in this Agreement nor the inclusion of any specific item in the
Disclosure Schedules is intended to imply that such amount, or higher or lower
amounts, or the item so included or other items, are or are not material, and no
party shall use the fact of the setting forth of any such amount or the
inclusion or omission of any such item in any dispute or controversy between the
parties as to whether any obligation, item or matter not described herein or
included in the Disclosure Schedules is or is not material for purposes of this
Agreement. Unless this Agreement specifically provides otherwise, neither the
specification of any item or matter in any representation or warranty contained
in this Agreement nor the inclusion of any specific item in the Disclosure
Schedules is intended to imply that such item or matter, or other items or
matters, are or are not in the ordinary course of business, and no party shall
use the fact of the setting forth or the inclusion of any such item or matter in
any dispute or controversy between the parties as to whether any obligation,
item or matter not described herein or included in the Disclosure Schedules is
or is not in the ordinary course of business for purposes of this Agreement. The
Principal Stockholder may once not later than 20 days after the date hereof (or,
in the event the Closing shall not have occurred prior to the date set forth in
Section 8.2.2, then once per 30 days thereafter) by notice in accordance with
the terms of this Agreement, supplement or amend the Disclosure Schedules, in
order to add information arising from events after the date hereof. No such
supplement or amendment shall be evidence, in and of itself, that the
representations and warranties in the Agreement are no longer true and correct
in accordance with their terms. It is specifically agreed that the Disclosure
Schedules may be so supplemented or amended to add immaterial, as well as
material, items thereto. No such supplemental or amended Disclosure Schedules
shall be deemed to cure any breach for purposes of Section 4.2. If, however, the
Closing occurs, any such supplement or amendment will be effective to cure and
correct for all other purposes any breach of any representation, warranty,
covenant or agreement which would have existed if Seller had not made such
supplement or amendment, and all references to the Disclosure Schedules which
are supplemented or amended as provided in this Section 9.4 shall for all
purposes after the Closing be deemed to be a reference to the Disclosure
Schedules as so supplemented or amended.
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9.5. Non-Waiver. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.
9.6. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original, and all such counterparts shall
constitute but one instrument.
9.7. Severability. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
9.8. Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their successors and permitted
assigns. Except as set forth in Section 6.5 or in respect of any RCGI Indemnitee
or Stockholder Indemnitee which is not a party hereto, nothing in this
Agreement, express or implied, shall confer on any person other than the parties
hereto, and their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
including third party beneficiary rights.
9.9. Assignability. This Agreement shall not be assignable by RCGI without
the prior written consent of the Principal Stockholder; provided, however, that
RCGI may assign its rights hereunder to the Company, any Affiliates of RCGI, to
any successor to its business, or as collateral security to any person providing
financing to RCGI to consummate the transactions contemplated hereunder; and
provided further, however, that no such assignment shall relieve RCGI of its
obligations hereunder.
9.10. Governmental Reporting. Anything to the contrary in this Agreement
notwithstanding, nothing in this Agreement shall be construed to mean that a
party hereto or other person must make or file, or cooperate in the making or
filing of, any return or report to any governmental authority in any manner that
such person or such party reasonably believes or reasonably is advised is not in
accordance with law.
9.11. Applicable Law. This Agreement shall be governed and controlled as to
validity, enforcement, interpretation, construction, effect and in all other
respects by the internal laws of the State of New York applicable to contracts
made in that State.
9.12. Waiver of Trial by Jury. Each of the parties hereto waives the right
to a jury trial in connection with any suit, action or proceeding seeking
enforcement of such party's rights under this Agreement.
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9.13. Consent to Jurisdiction. This Agreement has been executed and
delivered in and shall be deemed to have been made in New York, New York. Each
of the Principal Stockholder, 399 Venture, the Company and RCGI agrees to the
exclusive jurisdiction of any state or Federal court within the City of New
York, Borough of Manhattan with respect to any claim or cause of action arising
under or relating to this Agreement, and waives personal service of any and all
process upon it or him, and consents that all services of process be made by
hand, by registered mail or certified mail, return receipt requested, directed
to it or him at its or his address as set forth in Section 9.3, and service so
made shall be deemed to be completed when received. Each of the Principal
Stockholder, 399 Venture, the Company and RCGI waives any objection based on
forum non conveniens and waives any objection to venue of any action instituted
hereunder. Nothing in this paragraph shall affect the right of each of the
Principal Stockholder, 399 Venture, the Company or RCGI to serve legal process
in any other manner permitted by law.
9.14. Amendments. This Agreement shall not be modified or amended except
pursuant to an instrument in writing executed and delivered on behalf of each of
the parties hereto.
9.15. Construction. The titles and headings contained in this Agreement are
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement. The term "including" means "including, without
limitation".
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IN WITNESS WHEREOF, the parties have executed this Exchange Agreement on
the date first above written.
XXXXXXX-XXXXX GROUP, INC.
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
399 VENTURE PARTNERS, INC.
By: /s/ Xxxxxx X. XxXxxxxxxx
------------------------------------
Name: Xxxxxx X. XxXxxxxxxx
Title:
XXXXXXX-XXXXX, INC.
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
/s/ Xxxxxxx X. Xxxxxxx, Xx.
-----------------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
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Annex A
Redemptions - Shares and Amounts
Annex B
Exchange - Shares and Amounts
