EXHIBIT 10.2
PURCHASE AGREEMENT
by and among
ACORN PRODUCTS, INC.,
UNIONTOOLS, INC.,
and
TCW SPECIAL CREDITS FUND III
TCW SPECIAL CREDITS FUND IIIB
TCW SPECIAL CREDITS TRUST IIIB
THE COMMON FUND FOR BOND INVESTMENTS, INC.
DELAWARE STATE EMPLOYEES' RETIREMENT FUND
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST (TCW)
TCW SPECIAL CREDITS TRUST
TCW SPECIAL CREDITS TRUST IV
TCW SPECIAL CREDITS TRUST IV-A
TCW SPECIAL CREDITS FUND IV
TCW SPECIAL CREDITS PLUS FUND
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
DATED AS OF JUNE 26, 2002
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which
it is attached but is inserted for convenience only.
Page
No.
----
ARTICLE I SALE OF NOTES AND CLOSING...............................................................................1
1.01 Purchase and Sale...............................................................................1
1.02 Closing.........................................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY..............................................................2
2.01 Organization of the Company.....................................................................2
2.02 Authority.......................................................................................2
2.03 Good Standing; Qualification....................................................................3
2.04 Capital Stock...................................................................................3
2.05 Subsidiaries....................................................................................4
2.06 No Conflicts....................................................................................4
2.07 Financial Statements; No Material Adverse Change................................................4
2.08 Ownership of Properties.........................................................................5
2.09 Rights of Registration and Voting Rights........................................................5
2.10 Private Offering................................................................................5
2.11 No Brokers......................................................................................6
2.12 Litigation......................................................................................6
2.13 Full Disclosure.................................................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASERS..........................................................6
3.01 Organization....................................................................................7
3.02 Authority.......................................................................................7
3.03 No Conflicts....................................................................................7
3.04 Purchase for Investment.........................................................................7
3.05 Ownership of Old Note...........................................................................8
3.06 No Broker.......................................................................................8
ARTICLE IV POST-CLOSING COVENANTS OF COMPANY......................................................................8
4.01 Regulatory and Other Approvals..................................................................8
4.02 [Intentionally Omitted].........................................................................8
4.03 Use of Proceeds; Payment of Fees and Expenses...................................................9
4.04 [Intentionally Omitted].........................................................................9
4.05 [Intentionally Omitted].........................................................................9
4.06 Conduct of Business.............................................................................9
4.07 Certain Restrictions...........................................................................10
4.08 Proxy Statement................................................................................11
4.09 Stockholder Meeting............................................................................12
4.10 Rights Offering................................................................................12
i
4.11 Use of Rights Offering Proceeds................................................................13
4.12 [Intentionally Omitted]........................................................................13
4.13 Notice and Cure................................................................................13
4.14 [Intentionally Omitted]........................................................................13
4.15 Consents of Optionholders......................................................................13
4.16 Registration Rights Agreements.................................................................13
ARTICLE V POST-CLOSING COVENANTS OF PURCHASERS...................................................................14
5.01 Regulatory and Other Approvals.................................................................14
5.02 [Intentionally Omitted]........................................................................14
5.03 Notice and Cure................................................................................14
5.04 Fulfillment of Conditions......................................................................14
5.05 Stockholder Votes..............................................................................14
ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASERS...............................................................15
6.01 Representations and Warranties.................................................................15
6.02 Performance....................................................................................15
6.03 Officers' Certificates.........................................................................15
6.04 Orders and Laws................................................................................15
6.05 Regulatory Consents and Approvals..............................................................16
6.06 New Credit and Loan Facilities.................................................................16
6.07 No Material Adverse Change.....................................................................16
6.08 [Intentionally Omitted]........................................................................16
6.09 Certificate of Designation.....................................................................16
6.10 Opinion of Counsel.............................................................................16
6.11 No Loss of Key Employees.......................................................................16
6.12 Releases.......................................................................................17
6.13 Proceedings....................................................................................17
ARTICLE VII CONDITIONS TO OBLIGATIONS OF COMPANY.................................................................17
7.01 Representations and Warranties.................................................................17
7.02 Performance....................................................................................17
7.03 Officers' Certificates.........................................................................17
7.04 Orders and Laws................................................................................17
7.05 Regulatory Consents and Approvals..............................................................17
7.06 Proceedings....................................................................................18
ARTICLE VIII SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS...................................18
8.01 Survival of Representations, Warranties, Covenants and Agreements..............................18
ARTICLE IX INDEMNIFICATION.......................................................................................18
9.01 Indemnification................................................................................18
9.02 Method of Asserting Claims.....................................................................19
ARTICLE X [INTENTIONALLY OMITTED]................................................................................22
10.01 [Intentionally Omitted]........................................................................22
ii
ARTICLE XI DEFINITIONS...........................................................................................22
11.01 Definitions....................................................................................22
ARTICLE XII MISCELLANEOUS........................................................................................29
12.01 Notices........................................................................................29
12.02 Entire Agreement...............................................................................30
12.03 Expenses.......................................................................................30
12.04 Public Announcements...........................................................................30
12.05 Confidentiality................................................................................31
12.06 Waiver.........................................................................................31
12.07 Amendment......................................................................................31
12.08 No Third Party Beneficiary.....................................................................32
12.09 No Assignment; Binding Effect..................................................................32
12.10 Headings.......................................................................................32
12.11 [Intentionally Omitted]........................................................................32
12.12 Invalid Provisions.............................................................................32
12.13 Governing Law..................................................................................32
12.14 Counterparts...................................................................................32
12.15 Obligations of Purchasers......................................................................32
EXHIBITS
EXHIBIT A 12% Convertible Note
EXHIBIT B Certificate of Designation
EXHIBIT C Amount of New Notes to be Purchased by each Purchaser
EXHIBIT D Long Term Incentive Plan
EXHIBIT E Form of Restricted Stock Agreement
EXHIBIT F Form of Officer's Certificate of the Company
EXHIBIT G Form of Secretary's Certificate of the Company
EXHIBIT H Terms of New Credit or Loan Facilities
EXHIBIT I Opinion of Porter, Wright, Xxxxxx & Xxxxxx LLP
EXHIBIT J Form of Officer's Certificate of Purchasers
iii
This PURCHASE AGREEMENT dated as of June 26, 2002 is made and
entered into by and among ACORN PRODUCTS, INC., a Delaware corporation (the
"Company"), UNIONTOOLS, INC., a Delaware corporation ("UnionTools"), and TCW
SPECIAL CREDITS FUND III, a California limited partnership, TCW SPECIAL CREDITS
FUND IIIB, a California limited partnership, TCW SPECIAL CREDITS TRUST IIIB, a
California collective investment trust, THE COMMON FUND FOR BOND INVESTMENTS,
INC., a New York corporation, DELAWARE STATE EMPLOYEES' RETIREMENT FUND,
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST (TCW), TCW SPECIAL CREDITS TRUST, a
California collective investment trust, TCW SPECIAL CREDITS TRUST IV, a
California collective investment trust, TCW SPECIAL CREDITS TRUST IV-A, a
California collective investment trust, TCW SPECIAL CREDITS FUND IV, a
California limited partnership, TCW SPECIAL CREDITS PLUS FUND, a California
limited partnership, and OCM PRINCIPAL OPPORTUNITIES FUND, L.P., a Delaware
limited partnership (each a "Purchaser" and, collectively, "Purchasers").
Capitalized terms not otherwise defined herein have the meanings set forth in
Section 11.01.
WHEREAS, the Company has authorized the sale and issuance of
its 12% Convertible Notes (the "New Notes") in the aggregate principal amount of
$10,000,000 that will convert upon certain terms and conditions into shares of
the Company's Common Stock as attached hereto as Exhibit A (the "12% Convertible
Note") and the issuance of a sufficient number of shares of its Series A
Convertible Preferred Stock, with such terms, conditions, rights and preferences
as are more fully described in the certificate of designation attached hereto as
Exhibit B (the "Certificate of Designation") to exchange such shares for
participation interests in the outstanding 12% Exchangeable Note (the "Old
Note") of UnionTools in accordance with the terms of this Agreement (the "Series
A Preferred Stock");
WHEREAS, each Purchaser desires to purchase the principal
amount of New Notes from the Company set forth opposite such Purchaser's name on
Exhibit C attached hereto and the Company desires to issue and sell such
principal amount of New Notes to Purchasers on the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, each Purchaser desires to exchange all of its
outstanding participation interest in the Old Note for shares of Series A
Preferred Stock issued by the Company at an exchange ratio equal to one share of
Series A Preferred Stock for each $10,000 of participation interest held by such
Purchaser in the outstanding principal amount of the Old Note and accrued
interest thereon (the "Exchange Ratio");
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF NOTES AND CLOSING
1.01 Purchase and Sale. (a) The Company agrees to issue
and sell to Purchasers, and each Purchaser severally and not jointly agrees to
purchase from the Company,
1
the principal amount of New Notes set forth opposite such Purchaser's name on
Exhibit C attached hereto at the Closing at a purchase price equal to 100% of
the principal amount thereof (the "Purchase Price") and on the terms and subject
to the conditions set forth in this Agreement.
(b) Exchange of Old Notes for Series A Preferred Stock.
At the Closing, each Purchaser shall exchange all of its outstanding
participation interests in the Old Notes for the number of shares of Series A
Preferred Stock determined by multiplying the dollar amount of the participation
interest exchanged by such Purchaser by the Exchange Ratio (each a "Purchaser
Exchange Amount"). The Company shall issue and deliver to each Purchaser stock
certificates registered in the name of such Purchaser (or its nominee)
representing a number of shares of Series A Preferred Stock equal to such
Purchaser's Exchange Amount.
1.02 Closing. The Closing will take place at the offices
of Milbank, Tweed, Xxxxxx & XxXxxx LLP, 000 X. Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, or at such other place as Purchasers and the Company
mutually agree, at 10:00 A.M. local time, on the Closing Date. At the Closing,
each Purchaser severally and not jointly will pay its respective Purchase Price
by wire transfer of immediately available funds to such account as the Company
may reasonably direct by written notice delivered to Purchasers by the Company
at least two (2) Business Days before the Closing Date. Simultaneously, the
Company will issue and sell to each Purchaser the principal amount of New Notes
set forth opposite such Purchaser's name on Exhibit C attached hereto by
delivering to Purchasers such New Notes. In addition, at the Closing, Purchasers
shall present the participation interest in the Old Note held by such Purchaser
to the Company and, simultaneously, the Company will issue and sell to such
Purchaser a number of shares of Series A Preferred Stock equal to such
Purchaser's Exchange Amount by delivering to Purchasers certificates
representing such number of shares of Series A Preferred Stock, in form and
substance satisfactory to Purchasers. At the Closing, there shall also be
delivered to the Company and Purchasers the opinions, certificates and other
documents and instruments to be delivered under Articles VI and VII.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants to Purchasers as
follows:
2.01 Organization of the Company. Each of the Company and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization with all the
requisite corporate power and authority to own and operate its properties and
assets and to conduct its business as and to the extent now conducted, except
where the failure to do so would have a Material Adverse Effect.
2.02 Authority. (a) Subject to the receipt of stockholder
approvals described in Section 4.09 hereof, the Company has all necessary
corporate power and authority to execute and deliver this Agreement and each of
the other Documents to which it is a party, and to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby (the "Transactions"). The authorization, sale, issuance and delivery
of the Securities, and the execution, delivery and performance of this Agreement
and the other Documents to which it is a party have been approved and
recommended to the Board of
2
Directors for authorization by the Special Committee of the Board of Directors
of the Company, consisting solely of disinterested members of the Board of
Directors, and authorized by the Board of Directors, and, except for the
requisite approval of stockholders as set forth in Section 4.09 below, no other
corporate or stockholder proceedings or approvals are required on the part of
the Company or its stockholders to authorize this Agreement or the other
Documents to which it is a party or to consummate the Transactions. This
Agreement and the other Documents have been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery thereof by the Purchasers, constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Transactions have been approved by the
Board of Directors of the Company.
(b) The Series A Preferred Stock has been duly authorized
and, when issued in accordance with this Agreement, will be validly issued,
fully paid and nonassessable shares of Series A Preferred Stock of the Company
with no personal liability attaching to the ownership thereof and free of
restrictions on transfer other than under applicable state and federal
securities laws. The issuance, sale and delivery of the Series A Preferred Stock
are not subject to any preemptive right of stockholders of the Company or to any
right of first refusal or other right in favor of any person.
2.03 Good Standing; Qualification. Each of the Company and
its Subsidiaries has been duly qualified, licensed or admitted to do business
and is in good standing under the laws of each jurisdiction in which the nature
of its business or location of its properties requires such qualification,
except where the failure to do so would have a Material Adverse Effect.
2.04 Capital Stock. The authorized capital stock of the
Company consists of (i) Twenty Million (20,000,000) shares of Common Stock, of
which [6,062,359] shares are issued and outstanding and (ii) One Thousand
(1,000) shares of Preferred Stock with respect to which no certificate of
designations has been filed and of which no shares are issued and outstanding.
All of the issued and outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof. Except for this Agreement and as disclosed
in Section 2.04 of the Disclosure Schedule, there are no outstanding Options
with respect to the Company. There are no issued and outstanding shares of the
capital stock of the Company which have dividend or redemption rights, co-sale
rights, liquidation preferences, conversion rights, voting rights or otherwise
which are superior to the Series A Preferred Stock. The delivery of a note or
notes or a certificate or certificates at the Closing representing the New Notes
and the Series A Preferred Stock, respectively, in the manner provided in
Section 1.02 will vest good and valid title to the New Notes and the Series A
Preferred Stock in each Purchaser, free and clear of all Liens.
2.05 Subsidiaries. Except as disclosed in Section 2.05 of
the Disclosure Schedule, the Company has no Subsidiaries and owns no Equity
Interest in any Person. Except as disclosed in Section 2.05 of the Disclosure
Schedule, all of the issued and outstanding capital stock of each of such
Subsidiaries listed on Section 2.05 of the Disclosure Schedule is owned
3
beneficially and of record by the Company and there are no options, agreements,
instruments or securities relating to any issued or unissued securities of any
such Subsidiary or obligating the Company or any such Subsidiary to issue,
transfer, grant or sell any Equity Interests in any such Subsidiary.
2.06 No Conflicts. The execution and delivery by the
Company of this Agreement do not, the performance by the Company of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents) of
the Company or any Subsidiary;
(b) conflict with or result in a violation or breach of
any material term or provision of any Law or Order applicable to the Company or
any Subsidiary or any of their respective Assets and Properties; or
(c) except as disclosed in Section 2.06 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require the Company or any Subsidiary to obtain any consent, approval or
action of, make any filing with or give any notice to any Person as a result or
under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (vi) result
in the creation or imposition of any Lien upon the Company or any Subsidiary
under, any Contract or License to which the Company or any Subsidiary is a party
or by which any of their respective Assets and Properties is bound.
2.07 Financial Statements; No Material Adverse Change. (a)
Prior to the execution of this Agreement, the Company has delivered to
Purchasers true and complete copies of the following financial statements:
(i) the audited consolidated financial statements of the
Company as of December 31, 2001 (the "Financial Statements") including the
related audited consolidated balance sheet, statements of operations,
stockholders' equity and cash flows for each of the fiscal years then ended,
together with a true and correct copy of the report on such audited information
by Ernst & Young LLP, and all letters from such accountants with respect to the
results of such audits; and
(ii) the unaudited consolidated balance sheets of the
Company as of March 31, 2002 and the related unaudited statements of operations,
stockholders' equity and cash flows for the portion of the fiscal year then
ended.
Except as set forth in the notes thereto and as disclosed in Section 2.07 of the
Disclosure Schedule, all such financial statements (i) were prepared in
accordance with GAAP, (ii) fairly present the consolidated financial condition
and results of operations of the Company and the Subsidiaries as of the
respective dates thereof and for the respective periods covered thereby, and
4
(iii) were compiled from the books and records of the Company and the
Subsidiaries regularly maintained by management and used to prepare the
financial statements of the Company and the Subsidiaries in accordance with the
principles stated therein. The Company and the Subsidiaries have maintained
their respective books and records in a manner sufficient to permit the
preparation of financial statements in accordance with GAAP.
(b) Except for liabilities disclosed in Section 2.07 of
the Disclosure Schedule and other liabilities not equal to or greater than
$100,000, in aggregate, none of the Company or its Subsidiaries has incurred any
liabilities other than liabilities contemplated by the Transactions. Except for
the execution and delivery of this Agreement and the transactions to take place
pursuant hereto on or prior to the Closing Date, since December 31, 2001 there
has not been any Material Adverse Effect, or any event or development which,
individually or together with other such events, could not be reasonably
expected to and would not have a Material Adverse Effect.
2.08 Ownership of Properties. Except as set forth on
Section 2.08 of the Disclosure Schedule, each of the Company and its
Subsidiaries possesses good, valid and marketable title to, and owns or has
valid leasehold interests or rights to use of, all of the assets and property
reflected in the Financial Statements , assets and properties acquired
thereafter and all of the property and assets material to its business, in each
case free and clear of all Liens other than Permitted Liens. With respect to the
property and assets it leases, each of the Company and its Subsidiaries is in
compliance with such leases except for such failures to comply as could not be
reasonably expected to and would not have a Material Adverse Effect, and, to its
Knowledge, holds a valid leasehold interest free of any Liens other than
Permitted Liens. Each of the Company and its Subsidiaries owns or has valid
leasehold interests or valid rights under contract to use all personal and real
property reasonably necessary for the conduct of its business.
2.09 Rights of Registration and Voting Rights. Except for
the Registration Rights Agreement, dated June 18, 1997, between the Company and
various funds and accounts managed by TCW Special Credits, and the Registration
Rights Agreement, dated as of June 18, 1997, between the Company and POF, the
Company has not granted or agreed to grant any registration rights, including
piggyback rights, to any person or entity.
2.10 Private Offering. Assuming the correctness of the
representations and warranties set forth in Section 3.04 hereof, the offer and
sale of the Securities to the Purchasers hereunder is exempt from the
registration and prospectus delivery requirements of the Securities Act. In the
case of each offer or sale of the Securities, no form of general solicitation or
general advertising was used by the Company and its representatives, including,
but not limited to, advertisements, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
2.11 No Brokers. Except for Xxxxxxxx Xxxxx Xxxxxx & Xxxxx
Financial Advisors, Inc., the Company has not engaged any broker, finder,
commission agent or other such intermediary in connection with the issuance and
sale of the Securities and the transactions contemplated by this Agreement and
the other Documents, and the Company is under no obligation to pay any broker's
or finder's fee or commission or similar payment in connection with such
transactions.
5
2.12 Litigation. (a) There is no Proceeding, commenced, or
to the Knowledge of the Company, threatened against or affecting either the
Company or any Subsidiary or any of their respective properties or assets that
could be reasonably expected to have a Material Adverse Effect, and there is no
Proceeding seeking to restrain, enjoin, prevent the consummation of or otherwise
challenge this Agreement or any of the other Documents or the Transactions.
(b) Neither the Company nor any Subsidiary is subject to
(i) any Claim, (ii) any Order or (iii) any rule or regulation of any
Governmental Authority that has had a Material Adverse Effect or that could be
reasonably expected to, individually or in the aggregate, have a Material
Adverse Effect.
2.13 Full Disclosure. All facts relating to the Company,
the Subsidiaries and their respective businesses that could reasonably be
expected to or would have a Material Adverse Effect have been disclosed to the
Purchasers in or in connection with this Agreement. None of this Agreement, or
any Document, or any document provided to the Purchaser contains any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. The Company has filed all
required filings with the Securities and Exchange Commission (the "Commission")
and all such filings complied at the time of filing in all material respects
with all applicable requirements of the Securities Act and/or the Exchange Act.
All statements and periodic reports filed by the Company with the Commission, as
of the dates of such documents, did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading in light of
the circumstances under which such statements were made. The Company's Financial
Statements included in such filings complied as of their dates in all material
respects with the applicable accounting requirements and published rules and
regulations of the Commission.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser severally and not jointly hereby represents and
warrants to the Company as follows:
3.01 Organization. Such Purchaser is a corporation duly
organized or a limited partnership or trust duly formed, validly existing and in
good standing under the Laws of the state of its incorporation or formation.
Such Purchaser has full corporate, limited partnership or trust power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
3.02 Authority. The execution and delivery by each of the
Purchasers of this Agreement, and the performance by such Purchaser of its
obligations hereunder, have been duly and validly authorized by the board of
directors or general partner, as applicable, of such Purchaser, no other
corporate, limited partnership or trust action on the part of such Purchaser or
its equityholders or beneficiaries being necessary. This Agreement has been duly
and validly executed and delivered by such Purchaser and constitutes a legal,
valid and binding obligation of such Purchaser enforceable against such
Purchaser in accordance with its terms.
6
3.03 No Conflicts. The execution and delivery by such
Purchaser of this Agreement do not, the performance by such Purchaser of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the certificate of formation (or
other comparable corporate charter document) of such Purchaser;
(b) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to such Purchaser or any of
its respective Assets and Properties; or
(c) except as disclosed in Section 3.03 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require such Purchaser to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the terms
of, or (iv) result in the creation or imposition of any Lien upon such Purchaser
or any of its Assets or Properties under, any Contract or License to which such
Purchaser is a party or by which any of its Assets and Properties are bound.
3.04 Purchase for Investment. Such Purchaser is an
accredited investor as defined in Rule 502(a) of Regulation D promulgated under
the Securities Act. The Securities will be acquired by such Purchaser (or, if
applicable, its assignee pursuant to Section 12.09(b)(i)) for its own account
for the purpose of investment, it being understood that the right to dispose of
such Securities shall be entirely within the discretion of such Purchaser (or
such assignee, as the case may be). Such Purchaser (or such assignee, as the
case may be) will refrain from transferring or otherwise disposing of any of the
Securities, or any interest therein, in such manner as to cause the Company to
be in violation of the registration requirements of the Securities Act of 1933,
or applicable state securities or blue sky laws.
3.05 Ownership of Old Note. Such Purchaser is the owner of
a participation interest in the Old Note to be exchanged for Series A Preferred
Stock in accordance with Section 1.01(b) and has full power and authority to
exchange, assign and transfer the participation interest tendered for exchange
hereby, and when such participation interest is accepted for exchange by the
Company, the Company will acquire good and marketable title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims. Such Purchaser will, upon request, execute and deliver any
additional documents deemed by the Company to be necessary or desirable to
complete the exchange, assignment and transfer of the participation interest
tendered for exchange hereby. Such Purchaser has not heretofore assigned,
transferred, pledged, or hypothecated, or purported to assign, transfer, pledge,
or hypothecate, to any entity or individual, any of its interest in the Old
Note.
3.06 No Broker. All negotiations relevant to this
Agreement and all the transactions contemplated hereby have been carried out by
such Purchaser directly with Company without the intervention of any Person on
behalf of such Purchaser in such manner as to give rise to any valid claim by
any Person against Company for a finder's fee, brokerage commission or similar
payment.
7
ARTICLE IV
POST-CLOSING COVENANTS OF COMPANY
The Company covenants and agrees with Purchasers that, at all
times from and after the date hereof until the expiration of the Rights Offering
(defined below), the Company will comply with all covenants and provisions of
this Article IV, except to the extent Purchasers may otherwise consent in
writing.
4.01 Regulatory and Other Approvals. The Company will, and
will cause the Subsidiaries to, as promptly as practicable (a) take all
commercially reasonable steps necessary or desirable to obtain all consents,
approvals or actions of, make all filings with and give all notices to
Governmental or Regulatory Authorities or any other Person required of the
Company or any Subsidiary to consummate the transactions contemplated hereby,
including stockholder approval of the items set forth in Sections 4.08 and 4.09
hereof, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as Purchaser or such
Governmental or Regulatory Authorities or other Persons may reasonably request
in connection therewith and (c) cooperate with Purchasers in connection with the
performance of their obligations under Section 5.01. The Company will provide
prompt notification to Purchasers when any such consent, approval, action,
filing or notice referred to in clause (a) above is obtained, taken, made or
given, as applicable, and will advise Purchasers of any communications (and,
unless precluded by Law, provide copies of any such communications that are in
writing) with any Governmental or Regulatory Authority or other Person regarding
any of the transactions contemplated by this Agreement.
4.02 [Intentionally Omitted].
4.03 Use of Proceeds; Payment of Fees and Expenses.
Immediately following the consummation of the transactions contemplated in this
Agreement, (a) the Company shall advance the proceeds from the sale of the New
Notes to UnionTools to be applied as partial repayment of UnionTools'
obligations which are then due and payable under that certain Amended and
Restated Credit Agreement dated as of May 20, 1997 by and between UnionTools, as
borrower, and Xxxxxx Financial, Inc., as lender ("Xxxxxx"), as such agreement
shall have been amended from time to time and (b) the Company shall or shall
cause UnionTools to (i) pay to Xxxxxxxx Xxxxx Xxxxxx & Xxxxx ("HLHZ") $1,800,000
in full satisfaction of any payment obligations by the Company to HLHZ for
financial advisory work performed and fairness opinions prepared on behalf of
the Company's stockholders (other than Purchasers), of which $600,000 is payable
in cash from the proceeds of the New Notes and $1,200,000 is payable in the form
of a note (the "Supplemental Note") as attached hereto as Schedule 4.03, (ii)
reimburse to HLHZ all amounts for documented reasonable expenses that remain
unpaid as of the Closing Date, and (iii) pay the expenses in connection with the
transactions contemplated by this Agreement of (1) counsel for the lender party
to the new secured credit facility to be entered into by UnionTools in
connection with the transactions contemplated by this Agreement, (2) counsel for
the Special Committee of the Board of Directors and (3) counsel for the
Purchasers.
4.04 [Intentionally Omitted].
4.05 [Intentionally Omitted].
8
4.06 Conduct of Business. The Company will cause the
Subsidiaries to conduct business only in the ordinary course consistent with
past practice. Without limiting the generality of the foregoing, the Company
will:
(a) and will cause the Subsidiaries to, use commercially
reasonable efforts to (i) preserve intact the present business organization and
reputation of the Company and the Subsidiaries, (ii) keep available (subject to
dismissals and retirements in the ordinary course of business consistent with
past practice) the services of the present officers, employees and consultants
of the Company and the Subsidiaries, (iii) maintain the Assets and Properties of
the Company and the Subsidiaries in good working order and condition, ordinary
wear and tear excepted, (iv) maintain the good will of customers, suppliers,
lenders and other Persons to whom the Company or any Subsidiary sells goods or
provides services or with whom the Company or any Subsidiary otherwise has
significant business relationships and (v) continue all current sales, marketing
and promotional activities relating to the business and operations of the
Company and the Subsidiaries;
(b) except to the extent required by applicable Law, (i)
cause the Books and Records to be maintained in the usual, regular and ordinary
manner, (ii) not permit any material change in (A) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or Tax practice or
policy of the Company or any Subsidiary, or (B) any method of calculating any
bad debt, contingency or other reserve of the Company or any Subsidiary for
accounting, financial reporting or Tax purposes and (iii) not permit any change
in the fiscal year of the Company or any Subsidiary; and
(c) cause the Company and the Subsidiaries to comply, in
all material respects, with all Laws and Orders applicable to the business and
operations of the Company and the Subsidiaries, and promptly following receipt
thereof to give Purchasers copies of any notice received from any Governmental
or Regulatory Authority or other Person alleging any violation of any such Law
or Order.
4.07 Certain Restrictions. Without the prior written
consent of the representatives of the Purchasers who are members of the
Company's Board of Directors, Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxxx (or any of
their successors or replacements), to engage in any of the following, the
Company will, and will cause the Subsidiaries to, refrain from:
(a) amending their certificates or articles of
incorporation or by-laws (or other comparable corporate charter documents)
except as necessary to consummate the transactions contemplated hereby, the
Rights Offering (defined below) and the Reverse Split (defined below) or taking
any action with respect to any such amendment or any recapitalization,
reorganization, liquidation or dissolution of any such corporation;
(b) except as contemplated hereby or as necessary to
implement the Long Term Incentive Plan, the issuance of shares of Restricted
Stock pursuant to the 1997 Stock Incentive Plan and the 1997 Non-Employee
Director Stock Option Plan, authorizing, issuing, selling or otherwise disposing
of any shares of capital stock of or any Option with respect to the Company or
any Subsidiary, or modifying or amending any right of any holder of outstanding
shares of capital stock of or Option with respect to the Company or any
Subsidiary;
9
(c) declaring, setting aside or paying any dividend or
other distribution in respect of the capital stock of the Company or any
Subsidiary not wholly owned by the Company, or directly or indirectly redeeming,
purchasing or otherwise acquiring any capital stock of or any Option with
respect to the Company or any Subsidiary not wholly owned by the Company;
(d) acquiring or disposing of, or incurring any Lien
(other than a Permitted Lien) on, any Assets and Properties, other than in the
ordinary course of business consistent with past practice;
(e) (i) entering into, amending, modifying, terminating
(partially or completely), granting any waiver under or giving any consent with
respect to (A) any material Contract or (B) any material License or (ii)
granting any irrevocable powers of attorney;
(f) violating, breaching or defaulting under in any
material respect, or taking or failing to take any action that (with or without
notice or lapse of time or both) would constitute a material violation or breach
of, or default under, any term or provision of any License held or used by the
Company or any Subsidiary or any Contract to which the Company or any Subsidiary
is a party or by which any of their respective Assets and Properties is bound;
(g) (i) except as contemplated hereby, incurring
Indebtedness (other than borrowings in the ordinary course under the Revolving
Loan Agreement with Xxxxxx as in effect on the date hereof) in an aggregate
principal amount exceeding $100,000, or (ii) voluntarily purchasing, canceling,
prepaying or otherwise providing for a complete or partial discharge in advance
of a scheduled payment date with respect to, or waiving any right of the Company
or any Subsidiary under, any Indebtedness of or owing to the Company or any
Subsidiary;
(h) engaging with any Person in any merger or other
business combination;
(i) making capital expenditures or commitments for
additions to property, plant or equipment constituting capital assets in an
aggregate amount exceeding $100,000;
(j) making any change in the lines of business in which
they participate or are engaged;
(k) writing off or writing down any of their Assets and
Properties outside the ordinary course of business consistent with past practice
or generally accepted accounting principles ("GAAP"); or
(l) entering into any Contract to do or engage in any of
the foregoing.
4.08 Proxy Statement. Promptly upon the execution of this
Agreement, the Company will commence preparation of a proxy statement (the
"Proxy Statement") pursuant to which it will solicit the approval of its
stockholders of (i) an amendment to the Company's Certificate of Incorporation
(the "Amended and Restated Certificate of Incorporation") authorizing an
increase in the number of authorized shares of Common Stock from 20,000,000 to
200,000,000 and an increase in the authorized number of shares of preferred
stock from 1,000 to 1,000,000, and a 1-for-10 reverse split of the common stock
then outstanding (the "Reverse
10
Split"), (ii) a new Long Term Incentive Plan substantially in the form attached
hereto as Exhibit D (the "Long Term Incentive Plan") which shall include the
employees set forth in Section 4.08 of the Disclosure Schedule, and (iii) an
increase in the number of shares of common stock issuable pursuant to the 1997
Stock Incentive Plan from 1,000,000 to 2,500,000 and an increase in the number
of shares of common stock issuable pursuant to the 1997 Non-Employee Director
Stock Option Plan from 500,000 to 3,000,000 in order to allow for the issuance
of Restricted Stock to Key Employees of up to 1,330,000 shares (computed on a
basis before giving effect to the Reverse Split) pursuant to the terms and
conditions contained in the form of Restricted Stock Agreement substantially in
the form attached hereto as Exhibit E (the "Restricted Stock Agreement") which
shall include the allocation of shares by employee and director as set forth in
Section 4.08 of the Disclosure Schedule, and (iv) the issuance of shares of the
Company's Common Stock upon the conversion of the New Notes, the Series A
Preferred Stock, and the Supplemental Note, and will diligently and faithfully
pursue the filing with and resolution of comments from the Commission with
regard thereto. The Proxy Statement, insofar as it shall contain information
pertaining to the Company and any Subsidiaries, will comply in all material
requirements of the Exchange Act and the rules and regulations adopted
thereunder, and will contain no untrue statement of any material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will advise Purchasers in
writing if prior to the Closing it shall obtain Knowledge of any facts that lead
it to believe that such Proxy Statement failed to comply with any applicable
law, rule or regulation.
4.09 Stockholder Meeting. The Company will call a meeting
of its stockholders to be held no later than 30 days following the date its
Proxy Statement is cleared by the Commission, or such other date as shall be
mutually agreed upon in writing by the parties hereto, for the purpose of
submitting to its stockholders for authorization and approval of (i) the Amended
and Restated Certificate of Incorporation authorizing an increase in the number
of authorized shares of Common Stock from 20,000,000 to 200,000,000 and an
increase in the authorized number of shares of preferred stock from 1,000 to
1,000,000, (ii) the Long Term Incentive Plan, (iii) an increase in the number of
shares of common stock issuable pursuant to the Company's 1997 Stock Incentive
Plan from 1,000,000 shares to 2,500,000 and an increase in the number of shares
of common stock issuable pursuant to the 1997 Non-Employee Director Stock Option
Plan from 500,000 to 3,000,000 in order to allow for the issuance of Restricted
Stock to Key Employees and directors, (iv) the Rights Offering, (v) the Reverse
Split and (vi) the issuance of shares of the Company's Common Stock upon the
conversion of the New Notes, the Series A Preferred Stock, and the Supplemental
Note. The Board of Directors shall recommend that the stockholders of the
Company approve the increase in authorized shares of Common Stock from
20,000,000 to 200,000,000 and an increase in the authorized number of shares of
preferred stock from 1,000 to 1,000,000, the Reverse Split, the Long Term
Incentive Plan, the increase in the number of shares of common stock issuable
pursuant to the Company's 1997 Stock Incentive Plan from 1,000,000 shares to
2,500,000 and an increase in the number of shares of common stock issuable
pursuant to the 1997 Non-Employee Director Stock Option Plan from 500,000 to
3,000,000, and the issuance of shares of the Company's Common Stock upon the
conversion of the New Notes, the Series A Preferred Stock, and the Supplemental
Note. Upon approval by the Company's stockholders of all of the foregoing
actions, the Company will make the Rights Offering, as set forth in Section
4.10, and effectuate the Reverse Split, grant participations in the Long Term
Incentive Plan to the participants named therein in accordance
11
the allocations specified therein and subject to the terms thereof and grant the
shares of Restricted Stock pursuant to the 1997 Stock Incentive Plan, the 1997
Nonemployee Director Stock Option Plan, and the Restricted Stock Agreements.
4.10 Rights Offering. No later than 10 business days
following the later of the filing of the Amended and Restated Certificate of
Incorporation, the completion of the Reverse Stock Split and approval by the
Commission, the NASDAQ Stock Exchange and other regulatory authorities of
documents relating the Rights Offering, the Company shall initiate a rights
offering on terms and conditions satisfactory to Purchasers (the "Rights
Offering") whereby each holder of Common Stock (other than Purchasers) shall
receive 1,000 rights per 100 shares of Common Stock held by such holder. Each
right shall be distributed to holders of record as of a date selected by the
Board of Directors and shall be non-transferable. Each right shall entitle the
holder to purchase one share of newly issued Common Stock for $5.00 in cash
(computed on a basis after giving effect to the Reverse Split) during a
specified period of time following the declaration of effectiveness by the
Commission (and other regulatory entity as necessary) of a registration
statement covering the shares to be issued thereby. The terms of such Rights
Offering shall provide that each Purchaser or its designee shall have the right
for 30 days following the completion of the Rights Offering to purchase from the
Company pursuant to registration statement any shares covered thereunder that
are not purchased pursuant to the exercise of the Rights at the same price per
share as specified in respect of the Rights Offering. Such rights shall be
allocated among Purchasers and their designees in such manner as shall be agreed
upon by Purchasers.
4.11 Use of Rights Offering Proceeds. Immediately
following the consummation of the Rights Offering, the Company shall apply the
proceeds from the Rights Offering as follows: first, to pay accrued interest on
the Supplemental Note, second, to repay up to $600,000 principal amount of the
Supplemental Note, third, to pay interest that has accrued on the New Notes, pro
rata among all holders of outstanding New Notes, and fourth, for general
corporate purposes of the Company and/or UnionTools (including capital
expenditures and debt repayment of the Company and UnionTools) and fees and
expenses related to the Rights Offering.
4.12 [Intentionally Omitted].
4.13 Notice and Cure. The Company will notify Purchasers
in writing (where appropriate, through updates to the Disclosure Schedule) of,
and contemporaneously will provide Purchasers with true and complete copies of
any and all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing of the Rights Offering, any event,
transaction or circumstance, as soon as practicable after it becomes Known to
the Company, occurring after the date of this Agreement that causes or will
cause any covenant or agreement of the Company under this Agreement to be
breached or that renders or will render untrue any representation or warranty of
the Company contained in this Agreement as if the same were made on or as of the
date of such event, transaction or circumstance. No notice given pursuant to
this Section shall have any effect on the representations, warranties, covenants
or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein or shall in any way limit
Purchasers' right to seek indemnity under Article IX.
12
4.14 [Intentionally Omitted].
4.15 Consents of Optionholders. The Company will obtain
the written consent of each participant named in the Restricted Stock Plan to
deliver to the Company for cancellation all options to purchase common stock of
the Company held by such participant (as well as any contractual right to be
granted options under existing agreements or commitments) on or before the
effective date of the issuance of restricted stock pursuant to the Company's
1997 Stock Incentive Plan and the 1997 Nonemployee Director Stock Option Plan.
4.16 Registration Rights Agreements. The Company will
enter into registration rights agreements with respect to shares of Common Stock
held by the Purchasers and their affiliates on terms and conditions satisfactory
to the Purchasers.
ARTICLE V
POST-CLOSING COVENANTS OF PURCHASERS
Each Purchaser severally and not jointly covenants and agrees
with the Company that, at all times from and after the date hereof until the
expiration of the Rights Offering, such Purchaser will comply with all covenants
and provisions of this Article V, except to the extent the Company may otherwise
consent in writing.
5.01 Regulatory and Other Approvals. Such Purchaser will
as promptly as practicable (a) take all commercially reasonable steps necessary
or desirable to obtain all consents, approvals or actions of, make all filings
with and give all notices to Governmental or Regulatory Authorities or any other
Person required of such Purchaser to consummate the transactions contemplated
hereby, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as the Company or such
Governmental or Regulatory Authorities or other Persons may reasonably request
in connection therewith and (c) cooperate with the Company and the Subsidiaries
in connection with the performance of their obligations under Section 4.01. Such
Purchaser will provide prompt notification to the Company when any such consent,
approval, action, filing or notice referred to in clause (a) above is obtained,
taken, made or given, as applicable, and will advise the Company of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement.
5.02 [Intentionally Omitted].
5.03 Notice and Cure. Such Purchaser will notify the
Company in writing of, and contemporaneously will provide the Company with true
and complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing, any
event, transaction or circumstance, as soon as practicable after it becomes
known to such Purchaser, occurring after the date of this Agreement that causes
or will cause any covenant or agreement of such Purchaser under this Agreement
to be breached or that renders or will render untrue any representation or
warranty of such Purchaser contained in this Agreement as if the same were made
on or as of the date of such event, transaction or
13
circumstance. No notice given pursuant to this Section shall have any effect on
the representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition contained
herein or shall in any way limit the Company's right to seek indemnity under
Article IX.
5.04 Fulfillment of Conditions. Such Purchaser will take
all commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each condition to the obligations of the Company
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
5.05 Stockholder Votes. So long as there has not been (i)
a threatened or actual loss or termination of employment of a Key Employee, (ii)
the occurrence of a Material Adverse Effect or (iii) the occurrence or likely
occurrence of a default or event of default with respect to an loan facility or
loan agreement of the Company or UnionTools, such Purchaser shall vote for all
Stockholder proposals necessary to consummate the Transactions, including the
approval of the increase in the number of authorized shares of Common Stock from
20,000,000 to 200,000,000 and an increase in the authorized number of shares of
preferred stock from 1,000 to 1,000,000, the Reverse Split, Rights Offering, the
Amended and Restated Certificate of Incorporation, the Long Term Incentive Plan
and the increase in the number of shares of common stock issuable pursuant to
the 1997 Stock Incentive Plan from 1,000,000 to 2,500,000 and an increase in the
number of shares of common stock issuable pursuant to the 1997 Non-Employee
Director Stock Option Plan from 500,000 to 3,000,000, and to approve the
issuance of shares of the Company's common stock upon the conversion of the New
Notes, the Series A Preferred Stock, and the Supplemental Note.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASERS
The obligations of Purchasers hereunder to purchase the
Securities are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by Purchasers in their sole discretion):
6.01 Representations and Warranties. Each of the
representations and warranties made by the Company in this Agreement (other than
those made as of a specified date earlier than the Closing Date) shall be true
and correct in all material respects on and as of the Closing Date as though
such representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects on and as of such
earlier date.
6.02 Performance. The Company shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the Company at
or before the Closing.
6.03 Officers' Certificates. The Company shall have
delivered to Purchasers a certificate, dated the Closing Date and executed in
the name and on behalf of the Company by
14
the Chairman of the Board, the President or any Executive or Senior Vice
President of the Company, substantially in the form and to the effect of Exhibit
F hereto, and a certificate, dated the Closing Date and executed by the
Secretary or any Assistant Secretary of the Company, substantially in the form
and to the effect of Exhibit G hereto.
6.04 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or which could reasonably be expected to otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to Purchasers, and there shall not be pending or threatened on the
Closing Date any Action or Proceeding in, before or by any Governmental or
Regulatory Authority which could reasonably be expected to result in the
issuance of any such Order or the enactment, promulgation or deemed
applicability to Purchasers, the Company, any Subsidiary or the transactions
contemplated by this Agreement of any such Law.
6.05 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchasers and the Company to perform
their obligations under this Agreement and to consummate the transactions
contemplated hereby (a) shall have been duly obtained, made or given, (b) shall
be in form and substance reasonably satisfactory to Purchasers, (c) shall not be
subject to the satisfaction of any condition that has not been satisfied or
waived and (d) shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement shall have occurred.
6.06 New Credit and Loan Facilities. UnionTools and/or the
Company shall have entered into a new credit or loan facilities, both in form
and substance reasonably satisfactory to the Company, UnionTools and Purchasers,
on substantially the terms set forth in Exhibit H attached hereto.
6.07 No Material Adverse Change. No material adverse
change in the Business or Condition of the Company shall have occurred following
the date of this Agreement.
6.08 [Intentionally Omitted].
6.09 Certificate of Designation. The Certificate of
Designation setting forth the terms, conditions, rights and preferences of the
Series A Convertible Preferred Stock in form and substance satisfactory to
Purchasers and substantially in the form and to the effect of Exhibit A hereto
shall have been filed with the Secretary of State of the State of Delaware.
6.10 Opinion of Counsel. Purchasers shall have received
the opinion of Porter, Wright, Xxxxxx & Xxxxxx LLP, counsel to the Company,
dated the Closing Date, substantially in the form and to the effect of Exhibit I
hereto.
6.11 No Loss of Key Employees. Each of Xxxx Xxxxx, Xxxx
Xxxxx, Xxxx Xxxxxxxxx and Xxxxx XxXxxxx (each a "Key Employee") shall have
remained employed in the same position of employment with the Company as such
employee holds on the date hereof, and with the same duties and responsibilities
as such employee has on the date hereof, and neither the
15
Company nor Xxxx Xxxxx, Xxxx Xxxxx, Xxxx Xxxxxxxxx or Xxxxx XxXxxxx shall have
given notice of their intent to terminate the employment of any such employee.
6.12 Releases. Purchasers shall have received written
evidence (satisfactory in its reasonable discretion) that the retention and
engagement letter between the Company, UnionTools and HLHZ shall have been
amended in form and substance satisfactory to Purchasers.
6.13 Proceedings. All proceedings to be taken on the part
of the Company in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to Purchasers, and Purchasers shall have received copies of
all such documents and other evidences as Purchasers may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF COMPANY
The obligations of the Company hereunder to sell and issue the
Shares are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
the Company in its sole discretion):
7.01 Representations and Warranties. Each of the
representations and warranties made by Purchasers in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date.
7.02 Performance. Purchasers shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by Purchasers at
or before the Closing.
7.03 Officers' Certificates. Each Purchaser shall have
delivered to the Company a certificate, dated the Closing Date and executed in
the name and on behalf of such Purchaser by the representative of such Purchaser
substantially in the form and to the effect of Exhibit J hereto, and a
certificate, dated the Closing Date.
7.04 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law that became effective after the date of this
Agreement restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.
7.05 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit the Company and Purchasers to perform
their obligations under this Agreement and to consummate the transactions
contemplated hereby (a) shall have been duly obtained, made or given, (b) shall
not be subject to the satisfaction of any condition that has not been satisfied
or waived and (c) shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by
16
any Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement shall have occurred.
7.06 Proceedings. All proceedings to be taken on the part
of Purchasers in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Company, and the Company shall have received copies of all such
documents and other evidences as the Company may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
8.01 Survival of Representations, Warranties, Covenants
and Agreements. Notwithstanding any right of Purchasers (whether or not
exercised) to investigate the affairs of the Company and the Subsidiaries or any
right of any party (whether or not exercised) to investigate the accuracy of the
representations and warranties of the other party contained in this Agreement,
the Company and Purchasers have the right to rely fully upon the
representations, warranties, covenants and agreements of the other contained in
this Agreement. The representations, warranties, covenants and agreements of the
Company and Purchasers contained in this Agreement will survive the Closing (a)
indefinitely with respect to (i) the representations and warranties contained in
Sections 2.01, 2.02, 2.04, 2.05 (but only as it relates to the capital stock of
the Subsidiaries), 2.11, 2.12, 3.02, 3.05 and 3.06 and (ii) the covenants and
agreements contained in Sections 12.03 and 12.05; (b) until the date that is one
year following the Closing Date in the case of all other representations and
warranties and any covenant or agreement to be performed in whole or in part on
or prior to the Closing or (c) with respect to each other covenant or agreement
contained in this Agreement, until sixty (60) days following the last date on
which such covenant or agreement is to be performed; provided that any
representation, warranty, covenant or agreement that would otherwise terminate
in accordance with clause (b) or (c) above will continue to survive if a Claim
Notice or Indemnity Notice (as applicable) shall have been timely given under
Article IX on or prior to such termination date, until the related claim for
indemnification has been satisfied or otherwise resolved as provided in Article
IX.
ARTICLE IX
INDEMNIFICATION
9.01 Indemnification.
(a) Subject to paragraph (c) of this Section and the
other Sections of this Article IX, the Company shall indemnify the Purchaser
Indemnified Parties for the periods of time set forth in Section 8.01 above in
respect of, and hold each of them harmless from and against, any and all Losses
suffered, incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to any breach of
representation or warranty or nonfulfillment of or failure to perform any
covenant or agreement on the part of the Company contained in this Agreement.
17
(b) Subject to the other Sections of this Article IX,
each Purchaser shall severally and not jointly indemnify the Company Indemnified
Parties for the periods of time set forth in Section 8.01 above in respect of,
and hold each of them harmless from and against, any and all Losses suffered,
incurred or sustained by any of them or to which any of them becomes subject,
resulting from, arising out of or relating to any breach of representation or
warranty or nonfulfillment of or failure to perform any covenant or agreement on
the part of such Purchaser contained in this Agreement.
(c) No amounts of indemnity shall be payable in the case
of a claim by a Purchaser Indemnified Party under Section 9.01(a) (A) unless and
until the Purchasers Indemnified Parties have suffered, incurred, sustained or
become subject to Losses referred to in such Section in excess of $250,000 in
the aggregate; in which event the Purchasers Indemnified Parties shall be
entitled to claim indemnity for all amounts in excess of $250,000; provided that
this paragraph (c) shall not apply to a breach of a representation or warranty
contained in Section 2.01, 2.02, 2.04, 2.05 (but only as it relates to the
capital stock of the Subsidiaries), 2.11, 2.12 or to a breach of a covenant
contained in Section 12.03 or 12.05. In no case shall the amounts payable by any
party under this Article IX exceed the Purchase Price in the aggregate.
9.02 Method of Asserting Claims. All claims for
indemnification by any Indemnified Party under Section 9.01 will be asserted and
resolved as follows:
(a) In the event any claim or demand in respect of which
an Indemnified Party might seek indemnity under Section 9.01 is asserted against
or sought to be collected from such Indemnified Party by a Person other than the
Company or any Affiliate of the Company or of a Purchaser (a "Third Party
Claim"), the Indemnified Party shall deliver a Claim Notice with reasonable
promptness to the Indemnifying Party. If the Indemnified Party fails to provide
the Claim Notice with reasonable promptness after the Indemnified Party receives
notice of such Third Party Claim, the Indemnifying Party will not be obligated
to indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been irreparably
prejudiced by such failure of the Indemnified Party. The Indemnifying Party will
notify the Indemnified Party as soon as practicable within the Dispute Period
whether the Indemnifying Party disputes its liability to the Indemnified Party
under Section 9.01 and whether the Indemnifying Party desires, at its sole cost
and expense, to defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to this
Section 9.02(a), then the Indemnifying Party will have the right to defend, with
counsel reasonably satisfactory to the Indemnified Party, at the sole cost and
expense of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party, which consent will not be unreasonably withheld, in the case
of any settlement that provides for any relief other than the payment of
monetary damages as to which the Indemnified Party will be indemnified in full).
The Indemnifying Party will be deemed to have waived its right to dispute its
liability to the Indemnified Party under Section 9.01 with respect to any Third
Party Claim as to which it elects to control the defense.
18
The Indemnifying Party will have full control of such defense and proceedings,
including (except as provided in the immediately preceding sentence) any
settlement thereof; provided, however, that the Indemnified Party may, at the
sole cost and expense of the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to in the first sentence of
this clause (i), file any motion, answer or other pleadings or take any other
action that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further, that if requested by
the Indemnifying Party, the Indemnified Party will, at the sole cost and expense
of the Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may retain separate counsel to represent it in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this clause (i), and the Indemnified Party
will bear its own costs and expenses with respect to such separate counsel,
except as provided in the preceding sentence and except that the Indemnifying
Party will pay the costs and expenses of such separate counsel if (x) in the
Indemnified Party's good faith judgment, it is advisable, based on advice of
counsel, for the Indemnified Party to be represented by separate counsel because
a conflict or potential conflict exists between the Indemnifying Party and the
Indemnified Party which makes representation of both parties inappropriate under
applicable standards of professional conduct or (y) the named parties to such
Third Party Claim include both the Indemnifying Party and the Indemnified Party
and the Indemnified Party determines in good faith, based on advice of counsel,
that defenses are available to it that are unavailable to the Indemnifying
Party. Notwithstanding the foregoing, the Indemnified Party may retain or take
over the control of the defense or settlement of any Third Party Claim the
defense of which the Indemnifying Party has elected to control if the
Indemnified Party irrevocably waives its right to indemnity under Section 9.01
with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Third Party Claim pursuant to Section 9.02(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, then the Indemnified Party will have
the right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
prosecuted by the Indemnified Party in good faith or will be settled at the
discretion of the Indemnified Party (with the consent of the Indemnifying Party,
which consent will not be unreasonably withheld). The Indemnified Party will
have full control of such defense and proceedings, including (except as provided
in the immediately preceding sentence) any settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying Party
will, at the sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnified Party and its counsel in contesting any Third
Party Claim which the Indemnified Party is contesting. Notwithstanding the
foregoing provisions of this clause (ii), if the Indemnifying Party has notified
the Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability hereunder to the Indemnified Party with respect to such
Third Party Claim and if such dispute is resolved in favor of the Indemnifying
Party in the manner provided in clause (iii) below, the Indemnifying Party will
not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this clause (ii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such
19
litigation. The Indemnifying Party may retain separate counsel to represent it
in, but not control, any defense or settlement controlled by the Indemnified
Party pursuant to this clause (ii), and the Indemnifying Party will bear its own
costs and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified
Party that it does not dispute its liability to the Indemnified Party with
respect to the Third Party Claim under Section 9.01 or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party with respect to such Third Party
Claim, the Loss arising from such Third Party Claim will be conclusively deemed
a liability of the Indemnifying Party under Section 9.01 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand
following the final determination thereof. If the Indemnifying Party has timely
disputed its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by arbitration in accordance with
paragraph (c) of this Section 9.02.
(b) In the event any Indemnified Party should have a
claim under Section 9.01 against any Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss arising from the claim specified in such Indemnity Notice will
be conclusively deemed a liability of the Indemnifying Party under Section 9.01
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand following the final determination thereof. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by arbitration in
accordance with paragraph (c) of this Section 9.02.
(c) Any dispute submitted to arbitration pursuant to this
Section 9.02 shall be finally and conclusively determined by the decision of a
board of arbitration consisting of three (3) members (hereinafter sometimes
called the "Board of Arbitration") selected as hereinafter provided. Each of the
Indemnified Party and the Indemnifying Party shall select one (1) member and the
third member shall be selected by mutual agreement of the other members, or if
the other members fail to reach agreement on a third member within twenty (20)
days after their selection, such third member shall thereafter be selected by
the American Arbitration Association upon application made to it for a third
member possessing expertise or experience appropriate to the dispute jointly by
the Indemnified Party and the Indemnifying Party. The Board of Arbitration shall
meet in New York, New York or such other place as a majority of the members of
the Board of Arbitration determines more appropriate, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the Indemnifying Party is
required to pay to the Indemnified Party in respect of a claim filed by the
Indemnified Party. In connection with rendering its decisions, the
20
Board of Arbitration shall adopt and follow such rules and procedures as a
majority of the members of the Board of Arbitration deems necessary or
appropriate. To the extent practical, decisions of the Board of Arbitration
shall be rendered no more than thirty (30) days following commencement of
proceedings with respect thereto. The Board of Arbitration shall cause its
written decision to be delivered to the Indemnified Party and the Indemnifying
Party. Any decision made by the Board of Arbitration (either prior to or after
the expiration of such thirty (30) calendar day period) shall be final, binding
and conclusive on the Indemnified Party and the Indemnifying Party and entitled
to be enforced to the fullest extent permitted by law and entered in any court
of competent jurisdiction. Each party to any arbitration shall bear its own
expense in relation thereto, including but not limited to such party's
attorneys' fees, if any, and the expenses and fees of the Board of Arbitration
shall be divided between the Indemnifying Party and the Indemnified Party in the
same proportion as the portion of the related claim determined by the Board of
Arbitration to be payable to the Indemnified Party bears to the portion of such
claim determined not to be so payable.
ARTICLE X
[INTENTIONALLY OMITTED]
10.01 [Intentionally Omitted].
ARTICLE XI
DEFINITIONS
11.01 Definitions.
(a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:
"12% Convertible Note" shall have the meaning ascribed to such
term in the forepart of this Agreement.
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning ten percent (10%) or more of the voting securities of another
Person shall be deemed to control that Person.
"Agreement" means this Purchase Agreement and the Exhibits,
the Disclosure Schedule and the Schedules hereto and the certificates delivered
in accordance with Sections 6.03 and 7.03, as the same shall be amended from
time to time.
"Amended and Restated Certificate of Incorporation" shall have
the meaning ascribed to such term in Section 4.08.
21
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Board of Arbitration" has the meaning ascribed to it in
Section 9.02(c).
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of the Company,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
"Business or Condition of the Company" means the business,
condition (financial or otherwise), results of operations, Assets and
Properties, customer and vendor relationships and prospects of the Company and
each of the Subsidiaries.
"Certificate of Designation" has the meaning ascribed to it in
the forepart of this Agreement.
"Claim" means any claim, demand, assessment, judgment, order,
decree, action, cause of action, litigation, suit, investigation or other
Proceeding.
"Claim Notice" means written notification pursuant to Section
9.02(a) of a Third Party Claim as to which indemnity under Section 9.01 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim against the Indemnifying Party under Section 9.01,
together with the amount or, if not then reasonably determinable, the estimated
amount, determined in good faith, of the Loss arising from such Third Party
Claim.
"Closing" means the closing of the transactions contemplated
by Section 1.02.
"Closing Date" means the date of the Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Commission" has the meaning ascribed to it in Section 2.13.
"Common Stock" means the common stock, par value $0.001 per
share, of the Company.
22
"Company" has the meaning ascribed to it in the forepart of
this Agreement.
"Company Indemnified Parties" means the Company and its
officers, directors, employees, agents and Affiliates.
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Disclosure Schedule" means the record delivered to Purchasers
by the Company herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by the Company pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Documents" means this Agreement and the other documents,
agreements and certificates executed pursuant to or in connection with this
Agreement.
"Equity Interest" means (i) with respect to a corporation, any
and all issued and outstanding capital stock and warrants, options, other rights
to acquire capital stock and other rights to participate in the profits of such
corporation and (ii) with respect to a partnership, limited liability company or
similar Person, any and all units, interests, or other equivalents of, or other
ownership interests in any such Person and warrants, options, other rights to
acquire any such units or interests and other rights to participate in the
profits of such partnership.
"Exchange Ratio" has the meaning ascribed to it in the
forepart of this Agreement.
"Financial Statements" has the meaning ascribed thereto in
Section 2.07(a)(i).
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"Xxxxxx" shall have the meaning ascribed to such term in
Section 4.03.
"HLHZ" shall have the meanings ascribed to such term in
Section 4.03.
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any other Person.
23
"Indemnified Party" means any Person claiming indemnification
under any provision of Article IX.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article IX.
"Indemnity Notice" means written notification pursuant to
Section 9.02(b) of a claim for indemnity under Article IX by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably determinable, the estimated amount, determined
in good faith, of the Loss arising from such claim.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company or
any Subsidiary and issued by any Person other than the Company or any Subsidiary
(other than trade receivables generated in the ordinary course of business of
the Company and the Subsidiaries).
"Key Employee" has the meaning ascribed to such term in
Section 6.11.
"Knowledge of the Company" or "Known to the Company" means the
actual knowledge of any executive officer, or director of the Company.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Long Term Incentive Plan" has the meaning ascribed to such
term in Section 4.08.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, fees of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment).
24
"Material Adverse Effect" means (i) a material adverse effect
upon the Business or Condition of the Company or any of its Subsidiaries, or a
material adverse effect on reasonably foreseeable business opportunities of the
Companies or any of its Subsidiaries, or (ii) a material adverse effect on the
ability of the Company to perform its obligations under this Agreement or any of
the other Documents; provided, however, that the term "Material Adverse Effect"
shall not include any such material adverse effect to the extent it directly or
indirectly relates to or results from:
(i) the public announcement of, or the response or
reaction of customers, vendors, licensors, investors, Company employees or
others to, this Agreement, or any of the agreements or transactions contemplated
by this Agreement or entered into in connection with this Agreement;
(ii) changes, developments or circumstances in worldwide
or national conditions (political, economic, or regulatory) that adversely
affect generally the markets where the Company or any of its subsidiaries
operates or affect generally industries engaged in the business in which the
Company or any of its subsidiaries operates (including proposed legislation or
regulation by any governmental or regulatory body or the introduction of any
technological changes in the industry), or adversely affect a broad group of
industries generally;
(iii) changes, developments or circumstances in U.S. or
international securities markets in general; or
(iv) any matter disclosed in the Disclosure Schedules.
"Net Operating Losses" of the Company means all tax attributes
of the Company whose use is limited pursuant to Sections 382(a) and 382 of the
Code if a corporation undergoes an Ownership Change, including, without
limitation, net operating loss carryforwards and net operating losses allocable
to a period prior to the date of an Ownership Change (within the meaning of
Section 382(d) of the Code), excess credits (within the meaning of Section
383(a) of the Code), net capital losses (within the meaning of Section 383(b) of
the Code) and foreign tax credits (within the meaning of Section 383(c) of the
Code).
"New Notes" shall have the meaning ascribed to such term in
the forepart of this Agreement.
"Old Note" shall have the meaning ascribed to such term in the
forepart of this Agreement.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive or exercise any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock of such Person, including
any rights to participate in the equity or income of such Person or to
participate in or direct the election of any directors or officers of such
Person or the manner in which any shares of capital stock of such Person are
voted.
25
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Ownership Change" means "ownership change" as that term is
defined in Section 382(g) of the Code.
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not materially impair the value of the
property subject to such Lien or the use of such property in the conduct of the
business of the Company or any Subsidiary.
"Person" means any natural person, corporation, limited
liability company, general partnership, limited partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Preferred Stock" means the preferred stock, par value $0.001
per share, of the Company.
"Proceeding" means any legal, administrative or arbitration
action, suit, complaint, charge, hearing, inquiry, investigation or proceeding
(including any partial or threatened proceedings).
"Proxy Statement" has the meaning ascribed to it in Section
4.08.
"Purchase Price" has the meaning ascribed to it in Section
1.01(a).
"Purchaser" and "Purchasers" have the meaning ascribed to such
terms in the forepart of this Agreement.
"Purchaser Exchange Amount" has the meaning ascribed to it
Section 1.01(b).
"Purchaser Indemnified Parties" means Purchasers and its
officers, directors, employees, agents and Affiliates.
"Representatives" has the meaning ascribed to it in Section
4.04.
"Resolution Period" means the period ending thirty (30) days
following receipt by an Indemnified Party of a written notice from an
Indemnifying Party stating that it disputes all or any portion of a claim set
forth in a Claim Notice or an Indemnity Notice.
"Restricted Stock Plan" has the meaning ascribed to such term
in Section 4.08.
"Reverse Split" has the meaning ascribed to such term in
Section 4.08.
"Rights Offering" has the meaning ascribed to such term in
Section 4.10.
26
"Securities" means the New Notes and the Series A Preferred
Stock.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same may from time to time be in
effect.
"Series A Preferred Stock" has the meaning ascribed to such
term in the forepart of this Agreement.
"Subsidiary" means any Person in which the Company, directly
or indirectly through Subsidiaries or otherwise, beneficially owns more than
fifty percent (50%) of either the equity interests in, or the voting control of,
such Person.
"Supplemental Note" has the meaning ascribed to such term in
Section 4.03.
"Tax Returns" means a report, return, document, declaration or
other information or filing (including any amendments) required to be supplied
to a governmental entity with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of entities that
includes the Company.
"Taxes" means any and all taxes, charges, fees, levies or
other assessments including income, gross receipts, real or personal property,
sales, use, capital gain, transfer, recording, excise, license, production,
franchise, employment or unemployment, social security, service, service use,
net worth, occupation, payroll, registration, governmental pension or insurance,
environmental, withholding, royalty, severance, stamp or documentary, customs or
duties, or value added, imposed by any taxing authority (whether domestic or
foreign including any state, local or foreign government or any subdivision or
taxing agency thereof (including a United States possession)), whether computed
on a separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest, penalties or additional amounts attributable to, or
imposed upon, or with respect to, any such taxes, charges, fees, levies or other
assessments.
"Third Party Claim" has the meaning ascribed to it in Section
9.03(a).
"Transactions" has the meaning ascribed to it in Section
2.02(a).
"UnionTools" has the meaning ascribed to it in the forepart of
this Agreement.
(a) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any gender include
each other gender; (ii) words using the singular or plural number also include
the plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; (iv)
the terms "Article" or "Section" refer to the specified Article or Section of
this Agreement; and (v) the phrases "ordinary course of business" and "ordinary
course of business consistent with past practice" refer to the business and
practice of the Company or a Subsidiary. Whenever this Agreement refers to a
number of days, such number shall refer to calendar days unless Business Days
are specified. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
27
ARTICLE XII
MISCELLANEOUS
12.01 Notices. All notices, requests and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally or by facsimile transmission or mailed (first
class postage prepaid) to the parties at the following addresses or facsimile
numbers:
If to Purchasers, to:
Oaktree Capital Management, LLC
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxx
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx, LLP
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx Xxxxxx, Esq.
If to the Company, to:
Acorn Products, Inc.
000 X. Xxxxxxxxxx Xxxx.
Xxxxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: A. Xxxxxxx Xxxxx, President
with a copy to:
Porter, Wright, Xxxxxx & Xxxxxx LLP
00 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
28
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
12.02 Entire Agreement. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof and contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof.
12.03 Expenses. Except as otherwise expressly provided in
this Agreement (including without limitation as provided in Section 10.02),
whether or not the transactions contemplated hereby are consummated, the Company
and the Purchasers will each pay their respective fees and expenses (including
the fees and expenses of legal counsel, investment bankers, brokers and other
representatives or consultants) in connection with the Transactions; provided
that upon consummation of the Transactions, the Company and UnionTools shall
jointly and severally reimburse the reasonable fees and expenses incurred by the
Purchasers in connection with the Transactions.
12.04 Public Announcements. At all times at or before the
Closing, none of the Company or any of Purchasers will issue or make any
reports, statements or releases to the public or generally to the employees,
customers, suppliers or other Persons to whom the Company and the Subsidiaries
sell goods or provide services or with whom the Company and the Subsidiaries
otherwise have significant business relationships with respect to this Agreement
or the transactions contemplated hereby without the consent of the other, which
consent shall not be unreasonably withheld. If either party is unable to obtain
the approval of its public report, statement or release from the other party and
such report, statement or release is, in the opinion of legal counsel to such
party, required by Law in order to discharge such party's disclosure
obligations, then such party may make or issue the legally required report,
statement or release and promptly furnish the other party with a copy thereof.
The Company and Purchasers will also obtain the other party's prior approval of
any press release to be issued immediately following the Closing announcing the
consummation of the transactions contemplated by this Agreement.
12.05 Confidentiality. Each party hereto will hold, and
will use its best efforts to cause its Affiliates, and in the case of
Purchasers, any Person who has provided, or who is considering providing,
financing to Purchasers to finance all or any portion of the Purchase Price, and
their respective Representatives to hold, in strict confidence from any Person
(other than any such Affiliate, Person who has provided, or who is considering
providing, financing or Representative), unless (i) compelled to disclose by
judicial or administrative process (including without limitation in connection
with obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party or any of
its Affiliates furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public
29
domain (either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; provided that following the Closing the
foregoing restrictions will not apply to Purchasers' use of documents and
information concerning the Company and the Subsidiaries furnished by the Company
hereunder. In the event the transactions contemplated hereby are not
consummated, upon the request of the other party, each party hereto will, and
will cause its Affiliates, any Person who has provided, or who is considering
providing, financing to such party and their respective Representatives to,
promptly (and in no event later than five (5) Business Days after such request)
redeliver or cause to be redelivered all copies of documents and information
furnished by the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the party furnished such documents and information
or its Representatives.
12.06 Waiver. Any term or condition of this Agreement may
be waived at any time by the party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
12.07 Amendment. This Agreement may be amended,
supplemented or modified only by a written instrument duly executed by or on
behalf of each party hereto.
12.08 No Third Party Beneficiary. The terms and provisions
of this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article IX.
12.09 No Assignment; Binding Effect. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other party hereto and any
attempt to do so will be void, except (a) for assignments and transfers by
operation of Law and (b) that Purchasers may assign any or all of its rights,
interests and obligations hereunder (including without limitation its rights
under Article IX) to (i) a wholly-owned subsidiary, provided that any such
subsidiary agrees in writing to be bound by all of the terms, conditions and
provisions contained herein, (ii) any post-Closing purchaser of all or any
portion of the Shares or (iii) any financial institution providing purchase
money or other financing to Purchasers or the Company from time to time as
collateral security for such financing, but no such assignment referred to in
clause (i) or (ii) shall relieve Purchasers of its obligations hereunder.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
30
12.10 Headings. The headings used in this Agreement have
been inserted for convenience of reference only and do not define or limit the
provisions hereof.
12.11 [Intentionally Omitted].
12.12 Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any present or
future Law, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (a) such
provision will be fully severable, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom.
12.13 Governing Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Delaware applicable to
a Contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
12.14 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
12.15 Obligations of Purchasers. The Obligations of each
Purchaser under this agreement are several and not joint and the indemnification
obligation of any purchaser relative to the other Purchasers shall be determined
in accordance with the number of shares of common stock of the Company held by
such Purchaser in relation to the number of shares of the Company's common stock
held by all Purchasers as of the date of determination related to the
indemnification obligation. The obligations of the Company and UnionTools are
joint and several between such parties.
31
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party hereto as of the date first above
written.
PURCHASERS:
TCW SPECIAL CREDITS, as general partner
and investment manager of the funds and
accounts set forth on Schedule I
By: TCW Asset Management Company
Its: Managing General Partner
By: /s/ Xxxxxxx Xxxxxx
--------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Authorized Signatory
By: /s/ Xxxxxxx Xxxxxxx
--------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Authorized Signatory
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
By: Oaktree Capital Management, LLC, Its
General Partner
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
By: /s/ Xxxxxx X. Xxxx
--------------------------------------
Name: Xxxxxx X. Xxxx
Title: Managing Director
COMPANY:
ACORN PRODUCTS, INC.
By: /s/ A. Xxxxxxx Xxxxx
--------------------------------------
Name: A. Xxxxxxx Xxxxx
Title: President
and Chief Executive Officer
UNIONTOOLS, INC.
By: /s/ A. Xxxxxxx Xxxxx
--------------------------------------
Name: A. Xxxxxxx Xxxxx
Title: President
SCHEDULE I
TCW SPECIAL CREDITS FUND III
TCW SPECIAL CREDITS FUND IIIB
TCW SPECIAL CREDITS TRUST IIIB
THE COMMON FUND FOR BOND INVESTMENTS, INC.
DELAWARE STATE EMPLOYEES' RETIREMENT FUND
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST (TCW)
TCW SPECIAL CREDITS TRUST
TCW SPECIAL CREDITS TRUST IV
TCW SPECIAL CREDITS TRUST IV-A
TCW SPECIAL CREDITS FUND IV
TCW SPECIAL CREDITS PLUS FUND
