EXHIBIT 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
by and among
D AND W HOLDINGS, INC.,
D AND W ACQUISITION CORP.,
ATRIUM CORPORATION,
and
THE SECURITYHOLDERS NAMED HEREIN
Dated as of August 3, 1998
ARTICLE 1
DEFINED TERMS
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 References and Titles . . . . . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE 2
MERGER OF SUB INTO THE COMPANY
2.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.2 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.4 Certificate of Incorporation and By-Laws. . . . . . . . . . . . . . . . .13
2.5 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . .13
2.6 Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.7 Treatment of Options. . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.8 Closing of Transfer Books . . . . . . . . . . . . . . . . . . . . . . . .14
2.9 Payment in Connection with Closing. . . . . . . . . . . . . . . . . . . .14
2.10 Indemnification Escrow. . . . . . . . . . . . . . . . . . . . . . . . . .15
2.11 Reductions Notice.. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
2.13 Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company . . . . . . . . . . . . . .17
3.2 Representations and Warranties of Parent and Sub. . . . . . . . . . . . .30
3.3 Representations and Warranties of Securityholders . . . . . . . . . . . .32
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . .34
ARTICLE 5
ADDITIONAL COVENANTS OF THE COMPANY AND THE SECURITYHOLDERS
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5.1 Access and Information. . . . . . . . . . . . . . . . . . . . . . . . . .36
5.2 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . .37
5.3 Notification of Breach. . . . . . . . . . . . . . . . . . . . . . . . . .37
5.4 No Solicitation of Transactions.. . . . . . . . . . . . . . . . . . . . .37
5.5 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . .38
5.6 Termination of Certain Agreements . . . . . . . . . . . . . . . . . . . .38
ARTICLE 6
COVENANTS OF PARENT AND SUB
6.1 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . .38
6.2 Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
6.3 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . .40
6.4 Solvency Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
6.5 Repayment of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
6.6 Indemnification of Officers, Directors, Employees and Agents. . . . . . .42
6.7 Notification of Breach. . . . . . . . . . . . . . . . . . . . . . . . . .42
6.8 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . .42
ARTICLE 7
MUTUAL COVENANTS
7.1 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . .43
7.2 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . .43
7.3 Investigation and Agreement by Parent and Sub; No Other
Representations or Warranties . . . . . . . . . . . . . . . . . . . . . .43
7.4 Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . .45
7.5 Option Exercise Prices. . . . . . . . . . . . . . . . . . . . . . . . . .45
7.6 Other Matters Relating to Options . . . . . . . . . . . . . . . . . . . .45
ARTICLE 8
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation . . . . . . . . . . . . . . . . . .45
8.2 Conditions to Obligation of Parent and Sub. . . . . . . . . . . . . . . .46
8.3 Conditions to Obligations of the Company. . . . . . . . . . . . . . . . .46
ARTICLE 9
CLOSING
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9.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
9.2 Actions to Occur at Closing . . . . . . . . . . . . . . . . . . . . . . .47
9.3 Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . .48
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . .49
10.3 Return of Documentation . . . . . . . . . . . . . . . . . . . . . . . . .50
10.4 Sole and Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . .50
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification of Buyer Indemnified Parties. . . . . . . . . . . . . . .50
11.2 Indemnification of Seller Indemnified Parties . . . . . . . . . . . . . .50
11.3 Defense of Third-Party Claims . . . . . . . . . . . . . . . . . . . . . .50
11.4 Direct Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
11.5 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
11.6 Buyer Indemnified Reductions Costs. . . . . . . . . . . . . . . . . . . .55
ARTICLE 12
THE REPRESENTATIVE
12.1 Authorization of the Representative . . . . . . . . . . . . . . . . . . .55
12.2 Payments of Expenses, Holdbacks . . . . . . . . . . . . . . . . . . . . .57
12.3 Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
12.4 Bank Accounts; Investments. . . . . . . . . . . . . . . . . . . . . . . .58
12.5 Compensation; Exculpation; Indemnity. . . . . . . . . . . . . . . . . . .59
12.6 Removal and Replacement of Representative; Successor Representative;
Action by Representative. . . . . . . . . . . . . . . . . . . . . . . . .60
12.7 Reliance; Limitation as to Parent, Sub and the Surviving Corporation. . .60
ARTICLE 13
GENERAL PROVISIONS
13.1 Survival of Representations, Warranties, Covenants and Agreements . . . .61
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13.2 Amendment and Modification. . . . . . . . . . . . . . . . . . . . . . . .61
13.3 Waiver of Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . .61
13.4 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . .62
13.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
13.6 Expenses and Obligations. . . . . . . . . . . . . . . . . . . . . . . . .62
13.7 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .62
13.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
13.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
13.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
13.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
13.12 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . .65
13.13 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
13.14 Director and Officer Liability. . . . . . . . . . . . . . . . . . . . . .65
13.15 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
13.16 No Waiver Relating to Claims for Fraud. . . . . . . . . . . . . . . . . .65
EXHIBITS:
*Exhibit A - Form of Letter of Transmittal
*Exhibit B - Form of Option Release
*Exhibit C - Form of Indemnification Escrow Agreement
*Exhibit D - Form of Termination Agreement
* The above exhibits have been omitted. The Company will provide them to the
Securities and Exchange Commission supplementally upon request.
SCHEDULES:
*Schedule I Securityholders' Contribution to
Indemnification Escrow and Company
Transaction Costs Holdback
*Schedule II Stockholders
*Schedule III Optionholders
*Schedule 3.1(a) Subsidiaries
*Schedule 3.1(b) Capital Structure
*Schedule 3.1(d) No Conflict; Required Filings and Consents
*Schedule 3.1(f)(i) Financial Statements
*Schedule 3.1(f)(ii) Material Undisclosed Liabilities
*Schedule 3.1(f)(iii) Ordinary Course - Material Adverse Effect
*Schedule 3.1(g) Compliance with Applicable Laws
*Schedule 3.1(h) Litigation
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*Schedule 3.1(i) Insurance
*Schedule 3.1(j) Owned Real Property
*Schedule 3.1(k) Leased Real Property
*Schedule 3.1(l) Tangible Property
*Schedule 3.1(m) Liens and Encumbrances
*Schedule 3.1(n) Environmental Matters
*Schedule 3.1(o) Taxes
*Schedule 3.1(p) Material Contracts
*Schedule 3.1(q) ERISA Compliance; Labor
*Schedule 3.1(r)(i) Patents, Trademarks, Etc.
*Schedule 3.1(r)(ii) Intellectual Property Ownership Exceptions
*Schedule 3.1(r)(iii) Licenses
*Schedule 3.1(s) Affiliate Relationships
*Schedule 3.1(u) Inventories
*Schedule 3.2(c) No Conflict; Required Filings and Consents
*Schedule 3.2(e) Financing Commitments
*Schedule 3.2(g)(i)(A) Financial Statements
*Schedule 3.(g)(i)(B) Balance Sheet
*Schedule 3.2(g)(ii) Material Undisclosed Liabilities
*Schedule 3.2(g)(iii) Ordinary Course - Material Adverse Effect
*Schedule 3.3(a) Liens on Common Stock and Options
*Schedule 3.3(c) No Conflict; Required Filings and Consents
*Schedule 3.3(e)(i)(A) Combined Financial Statements
*Schedule 3.3(e)(i)(B) Balance Sheet
*Schedule 3.3(e)(ii) Material Undisclosed Liabilities
*Schedule 3.3(e)(iii) Ordinary Course - Material Adverse Effect
*Schedule 4.1 Covenants of the Company
*Schedule 6.6(b) Indemnification Agreements
* The above schedules have been omitted. The Company will provide them to
the Securities and Exchange Commission supplementally upon request.
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
August 3, 1998, is made by and among D and W Holdings, Inc., a Delaware
corporation ("Parent"), D and W Acquisition Corp., a Delaware corporation and a
wholly-owned Subsidiary of Parent ("Sub"), Atrium Corporation, a Delaware
corporation (the "Company"), and each of the persons identified on SCHEDULE I,
who are all of the holders of the issued and outstanding Common Stock (as
hereinafter defined) and Options (as hereinafter defined) issued by the Company
(the "Securityholders").
PRELIMINARY STATEMENTS
A. Each Securityholder identified on SCHEDULE II (collectively, the
"Stockholders") owns the number of shares of the Company's common stock, par
value $0.01 per share ("Common Stock"), set forth opposite such Securityholder's
name on SCHEDULE II.
B. Each Securityholder identified on SCHEDULE III (collectively,
the "Optionholders") holds Options (as hereinafter defined) to purchase the
number of shares of Common Stock set forth opposite such Securityholder's name
on SCHEDULE III.
C. The respective Boards of Directors of the Company, Parent and
Sub deem it advisable that Sub merge with and into the Company, and,
accordingly, have each approved this Agreement and the transactions contemplated
hereby, upon the terms and subject to the conditions set forth herein.
D. Parent, by its execution of this Agreement, has (in its capacity
as the sole stockholder of Sub) consented to, and has authorized, approved and
adopted, this Agreement and the transactions contemplated herein.
E. Each of the Stockholders, by their execution of this Agreement,
has (in his, her or its capacity as a stockholder of the Company) consented to,
and has authorized, approved and adopted this Agreement and the transactions
contemplated herein.
F. The Company, Parent, Sub and the Securityholders desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger (as hereinafter defined).
AGREEMENTS
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency
of which are hereby acknowledged, and upon the terms and subject to the
conditions hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE 1
DEFINED TERMS
1.1 DEFINED TERMS. The following terms shall have the following
meanings in this Agreement:
"1996 PLAN" means the Atrium Corporation 1996 Stock Option Plan,
approved by the Board of Directors of the Company and the stockholders of the
Company on November 7, 1996, and which became effective on November 27, 1996.
"AFFILIATE" means, with respect to any person, any other person
controlling, controlled by or under common control with such person. For
purposes of this definition and this Agreement, the term "control" (and
correlative terms) means the power, whether by contract, equity ownership or
otherwise, to direct the policies or management of a person.
"AGGREGATED GROUP" has the meaning set forth in Section 3.1(q).
"APPLICABLE LAWS" means all laws, statutes, rules, regulations,
ordinances, judgments, orders, decrees, injunctions and writs of any
Governmental Entity having jurisdiction over the business or operations of the
Company and its Subsidiaries, as may be in effect on or prior to the Closing
Date.
"APPRAISER" has the meaning set forth in Section 6.4(a)
"ATRIUM COMPANIES, INC." means Atrium Companies, Inc., a
Delaware corporation and a direct wholly-owned subsidiary of the Company.
"BALANCE SHEET" has the meaning set forth in Section 3.1(f).
"BALANCE SHEET DATE" has the meaning set forth in Section
3.1(f).
"BUSINESS DAY" means any day other than (i) a Saturday, Sunday
or federal holiday or (ii) a day on which commercial banks in New York, New York
or Dallas, Texas are authorized or required to be closed.
"BUYER CONTROLLED CLAIM" means a third-party action with respect
to which a Buyer Indemnified Party has assumed control as contemplated in
Section 11.3(d)(iii).
"BUYER INDEMNIFIED COMPANY COSTS" means (a) any and all damages,
losses, claims, liabilities, Taxes, demands, charges, suits, penalties, costs
and expenses (including court costs and
reasonable attorneys' fees and expenses incurred in investigating and
preparing for any litigation or proceeding) that any of the Buyer Indemnified
Parties incurs and that arise out of any failure of any of the
representations or warranties made by the Company under this Agreement or any
of the other Transaction Documents to be true and correct at the time as of
which they are made; (b) any and all damages, losses, claims, liabilities,
Taxes, demands, charges, suits, penalties, costs, and expenses (including
court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) that any of the
Buyer Indemnified Parties incurs and that arise out of any breach or default
by the Company of any covenant or agreement made by the Company under this
Agreement or any of the other Transaction Documents and which are required to
be performed by the Company prior to the Closing; and (c) any and all
actions, suits, proceedings, claims, demands, assessments, judgments, costs,
and expenses, including reasonable legal fees and expenses, incident to any
of the foregoing.
"BUYER INDEMNIFIED COSTS" means the Buyer Indemnified Company
Costs and the Buyer Indemnified Securityholder Costs.
"BUYER INDEMNIFIED PARTIES" means Parent, each of Parent's
stockholders, partners and Affiliates, and each officer, director, employee and
consultant of Parent and its Affiliates.
"BUYER INDEMNIFIED REDUCTIONS COSTS" means Buyer Indemnified
Company Costs that a Buyer Indemnified Party incurs and that arise out of a
misstatement of the amount of Debt, Company Transaction Costs and/or Restricted
Payments Basket Shortfall Amount, if any, set forth in the Reductions Notice.
"BUYER INDEMNIFIED SECURITYHOLDER COSTS" means, with respect to
any Securityholder, (a) any and all damages, losses, claims, liabilities, Taxes,
demands, charges, suits, penalties, costs and expenses (including court costs
and reasonable attorneys' fees and expenses incurred in investigating and
preparing for any litigation or proceeding) that any of the Buyer Indemnified
Parties incurs and that arise out of any failure of any of the representations
or warranties made by such Securityholder under this Agreement or any of the
other Transaction Documents to be true and correct at the time as of which they
are made; (b) any and all damages, losses, claims, liabilities, Taxes, demands,
charges, suits, penalties, costs, and expenses (including court costs and
reasonable attorneys' fees and expenses incurred in investigating and preparing
for any litigation or proceeding) that any of the Buyer Indemnified Parties
incurs and that arise out of any breach or default by such Securityholder of any
covenant or agreement made by such Securityholder under this Agreement or any of
the other Transaction Documents; and (c) any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs, and expenses,
including reasonable legal fees and expenses, incident to any of the foregoing.
"CERCLA" has the meaning set forth in the definition of
Environmental Laws contained in this Section 1.1.
"CERTIFICATE" has the meaning set forth in Section 2.9.
3
"CERTIFICATE OF MERGER" has the meaning set forth in
Section 2.2.
"CLAIMS AMOUNT" has the meaning set forth in Section 11.5(e).
"CLOSING" means the closing of the Merger in accordance with the
provisions of Article 9.
"CLOSING DATE" has the meaning set forth in Section 9.1.
"CODE" means the United States Internal Revenue Code of 1986, as
amended. All references to the Code, U.S. Treasury regulations or other
governmental pronouncements shall be deemed to include references to any
applicable successor regulations or amending pronouncement.
"COMMON STOCK" has the meaning set forth in Section 2.6.
"COMPANY" has the meaning set forth in the first paragraph of
this Agreement.
"COMPANY 401(k) PLAN" means the retirement plan maintained by
the Company and designed to comply with Section 401 of the Code.
"COMPANY PERMITS" has the meaning set forth in Section 3.1(g).
"COMPANY SEC DOCUMENTS" has the meaning set forth in Section
3.1(e).
"COMPANY TRANSACTION COSTS" means the aggregate amount of all
fees, costs and expenses of the Company (whether incurred on behalf of the
Company or on behalf of any Stockholder) incurred in connection with this
Agreement and the other Transaction Documents or the transactions contemplated
hereby or thereby, including, without limitation, any investment banking,
accounting, advisory, brokers, finders, escrow agent or legal fees or fees paid
to any Governmental Entity or third party; provided, however, that "Company
Transaction Costs" shall not include (i) any fees, costs, or other expenses of
any kind incurred by or on behalf of the Company or any of its Subsidiaries in
connection with, or relating to, the efforts of Parent or any Affiliate of
Parent to obtain the funds necessary to consummate the Merger and for Parent to
otherwise perform its obligations under this Agreement and the other Transaction
Documents (including without limitation all accounting and legal fees and
expenses incurred in connection therewith); or (ii) any amounts paid or payable
by the Company under the Monitoring and Oversight Agreement.
"COMPANY TRANSACTION COSTS HOLDBACK AMOUNT" means an amount
equal to $250,000.
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"COMPANY TRANSACTION COSTS NOTICE AMOUNT" means the amount of
Company Transaction Costs set forth in the Reductions Notice.
"COMPANY VOTING DEBT" has the meaning set forth in Section
3.1(b).
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement
entered into between Wing Industries Holdings, Inc. and Salomon Brothers Inc. on
behalf of Atrium Companies, Inc. dated March 10, 1998.
"CONSENTS" means all governmental consents and approvals, and
all consents and approvals of third parties, in each case that are necessary in
order to consummate the transactions contemplated herein.
"CURE PERIOD" has the meaning set forth in Section 10.1(b).
"DGCL" means the General Corporation Law of the State of
Delaware.
"DEBT" without duplication, means, as of 11:59 p.m. on the day
immediately preceding the Closing Date and except for accounts and obligations
owed by the Company to its Subsidiaries or owed by a Subsidiary of the Company
to the Company and/or one or more of its Subsidiaries, the aggregate amount of
(a) all indebtedness of the Company or any of its Subsidiaries for the repayment
of money borrowed, whether or not represented by bonds, debentures, notes or
other securities, and all accrued and unpaid interest thereon, (b) all deferred
indebtedness of the Company or any of its Subsidiaries for the payment of the
purchase price of property or assets purchased, (c) all obligations of the
Company or any of its Subsidiaries to pay rent or any payment amounts under a
lease of real or personal property which is required to be classified as a
capital lease or a liability on the face of a balance sheet prepared in
accordance with GAAP, (d) any outstanding reimbursement obligations of the
Company or any of its Subsidiaries with respect to amounts drawn under letters
of credit, bankers' acceptances or similar facilities issued for the account of
the Company or any of its Subsidiaries, (e) any payment obligation of the
Company or any of its Subsidiaries under any interest rate swap agreement,
forward rate agreement, interest rate collar agreement or other financial
agreement or arrangement entered into for the purpose of limiting or managing
interest rate risks, (f) all indebtedness for borrowed money of any Person that
is not a direct or indirect Subsidiary of the Company that is secured by any
Lien on property owned by the Company or any its Subsidiaries, whether or not
indebtedness secured thereby shall have been assumed, (g) all guarantees,
endorsements (other than endorsements of checks in the ordinary course of
business), assumptions and other contingent obligations of the Company or any of
its Subsidiaries in respect of, or to purchase or to otherwise acquire,
indebtedness for borrowed money of any Person that is not a direct or indirect
Subsidiary of the Company, and (h) all premiums, prepayment penalties, change of
control payments, fees, expenses and other amounts which are or will be paid
(including LIBOR breakage costs under the Senior Credit Agreement) in respect of
any of the foregoing as a result of the consummation of the transactions
contemplated by this Agreement and the other Transactions Documents, but
excluding all premiums, prepayment penalties, change of
5
control payments, fees, expenses and other such amounts as are required to be
paid in respect of the Senior Subordinated Notes as a result of the
transactions contemplated by this Agreement and the other Transaction
Documents.
"DEBT NOTICE AMOUNT" means the amount of Debt set forth in the
Reductions Notice.
"DE MINIMIS LOSSES" has the meaning set forth in
Section 11.5(b).
"DOJ" means the United States Department of Justice.
"EFFECTIVE TIME" has the meaning set forth in Section 2.2.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" within
the meaning of Section 3(3) of ERISA and any bonus, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, vacation, severance, disability, death benefit, hospitalization or
insurance plan providing benefits to any present or former employee or
contractor of the Company or any member of the Aggregated Group maintained by
any such entity.
"ENVIRONMENTAL COSTS OR LIABILITIES" has the meaning set forth
in Section 3.1(n).
"ENVIRONMENTAL LAWS" means all Applicable Laws pertaining to the
environment, natural resources, and public or employee health and safety,
including without limitation: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Emergency Planning and
Community Right to Know Act and the Superfund Amendments and Reauthorization Act
of 1986, the Resource Conservation and Recovery Act of 1976, the Hazardous and
Solid Waste Amendments Act of 1984, the Clean Air Act, the Clean Water Act, the
Federal Water Pollution Control Act, the Toxic Substances Control Act, the Safe
Drinking Water Act, the Occupational Safety and Health Act of 1970, the Oil
Pollution Act of 1990, the Hazardous Materials Transportation Act, and any
similar or analogous statutes, regulations and decisional law of any
Governmental Entity, as may be in effect on or prior to the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means Norwest Bank Texas, N.A. and includes its
successors and assigns.
"ESCROW AMOUNT" means an amount equal to $15,000,000, or such
lesser amount as may be defined as the Escrow Amount from time to time as set
forth in Section 11.5(e)(ii).
"EXCHANGE ACCOUNT" has the meaning set forth in Section 2.9.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" has the meaning set forth in Section 2.9.
"EXPIRATION DATE" has the meaning set forth in Section 11.5(c).
"FINANCIAL ADVISORY AGREEMENT" means the Financial Advisory
Agreement made and entered into effective as of November 27, 1996, among the
Company, Atrium Companies, Inc., and Xxxxx, Muse & Co. Partners, L.P.
"FINANCIAL STATEMENTS" has the meaning set forth in
Section 3.1(f).
"FINANCING COMMITMENTS" means the collective reference to the
Subscription Agreement and the Merrrill Xxxxx Letter.
"FIRST ANNIVERSARY" has the meaning set forth in
Section 11.5(e).
"FULLY-DILUTED COMMON STOCK" means the number of outstanding
shares of Common Stock plus (without duplication) all shares of Common Stock
issuable, whether at or upon the passage of time or the occurrence of future
events, upon the exercise of all outstanding Options.
"FTC" means the United States Federal Trade Commission.
"GAAP" means generally accepted accounting principles in the
United States.
"GAINS AND TRANSFER TAXES" has the meaning set forth in
Section 3.1(d).
"GOVERNMENTAL ENTITY" means any governmental department,
commission, board, bureau, agency, court or other instrumentality, whether
foreign or domestic, of any country, nation, republic, federation or similar
entity or any state, county, parish or municipality, jurisdiction or other
political subdivision thereof.
"HAZARDOUS SUBSTANCES" has the meaning set forth in
Section 3.1(n).
"HSR ACT" has the meaning set forth in Section 3.1(d).
"INDEMNIFIED COSTS" means the Buyer Indemnified Company Costs,
the Buyer Indemnified Securityholder Costs or the Seller Indemnified Costs, as
the case may be.
"INDEMNIFIED PARTIES" means the Buyer Indemnified Parties or the
Seller Indemnified Parties, as the case may be.
7
"INDEMNIFICATION ESCROW AGREEMENT" has the meaning set forth in
Section 2.10.
"INDENTURE" means the Indenture dated as of November 27, 1996
among Atrium Companies, Inc., certain of its subsidiaries and the United States
Trust Company of New York, as Trustee, relating to the Senior Subordinated
Notes, as amended by the First Supplemental Indenture thereto.
"INTELLECTUAL PROPERTY" has the meaning set forth in
Section 3.1(r).
"KNOWLEDGE" means, with respect to a specified party hereto, the
actual knowledge of any officer of such party, except that in the case of the
Company, "Knowledge" shall also include the actual knowledge of any officer of
the Company's Subsidiaries and in the case of Parent, "Knowledge" shall also
include the actual knowledge of any officer of Parent's Subsidiaries.
"LEASED REAL PROPERTY" means all of the leasehold interests and
related rights of the Company and its Subsidiaries pursuant to the leases which
are identified and described in SCHEDULE 3.1(k).
"LETTER OF TRANSMITTAL" has the meaning set forth in
Section 2.9.
"LIENS" has the meaning set forth in Section 3.1(m).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations, financial condition, or results of operations of the
Company and its Subsidiaries, in each case taken as a whole.
"MATERIAL CONTRACT" has the meaning set forth in Section 3.1(p).
"MAXIMUM SECURITYHOLDER ESCROW AMOUNT" has the meaning set forth
in Section 11.5.
"MERGER" has the meaning set forth in Section 2.1.
"MERGER CONSIDERATION" means an amount equal to (i)
$225,000,000, minus (ii) the Company Transaction Costs Notice Amount, minus
(iii) the Debt Notice Amount, minus (iv) the Restricted Payments Basket
Shortfall Notice Amount, if any.
"XXXXXXX XXXXX LETTER" means the letter dated the date hereof
from Xxxxxxx Xxxxx Capital Corporation to Arddoor, LLC, GE Investment Private
Placement Partners II and Parent.
"MONITORING AND OVERSIGHT AGREEMENT" means the Monitoring and
Oversight Agreement made and entered into effective as of November 2, 1996,
among the Company, Atrium Companies, Inc., and Xxxxx, Muse & Co. Partners, L.P.
8
"OPTION PROCEEDS" means the aggregate exercise price that would
be paid if all Options outstanding immediately prior to the Effective Time were
exercised in full (assuming for the purposes of this definition that all such
Options could be exercised in full as of such time).
"OPTION RELEASE" has the meaning set forth in Section 2.9.
"OPTIONHOLDERS" has the meaning set forth in the Preliminary
Statements of this Agreement.
"OPTIONS" means the collective reference to (i) all options to
purchase shares of Common Stock issued under the 1996 Plan, (ii) all options to
purchase shares of Common Stock issued under the Original Plan, and (iii) the
Warrant.
"ORIGINAL PLAN" means the Atrium Corporation 1996 Original Stock
Option Plan, as amended, which was initially approved by the Board of Directors
of the Company on September 23, 1996, and the amendment of which was
subsequently approved by the Board of Directors of the Company and the
stockholders of the Company on November 7, 1996.
"OUTSTANDING SHARE" and "OUTSTANDING SHARES" have the meanings
set forth in Section 2.6.
"OWNED REAL PROPERTY" means those parcels of real property owned
in fee and used or held for use by the Company and its Subsidiaries as described
in SCHEDULE 3.1(j), and all buildings, structures, improvements, and fixtures
thereon, together with all rights of way, easements, rights of access,
privileges, and appurtenances pertaining or belonging thereto, including any
right, title, and interest of the Company and its Subsidiaries in and to any
street or other property adjoining any portion of such property.
"PARENT" has the meaning set forth in the first paragraph of
this Agreement.
"PENSION PLANS" has the meaning set forth in Section 3.1(q).
"PER SHARE ESCROW AMOUNT" means an amount equal to the
quotient obtained when (i) $15,000,000 is divided by (ii) the number of
shares of Fully-Diluted Common Stock immediately prior to the Effective Time.
"PER SHARE MERGER CONSIDERATION" means the quotient obtained
when (i) the sum of the Merger Consideration plus the Option Proceeds is divided
by (ii) the number of shares of Fully-Diluted Common Stock outstanding on the
Closing Date.
"PERMITS" has the meaning set forth in Section 3.1(n).
9
"PERMITTED ENCUMBRANCES" means (a) statutory liens for current
Taxes not yet due and payable, or, to the extent set forth on SCHEDULE 3.1(o),
being contested in good faith by appropriate proceedings, (b) mechanics',
carriers', workers', repairers', and other similar liens imposed by law arising
or incurred in the ordinary course of business for obligations which are not
overdue for a period of more than 90 days or which are being contested in good
faith by appropriate proceedings, (c) Liens arising under leases of vehicles,
rolling stock and other equipment, which Liens do not materially impair the
operation of the business at the facility at which such leased vehicle, rolling
stock or other equipment is located, (d) Liens on leases of real property
arising from the provisions of such leases, including, in relation to leased
real property, any agreements and/or conditions imposed on the issuance of land
use permits, zoning, business licenses, use permits, or other entitlements of
various types issued by any Governmental Entity, necessary or beneficial to the
continued use and occupancy of such real property or the continuation of the
business conducted by the Company and its Subsidiaries, (e) pledges or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other social security legislation,
(f) deposits to secure the performance of bids, contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business, (g) unviolated zoning regulations and restrictive
covenants and easements of record which do not detract from the value of the
Real Property and do not materially and adversely affect, impair or interfere
with the use of any property affected thereby, (h) public utility easements of
record, in customary form, to serve the Real Property, and (i) Liens not
otherwise included as Permitted Encumbrances that are disclosed in the Title
Commitments.
"PERMITTED LIENS" has the meaning set forth in Section 3.1(m).
"PERSON" and "PERSON" means an individual, corporation,
partnership, limited liability company, association, trust, unincorporated
organization, or other entity.
"PREFERRED STOCK" has the meaning set forth in Section 3.1(b).
"REAL PROPERTY" means the Leased Real Property and the Owned
Real Property.
"REDUCTIONS NOTICE" has the meaning set forth in Section 2.11.
"REPRESENTATIVE" has the meaning set forth in Section 12.1.
"RESTRICTED PAYMENTS BASKET SHORTFALL NOTICE AMOUNT" shall mean
the Restricted Payments Shortfall Amount set forth in the Reductions Notice.
"RESTRICTED PAYMENTS BASKET SHORTFALL AMOUNT" means the excess,
if any, of $123,000,000 over the sum of (i) the aggregate amount of Restricted
Payments (as defined in, and determined in accordance with the terms of, the
Indenture) that Atrium Companies, Inc. (without giving effect to the Merger or
any of the other transactions contemplated in the Merger Agreement
10
or the other Transaction Documents) could make under Section 4.4(a) of the
Indenture without creating a Default (as defined in the Indenture) plus
(ii) the amount of Debt set forth in the Reductions Notice.
"SCHEDULES" means the Schedules attached hereto.
"SEC" means the United States Securities and Exchange
Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SECURITYHOLDERS" has the meaning set forth in the first
paragraph of this Agreement.
"SELLER INDEMNIFIED COSTS" means (a) any and all damages,
losses, claims, liabilities, Taxes, demands, charges, suits, penalties, costs
and expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating and preparing for any litigation or proceeding) that
any of the Seller Indemnified Parties incurs and that arise out of any failure
of any of the representations or warranties made by Parent or Sub under this
Agreement or any of the other Transaction Documents to be true and correct at
the time as of which they are made; (b) any and all damages, losses, claims,
liabilities, Taxes, demands, charges, suits, penalties, costs, and expenses
(including court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) that any of the
Seller Indemnified Parties incurs and that arise out of any breach or default by
Parent or Sub of any of their respective covenants or agreements under this
Agreement or any of the other Transaction Documents or that arise out of any
breach or default by the Company or the Surviving Corporation of any of their
respective covenants or agreements under this Agreement or any of the other
Transaction Documents which are required to be performed at or after Closing;
and (c) any and all actions, suits, proceedings claims, demands, assessments,
judgments, costs, and expenses, including reasonable legal fees and expenses,
incident to any of the foregoing.
"SELLER INDEMNIFIED PARTIES" means each Securityholder, each
stockholder, partner and Affiliate of such Securityholder, and each officer,
director, employee and consultant of such Securityholder and its Affiliates.
"SENIOR CREDIT AGREEMENT" means the Amended and Restated Credit
Agreement by and among the Company, Atrium Companies, Inc., the Banks parties
thereto, and Bankers Trust Company, as Agent, dated as of March 27, 1998,
together with the "Credit Documents" (as such term is defined in such Amended
and Restated Credit Agreement).
"SENIOR SUBORDINATED NOTES" means the 10?% Senior Subordinated
Notes Due 2006, Series A, and the 10?% Senior Subordinated Notes Due 2006,
Series B, issued in the original aggregate principal amount of $100,000,000
pursuant to the Indenture.
11
"SOLVENCY LETTER" has the meaning set forth in Section 6.4(a).
"STOCKHOLDERS" has the meaning set forth in the Preliminary
Statements of this Agreement.
"SUB" has the meaning set forth in the first paragraph of
this Agreement.
"SUBSCRIPTION AGREEMENT" means the Subscription Agreement
dated as of the date hereof by and among Parent and each of GE Investment
Private Placement Partners II and Arddoor.
"SUBSIDIARY" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its board of directors
or other governing body or (if there are no such voting interests) 50% or
more of the equity interests of which is owned directly or indirectly by such
person.
"SURVIVING CORPORATION" has the meaning set forth in Section
2.1.
"TAX RETURNS" means any return, report, statement, election,
information return or other document (including any related or supporting
information) filed or required to be filed with any Governmental Entity in
connection with the determination, assessment, collection or administration
of any Taxes or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"TAXES" means taxes, charges, fees, imposts, levies,
interest, penalties, fines, additions to tax or other assessments or fees of
any kind, including, but not limited to, income, corporate, capital,
estimated, excise, property, sales, use, turnover, gross receipts, ad
valorem, transfer, gains, profits, inventory, capital stock, license,
payroll, employment, unemployment, social security, workers' compensation,
stamp, value added and franchise taxes, required deposits, deductions,
withholdings and customs duties, imposed by any Governmental Entity, together
with any obligations under Treas. Reg. Section 1.1502-6 or any agreements or
arrangements with any Person with respect to the liability for, or sharing
of, Taxes, and including any liability as a successor or transferee in
respect of Taxes.
"TERMINATION AGREEMENT" means the Termination Agreement in
the form of EXHIBIT D by and among the Company, Atrium Companies, Inc.,
Xxxxx, Muse & Co. Partners, L.P. and Hicks, Muse, Xxxx & Xxxxx Incorporated.
"TERMINATION DATE" has the meaning set forth in Section
10.1(b).
"TITLE CLAIMS" means, with respect to any Securityholder, any
claim brought against such Securityholder based upon the breach by such
Securityholder of the representations and warranties made by such
Securityholder in Section 3.3(a).
12
"TITLE COMMITMENTS" has the meaning set forth in Section 3.1(j).
"TRANSACTION DOCUMENTS" means the collective reference to
this Agreement, the Indemnification Escrow Agreement and each other
agreement, document and instrument required to be executed in accordance
herewith.
"WARRANT" means the Warrant dated November 27, 1996 issued by
the Company to Xxxxxxx X. Xxxxxxxx.
1.2 REFERENCES AND TITLES. All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections,
subsections, and other subdivisions of this Agreement unless expressly
provided otherwise. Titles appearing at the beginning of any Articles,
Sections, subsections, or other subdivisions of this Agreement are for
convenience only, do not constitute any part of such Articles, Sections,
subsections or other subdivisions, and shall be disregarded in construing the
language contained therein. The words "THIS AGREEMENT," "HEREIN," "HEREBY,"
"HEREUNDER," and "HEREOF," and words of similar import, refer to this
Agreement as a whole and not to any particular subdivision unless expressly
so limited. The words "THIS SECTION," "THIS SUBSECTION," and words of
similar import, refer only to the Sections or subsections hereof in which
such words occur. The word "INCLUDING" (in its various forms) means
"INCLUDING WITHOUT LIMITATION." Pronouns in masculine, feminine, or neuter
genders shall be construed to state and include any other gender and words,
terms, and titles (including terms defined herein) in the singular form shall
be construed to include the plural and vice versa, unless the context
otherwise expressly requires. Unless the context otherwise requires, all
defined terms contained herein shall include the singular and plural and the
conjunctive and disjunctive forms of such defined terms.
ARTICLE 2
MERGER OF SUB INTO THE COMPANY
2.1 MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time, Sub shall be merged with and
into the Company (the "Merger") in accordance with the terms of, and subject
to the conditions set forth in, this Agreement and the DGCL. Following the
Merger, the Company shall continue as the surviving corporation (sometimes
hereinafter referred to as the "Surviving Corporation") and the separate
corporate existence of Sub shall cease.
2.2 EFFECTIVE TIME. Immediately following the Closing, the
parties hereto shall cause a Certificate of Merger meeting the requirements
of Section 251 of the DGCL (the "Certificate of Merger") to be properly
executed and filed with the Secretary of State of the State of Delaware in
accordance with the terms and conditions of the DGCL. The Merger shall
become effective at the time of filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in
13
accordance with the DGCL, or at such later time which the parties hereto
shall have agreed upon and designated in such filing as the effective time of
the Merger (the "Effective Time").
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all
the property, rights, privileges, immunities, powers and franchises of the
Company and Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations and duties of the Company and Sub shall become the
debts, liabilities, obligations and duties of the Surviving Corporation.
2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The certificate of
incorporation and by-laws of the Company in effect immediately prior to the
Effective Time shall be the certificate of incorporation and by-laws of the
Surviving Corporation as of the Effective Time, until duly amended in
accordance with applicable law; provided that the provisions relating to the
indemnification of directors, officers, employees and agents of the Company,
its Subsidiaries and other entities as described in Section 6.6(a) shall be
included in such certificate of incorporation and by-laws.
2.5 DIRECTORS AND OFFICERS. The directors and officers of Sub
immediately prior to the Effective Time shall be the directors and officers
of the Surviving Corporation as of the Effective Time.
2.6 CONVERSION OF SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of any party:
(a) Each share of common stock, par value $.01 per share,
of Sub issued and outstanding immediately prior to the Effective Time shall
remain outstanding and shall represent one share of common stock, par value
$.01 per share, of the Surviving Corporation, so that, after the Effective
Time, Parent shall be the holder of all of the issued and outstanding shares
of the Surviving Corporation's common stock;
(b) Each share of the Company's common stock, par value
$0.01 per share ("Common Stock"), outstanding immediately prior to the
Effective Time (each, an "Outstanding Share" and collectively, the
"Outstanding Shares") shall be converted into the right to receive the Per
Share Merger Consideration in cash, payable to the holder thereof without
interest, and shall otherwise cease to be outstanding, shall be canceled and
retired and cease to exist.
(c) Each share of Common Stock held in the treasury of
the Company or any of the Company's Subsidiaries immediately prior to the
Effective Time shall be cancelled and retired without any conversion thereof,
and no payment or distribution shall be made with respect thereto.
2.7 TREATMENT OF OPTIONS. Immediately prior to the Effective
Time, each Option then outstanding, whether or not then exercisable, shall be
converted into the right to receive an amount in cash, payable to the holder
thereof without interest, equal to the product of (i) the number of
14
shares of Common Stock issuable immediately prior to the Effective Time upon
the exercise of such Option, whether at or upon the passage of time or the
occurrence of future events, and (ii) the excess, if any, of the Per Share
Merger Consideration over the exercise price per share of Common Stock
issuable upon the exercise of such Option immediately prior to the Effective
Time, whether at or upon the passage of time or the occurrence of future
events; and such Option shall otherwise cease to be outstanding, shall be
cancelled and retired and cease to exist.
2.8 CLOSING OF TRANSFER BOOKS. From and after the Effective
Time, the stock transfer books of the Company shall be closed and no transfer
of Common Stock shall thereafter be made. From and after the Effective Time,
the holders of Certificates evidencing ownership of Outstanding Shares
immediately prior to the Effective Time shall cease to have any rights with
respect to such Outstanding Shares, except as otherwise provided for herein
or by applicable law.
2.9 PAYMENT IN CONNECTION WITH CLOSING.
(a) At the Closing, Parent and the Surviving Corporation
shall transfer to a bank or trust company designated by Parent (the "Exchange
Agent"), by wire transfer of immediately available funds, cash in an amount
equal to (i) the Merger Consideration, minus (ii) the aggregate amount paid
to Securityholders pursuant to Paragraph 2.9(b), minus (iii) the Escrow
Amount, minus (iv) the Company Transaction Costs Holdback Amount. Such funds
shall be deposited by the Exchange Agent in an account (the "Exchange
Account") established for the benefit of the Securityholders. Upon such
payment to the Exchange Agent and any payments required pursuant to Paragraph
2.9(b), Parent, Sub and the Surviving Corporation shall thereafter have no
further liability to the Securityholders in connection with the Merger
Consideration. Nothing in the immediately preceding sentence shall limit any
claims of the Securityholders under this Agreement other than with respect to
the payment of the Merger Consideration. The Exchange Agent shall pay to
each holder of a stock certificate which immediately prior to the Effective
Time represented Outstanding Shares (a "Certificate"), upon receipt by the
Exchange Agent of the Certificate(s) held by such holder and a completed and
duly executed letter of transmittal in the form of EXHIBIT A hereto (a
"Letter of Transmittal"), an amount equal to (i) the product obtained when
the number of Outstanding Shares of Common Stock previously represented by
all Certificate(s) held by such holder is multiplied by the Per Share Merger
Consideration, minus (ii) the amount set forth opposite such Stockholder's
name in column G of SCHEDULE I. The Exchange Agent shall pay to each
Optionholder, upon receipt by the Exchange Agent of a completed and duly
executed Option Surrender Agreement, Release and Waiver in the form of
EXHIBIT B hereto (an "Option Release"), an amount equal to (i) the product
obtained when (x) the number of shares of Common Stock issuable upon the
exercise of such Option immediately prior to the Effective Time, whether at
or upon the passage of time or the occurrence of future events, is multiplied
by (y) an amount equal to the excess of the Per Share Merger Consideration
over the per share exercise price of such Option, minus (ii) the amount set
forth opposite such Optionholder's name in column H of SCHEDULE I.
(b) Each Stockholder who surrenders a Certificate for
cancellation to Parent at the Closing, together with a duly executed Letter
of Transmittal, shall be entitled to receive in
15
exchange therefor the amount such Stockholder has the right to receive if
such Stockholder delivers such Certificate and Letter of Transmittal to the
Exchange Agent pursuant to Section 2.9(a), payable by wire transfer of
immediately available funds on the Closing Date to an account designated in
writing by such Stockholder prior to the Closing Date, and the Certificate so
surrendered shall forthwith be cancelled. Each Optionholder who delivers to
Parent a duly executed Option Release at Closing shall be entitled to receive
in exchange therefor the amount such Optionholder has the right to receive if
such Optionholder delivers such Option Release to the Exchange Agent pursuant
to Section 2.9(a), payable by wire transfer of immediately available funds on
the Closing Date to an account designated in writing by such Optionholder
prior to the Closing Date, and the Option previously held by such
Optionholder shall forthwith be cancelled.
(c) All payments to Securityholders shall be subject to
any required withholding of taxes, if any. No interest shall accrue or be
paid on the cash payable upon the delivery of Certificates, Letters of
Transmittal or Option Releases. Neither the Exchange Agent nor any party
hereto shall be liable to a Securityholder for any cash or interest thereon
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar laws.
(d) The Exchange Agent will, promptly upon receipt
thereof, deliver to the Surviving Corporation surrendered Certificates,
Letters of Transmittal and Option Releases received by it, and on the date
that is nine months following the Closing Date, return to the Surviving
Corporation any portion of the Merger Consideration remaining to be paid to
Securityholders who have not yet surrendered their Certificates, Letters of
Transmittal or Option Releases, as the case may be, and any other funds in
the Exchange Account which are to be distributed to Securityholders. Any
Securityholders will thereafter be entitled to look only to the Surviving
Corporation for payment of their claim for the consideration set forth in
this Section 2.9, without interest thereon, but will have no greater rights
against the Surviving Corporation than may be accorded to general creditors
thereof under applicable law.
2.10 INDEMNIFICATION ESCROW. Pursuant to Article 11 hereof, the
Securityholders have (a) jointly and severally agreed to indemnify the Buyer
Indemnified Parties from and against certain Buyer Indemnified Company Costs,
and (b) severally agreed to indemnify the Buyer Indemnified Parties from and
against certain Buyer Indemnified Securityholder Costs. On or prior to
Closing, the Representative, Parent and the Escrow Agent shall enter into an
Indemnification Escrow Agreement in the form of EXHIBIT C, subject only to
the comments, if any, of the Escrow Agent as to its rights and obligations
thereunder (the "Indemnification Escrow Agreement"). Notwithstanding any
other provision in this Agreement to the contrary, in order to secure the
indemnity obligations of the Securityholders to the Buyer Indemnified Parties
under this Agreement, at the Closing a portion of the Merger Consideration
which would otherwise be required to be delivered to the Securityholders
equal to $15,000,000 shall be deposited in and held in escrow pursuant to the
terms of the Indemnification Escrow Agreement. Each Securityholder hereby
directs Parent to deposit the amount set forth opposite such Securityholder's
name in column C of Schedule I with the Escrow Agent at Closing and Parent
shall make such deposit as directed.
16
2.11 REDUCTIONS NOTICE. No later than the Business Day
immediately preceding the scheduled Closing Date, the Company shall deliver
to Parent a written notice (the "Reductions Notice") setting forth (i) the
amount of Debt, (ii) the Restricted Payments Basket Shortfall Amount, if any,
(iii) the amount of any Company Transaction Costs previously paid or payable
by the Company, and (iv) the names and wiring instructions for the persons to
whom payment for unpaid Company Transaction Costs are to be made. At or
prior to the Closing, the Company shall pay any unpaid Company Transaction
Costs identified in the Reductions Notice. The Securityholders shall
indemnify Parent for any Debt or Company Transaction Costs not set forth in
the Reductions Notice. The Securityholders shall indemnify Parent for any
Restricted Payments Basket Shortfall Amount not set forth in the Reductions
Notice.
2.12 COMPANY TRANSACTION COSTS HOLDBACK. Notwithstanding any
other provision set forth in this Agreement to the contrary, at the Closing a
portion of the Merger Consideration that would otherwise be required to be
delivered to the Securityholders equal to the Company Transaction Costs
Holdback Amount shall be paid to the Representative to be held for a period
of not less than sixty (60) days from the Closing Date pursuant to the terms
and provisions of Article 12 to secure the payment of any Company Transaction
Costs not paid at or prior to Closing, if any. Each Securityholder hereby
directs Parent to deposit the amount set forth opposite such Securityholder's
name in Column F of SCHEDULE I with the Representative at Closing and Parent
shall make such deposit as directed.
2.13 STOCKHOLDER APPROVAL. By his, her or its execution and
delivery of this Agreement, each Stockholder hereby consents (in his, her or
its capacity as a stockholder of the Company) to the Merger, this Agreement,
the Indemnification Escrow Agreement and the consummation of the transactions
contemplated herein and therein, and agrees that such Stockholder will not
(in his, her or its capacity as a stockholder of the Company) withdraw,
revoke, rescind or alter such consent in any way without the prior written
consent of Parent. In addition, by his, her or its execution and delivery of
this Agreement, each Stockholder hereby unconditionally and irrevocably
waives any appraisal rights such Stockholder would otherwise have as a result
of the Merger and the other transactions contemplated in this Agreement and
in the other Transaction Documents, and agrees that such Stockholder will not
withdraw, revoke, rescind or alter such waiver in any way without the prior
written consent of Parent. By its execution and delivery of this Agreement,
Parent hereby consents (in its capacity as the sole stockholder of Sub), to
the Merger, this Agreement, the Indemnification Escrow Agreement and the
consummation of the transactions contemplated herein and therein, and agrees
that Parent will not (in its capacity as a stockholder of Sub) withdraw,
revoke, rescind or alter such consent in any way without the prior written
consent of the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
17
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Parent and Sub as follows (with the understanding
that Parent and Sub are relying upon such representations and warranties in
entering into and performing their respective obligations under this
Agreement):
(a) ORGANIZATION, GOOD STANDING AND OTHER MATTERS Each
of the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction
of incorporation, has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
and is duly qualified to do business as a foreign corporation and in good
standing to conduct business in each jurisdiction in which the business it is
conducting, or the operation, ownership or leasing of its properties, makes
such qualification necessary, other than in such jurisdictions where the
failure so to qualify would not have a material adverse effect on the
business, operations, financial condition or results of operations of the
Company or such Subsidiary, as the case may be. The Company has made
available to Parent or its representatives complete and correct copies of its
certificate of incorporation and bylaws and its Subsidiaries' respective
certificates of incorporation and bylaws (or comparable charter or
organizational documents), as in effect on the date of this Agreement.
SCHEDULE 3.1(a) sets forth a true and complete list of all of the Company's
subsidiaries, together with the jurisdiction of incorporation of each
Subsidiary, and the jurisdictions where such Subsidiaries are qualified to do
business. Except as disclosed on SCHEDULE 3.1(a), the Company does not own,
directly or indirectly, any Subsidiaries or own, or have the right, pursuant
to a contract or otherwise, to acquire any capital stock, equity interest or
other similar investment in any corporation, partnership (or an arrangement
treated as such for Tax purposes), joint venture, association, limited
liability company, trust or other entity. Except as set forth on SCHEDULE
3.1(a), all outstanding shares of capital stock of the Company's Subsidiaries
are owned by the Company or a direct or indirect Subsidiary of the Company,
free and clear of all Liens.
(b) CAPITAL STRUCTURE. The authorized capital stock of
the Company consists of 100,000,000 shares of Common Stock, and 20,000,000
shares of preferred stock, par value $0.01 per share (the "Preferred Stock").
No shares of Preferred Stock are issued and outstanding. As of the date
hereof, (i) 38,796,428 shares of Common Stock are issued and outstanding and
(ii) 805,708 shares of Common Stock are held by the Company in treasury.
Except as described in clause (ii) of the immediately preceding sentence, no
shares of capital stock of the Company are held by the Company or its
Subsidiaries. As of the Closing Date, except for such changes as may result
from the issuance of Common Stock upon the exercise of Options outstanding as
of the date of this Agreement, (i) 38,796,428 shares of Common Stock will be
issued and outstanding, and (ii) 805,708 shares of Common Stock will be held
by the Company in treasury. No bonds, debentures, notes or other instruments
or evidence of indebtedness having the right to vote (or convertible into, or
exercisable or exchangeable for, securities having the right to vote) on any
matters on which the Company's stockholders may vote ("Company Voting Debt")
are issued or outstanding. All outstanding shares of Common Stock are
validly issued, fully paid and nonassessable and were not issued in violation
of any preemptive or other similar rights. Except as set forth in SCHEDULE
3.1(b), as of the date of this Agreement there are outstanding, and as of the
Closing Date there shall be
18
outstanding (except for such changes as may result from the issuance of
Common Stock upon the exercise of Options outstanding as of the date of this
Agreement): (A) no shares of capital stock, Company Voting Debt or other
voting securities of the Company or any Subsidiary of the Company; (B) no
securities of the Company or any Subsidiary of the Company convertible into,
or exchangeable or exercisable for, shares of capital stock, Company Voting
Debt or other voting securities of the Company or any Subsidiary of the
Company; and (C) no options, warrants, calls, rights (including preemptive
rights), commitments or agreements to which the Company or any Subsidiary of
the Company is a party or by which it is bound, in any case obligating the
Company or any Subsidiary of the Company to issue, deliver, sell, purchase,
redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or any Company
Voting Debt or other voting securities of the Company or of any Subsidiary of
the Company, or obligating the Company or any Subsidiary of the Company to
grant, extend or enter into any such option, warrant, call, right, commitment
or agreement.
(c) AUTHORITY. The Company has all requisite power and
authority to enter into this Agreement and the other Transaction Documents to
which the Company is a party and to consummate the transactions contemplated
herein and therein. The execution and delivery of such Transaction Documents
by the Company and the consummation of the transactions contemplated herein
or therein have been duly authorized by all necessary corporate action on the
part of the Company, including approval by the Company's Board of Directors.
This Agreement has been, and the other Transaction Documents to which the
Company will be a party have been, or upon execution and delivery will be,
duly executed and delivered by the Company and, assuming that such
Transaction Documents constitute the valid and binding agreement of the other
parties hereto, constitute, or upon execution and delivery will constitute,
the valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms and conditions, except that
the enforcement hereof and thereof may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(d) NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The
execution and delivery by the Company of the Transaction Documents to which
it is a party do not, and the performance by the Company of the transactions
contemplated herein and therein will not, subject to obtaining the consents,
approvals, authorizations, and permits and making the filings described in
this Section 3.1(d) or as otherwise described on SCHEDULE 3.1(d), (i)
violate, conflict with, or result in any violation or breach of any provision
of the Company's or any of its Subsidiaries' certificate of incorporation or
bylaws, (ii) violate, conflict with, or result in a violation or breach of,
constitute a default (with or without due notice or lapse of time or both) or
require the consent of any Person under, any of the terms, conditions, or
provisions of any agreement, contract or other instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their respective assets is
bound or give rise to any right of termination or acceleration thereunder,
(iii) violate any order, writ, judgment, injunction, decree, statute, law,
rule or regulation of any Governmental Entity binding upon the Company or any
of its
19
Subsidiaries or by which or to which any of their respective assets is bound
or subject, or (iv) result in or require the creation or imposition of any
Lien upon any of the properties or assets of the Company or any of its
Subsidiaries, except, with respect to each of clauses (i), (ii), (iii) and
(iv), such violations, conflicts, breaches or defaults as would not have a
Material Adverse Effect. No Consent of, or registration, declaration, or
filing with, any Governmental Entity is required by the Company or any of its
Subsidiaries in connection with the execution and delivery by the Company of
this Agreement and the other Transaction Documents to which it is a party or
the consummation of the transactions contemplated hereby or thereby, except
for (A) the filing of a premerger notification and report form by the Company
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the expiration or termination of the applicable waiting
period thereunder; (B) the filing with the SEC of such reports under and such
other compliance with the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby; (C) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other
states in which the Company and its Subsidiaries do business; (D) such filing
and approvals as may be required by any applicable state securities, "blue
sky" or takeover laws; (E) such filings in connection with any state or local
tax which is attributable to the beneficial ownership of the Real Property
("Gains and Transfer Taxes"), if any; and (F) such other consents, approvals,
orders, authorizations, registrations, declarations, filings, notices or
permits the failure of which to be obtained or make would not have a Material
Adverse Effect.
(e) SEC DOCUMENTS. (i) The Company has made available to
Parent a true, complete and accurate copy of each report, schedule,
registration statement, definitive proxy statement and other document filed
by Atrium Companies, Inc. with the SEC since January 1, 1997 and prior to the
date of this Agreement (the "Company SEC Documents"), which are all the
documents (other than preliminary materials) that Atrium Companies, Inc. was
required to file with the SEC since such date. As of their respective dates,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and none of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements included in the Company SEC Documents complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods covered thereby (except as may be
indicated in the notes thereto or, in the case of any unaudited statements,
as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present
in all material respects and in accordance with applicable requirements of
GAAP (subject, in the case of the unaudited statements, to year-end audit
adjustments, as permitted by Rule 10-01, and any other adjustments described
therein) the consolidated financial position of Atrium Companies, Inc. and
its consolidated Subsidiaries as of their respective dates and the
consolidated results of operations of Atrium Companies, Inc. and its
consolidated Subsidiaries for the periods presented therein.
20
(ii) The pro forma financial statements and other
pro forma financial information (including the notes thereto) included in the
Company SEC Documents comply as to form in all material respects with the
published rules and regulations of the SEC with respect thereto. The
assumptions used in the preparation of such pro forma financial statements
and other pro forma information included in the Company SEC Documents are
reasonable and the adjustments used therein are reasonably appropriate to
give effect to the transactions or circumstances referred to therein.
(f) FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES OR
EVENTS. (i) The Company has delivered to Parent true, complete and accurate
copies of the unaudited consolidated balance sheet of Atrium Companies, Inc.,
and its consolidated Subsidiaries as of June 30, 1998, a copy of which is
attached as SCHEDULE 3.1(f)(i) (the "Balance Sheet"), together with the
related unaudited consolidated statements of income for the six-month period
then ended (such unaudited financial statements are collectively referred to
as the "Financial Statements"). The Financial Statements were prepared in
accordance with GAAP (except that they do not contain footnotes and do not
reflect year end adjustments) applied on a consistent basis throughout the
periods covered thereby (except to the extent disclosed therein) and fairly
present in all material respects the consolidated financial position of
Atrium Companies, Inc., and its consolidated Subsidiaries at the dates
thereof and the consolidated results of the operations of Atrium Companies,
Inc., and its consolidated Subsidiaries for the respective periods indicated.
(ii) Except as disclosed in SCHEDULE 3.1(f)(ii),
there is no material liability of any kind, whether accrued, absolute, fixed,
contingent, or otherwise, of the Company or any of its Subsidiaries that is
not reflected, accrued or reserved against in the Balance Sheet, other than
(A) liabilities incurred in the ordinary course of business since June 30,
1998 (the "Balance Sheet Date"), (B) any such liability which would not be
required to be presented in audited financial statements of the Company and
the notes thereto prepared in conformity with GAAP applied, in a manner
consistent with the past practices of Atrium Companies, Inc. relating to
preparation of audited financial statements, in the preparation of the
Balance Sheet (without regard to the fact that the Balance Sheet is not
audited), (C) liabilities under this Agreement, and (D) liabilities for fees
and expenses incurred in connection with the transactions contemplated in the
Transaction Documents.
(iii) Except as disclosed in SCHEDULE 3.1(f)(iii),
since the Balance Sheet Date, the Company and each of its Subsidiaries has
conducted its respective business only in the ordinary course consistent with
past practice, and nothing has occurred that would have been prohibited by
Section 4.1 if the terms of such section had been in effect as of and after
the Balance Sheet Date. Since the Balance Sheet Date, there has not
occurred, and neither the Company nor any of its Subsidiaries has incurred or
suffered, any event, circumstance, or fact that has resulted in or would
reasonably be expected to result in a Material Adverse Effect.
(iv) Atrium Companies, Inc. has not repaid any
principal amount of Indebtedness under the New Credit Facility (including,
without limitation, any renewal, extension, refunding, restructuring,
replacement or refinancing thereof referred to in the definition thereof) or
21
any other agreements or indentures governing Senior Indebtedness with net
proceeds of Asset Dispositions, except to the extent that, in the case of a
repayment of revolving credit Indebtedness, the commitment to advance the
loans repaid has not been terminated. For the purposes of this Section
3.1(f)(iv), all capitalized terms used in this Section 3.1(f)(iv) shall have
the meanings ascribed to them in the Indenture.
(g) COMPLIANCE WITH APPLICABLE LAWS. The business of the
Company and each of its Subsidiaries has been conducted in compliance with
all Applicable Laws except where the failure to comply would not have a
Material Adverse Effect. Except as set forth on SCHEDULE 3.1(g), the Company
and its Subsidiaries hold all permits, licenses, variances, exemptions,
orders, franchises and approvals of all Governmental Entities necessary for
the lawful conduct of their respective businesses (the "Company Permits"),
except where the failure to hold any such Company Permits would not have a
Material Adverse Effect. To the Company's Knowledge, each of the Company
Permits was validly issued and is in full force and effect, and its validity
will not be affected by the transactions contemplated in this Agreement.
Except as set forth on SCHEDULE 3.1(g), the Company and its Subsidiaries are
in compliance with the terms of the Company Permits, except where the failure
to be in compliance would not reasonably be expected to have a Material
Adverse Effect. Except as set forth on SCHEDULE 3.1(g), no investigation or
review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the Knowledge of the Company, threatened
which, if resolved adversely to the Company, would have a Material Adverse
Effect.
(h) ABSENCE OF LITIGATION. Except as set forth on
SCHEDULE 3.1(h), there is no claim, action, suit, inquiry, judicial or
administrative proceeding, grievance or arbitration pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries by or before any arbitrator or Governmental Entity, nor are
there any investigations of the Company or any of its Subsidiaries pending
or, to the Knowledge of the Company, threatened by or before any arbitrator
or any Governmental Entity, except, in either case, such claims, actions,
suits, inquiries, proceedings, grievances, arbitrations or investigations
which, if resolved adversely to the Company or any of its Subsidiaries, would
not reasonably be expected to have a Material Adverse Effect. Except as set
forth in SCHEDULE 3.1(h), there is no judgment, decree, injunction, order,
determination, award, finding or letter of deficiency of any Governmental
Entity or arbitrator outstanding against the Company which has resulted in or
would reasonably be expected to result in a Material Adverse Effect. There
is no action, suit, inquiry or judicial or administrative proceeding pending
or, to the Knowledge of the Company, threatened against the Company or any of
its Subsidiaries relating to the transactions contemplated in the Transaction
Documents.
(i) INSURANCE. SCHEDULE 3.1(i) sets forth an accurate
list of all title, fire, general liability, malpractice liability, theft, and
other forms of property and casualty insurance and all fidelity bonds held by
the Company and each of its Subsidiaries and which are material to the
Company, its Subsidiaries and their respective businesses. A true, complete
and accurate copy of each policy relating to such insurance coverage has been
made available to Parent. To the Knowledge of the Company, each of such
policies are valid, binding and enforceable against the provider of such
insurance. To the Knowledge of the Company, no event has occurred, including
22
the failure by the Company or any of its Subsidiaries to give any notice or
information or the delivery of any inaccurate or erroneous notice or
information, which limits or impairs the rights of the Company or any of its
Subsidiaries under any such insurance policies in such a manner as has had or
would reasonably be expected to have a Material Adverse Effect.
(j) OWNED REAL PROPERTY. SCHEDULE 3.1(j) contains a
description of each parcel of real property included in Owned Real Property
and references a Commitment to Issue Title Insurance with respect to each
such parcel (the "Title Commitments"). True, complete and accurate copies of
the Title Commitments and the deeds by which title to each parcel of Owned
Real Property was transferred to the Company and its Subsidiaries have been
made available to Parent prior to the date hereof. Except as set forth in
SCHEDULE 3.1(j), to the Company's Knowledge the Company or a Subsidiary of
the Company has good and indefeasible, fee simple title in and to the Owned
Real Property, free and clear of all Liens other than Permitted Liens.
Except as set forth in SCHEDULE 3.1(j), at the Effective Time, the Company or
a Subsidiary of the Company will have good and indefeasible, fee simple title
in and to the Owned Real Property, free and clear of all Liens other than
Permitted Encumbrances. The Company has delivered to Parent copies of all as
built and boundary surveys of the Owned Real Property in the Company's
possession or within its control. The Company or a Subsidiary of the Company
has sufficient title to such easements, rights of way and other rights
appurtenant to each of the Owned Real Properties as are necessary to permit
ingress and egress to and from the Owned Real Property to a public way, and
the material improvements on the Owned Real Property have access to such
sewer, water, gas, electric, telephone, and other utilities as are necessary
to allow the business of the Company and each of its Subsidiaries operated
thereon to be operated in the ordinary course as currently operated. Except
as set forth on SCHEDULE 3.1(j), neither the Company nor any of its
Subsidiaries has received written notice of any pending condemnation or
similar proceeding with respect to the Owned Real Property or any portion
thereof, and, to the Knowledge of the Company, no such action is threatened.
Except as set forth on SCHEDULE 3.1(j), the improvements located on the Owned
Real Property are in sufficiently good condition (except for ordinary wear
and tear) to allow the business of the Company and its Subsidiaries to be
operated in the ordinary course as currently operated. The current use of
the Owned Real Property by the Company and its Subsidiaries does not violate
in any material respect any restrictive covenants of record or zoning
requirements affecting any of the Owned Real Property.
(k) LEASED REAL PROPERTY. SCHEDULE 3.1(k) contains a
list of all real property leases to which the Company and any of its
Subsidiaries is a party, true, complete and accurate copies of which have
been made available to Parent prior to the date hereof. Each lease described
in SCHEDULE 3.1(k) is a valid and binding obligation of the Company or a
Subsidiary of the Company and is in full force and effect without amendment
other than as described in SCHEDULE 3.1(k). Except as otherwise disclosed on
SCHEDULE 3.1(k), neither the Company nor any of its Subsidiaries is in
default in any material respect under, and to the Knowledge of the Company,
no other party is in default under, any lease listed in SCHEDULE 3.1(k).
(l) TANGIBLE PROPERTY. With respect to the tangible
properties and assets owned or leased by the Company and its
23
Subsidiaries (excluding Real Property), the Company and its Subsidiaries have
good and marketable title to, or hold pursuant to valid and enforceable
leases, all such properties and assets, with only such exceptions as
constitute Permitted Liens or as would not have a Material Adverse Effect.
Such tangible properties and assets of the Company and its Subsidiaries are
in good operating condition and repair, reasonable wear and tear excepted,
except where the failure to be in such repair or condition or so usable would
not have a Material Adverse Effect.
(m) LIENS AND ENCUMBRANCES. Substantially all of the
assets of the Company and each of its Subsidiaries are free and clear of all
liens, pledges, voting agreements, voting trusts, proxy agreements, adverse
claims, security interests, restrictions, mortgages, tenancies, and other
possessory or beneficial interests, conditional sale or other title retention
agreements, assessments, easements, rights-of-way, covenants, restrictions,
rights of first refusal, defects in title, encroachments, and other burdens,
options or encumbrances of any kind (collectively, the "Liens") except (i)
Permitted Encumbrances and (ii) Liens set forth on SCHEDULE 3.1(m) (the
"Liens" referred to in clauses (i) and (ii) being collectively referred to in
this Agreement as "Permitted Liens").
(n) ENVIRONMENTAL MATTERS. Except as disclosed on
SCHEDULE 3.1(n):
(i) The real property and facilities currently
owned, operated and leased by the Company or any of its Subsidiaries and the
operations of the Company and its Subsidiaries thereon comply (and with
respect to the real property and facilities formerly owned, operated and
leased by the Company or any of its Subsidiaries and the former operations of
the Company and its Subsidiaries thereon, such real property, facilities and
operations during the period of the Company's or its Subsidiaries' ownership,
operation or lease did comply) with all Environmental Laws, except for such
failures to comply as have not had or would not reasonably be expected to
have a Material Adverse Effect;
(ii) (A) No judicial, administrative or other
regulatory proceedings are pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries and (B) no written
notice from any Governmental Entity or any private or public Person has been
received by the Company or any of its Subsidiaries, in each case (1) claiming
any violation of any Environmental Laws by the Company or any of its
Subsidiaries, or by or on any real property or facility owned, operated or
leased by the Company or any of its Subsidiaries, or (2) requiring any
remediation, clean-up, modification, repair, work, construction, alteration,
or installation on any real property or facility owned, operated or leased by
the Company or any of its Subsidiaries that is necessary to comply with any
Environmental Laws and that have not been complied with or otherwise resolved
to the satisfaction of the party giving such notice;
(iii) All material permits, registrations, licenses
and authorizations ("Permits") required to be obtained or filed by the
Company or any of its Subsidiaries under any Environmental Laws in connection
with the Company's or any of its Subsidiaries' operations, including those
activities relating to the generation, use, storage, treatment, disposal,
release or remediation of Hazardous Substances, have been duly obtained or
filed, and the Company and each
24
of its Subsidiaries is in compliance with the terms and conditions of all
such Permits, except where the failure to comply would not have a Material
Adverse Effect, and, to the Company's Knowledge, each of such Permits was
validly issued and is in full force and effect, and its validity will not be
affected by the transactions contemplated in this Agreement;
(iv) All Hazardous Substances used, generated,
treated, stored, transported or disposed of by the Company or any of its
Subsidiaries on, in or under any of the Company's or any of its Subsidiaries'
currently owned, operated or leased real property or facilities or which are
transported from any such property or facility to another location for
storage, treatment or disposal, are (and with respect to the real property
and facilities formerly owned, operated or leased by the Company or any of
its Subsidiaries, any Hazardous Substances used, generated, treated, stored,
transported or disposed of by the Company or any of its Subsidiaries on, in
or under any such properties or facilities during the period of ownership,
operation, or lease by the Company or its Subsidiaries were) generated,
stored, used, treated, disposed of, and released by such persons or on their
behalf in compliance in all material respects with Environmental Laws and in
such manner as not to result in any Environmental Costs or Liabilities.
"Hazardous Substances" means (A) any hazardous materials, hazardous wastes,
hazardous substances, toxic wastes, and toxic substances as those or similar
terms are defined under any Environmental Laws; (B) any asbestos or any
material which contains any hydrated mineral silicate, including chrysolite,
amosite, crocidolite, tremolite, anthophylite and/or actinolite, whether
friable or non-friable; (C) PCBs, or PCB-containing materials, or fluids; (D)
radon; (E) any other hazardous, radioactive, toxic or noxious substance,
material, pollutant, contaminant, constituent, or solid, liquid or gaseous
waste regulated under, or for which remedial or environmental clean-up
liability may be imposed under, any Environmental Law; (F) any petroleum,
petroleum hydrocarbons, petroleum products, crude oil and any fractions or
derivatives thereof, any oil or gas exploration or production waste, and any
natural gas, synthetic gas and any mixtures thereof; and (G) any substance
that, whether by its nature or its use, is subject to regulation under any
Environmental Laws or with respect to which any Environmental Laws or
Governmental Entity requires environmental investigation, monitoring or
remediation. "Environmental Costs or Liabilities" means any material losses
or liabilities in connection with (1) any violation of any Environmental
Laws, or (2) a claim by any private or public person arising out of the
release or threatened release of Hazardous Substances to the environment or
any exposure of any person or property to Hazardous Substances; and
(v) Neither the Company nor any of its
Subsidiaries has received any written notification from any source advising
the Company or any of its Subsidiaries that: (A) it is or is proposed to be
a potentially responsible party under CERCLA or any other Environmental Laws;
(B) any real property or facility currently owned, operated or leased by it
is identified or proposed for listing as a federal National Priorities List
("NPL") (or state-equivalent) site or a Comprehensive Environmental Response,
Compensation and Liability Information System ("CERCLIS") list (or
state-equivalent) site; and (c) any facility to which it currently transports
or otherwise arranges for the disposal of Hazardous Substances is identified
or proposed for listing as an NPL (or state-equivalent) site or CERCLIS (or
state-equivalent) site.
25
(o) TAXES. (i) Except as set forth on SCHEDULE 3.1(o)
hereto, each of the Company and its Subsidiaries has timely filed, or caused to
be filed, all Tax Returns required to be filed by the Company or any of its
Subsidiaries with all Governmental Entities through the date hereof, except for
any such Tax Return the failure to file which has not had, and would not
reasonably be expected to have, a Material Adverse Effect, and all such Tax
Returns which have been filed are accurate and complete in all material
respects. Except as set forth in SCHEDULE 3.1(o), no extension of time within
which to file any Tax Return which has not been filed has been requested or
granted.
(ii) Each of the Company and its Subsidiaries has
paid (or there has been paid on its behalf), or has set up an adequate
reserve for the payment of, or accrued in its financial statements or books
and records, all material Taxes required to be paid, withheld, or deducted,
or for which the Company or any of its Subsidiaries is liable, in respect of
the periods covered by such Tax Returns. With respect to each Tax payable,
from the end of the period covered by the most recently filed Tax Return to
the Balance Sheet Date, the Balance Sheet reflects an adequate accrual or
reserve in all material respects for all Taxes payable, or required to be
withheld and remitted, by the Company or any of its Subsidiaries, or for
which the Company or any of its Subsidiaries are liable, accrued through the
Balance Sheet Date.
(iii) The Company has delivered to the Buyer true,
correct and complete copies of all federal income Tax returns, audit and
examination reports, if any, and statements of deficiencies, if any, filed
by, assessed against or agreed to by any of the Company or any of its
Subsidiaries for any period ending in 1994, 1995, 1996 or 1997. Except as
disclosed on SCHEDULE 3.1(o), (A) the Company has not received written notice
of any deficiencies for any Taxes asserted or assessed against the Company or
any of its Subsidiaries which remain unpaid; (B) the Company has not received
any written notice that the Tax Returns of the Company or any of its
Subsidiaries are currently being audited or examined by the Internal Revenue
Service or any other Governmental Authority, (C) to the Company's Knowledge,
no such examinations are pending or threatened against the Company or any of
its Subsidiaries, and (D) none of the Company or any of its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(iv) Except as disclosed on SCHEDULE 3.1(o), (A)
neither the Company nor any of its Subsidiaries is required to make any
material adjustments with respect to a change in Tax accounting methods and
neither the Company nor any of its Subsidiaries has proposed such adjustment
or received written notice that the Internal Revenue Service has proposed
such adjustment; (B) neither the Company nor any of its Subsidiaries has
received written notice of a claim made by any Taxing authority in a
jurisdiction where the Company or such Subsidiary, as the case may be, does
not file Tax Returns that the Company or such Subsidiary is subject to Tax in
such jurisdiction; (C) the Company is not, nor has it ever been, a member of
an "affiliated group" within the meaning of Code Section 1504(a)(1) other
than the affiliated group which currently consists of Atrium Corporation and
its direct and indirect wholly-owned Subsidiaries, nor has the Company
elected or been required to join in any consolidated, combined or unitary
Federal, state or local Tax filings; (D) neither the Company nor any of its
Subsidiaries has made any payments, is obligated to
26
make any payments, or is a party to any agreement that would reasonably be
expected to obligate it to make any payments that will not be deductible
solely by reason of Section 280G of the Code; (E) there are no Tax rulings,
requests for rulings or closing agreements with any Tax authority which would
reasonably be expected to cause a Material Adverse Effect; (F) neither the
Company nor any Subsidiary has any deferred income reportable for a period
beginning after the Closing Date but that is attributable to a transaction
(e.g., an installment sale) occurring in a period ending on or prior to the
Closing Date; (G) none of the presently outstanding debt of the Company or
any Subsidiary is "corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code; (H) each of the Company and its Subsidiaries has
disclosed on its federal income Tax Returns all positions taken therein which
would reasonably be expected to result in any material "substantial
understatement of federal income tax" within the meaning of Section 6222 of
the Code and (I) except with respect to intercompany transactions involving
items of inventory sold by a selling member to a buying member at a price
which is in excess of cost and which are held by such buying member for sale
in the ordinary course of business, there are no deferred intercompany gains
or losses (within the meaning of Treas. Reg. Section 1.1502-13) presently
existing between the Company and its Subsidiaries.
(p) MATERIAL CONTRACTS. The Company has made available
to Parent true and complete copies of all written contracts, agreements,
commitments, arrangements, leases (including with respect to personal
property), policies and other instruments to which the Company or any of its
Subsidiaries is a party or by which the Company or any such Subsidiary is
bound which (i) contain non-compete, non-solicitation or change-of-control
provisions binding on the Company or any of its Subsidiaries, (ii) contain
provisions relating to the voting of the Company's capital stock or the
capital stock of any of the Company's Subsidiaries, (iii) contain provisions
relating to the sharing of, or allocation of liabilities for, Taxes, or (iv)
require payments to be made in excess of $250,000 per year (either
individually or pursuant to a series of related contracts, agreements,
commitments, arrangements, leases, policies or other instruments) for goods
and/or services and do not by their terms expire and are not subject to
termination without penalty within 60 days from the date of the execution and
delivery of notice thereof (collectively, "Material Contracts"); provided,
however, that blanket purchase orders or similar arrangements shall not be
considered Material Contracts for purposes of this agreement. SCHEDULE
3.1(p) contains a true, accurate and complete list of the Material Contracts.
Neither the Company nor any of its Subsidiaries is, or has received any
written notice that it is, in default in any respect under any such Material
Contract, except as listed on SCHEDULE 3.1(p); and, to the Company's
Knowledge, there has not occurred any event or events that with the lapse of
time or the giving of notice or both would constitute such a default, except
as listed on SCHEDULE 3.1(p).
(q) ERISA COMPLIANCE; LABOR. (i) Except as set forth on
SCHEDULE 3.1(q), the present value of all accrued benefits (vested and
unvested) determined on a termination basis under all the "employee pension
benefit plans," as such term is defined in Section 3(2) of ERISA, which the
Company or any other entity required to be aggregated with the Company under
Section 414(b), 414(c) or 414(m) of the Code (the "Aggregated Group")
sponsors (the "Pension Plans"), did not, as of the respective last annual
valuation dates for such Pension Plans, exceed the value of the assets
27
of such Pension Plan allocable to such benefits. There are no members of the
Aggregated Group other than the Company and its Subsidiaries. Except as set
forth on SCHEDULE 3.1(q), neither the Company nor any member of the
Aggregated Group sponsors, and neither the Company nor any member of the
Aggregated Group has sponsored within the last three years, a "defined
benefit plan" as such term is defined in Section 3(35) of ERISA. No
"prohibited transaction," as such term is described in Section 4975 of the
Code, has occurred with respect to any of the Employee Benefit Plans which
would subject the Company or any member of the Aggregated Group, any officer
of the Company or any of such plans or any trust to any Tax or penalty on
prohibited transactions imposed by such Section 4975 of the Code. Except as
set forth on SCHEDULE 3.1(q), neither the Company nor any member of the
Aggregated Group has contributed or been obligated to contribute to any
"multi-employer plan" as such term is defined in Section 3(37) or Section
4001(a)(3) of ERISA. Other than the collective bargaining agreements
identified in SCHEDULE 3.1(q), the Company has not executed any agreement, or
taken any other action, that would reasonably be expected to require the
Company or any members of the Aggregated Group to make any contributions to
any multiemployer plan. Except as set forth on SCHEDULE 3.1(q) and in the
collective bargaining agreements identified on SCHEDULE 3.1(q), the Company
has no Knowledge of any condition that would reasonably be expected to give
rise to any obligation on the part of the Company or any member of the
Aggregated Group to make any contribution to any multiemployer plan. Except
as set forth on SCHEDULE 3.1(q), there are no Employee Benefit Plans. With
respect to the Employee Benefit Plans, no event has occurred and, to the
Knowledge of the Company, there exists no condition which would reasonably be
expected to subject the Company or any member of the Aggregated Group to any
liability under the terms of such Employee Benefit Plans or Applicable Laws
other than (G) any payment of benefits or premiums in the normal course of
plan operations, and (H) such conditions as would not have a Material Adverse
Effect. Except as described in Section 2.7 or as disclosed on SCHEDULE
3.1(q), no employee of the Company or any Subsidiary of the Company will be
entitled to any additional benefits or any acceleration of the time or
payment or vesting of any benefits under any Employee Benefit Plan as a
result of the transactions contemplated by this Agreement.
(ii) True, correct, and complete copies of each of
the Employee Benefit Plans, and related trust documents and favorable
determination letters, if applicable, have been made available to Parent or
its representatives, along with the most recent report filed on Form 5500 and
summary plan description with respect to each Employee Benefit Plan required
to file a Form 5500. All material reports and disclosures relating to the
Employee Benefit Plans required to be filed with or furnished to governmental
agencies or plan participants or beneficiaries have been furnished in
accordance with Applicable Laws in a timely manner. Each Employee Benefit
Plan has been maintained in all material respects in compliance with its
terms and Applicable Laws, and each Employee Benefit Plan intended to be
qualified under Section 401 of the Code satisfies the requirements of such
Section in all material respects and has not been operated in a manner which
would materially and adversely affect such qualified status. Except as
described on SCHEDULE 3.1(q), there are no actions, suits, or claims pending
(other than routine claims for benefits) or, to the Knowledge of the Company,
threatened against, or with respect to any of the Employee Benefit Plans.
All material contributions required to be made to the Employee Benefit Plans
pursuant to
28
their terms have been timely made. As of the date hereof, to the Knowledge
of the Company, there is no matter pending with respect to any of the
Employee Benefit Plans before the Internal Revenue Service, Department of
Labor or the Pension Benefit Guaranty Corporation other than as described on
SCHEDULE 3.1(q). Except as required by Section 4980B of the Code and Title
I, Subtitle B, Part 6 of ERISA, and except as set forth on SCHEDULE 3.1(q),
none of the Employee Benefit Plans provides medical insurance coverage
following retirement.
(iii) Except as described in SCHEDULE 3.1(q),
neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement. Except as set forth on SCHEDULE 3.1(q), each of the
Company and its Subsidiaries (A) is not engaged in any unfair labor
practices, and has no unfair labor practice charges or complaints before the
National Labor Relations Board pending or, to the Knowledge of the Company,
threatened against it, (B) has no notice of any charges, complaints or
proceedings before the Equal Employment Opportunity Commission, Department of
Labor or any other Governmental Entity responsible for regulating employment
practices, pending, or, to the Knowledge of the Company, threatened against
it and (C) has no Knowledge of any labor union or bargaining agent which has
bargaining rights with respect to any employee of the Company or any of its
Subsidiaries or which has applied or has indicated an intention to apply to
be certified as the bargaining agent of any such employee.
(r) PATENTS, TRADEMARKS, ETC.
(i) SCHEDULE 3.1(r)(i) contains a true and
complete list of all patents, patent applications, trademark and service xxxx
registrations and applications, copyright registrations and applications, and
material copyrights and grants of licenses or rights to the Company or its
Subsidiaries with respect to any of the foregoing, owned, used or claimed by
the Company or its Subsidiaries, whether registered or not (collectively, the
"Intellectual Property"). True and complete copies of all agreements
relating to the Intellectual Property have been made available to Parent
prior to the date of this Agreement.
(ii) Except as described in SCHEDULE 3.1(r)(ii),
the Company and its Subsidiaries own and/or have the exclusive right to use
the Intellectual Property, including all renewals therefor, and own all
claims for infringement thereof. The Company and its Subsidiaries own and/or
have the right to use every trade secret, know-how, process, discovery,
development, design, technique, customer and supplier list, promotional idea,
marketing and purchasing strategy, computer program (including source code)
technical data, invention, process, confidential data and other information
developed, created, or invented by the Company or its Subsidiaries which is
material to the conduct of the Company's business, or any of its
Subsidiaries' businesses, as presently conducted (collectively, "Proprietary
Information"), and have received no written claims of infringement from any
third party with respect to any of the Proprietary Information. The Company
and its Subsidiaries have taken reasonable measures to protect the secrecy
and confidentiality of all Proprietary Information.
29
(iii) SCHEDULE 3.1(r)(iii) contains a true and
complete list of all licenses of, or rights to, Proprietary Information
granted to the Company or its Subsidiaries by others or to others by the
Company or its Subsidiaries which are currently in effect. Except as
described in Schedule 3.1(r)(iii), neither the Company nor any of its
Subsidiaries (a) has sold, transferred, assigned, licensed, restricted,
encumbered or subjected to any Lien other than Permitted Liens any
Intellectual Property or Proprietary Information or any interest therein, or
(b) is obligated or under any liability whatsoever to make any payments by
way of royalties, fees or otherwise to any owner or licensor of, or other
claimant to, any Intellectual Property or Proprietary Information.
(iv) The Company has received no written notice
of, and to the Company's Knowledge there is not threatened, any claim,
action, suit, inquiry, judicial or administrative proceeding or arbitration
which challenges the rights of the Company in respect of any Intellectual
Property or any Proprietary Information.
(v) As of the date hereof, the Company has filed
with the U.S. Patent and Trademark Office (the "PTO"), together with all
necessary specimens and filing fees, trademark registration applications for
"THE ATRIUM DOOR," "ATRIUM," "THE FRENCH CLASSIC" and "MASTERVIEW"
trademarks. The Company has filed with the PTO, together with all necessary
documents and filing fees, all patent and trademark recordation cover sheets
necessary to evidence proper title in the Company of all patents, patent
applications, trademark registration applications and trademark registrations
listed on SCHEDULE 3.1(r).
(s) AFFILIATE RELATIONSHIPS. Except with respect to
health and other insurance arrangements referred to in SCHEDULE 3.1(i) and
except as described in SCHEDULE 3,1(s) hereof, and except for advances to
officers or directors of the Company of business expenses incurred in the
ordinary course of business, neither the Company nor any of its Subsidiaries
is a party to, or bound by, any contract, agreement, arrangement (written or
oral) or other instrument to which any officer, director, stockholder or
other Affiliate of the Company is also a party, and no officer, director,
stockholder or other Affiliate of the Company is indebted for borrowed money
to the Company or any of its Subsidiaries.
(t) ACCOUNTS RECEIVABLE. Each of the accounts receivable
of the Company and its Subsidiaries arose from bona fide sales of goods or
services in the ordinary course.
(u) INVENTORY. The inventories of the Company and its
Subsidiaries are located at the specific locations described on SCHEDULE
3.1(u).
(v) RELATIONSHIP WITH GENERAL ELECTRIC COMPANY. Except
as disclosed on SCHEDULE 3.1(v), the Company does not have any equity,
creditor or similar relationship (including without limitation any investment
in, or any debtor, revolving credit, leasing or creditor relationship, but
excluding any vendor or vendee relationship) with General Electric Company or
any entity known by the Company to be a Subsidiary of General Electric
Company.
30
(w) INFORMATION SYSTEMS PLAN. The Company has formulated
a plan in order to address the ability of the Company's information systems
to process date and time data from, into and beyond the year 2000 ("Year 2000
Data"), and the ability of such systems to interact with third parties'
systems and with and through electrical power, telecommunications and other
utilities and services. SCHEDULE 3.1(w) hereto identifies the Company's
information systems material to the operations of the Company and its
Subsidiaries (the "Information Systems") and identifies for each such
Information System (i) whether such Information System has been identified by
the Company as being able to accurately process such Year 2000 Data, and (ii)
if such Information System has not been identified by the Company as being
able to accurately process Year 2000 Data, the plan and target date for
replacing, updating or upgrading such Information System in order to be able
to accurately process such data. To the Company's Knowledge, such plans are
proceeding as scheduled and are being implemented at costs which do not
exceed the costs expected by the Company and its Subsidiaries to be incurred
with respect to their management information systems function in the ordinary
course of business. The Company is not aware of any facts or circumstances
that create a reasonable basis for the Company to believe that, if the
scheduled replacements, updates or upgrades continue to be made in accordance
with the plans identified on SCHEDULE 3.1(w), the Company's Information
Systems will be unable to accurately process such Year 2000 Data as of and
after December 31, 1999. No client, customer, supplier or vendor, and no
electric, telecommunications or other utility with whom the Company's
Information Systems interact has notified the Company that the Information
Systems, when used in combination with any information systems of such
person, will be unable to accurately process such Year 2000 Data if such
inability to accurately process such Year 2000 Data would reasonably be
expected to have a Material Adverse Effect.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and
Sub jointly and severally represent and warrant to the Company and the
Securityholders as follows (with the understanding that the Company and the
Securityholders are relying upon such representations and warranties in
entering into and performing their respective obligations under this
Agreement):
(a) ORGANIZATION, GOOD STANDING AND OTHER MATTERS. Each
of Parent and Sub is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation,
has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified to do business as a foreign corporation and in good standing to
conduct business in each jurisdiction in which the business it is conducting,
or the operation, ownership, or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure
so to qualify would materially impair the ability Parent and Sub to
consummate the transactions contemplated in this Agreement. All of the
issued and outstanding capital stock of Sub is owned directly by Parent free
and clear of any Lien of any kind. Parent and Sub have heretofore made
available to the Company complete and correct copies of their respective
Certificates of Incorporation and Bylaws, as in effect on the date of this
Agreement.
31
(b) AUTHORITY. Each of Parent and Sub has all requisite
power and authority to enter into this Agreement and the other Transaction
Documents to which they are a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of such
Transaction Documents by each of Parent and Sub, as applicable, and the
consummation of the transactions contemplated herein and therein have been
respectively duly authorized by all necessary corporate action on the part of
Parent and Sub, including approval by their respective Boards of Directors.
This Agreement has been, and the other Transaction Documents to which either
of Parent or Sub will be a party have been, or upon execution and delivery
will be, duly executed and delivered by each of Parent and Sub, as
applicable, and, assuming that such Transaction Documents constitute the
valid and binding agreement of the other parties thereto, constitute, or upon
execution and delivery will constitute, the valid and binding obligations of
Parent and Sub, as applicable, enforceable against Parent and Sub in
accordance with their respective terms and conditions, except that the
enforcement hereof and thereof may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(c) NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The
execution and delivery by Parent and Sub of the Transaction Documents to
which each of them is a party do not, and the performance by Parent and Sub
of the transactions contemplated herein and therein will not, subject to
obtaining the consents, approvals, authorizations, and permits and making the
filings described in this Section 3.2(c), (i) violate, conflict with, or
result in any breach of any provisions of the Certificate of Incorporation or
Bylaws of Parent or Sub, (ii) violate, conflict with, or result in a
violation or breach of, or constitute a default (with or without due notice
or lapse of time or both) or require the consent of any Person under, any of
the terms, conditions, or provisions of any loan or credit agreement, note,
bond, mortgage, indenture, or deed of trust, or any license, lease,
agreement, or other instrument or obligation to which Parent or Sub is a
party or by which Parent or Sub or any material portion of their respective
assets is bound, or (iii) violate any order, writ, judgment, injunction,
decree, statute, law, rule or regulation of registration, declaration, or
filing with any Governmental Entity applicable to Parent or Sub or by which
they or any portion of their respective assets is bound, except, with respect
to clauses (i), (ii) and (iii), such violations, conflicts, breaches or
defaults as would not materially interfere with the ability of Parent or Sub
to perform their obligations under this Agreement and the other Transaction
Documents to which either of them is a party or by which either of them is to
be bound. No Consent of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or Sub in
connection with the execution and delivery by Parent and Sub of this
Agreement and the other Transaction Documents to which either of them is a
party or the consummation of the transactions contemplated hereby or thereby,
except for (A) the filing of a premerger notification and report form by
Parent under the HSR Act; (B) the filing with the SEC of such reports under
and such other compliance with the Exchange Act and the rules and regulations
thereunder as may be required in connection with this Agreement and the
transactions contemplated hereby; (C) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware; (D) such filings and
approvals as may be required by any applicable state securities, "blue sky"
or takeover laws; (E) such filings in
32
connection with any Gains and Transfer Taxes; and (F) such other consents,
approvals, orders, authorizations, registrations, declarations, filings,
notices or permits the failure of which to obtain would not impair the
ability of Parent and Sub to perform the respective obligations under this
Agreement and the other Transaction Documents to which either of them is a
party.
(d) LITIGATION. There is no action, suit, judicial or
administrative proceeding pending or, to the Knowledge of Parent or Sub,
threatened against Parent or Sub relating to the transactions contemplated by
this Agreement or which, if adversely determined, would adversely affect the
ability of Parent or Sub to consummate the transactions contemplated by this
Agreement or to perform their respective covenants and agreements under this
Agreement.
(e) FINANCING. Parent has delivered to the Company a
true and complete executed copy of each of the Financing Commitments.
Assuming that the financing contemplated by the Financing Commitments is
consummated in accordance with the terms thereof, the funds to be borrowed
and/or provided thereunder will provide sufficient funds to (i) pay the
Merger Consideration and all related fees and expenses other than Company
Transaction Costs; (ii) repay the Debt of the Company and its Subsidiaries
under the Senior Credit Agreement; and (iii) to pay any amounts payable by
the Surviving Corporation or any of its Subsidiaries in connection with, or
as a result of, any tender offer or other offer to repay the Senior
Subordinated Notes that the Company, the Surviving Corporation or any of
their respective Subsidiaries is required to make as a result of the Merger
and the consummation of the transactions contemplated in the Transaction
Documents, and all related fees and expenses. Parent and Sub hereby
acknowledge that their obligations under this Agreement are not subject to
any conditions regarding their ability to obtain financing for the
transactions contemplated in this Agreement and in the other Transaction
Documents other than the condition set forth in Section 8.2(c).
(f) SURVIVING CORPORATION AFTER THE MERGER. Assuming the
representations and warranties of the Company contained in this Agreement are
true and accurate in all material respects immediately prior to the Effective
Time as if made as of such time, and assuming that immediately prior to the
Effective Time the Company has not failed to comply in any material respect
with any of its covenants under this Agreement, and assuming the Merger
Consideration constitutes fair value for the Common Stock and the Options, at
and immediately after the Effective Time, and after giving effect to the
Merger and the other transactions contemplated in connection therewith (and
any changes in the Surviving Corporation's assets and liabilities as a result
thereof) the Surviving Corporation: (i) will be solvent (in that both the
fair value of its assets will not be less than the sum of its debts and that
the present fair saleable value of its assets will not be less than the
amount required to pay its probable liability on its debts as they become
absolute and matured); (ii) will have adequate capital with which to engage
in its business; and (iii) will not have incurred and will not plan to incur
debts beyond its ability to pay as they become absolute and matured. The
Securityholders and the Representative are intended third party beneficiaries
of the representations and warranties made by Parent and Sub in this Section
3.2(f).
33
(g) BUSINESS OF PARENT AND SUB. Neither Parent nor Sub
has conducted any business activities other than in connection with this
Agreement and the transactions to be consummated in connection with the
Merger and the other transactions contemplated in the Transaction Documents.
Except for the contract rights of Parent and Sub under this Agreement and the
other Transaction Documents, Parent's contract rights under the Financing
Commitments and the capital stock of Sub which is owned by Parent, neither
Parent nor Sub has any assets. Except for Taxes not yet due and payable, the
liabilities and obligations of Parent and Sub under this Agreement and the
liabilities and obligations of Parent under the Financing Commitments,
neither Parent nor Sub has any liability of any kind, whether accrued,
absolute, fixed, contingent or otherwise.
3.3 REPRESENTATIONS AND WARRANTIES OF SECURITYHOLDERS. Each
Securityholder, severally as to such Securityholder and not jointly,
represents and warrants to Parent and Sub as follows (with the understanding
that Parent and Sub are relying on such representations and warranties in
entering into and performing their respective obligations under this
Agreement):
(a) OWNERS OF SHARES AND WARRANTS. As of the date of
this Agreement, such Securityholder is the holder of record of and
beneficially owns that number of shares of Common Stock set forth opposite
such Securityholder's name on SCHEDULE II hereto, if applicable, and such
Securityholder is the holder of record of and beneficially owns Options to
purchase that number of shares of Common Stock set forth opposite such
Securityholder's name on SCHEDULE III hereto, if applicable. As of the
Closing Date, such Securityholder will be the holder of record of and will
beneficially own that number of shares of Common Stock set forth opposite
such Securityholder's name on SCHEDULE II hereto, if applicable, and as of
the Closing Date such Securityholder will be the holder of record of and
beneficially own Options to purchase the number of shares of Common Stock set
forth opposite such Securityholder's name on SCHEDULE III hereto, if
applicable, in each case free of any Liens other than those set forth on
SCHEDULE 3.3(a).
(b) AUTHORITY. (i) If such Securityholder is an entity
(i.e., not a natural person), such Securityholder has all requisite power and
authority to execute this Agreement and the other Transaction Documents to
which it is a party and to perform its obligations hereunder and thereunder,
and the execution, delivery and performance by such Securityholder of its
obligations under this Agreement and the other Transaction Documents to which
it is a party have been duly authorized by all necessary action on behalf of
such Securityholder. If such Securityholder is a natural person, such
Securityholder has full legal capacity to execute and deliver this Agreement
and the other Transaction Documents to which such Securityholder is a party
and to perform the obligations of such Securityholder hereunder and
thereunder.
(ii) This Agreement has been, and the other
Transaction Documents to which such Securityholder will be a party have been,
or upon execution and delivery will be, duly executed and delivered by such
Securityholder, as applicable, and, assuming that such Transaction Documents
constitute the valid and binding agreement of the other parties thereto,
constitute, or upon execution and delivery will constitute, the valid and
binding obligations of such Securityholder,
34
enforceable against such Securityholder in accordance with their respective
terms and conditions, except that the enforcement hereof and thereof may be
limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect
relating to creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or
in equity).
(c) NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The
execution and delivery of this Agreement and the other Transaction Documents
to which it is a party by such Securityholder do not, and the performance by
such Securityholder of his, her or its obligations hereunder or thereunder
will not, subject to obtaining the consents, approvals, authorizations, and
permits and making the filings described in this Section or otherwise
described on SCHEDULE 3.3(c), (i) if such Securityholder is an entity (i.e.,
not a natural person), violate, conflict with or result in any violation or
breach of any provision of such Securityholder's certificate of
incorporation, bylaws or other similar documents, (ii) violate, conflict
with, or result in any violation or breach of, constitute a default (with or
without due notice or lapse of time or both) or require the consent of any
Person under, or give any party the right to terminate or accelerate any
obligation, or give rise to the creation of any Lien upon the shares of
Common Stock or Options owned by such Securityholder under, any of the terms,
conditions, or provisions of any agreement, instrument, contract or
obligation to which such Securityholder is a party or by which it may be
bound, or (iii) violate any order, writ, judgment, injunction, decree,
statute, law, rule, or regulation of any Governmental Entity binding upon
such Securityholder, except, with respect to clauses (i), (ii) and (iii),
such violations, conflicts, breaches or defaults as would not materially
interfere with such Securityholder's ability to perform his, her or its
obligations under this Agreement and the other Transaction Documents to which
such Securityholder is to be a party or by which such Securityholder is to be
bound. No Consent of or registration, declaration, or filing with any
Governmental Entity or any other Person is required by such Securityholder in
connection with the execution and delivery of any Transaction Documents by
such Securityholder or the consummation of the transactions contemplated
hereby or thereby, except for (A) the filing of a premerger notification
report and all other filings required under the HSR Act and the expiration or
termination of any waiting period in connection therewith, (B) applicable
requirements, if any, of the Securities Act and the Exchange Act and state
securities or blue sky laws and (C) such other consents, approvals, orders,
authorizations, registrations, declarations, filings, notices or permits the
failure of which to obtain would not impair the ability of such
Securityholder to perform his, her or its obligations under this Agreement
and the other Transaction Documents to which such Securityholder is a party.
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF THE COMPANY. Except as contemplated by or
otherwise permitted under this Agreement or described in SCHEDULE 4.1 or to
the extent that Parent shall otherwise consent in writing, from the date of
this Agreement until the Closing, the Company covenants and agrees with
Parent that the Company shall not, and shall not permit any of its
Subsidiaries to:
35
(a) conduct its business other than in compliance in all
material respects with all Applicable Laws and in the ordinary course
consistent with past practices of the Company; or
(b) fail to use commercially reasonable efforts to (i)
preserve substantially intact the Company's and each of its Subsidiaries'
present business organization, (ii) keep available the services of any
executive officer of the Company or any of its Subsidiaries, and (iii)
preserve its present relationships with customers, suppliers and others
having business dealings with it; or
(c) fail to use commercially reasonable efforts to (i)
maintain the material tangible assets of the Company and each of its
Subsidiaries in their current physical condition, except for ordinary wear
and tear (any compliance with this Section 4.1(c) shall not be deemed to be a
breach of Section 4.1(h)) and (ii) maintain its rights to the Intellectual
Property such that the Intellectual Property may continue to be used as
currently used by the Company and its Subsidiaries in the conduct of their
respective businesses; or
(d) except for amendments, terminations or non-renewals
in the ordinary course of business and consistent with past practices of the
Company, amend, terminate or fail to use its commercially reasonable efforts
to renew any Material Contract, Company Permit or Permit; or
(e) merge or consolidate with or into any other legal
entity, dissolve or liquidate; or
(f) (i) adopt or amend any Employee Benefit Plan or
employment agreements to which the Company or any of its Subsidiaries is a
party, (ii) increase in any manner the aggregate compensation or fringe
benefits of any director or executive employee of the Company or any of its
Subsidiaries, excluding any increases required to be made pursuant to
contractual obligations of the Company existing as of the date of this
Agreement identified on SCHEDULE 3.1(s), or (iii) except in the ordinary
course consistent with past practices of the Company, increase in any manner
the aggregate compensation or fringe benefits of any non-executive employee
of the Company or any of its Subsidiaries, or
(g) purchase, acquire by lease or otherwise acquire any
assets except for (i) capital expenditures in the ordinary course of business
and consistent with past practices of the Company and, in any event, in an
aggregate amount not to exceed $650,000 and (ii) the acquisition of raw
materials and supplies in the ordinary course of business and consistent with
past practices of the Company;
(h) sell or otherwise dispose (including by lease) of any
assets except in the ordinary course of business and consistent with past
practice; provided, however, that even if in the ordinary course of business
and consistent with past practices, the Company shall not (i) sell or
otherwise dispose (including by lease) of any assets (other than sales of
inventory or surplus or obsolete equipment in the ordinary course of business
and consistent with past practices), whether
36
in one or more transactions, which have an aggregate fair market value in
excess of $250,000 or (ii) write down or write off any assets other than in
the ordinary course and consistent with past practices; or
(i) mortgage, pledge, or subject to any Lien, other than
Permitted Liens, any of its assets; or
(j) except as required by GAAP, by Applicable Law or by
accounting rules or Regulation S-X as promulgated under the Securities Act,
change any of the accounting principles or practices or credit criteria used
by the Company or its Subsidiaries; or
(k) pay, discharge, or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in the ordinary course of business consistent with
past practices of the Company, or fail to pay or otherwise satisfy (except if
being contested in good faith) any accounts payable, liabilities or current
obligations when due and payable other than on a basis, and within the time,
consistent with past practices; or
(l) except for the issuance of shares of capital stock of
the Company issuable upon the exercise of any Options outstanding on the date
of this Agreement, issue, sell, pledge, dispose of, encumber or deliver
(whether through the issuance or granting of any options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any securities convertible into or exercisable or exchangeable for
shares of stock of any class (except for pledges of capital stock or
securities under the Senior Credit Agreement and other than the issuance of
certificates in replacement of lost certificates); or
(m) change or amend its charter documents or bylaws; or
(n) except under the Senior Credit Agreement for working
capital purposes in the ordinary course consistent with past practices of the
Company, and except for current liabilities within the meaning of GAAP
incurred in the ordinary course of business, incur or assume any Debt,
assume, guarantee, endorse, or otherwise become liable or responsible for the
obligations of any other person (other than endorsements of checks in the
ordinary course) or make any loans, advances or capital contributions to, or
investments in, any person (other than among the Company and its Subsidiaries
and among such Subsidiaries, and other than advances to officers, directors
and employees for travel and related business expenses in the ordinary course
of business consistent with past practices of the Company); or
(o) make any settlement of or compromise any Tax
liability, change in any material respect any Tax election, Tax practice or
Tax method of accounting or make any new Tax election or adopt any new Tax
practice or Tax method of accounting; or
(p) engage in any transactions with any of its Affiliates
(other than among the Company and its Subsidiaries and among such
Subsidiaries) other than (i) transactions approved by
37
Parent in writing or (ii) transactions with Affiliates pursuant to and in
accordance with the contracts, agreements or arrangements disclosed on
SCHEDULE 3.1(s), as in effect on the date of this Agreement, including
without limitation the Monitoring and Oversight Agreement and the Financial
Advisory Agreement; or
(q) split, combine, divide, distribute or reclassify any
shares of its capital stock, declare, pay or set aside for payment any
dividend or other distribution in respect of its capital stock, or directly
or indirectly, redeem, purchase or otherwise acquire any shares of its
capital stock or other securities; or
(r) change its existing practices and procedures with
respect to the collection of accounts receivable and, except with respect to
good faith attempts consistent with past practices to obtain payment of a
past due receivable or, except in accordance with existing practices, a
contested receivable, offer to discount, write off, write down or issue a
credit against the amount of any outstanding receivable or extend any other
incentive (whether to the account debtor or any employee or third party
responsible for collection of receivables) to accelerate the collection
thereof; or
(s) change its existing practices and procedures with
respect to, or change the terms of, any warranty program except in the
ordinary course of business and consistent with past practice of the Company;
or
(t) agree to or make any commitment, orally or in
writing, to take any actions prohibited by this Section 4.1.
ARTICLE 5
ADDITIONAL COVENANTS OF THE COMPANY
AND THE SECURITYHOLDERS
5.1 ACCESS AND INFORMATION. (a) Until the Closing, provided that
Parent shall agree to be bound by any confidentiality provisions of the
Material Contracts, the Company shall, at the sole cost and expense of
Parent, afford to Parent, any lenders of Parent and their respective
representatives (including financial advisors, accountants and counsel)
reasonable access, in each case, during normal business hours, upon
reasonable prior notice and in such manner as will not unreasonably interfere
with the conduct of the business of the Company or any of its Subsidiaries,
to all properties, books, records (written and computer), Tax Returns,
lenders, counsel and accountants of the Company and each of its Subsidiaries
and all other information with respect to their respective businesses,
together with the opportunity, at the sole cost and expense of Parent, to
make copies of such books, records and other documents and to discuss the
business of the Company and each of its Subsidiaries with such officers,
directors and counsel for the Company as Parent deems reasonably necessary
for the purposes of familiarizing itself with the Company and each of the
Company's Subsidiaries, provided, that Parent shall not contact customers,
vendors or any
38
personnel of the Company or its Subsidiaries regarding the transactions
contemplated by this Agreement without the express prior consent of the
Company, which consent shall not be unreasonably withheld. All information
provided pursuant to this Agreement shall remain subject in all respects to
the Confidentiality Agreement until such time as the transactions
contemplated by this Agreement have been consummated at the Closing.
(b) Within 30 days after the end of each calendar month
until the Closing, the Company shall deliver to Parent monthly operating
statements for the Company and its Subsidiaries, taken as a whole (in a form
consistent with the monthly operating statements previously supplied to
Parent), prepared in the ordinary course of business for internal purposes.
Further, within 45 days after the end of each calendar quarter, the Company
shall deliver to Parent quarterly statements prepared in the ordinary course
for internal purposes.
5.2 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt written notice to Parent of (a) the occurrence, or failure to occur,
of any event of which it has Knowledge that has caused or would be reasonably
likely to cause any representation or warranty of the Company contained in
this Agreement to be untrue or inaccurate in any material respect as of the
date of this Agreement, (b) the failure of the Company to comply with or
satisfy in any material respect any covenant to be complied with by it
hereunder, and (c) the receipt by the Company or any of its Subsidiaries of
any written notice that any claim, action, judicial or administrative
proceeding, grievance or arbitration has been instituted against the Company
or any of its Subsidiaries. No such notification shall affect or amend the
representations or warranties of the parties or the conditions to their
respective obligations hereunder.
5.3 NOTIFICATION OF BREACH. If the Company obtains Knowledge of
a breach by Parent or Sub of a representation, warranty, covenant or
agreement made by Parent or Sub contained in this Agreement, the Company
shall promptly notify Parent of such breach; provided that such notification
or failure to give such notification shall not result in the waiver by the
Company of any of the Company's rights or remedies under this Agreement.
5.4 NO SOLICITATION OF TRANSACTIONS. The Company and each
Stockholder, severally and not jointly, hereby agree that they shall not,
directly or indirectly, through any Affiliate, officer, director,
stockholder, employee, agent, financial advisor, banker or other
representative or otherwise, solicit, initiate, or encourage the submission
of any proposal or offer from any person relating to any acquisition or
purchase of any equity interest in the Company or any of its Subsidiaries or
all or any material portion of the assets of the Company and its
Subsidiaries, taken as a whole, or any merger, consolidation, share exchange,
business combination or other similar transaction with the Company or any of
its Subsidiaries or participate in any negotiations regarding, or furnish to
any other person any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, facilitate, or encourage, any
effort or attempt by any other person to do or seek any of the foregoing.
The Company and each Stockholder, severally and not jointly, hereby agree
that they immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing.
39
5.5 BOARD OF DIRECTORS. At the Closing, the Company and each of
its Subsidiaries shall deliver to Parent letters from each director of the
Company and each such Subsidiary, pursuant to which such directors shall
resign from their positions on the Company's and each of is Subsidiaries'
board of directors.
5.6 TERMINATION OF CERTAIN AGREEMENTS. (a) The Company and each
Securityholder party to that certain Stockholders Agreement identified in
Item 5 on SCHEDULE 3.1(b) (the "Stockholders Agreement") hereby covenant and
agree with Parent and Sub that, at the Effective Time, the Stockholders
Agreement and all obligations of the parties thereunder shall automatically,
and without any further action by any party thereto, be terminated, and that
from and after such termination the Company and each such Securityholder
hereby release each other from any liability they would otherwise have to the
other thereunder.
(b) The Company and the Securityholders party to those
certain Buy-Sell Agreements identified in Item 6 on SCHEDULE 3.1(b) (the
"Buy-Sell Agreements") hereby covenant and agree with Parent and Sub that, at
the Effective Time, the respective Buy-Sell Agreements and all obligations of
the parties thereunder shall automatically, and without any further action by
any party thereto, be terminated, and that from and after such termination
the Company and each such Securityholder hereby release each other from any
liability they would otherwise have to the other thereunder.
ARTICLE 6
COVENANTS OF PARENT AND SUB
6.1 NOTIFICATION OF CERTAIN MATTERS. If Parent, Sub or any other
Affiliate of Parent receives an administrative or other order or notification
relating to any violation or claimed violation of the rules and regulations
of any Governmental Entity, that could affect the ability of Parent or Sub to
consummate the transactions contemplated hereby, Parent and Sub shall
promptly notify the Company thereof and shall use their respective
commercially reasonable efforts to take such steps as are necessary to remove
any such impediment to the transactions contemplated by this Agreement. In
addition, Parent and Sub shall give to the Company prompt written notice of
(a) the occurrence, or failure to occur, of any event of which either of them
has Knowledge that has caused or that would be likely to cause any
representation or warranty of Parent or Sub contained in this Agreement to be
untrue or inaccurate in any material respect as of the date of this
Agreement, (b) the failure of Parent or Sub to comply with or satisfy in any
material respect any covenant to be complied with by it hereunder, and (c)
the receipt by Parent or Sub of any written notice that any claim, action,
judicial or administrative proceeding, grievance or arbitration has been
instituted against Parent or Sub which would reasonably be expected to
interfere with the ability of Parent or Sub to perform their obligations
under this Agreement and the other Transaction Documents. No such
notification
40
shall affect or amend the representations or warranties of the parties or the
conditions to their respective obligations hereunder.
6.2 EMPLOYEE MATTERS. (a) Parent shall take such action as may
be necessary so that on and after the Effective Time and for one year
thereafter, directors, officers and employees of the Company and its
Subsidiaries immediately prior to the Effective Time shall be provided
employee benefits, plans and programs (including but not limited to incentive
compensation, deferred compensation, pension, life insurance, welfare, profit
sharing, 401(k), severance, salary continuation and fringe benefits and
excluding non-retirement equity-based compensation arrangements) which, in
the aggregate, are no less favorable than those made available by the Company
and its Subsidiaries to such directors, officers and employees immediately
prior to the Effective Time. For purposes of eligibility to participate and
vesting in all benefits provided by Parent to such directors, officers and
employees, the directors, officers and employees of the Company and its
Subsidiaries will be credited with their years of service with the Company
and its Subsidiaries and prior employers to the extent service with Parent
and its Subsidiaries and prior employers is taken into account under the
plans of Parent and its Subsidiaries. The eligibility of any director,
officer or employee of the Company and its Subsidiaries to participate in any
welfare benefit plan or program of Parent shall not be subject to any
exclusions for any pre-existing conditions if such individual has met the
participation requirements of similar benefit plans and programs of the
Company and its Subsidiaries. All individuals eligible to participate in any
plan or arrangement contemplated above shall be immediately eligible to
participate in the similar plan or arrangement maintained by the Parent or
its Subsidiaries (or the same plan or arrangement if still maintained).
Amounts paid before the Effective Time by directors, officers and employees
of the Company and its Subsidiaries under any health plans of the Company or
its Subsidiaries shall, after the Effective Time, be taken into account in
applying deductible and out-of-pocket limits applicable under the health
plans of Parent provided as of the Effective Time to the same extent as if
such amounts had been paid under such health plans of Parent.
Notwithstanding the foregoing, nothing in this Section 6.2(a) shall require
Parent to provide to employees whose employment relationship with the Company
or one of its Subsidiaries is governed by a collective bargaining agreement a
level of benefits under one of the plans or programs contemplated above which
is greater than the level of benefits required under the collective
bargaining agreement covering the applicable employee's employment
relationship.
(b) For a period of at least one year after the Effective
Time, Parent shall either (i) cause the Surviving Corporation to continue to
provide benefits to the employees of the Company pursuant to the Company
401(k) Plan, or (ii) in accordance with Applicable Laws, maintain, adopt or
cause the Surviving Corporation to adopt, or participate in, a cash or
deferred arrangement which meets the requirements of Section 401(k) of the
Code. Any provisions of benefits pursuant to this Section 6.2(b) shall also
satisfy the requirements of 6.2(a).
(c) Subject to the other provisions set forth in this
Section 6.2, after the Closing Date and subject to Applicable Law and the
terms of any Employee Benefit Plan, Parent may amend, modify, or terminate
any Employee Benefit Plan in existence prior to the Closing. Except as
specifically provided herein (including in Section 6.6 hereof), Parent, the
Surviving Corporation and
41
each of their respective Subsidiaries are and shall remain liable for, and
Parent, the Surviving Corporation and each of their respective Subsidiaries
shall be responsible for and shall promptly discharge, all liabilities,
duties and claims (by or to any of the Company's or its Subsidiaries'
employees, former employees, any beneficiary under any Employee Benefit Plan,
any Governmental Entity or otherwise) arising out of or relating to the
employment relationship between the Company or any of its Subsidiaries and an
employee or former employee, whether made to or imposed upon Parent, Sub, the
Company, the Surviving Corporation, any of their respective Subsidiaries or
any Securityholder (or any Affiliate thereof), including, without limitation,
liabilities, duties and claims: (i) for deferred compensation, incentive
compensation, retirement benefits, health and life benefits, severance
arrangements and benefits, disability benefits and other fringe benefits
under any Employee Benefit Plan; (ii) relating to continuation health
coverage pursuant to Section 4980B of the Code and Title I, Subtitle B, Part
6 of ERISA; (iii) for unemployment and workers' compensation or similar
benefits; and (iv) to file any and all annual reports, filings or notices
that may be required to be filed with Governmental Entities or provided to
participants and beneficiaries after the Closing.
(d) Notwithstanding the immediately preceding sentence,
Parent, Sub, the Company, the Surviving Corporation and each of their
respective Subsidiaries hereby agree to indemnify each of the Securityholders
and their respective, officers, directors, employees, consultants,
stockholders and Affiliates for, and to hold each of them harmless, from and
against, all damages, losses, claims, liabilities, penalties, costs and
expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating and preparing for any litigation or proceeding)
which any of them may suffer by reason of or in connection with any claim,
proceeding or suit brought against any of them under the Worker Adjustment
Retraining and Notification Act, or any local, state, federal or foreign law,
which relates to actions taken by Parent, Sub, the Company, the Surviving
Corporation or any of their respective Subsidiaries or Affiliates at, or at
any time after, the Closing with regard to any site of employment or one or
more facilities or operating units within any site of employment of the
Company or any of its Subsidiaries.
6.3 ACCESS TO INFORMATION. From and after the Closing Date,
Parent shall (and shall cause the Surviving Corporation and each of its
Subsidiaries and other Affiliates to), during normal business hours and upon
reasonable prior notice and in such a manner as will not unreasonably
interfere with the conduct of the business of Parent or any of its
Subsidiaries, make available and provide the Representative and each former
Securityholder and their respective representatives (including, without
limitation, counsel and independent auditors) with access to the facilities
and properties of the Surviving Corporation and each of its Subsidiaries and
to all information, files, documents and records (written and computer)
relating to the Surviving Corporation or its Subsidiaries or any of their
businesses or operations for any and all periods prior to or including the
Closing Date which they may require with respect to any claim, dispute,
action, cause of action, investigation or proceeding of any kind by or
against any Person, including such claim, dispute, action, cause of action,
investigation or proceeding which could reasonably be expected to result in a
claim by a Buyer Indemnified Party for Buyer Indemnified Costs, and shall
(and shall cause the Surviving Corporation and each of its Subsidiaries to)
cooperate fully with the Representative, such Securityholders and their
respective representatives (including, without limitation, counsel and
42
independent auditors) in connection with the foregoing, at the
Representative's, such Securityholders' or their respective representatives',
sole cost and expense, including, without limitation, by making tax,
accounting and financial personnel and other appropriate employees and
officers of the Surviving Corporation and each of its Subsidiaries available
to the Representative, such Securityholders and their respective
representatives (including, without limitation, counsel and independent
auditors). In addition, following the Closing, the Representative, the
Securityholders and their respective representatives shall be given the
opportunity to review, comment upon and suggest changes or corrections to any
Tax Returns, reports and declarations which include the Company or any of its
Subsidiaries prepared by Parent, Sub, the Surviving Corporation or any
Affiliate thereof, including without limitation the Company and its
Subsidiaries (and the work papers used in the preparation thereof) which
relate to or include any period or portion thereof ending on or before the
Closing Date (or periods beginning prior to the Closing Date and ending
subsequent thereto, if any), in each case prior to the filing thereof (but in
no event less than 15 days prior to such filing). Parent and each Person who
receives information pursuant to this Section 6.3 shall work together in good
faith to establish a reasonable agreement relating to the confidentiality of
all information provided pursuant to this Section 6.3.
6.4 SOLVENCY LETTER.
(a) Parent shall deliver to the Board of Directors of the
Company at the Closing a letter addressed to the Company and the Company's
Board of Directors (the "Solvency Letter") from an independent third party
selected by Parent and reasonably satisfactory to the Company (the
"Appraiser") attesting that, immediately after the Effective Time and after
giving effect to the Merger and the other transactions contemplated in
connection therewith (and any changes in the Surviving Corporation's assets
and liabilities as a result thereof), the Surviving Corporation: (i) will be
solvent (in that both the fair value of its assets will not be less than the
sum of its debts and that the present fair saleable value of its assets will
not be less than the amount required to pay its probable liability on its
debts as they become absolute and matured); (ii) will have adequate capital
with which to engage in its business; and (iii) will not have incurred and
does not plan to incur debts beyond its ability to pay as they become
absolute and matured, based upon (A) the proposed financing structure for the
Merger (B) certain other financial information to be provided to the
Appraiser by Parent and the Company, and (C) the assumption that the Merger
Consideration constitutes fair value for the Outstanding Shares and the
Options. Subject to the foregoing, the Solvency Letter shall be in form and
substance reasonably satisfactory to the Company. Except with the prior
written consent of the Company, Parent will not consummate the Merger unless
and until the Company and its Board of Directors shall have received the
Solvency Letter.
(b) Parent will request the Appraiser to deliver a form
of the Solvency Letter as promptly as practicable but in no event later than
five (5) Business Days prior to the scheduled Closing Date. The parties
agree to cooperate with the Appraiser in connection with the preparation of
the Solvency Letter, including, without limitation, providing the Appraiser
with any information reasonably available to them necessary for the
Appraiser's preparation of such letter.
43
6.5 REPAYMENT OF DEBT. At or prior to the Closing, Parent shall
cause all Debt outstanding under the Senior Credit Agreement to be repaid,
and all fees, expenses and other amounts that may be payable in connection
with such repayment. Notwithstanding the immediately preceding sentence,
Parent may cause all Debt under the Senior Credit Agreement to be refinanced
in full or may obtain waivers to any breaches of the Senior Credit Agreement
that the transactions contemplated in the Transaction Documents would cause.
Parent, Sub and the Surviving Corporation hereby covenant and agree that they
shall cause the Surviving Corporation to repay, or to effect any tender
offers or other offers to repay, the Senior Subordinated Notes if such
repayment, tender offer or other offer is required under the terms of the
Indenture as a result of the consummation and financing of the Merger and the
other transactions contemplated in this Agreement and the other Transaction
Documents.
6.6 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
(a) The certificate of incorporation and by-laws of the
Surviving Corporation shall contain provisions no less favorable with respect
to indemnification than are set forth in the certificate of incorporation and
by-laws of the Company, as in effect on the date hereof, which provisions
shall not be amended, repealed or otherwise modified for a period of six
years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who at any time prior to the Effective Time
were directors, officers, employees or agents of the Company or any of its
Subsidiaries.
(b) From and after the Effective Time and without in any
way releasing the Company from any of its obligations thereunder, the
Surviving Corporation will perform, and Parent will cause the Surviving
Corporation to perform, the Company's obligations under the indemnification
agreements identified in SCHEDULE 6.6(b) to the same extent as if they were
the Company and had executed such agreements. The Company may enter into
substantially similar indemnification agreements with other directors of the
Company.
(c) The provisions of this Section 6.6 are intended to be
for the benefit of, and shall be enforceable by, each of the Seller
Indemnified Parties, their heirs and their personal representatives and shall
be binding on all successors and assigns of Parent, Sub, the Company and the
Surviving Corporation.
6.7 NOTIFICATION OF BREACH. If Parent or Sub obtains Knowledge
of a breach by the Company of a representation, warranty, covenant or
agreement made by the Company contained in this Agreement, Parent shall
promptly notify the Company of such breach; provided that such notification
or failure to give such notification shall not result in the waiver by Parent
or Sub of any of their respective rights or remedies under this Agreement.
6.8 CONDUCT OF BUSINESS. Each of Parent and Sub hereby covenant
and agree with the Company and the Securityholders that from the date of this
Agreement through the Closing Date, it will not conduct any business
activities other than those undertaken in connection with the Merger
44
and the other transactions contemplated in this Agreement, the other
Transaction Documents and the Financing Commitments.
ARTICLE 7
MUTUAL COVENANTS
7.1 GOVERNMENTAL CONSENTS. Promptly following the execution of
this Agreement, but in no event later than five Business Days following the
Date of this Agreement, the parties shall file, or cause to be filed by their
respective "ultimate parent entities," with the FTC and the DOJ the
notifications and other information (if any) required to be filed under the
HSR Act with respect to the transactions contemplated in the Transaction
Documents. Promptly following the execution of this Agreement, the Company
and Parent shall promptly proceed to prepare and file with the appropriate
Governmental Entities such additional requests, reports, or notifications as
may be required in connection with this Agreement and shall diligently and
expeditiously prosecute, and shall cooperate fully with each other in the
prosecution of, such matters. Without limiting the foregoing, promptly
following the execution of this Agreement, the Company and Parent shall use
their commercially reasonable efforts to (a) cause, and shall request the FTC
and the DOJ to cause, all applicable waiting periods under the HSR Act to
expire or be terminated as of the earliest possible date, (b) make all
necessary filings, and (c) thereafter, make any other required submissions
with respect to the transactions contemplated hereby under the Securities
Act, the Exchange Act and the rules and regulations thereunder and any other
applicable federal or state securities laws. The failure by the Company or
Parent to use commercially reasonable efforts to timely file or diligently
prosecute its portion of any such application shall be a material breach of
this Agreement.
7.2 BROKERS OR FINDERS. Except for the previously disclosed fees
payable by the Company to Xxxxxxx Xxxxx Xxxxxx and CIBC Xxxxxxxxxxx, which
fees shall be paid in accordance with Section 2.11, the Company and each
Securityholder represents and warrants to Parent and Sub that no agent,
broker, investment banker, or other person engaged by or on behalf of the
Company, any such Securityholder or any of their respective Affiliates is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee payable by Parent, Sub or the Company in connection with any of
the transactions contemplated by this Agreement. Each of Parent and Sub
represents and warrants to the Company that neither Parent, Sub nor any
Affiliate of Parent has engaged any broker, investment banker or other person
that will be entitled to any broker's or finder's fee or any other commission
or similar fee from the Company or any Securityholder in connection with any
of the transactions contemplated by this Agreement.
7.3 INVESTIGATION AND AGREEMENT BY PARENT AND SUB; NO OTHER
REPRESENTATIONS OR WARRANTIES.
(a) Each of Parent and Sub acknowledges and agrees that
it has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning,
45
the Company and its Subsidiaries and their businesses and operations, and
Parent and Sub have requested such documents and information from the Company
as Parent and Sub consider material in determining whether to enter into this
Agreement and to consummate the transactions contemplated in this Agreement
and in the other Transaction Documents. Parent and Sub acknowledge and agree
that they have had an opportunity to ask all questions of and receive answers
from the Company with respect to any matter Parent and Sub consider material
in determining whether to enter into this Agreement and to consummate the
transactions contemplated in this Agreement and in the other Transaction
Documents. In connection with Parent's and Sub's investigation of the
Company and its Subsidiaries and their businesses and operations, Parent, Sub
and their respective representatives have received from the Company or its
representatives certain projections and other forecasts for the Company and
its Subsidiaries and certain estimates, plans and budget information. Parent
and Sub acknowledge and agree that there are uncertainties inherent in
attempting to make such projections, forecasts, estimates, plans and budgets;
that Parent and Sub are familiar with such uncertainties; that Parent and Sub
are taking full responsibility for making their own evaluations of the
adequacy and accuracy of all estimates, projections, forecasts, plans and
budgets so furnished to it or its representatives; and that Parent and Sub
will not (and will cause all of their respective Subsidiaries or other
Affiliates or any other Person acting on their behalf to not), in the absence
of fraud, assert any claim or cause of action against any of the Company's
direct or indirect partners, directors, officers, employees, agents,
stockholders, Affiliates, consultants, counsel, accountants, investment
bankers or representatives with respect thereto, or hold any such other
person liable with respect thereto.
(b) Each of Parent and Sub agrees that, except for the
representations and warranties made by the Company that are expressly set
forth in Section 3.1 of this Agreement and the representations and warranties
made by the Securityholders that are expressly set forth in Section 3.3 of
this Agreement, neither the Company, nor any of the Securityholders nor any
of their respective Affiliates has made and shall not be deemed to have made
to Parent, Sub or to any of their respective representatives or Affiliates
any representation or warranty of any kind. Without limiting the generality
of the foregoing, each of Parent and Sub agree that neither the Company, nor
any of the Securityholders nor any of their respective Affiliates makes or
has made any representation or warranty to Parent, Sub or to any of their
respective representatives or Affiliates with respect to:
(i) any projections, forecasts, estimates, plans
or budgets of future revenues, expenses or expenditures, future results of
operations (or any component thereof), future cash flows (or any component
thereof) or future financial condition (or any component thereof) of the
Company or any of its Subsidiaries or the future business, operations or
affairs of the Company or any of its Subsidiaries heretofore or hereafter
delivered to or made available to Parent, Sub or their respective counsel,
accountants, advisors, lenders, representatives or Affiliates; and
(ii) any other information, statement or documents
heretofore or hereafter delivered to or made available to Parent, Sub or
their respective counsel, accountants, advisors, lenders, representatives or
Affiliates with respect to the Company or any of its Subsidiaries or the
business, operations or affairs of the Company or any of its Subsidiaries,
except to the extent and
46
as expressly covered by a representation and warranty made by the Company and
contained in Section 3.1 of this Agreement or a representation and warranty
made by any Securityholder and contained in Section 3.3 of this Agreement.
(c) The Company acknowledges and agrees that except for
the representations and warranties made by Parent or Sub as expressly set
forth in this Agreement, neither Parent, Sub nor any of their respective
Affiliates has made and shall not be construed as having made to the Company
or any Securityholder or to any Affiliate thereof any representation or
warranty of any kind.
7.4 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
of this Agreement, each of the Company, Parent and Sub will use its
commercially reasonable efforts to take, or to cause to be taken, all actions
and to do, or cause to be done, all things necessary or desirable under
Applicable Laws to consummate and to make effective the transactions
contemplated by this Agreement and the other Transaction Documents. If at
any time after the Closing Date, any further action is necessary to comply
with this Agreement and the other Transaction Documents, the parties to this
Agreement or their duly authorized representatives shall take all such action.
7.5 OPTION EXERCISE PRICES. Each of the Company, Parent, Sub and
the Securityholders hereby covenant and agree that, notwithstanding any other
provision set forth in this Agreement, (a) the Company and certain
Optionholders may agree to amend the terms of certain Options to lower the
exercise price per share of Common Stock for such Options, (b) any such
amendment shall not be a breach of any other term or provision of this
Agreement and shall not require the consent or waiver of any person other
than the Company and such Optionholder(s), and (c) each of the Company,
Parent, Sub and the Securityholders hereby release each other from any
liability they would otherwise have under this Agreement or otherwise solely
as a result of the execution and delivery of any such amendment.
7.6 OTHER MATTERS RELATING TO OPTIONS. Each of the Company,
Parent, Sub and the Securityholders hereby acknowledge and agree that Parent
and certain members of management of the Company and its Subsidiaries
("Management") may wish to reach an agreement pursuant to which all or any
portion of Management's Outstanding Shares or Options shall not convert into
the right to receive a portion of the Merger Consideration but may be
converted into the right to receive other consideration to be agreed upon
between Parent and such members of Management. Each of the Company, Parent,
Sub and the Securityholders hereby covenant and agree that if any such
amendments are entered into, provided that such amendments meet the
requirements set forth in the second proviso of Section 13.2, each of the
Company, Parent, Sub and the Securityholders will not assert any claim
against the other as a result of the execution and delivery of such amendment.
ARTICLE 8
CONDITIONS PRECEDENT
47
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective
obligations of the Company, Parent and Sub to effect the transactions
contemplated hereby are subject to the satisfaction on or prior to the
Closing Date of the following conditions:
(a) CONSENTS AND APPROVALS. All authorizations,
consents, orders, permits, licenses or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any Governmental
Entity necessary for the consummation of the transactions contemplated by the
Transaction Documents shall have been filed, occurred or been obtained and
the applicable waiting period under the HSR Act shall have expired or
terminated.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the transactions contemplated by
the Transaction Documents shall be in effect.
(c) NO ACTION. No action shall have been taken nor any
statute, rule or regulation shall have been enacted by any Governmental
Entity that makes the consummation of the transactions contemplated hereby
illegal.
8.2 CONDITIONS TO OBLIGATION OF PARENT AND SUB. The obligation
of Parent and Sub to effect the transactions contemplated hereby is subject
to the satisfaction of the following conditions unless waived, in whole or in
part, by Parent:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the Company set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date (except for any
representation or warranty that expressly relates to an earlier date, in
which case such representation or warranty shall have been true and correct
as of such earlier date) and the Company shall have performed in all material
respects the obligations required to be performed by it under this Agreement
on or prior to the Closing Date. Parent shall have received a certificate to
the foregoing effect signed on behalf of the Company by the chief executive
officer or by the chief financial officer of the Company.
(b) CLOSING DELIVERIES. All documents, instruments,
certificates or other items required to be delivered by the Company pursuant
to Section 9.2 shall have been delivered.
(c) SENIOR CREDIT MATTERS. Neither Parent nor Sub shall
have received written notice from Xxxxxxx Xxxxx Capital Corporation ("MLCC")
that MLCC will not provide the financing contemplated in the Xxxxxxx Xxxxx
Letter because (i) MLCC has determined that a material adverse change has
occurred and is continuing in the loan syndication or financial, banking or
capital market conditions generally from those in effect on the date of the
Xxxxxxx Xxxxx Letter that, individually or in the aggregate, in the
reasonable judgment of MLCC could materially adversely
48
affect the ability of MLCC to syndicate the Credit Facilities (as defined in
the Xxxxxxx Xxxxx Letter) or (ii) a banking moratorium has been declared by
federal or New York State banking authorities and shall be continuing.
8.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the transactions contemplated hereby is subject to the
satisfaction of the following conditions unless waived, in whole or in part,
by the Company:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Parent and Sub set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date (except for any
representation or warranty that expressly relates to an earlier date, in
which case such representation or warranty shall have been true and correct
as of such earlier date) and Parent and Sub shall have performed in all
material respects the obligations required to be performed by them under this
Agreement at or prior to the Closing Date. The Representative shall have
received a certificate to the foregoing effect signed on behalf of Parent and
Sub by the chief executive officer or by the chief financial officer of
Parent and Sub, respectively.
(b) CLOSING DELIVERIES. All documents, instruments,
certificates or other items required to be delivered by Parent or Sub
pursuant to Section 9.2 shall have been delivered.
ARTICLE 9
CLOSING
9.1 CLOSING. Subject to the satisfaction or waiver of the
conditions set forth in Article 8, the Closing will take place at the offices
of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, New York, New York, at 10:00 a.m.,
local time (or at such other place and time as Parent and the Company may
agree), on a date which shall be (i) the later to occur of the date that is
sixty (60) days after the date of this Agreement, or the fifth Business Day
after the day on which the last condition to Closing has been met or waived
as contemplated in Article 8, or (ii) such other date as may be selected by
Parent and the Company (the "Closing Date"). Notwithstanding the foregoing,
but subject to the satisfaction or waiver of the conditions set forth in
Article 8, if a Cure Period has not ended on or before the scheduled Closing
Date, the Closing Date shall be extended to the end of the Cure Period.
9.2 ACTIONS TO OCCUR AT CLOSING. (a) At the Closing, Parent and
the Surviving Corporation shall deliver the following:
(i) MERGER CONSIDERATION. To the Stockholders,
the Optionholders and the Exchange Agent, by wire transfer of immediately
available funds, the payments required by Parent to be made under Section
2.9, which payments shall, in the aggregate, equal the Merger
49
Consideration minus (x) the Escrow Amount, and (y) the Company Transaction
Costs Holdback Amount;
(ii) SOLVENCY LETTER. The Solvency Letter
executed by the Appraiser and addressed to the Company and the Board of
Directors of the Company;
(iii) ESCROW AMOUNT. The Escrow Amount to the
Escrow Agent by wire transfer of immediately available funds.
(iv) INDEMNIFICATION ESCROW AGREEMENT. To the
Representative, a counterpart of the Indemnification Escrow Agreement
executed by Parent.
(v) COMPANY TRANSACTION COSTS HOLDBACK AMOUNT.
To the Representative, the Company Transaction Costs Holdback Amount by wire
transfer of immediately available funds.
(vi) CERTIFICATES. The certificates described in
Section 8.3(a) and such other documentation as the Company and the
Representative may reasonably require in order to confirm that Parent has
performed its obligations under Section 6.5 hereof.
(b) At the Closing, the Company shall deliver to Parent
the following:
(i) CERTIFICATE. The certificate described in
Section 8.2(a) or another certificate or certificates with exceptions to the
matters contemplated in Section 8.2(a);
(ii) RESIGNATIONS. The resignations described in
Section 5.5;
(iii) RELEASE OF LIENS; RECEIPTS; PAYOUT LETTERS.
Evidence of the release of all Liens except Permitted Encumbrances and
executed receipts, payoff letters or similar documents executed by the
Company's lenders under the Senior Credit Agreement, each in form and
substance reasonably satisfactory to Parent;
(iv) TERMINATION AGREEMENT. To Parent, a fully
executed copy of the Termination Agreement; and
(v) INDEMNIFICATION ESCROW AGREEMENT. To Parent,
a counterpart of the Indemnification Escrow Agreement executed by the
Representative.
9.3 CERTIFICATE OF MERGER. Immediately following the Closing,
the Company shall execute the Certificate of Merger and file the Certificate
of Merger with the Secretary of State of the State of Delaware.
50
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
10.1 TERMINATION. This Agreement may be terminated prior to the
Closing, and the Merger may be abandoned at any time prior to the Effective
Time:
(a) by mutual consent of Parent and the Company; or
(b) by either Parent or the Company:
(i) if the terminating party is not then in
material breach of this Agreement and if there shall have been any breach by
a party (which has not been waived) of one or more of its representations or
warranties (as of the date when any such representation or warranty was
made), covenants or agreements set forth in this Agreement, which breach or
breaches (A) would give rise to the failure of a condition set forth in
Section 8.2(a) or 8.3(a), as applicable, and (B) shall not have been cured
within 30 days following receipt by the breaching party of written notice of
such breach, or such longer period in the event that such breach cannot
reasonably be expected to be cured within such 30-day period and such
nonterminating party is diligently pursuing such cure, but in no event later
than the Termination Date (the "Cure Period"); provided, however, that there
shall be no Cure Period for Parent's failure to obtain on or prior to the
Closing Date all funds necessary to consummate the Merger and the other
transactions contemplated in the Transaction Documents in accordance with the
terms and conditions hereof (which failure shall constitute a material breach
hereunder);
(ii) if a court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree, or ruling or taken
any other action (which order, decree, or ruling Parent and the Company
shall use their best efforts to lift), in each case permanently restraining,
enjoining, or otherwise prohibiting the transactions contemplated by the
Transaction Documents, and such order, decree, ruling, or other action shall
have become final and nonappealable; or
(iii) if the Closing shall not have occurred on or
before the date that is 65 days after the date of this Agreement (the
"Termination Date"); provided, however, that the right to terminate this
Agreement under this clause (iii) shall not be available to any party whose
breach of this Agreement has been the cause of, or resulted in, the failure
of the Closing to occur on or before such date.
The right of any party hereto to terminate this Agreement pursuant to
this Section 10.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers,
directors, employees, accountants, consultants, legal counsel, agents or
other representatives whether prior to or after the execution of this
Agreement. Notwithstanding anything in the foregoing to the contrary, a party
that is in material breach of this Agreement shall not be entitled to
terminate this
51
Agreement except, in the case of a default by the Company, with the consent
of Parent, or in the case of a default by Parent or Sub, with the consent of
the Company.
10.2 EFFECT OF TERMINATION. Termination of this Agreement
pursuant to Section 10.1 shall terminate all obligations of the parties to
each other hereunder, except for the obligations and agreements under Article
1 and Sections 10.2, 10.3 and 10.4 and Article 13. If this Agreement is
terminated by Parent as provided in Section 10.1, there shall be no liability
on the part of the Company or any Securityholder, except for liability
arising out of a willful breach by such party of this Agreement. If this
Agreement is terminated by the Company as provided in Section 10.1, there
shall be no liability on the part of Parent or Sub, except for (i) liability
arising out of a willful breach by Parent or Sub of this Agreement, and (ii)
liability arising out of the failure by Parent to obtain on or prior to the
Closing Date all funds necessary to consummate the Merger and the other
transactions contemplated in the Transaction Documents in accordance with
terms and conditions hereof and thereof; provided, however, that if such
failure is due to the failure to occur of the condition set forth in Section
8.2(c), there shall be no liability on the part of Parent or Sub.
10.3 RETURN OF DOCUMENTATION. Following a termination in
accordance with Section 10.1, Parent shall return all agreements, documents,
contracts, instruments, books, records, materials and all other information
of the Company or any of its Subsidiaries or Affiliates or any Securityholder
provided by any of them, or by any representative of any of them to Parent,
Sub or any of their Subsidiaries or other Affiliates or any representatives
of Parent, Sub or any of their Subsidiaries or other Affiliates in connection
with the transactions contemplated by this Agreement and the other
Transaction Documents, and the Company shall return all agreements,
documents, contracts, instruments, books, records, materials and all other
information of Parent or Sub provided by Parent, Sub or any representative
thereof to the Company or any of the Securityholders in connection with the
transactions contemplated by this Agreement.
10.4 SOLE AND EXCLUSIVE REMEDY. Following termination of this
Agreement, or if the Closing does not otherwise occur, each party hereto
acknowledges and agrees that such party's sole and exclusive remedy with
respect to any and all claims for any breach or liability under this
Agreement or otherwise relating to the subject matter of this Agreement and
the transactions contemplated hereby shall be limited to the right to
terminate this Agreement pursuant to Section 10.1 and the effect of any such
termination pursuant to Section 10.2 hereof; provided that nothing in this
Section 10.4 shall prevent Parent from electing to not terminate this
Agreement and to seek specific performance under Section 13.4.
ARTICLE 11
INDEMNIFICATION
11.1 INDEMNIFICATION OF BUYER INDEMNIFIED PARTIES.
52
(a) From and after the Closing Date and subject to the
provisions of this Article 11 (including without limitation Section 11.5),
each of the Securityholders hereby agrees, jointly and severally, to
indemnify and hold harmless the Buyer Indemnified Parties from and against
any and all Buyer Indemnified Company Costs.
(b) From and after the Closing Date and subject to the
provisions of this Article 11 (including without limitation Section 11.5),
each Securityholder severally and not jointly agrees to indemnify and hold
harmless the Buyer Indemnified Parties from and against any and all Buyer
Indemnified Securityholder Costs with respect to such Securityholder.
11.2 INDEMNIFICATION OF SELLER INDEMNIFIED PARTIES. From and
after the Closing Date and subject to the provisions of this Article 11
(including without limitation Section 11.5), each of Parent, Sub, the Company
and the Surviving Corporation hereby agree, jointly and severally, to
indemnify and hold harmless the Seller Indemnified Parties from and against
any and all Seller Indemnified Costs.
11.3 DEFENSE OF THIRD-PARTY CLAIMS. An Indemnified Party shall
give prompt written notice to any entity or person who is obligated to
provide indemnification under Section 11.1 or 11.2 (an "Indemnifying Party")
of the commencement or assertion of any action, proceeding, demand or claim
by a third party (collectively, a "third-party action") in respect of which
such Indemnified Party shall seek indemnification hereunder; provided,
however, that a Buyer Indemnified Party shall be deemed to have given such
notice to each Securityholder if such Buyer Indemnified Party gives such
written notice to the Representative as set forth in Section 13.8. Any
failure so to notify an Indemnifying Party shall not relieve such
Indemnifying Party from any liability that it, he, or she may have to such
Indemnified Party under this Article 11 unless, and only to the extent that,
the failure to give such notice materially and adversely prejudices such
Indemnifying Party. The Indemnifying Party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Indemnified Party shall be entitled, at its own
expense, to participate in the defense of such third-party action (provided,
however, that the Indemnifying Parties shall pay the attorneys' fees of the
Indemnified Party if (i) the employment of separate counsel shall have been
authorized in writing by any such Indemnifying Party in connection with the
defense of such third-party action, or (ii) the Indemnified Party's counsel
shall have advised the Indemnified Party in writing, with a copy delivered to
the Indemnifying Party, that there is a material conflict of interest that
would make it inappropriate to have common counsel);
(b) The Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into or making any
settlement, compromise, admission, or acknowledgment of the validity of such
third-party action or any liability in respect thereof if such settlement,
compromise, admission, or acknowledgment (i) would impose injunctive or other
equitable relief against the Indemnified Party, (ii) would give rise to
liability on the part of the
53
Indemnified Party, or (iii) could, in the reasonable opinion of the
Indemnified Party, have a material adverse effect on its business;
(c) No Indemnifying Party shall consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to each
Indemnified Party of a release from all liability in respect of such
third-party action; and
(d) At the Indemnified Party's option, the Indemnifying
Party shall not be entitled to control (but shall be entitled to participate
at its own expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement, compromise,
admission, or acknowledgment of any third-party action (i) as to which the
Indemnifying Party fails to assume the defense within a reasonable length of
time, (ii) to the extent the third-party action seeks an order, injunction,
or other equitable relief against the Indemnified Party which, if successful,
would materially adversely affect the business, operations, assets, or
financial condition of the Indemnified Party or (iii) if the amount in
controversy with respect to such action exceeds (x) the Escrow Amount if such
action is for Buyer Indemnified Company Costs, or (y) a Securityholder's
Maximum Securityholder Escrow Amount if such action is for Buyer Indemnified
Securityholder Costs; PROVIDED, HOWEVER, that the Indemnified Party shall
not, without the prior written consent of the Indemnifying Party, enter into
or make any settlement, compromise, admission, or acknowledgment of the
validity of such third-party action or any liability in respect thereof if
such settlement, compromise, admission or acknowledgment (A) would impose
injunctive or other equitable relief against the Indemnifying Party, (B)
would give rise to liability on the part of any Indemnifying Party, or (C)
could, in the reasonable opinion of the Indemnifying Party, have a material
adverse effect on its business.
The parties hereto shall extend reasonable cooperation in connection
with the defense of any third-party action pursuant to this Article 11 and,
in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings,
trials, and appeals as may be reasonably requested.
Parent and the Representative agree that, upon written request by an
Indemnified Party or Indemnifying Party who controls the defense of a
third-party action (other than a Buyer Indemnified Party with respect to a
Buyer Controlled Claim), Parent and the Representative shall give joint
written instructions to the Escrow Agent to release to such Indemnified Party
or Indemnifying Party a portion of the Escrow Amount equal to all court costs
and reasonable attorneys' fees and expenses incurred by such party, or for
which such party has received an invoice or similar request for payment, in
investigating and preparing for any litigation proceedings relating to such
third-party action.
11.4 DIRECT CLAIMS. In any case in which an Indemnified Party
seeks indemnification hereunder which is not subject to Section 11.3 because
no third-party action is involved (a "direct action"), the Indemnified Party
shall notify the Indemnifying Party in writing of any Indemnified
54
Costs which such Indemnified Party claims are subject to indemnification
under the terms hereof. Subject to the limitations set forth in Section
11.5(b), the failure of the Indemnified Party to exercise promptness in such
notification shall not amount to a waiver of such claim unless and only to
the extent that the resulting delay materially and adversely prejudices the
position of the Indemnifying Party with respect to such claim.
11.5 LIMITATIONS. The following provisions of this Section 11.5
shall limit the parties' indemnification obligations hereunder:
(a) MINIMUM LOSS. The Securityholders shall not be
required to indemnify a Buyer Indemnified Party for Buyer Indemnified Costs
unless and until the aggregate amount of all Buyer Indemnified Costs for
which all Buyer Indemnified Parties (taken together) are otherwise entitled
to indemnification pursuant to this Article 11 exceeds $500,000 (the "Minimum
Loss"). After the Minimum Loss is exceeded, Buyer Indemnified Parties shall
be entitled to be paid the entire amount of any Buyer Indemnified Costs in
excess of (but not including) the Minimum Loss, subject to the limitations on
recovery and recourse set forth in this Section 11.5. The parties agree that
if the aggregate amount of De Minimis Losses exceeds $1,000,000, and are
therefore deemed Buyer Indemnified Costs as set forth in Section 11.5(b), the
Buyer Indemnified Parties shall be entitled to be paid the entire amount of
any Buyer Indemnified Costs (including Buyer Indemnified Costs comprised of
De Minimis Losses) in excess of (but not including) the Minimum Loss, subject
to the limitations on recovery and recourse set forth in this Section 11.5.
Notwithstanding the foregoing, the parties agree that, if and when Buyer
Indemnified Costs exceed the Minimum Loss, the Minimum Loss shall be deemed
to be exceeded for all purposes of this Section 11.5(a).
(b) MINIMUM CLAIM. If any third-party action or direct
action results in any damages, losses, liabilities, charges, penalties, costs
and expenses (including court costs and reasonable attorneys' fees and
expenses incurred in investigating and preparing for any litigation or
proceeding) which in the aggregate do not exceed $10,000 ("De Minimis
Losses") such damages, losses, liabilities, charges, penalties, costs and
expenses shall not be deemed to be Buyer Indemnified Costs; provided, that if
the aggregate amount of all De Minimis Losses equals or exceeds $1,000,000,
all such De Minimis Losses shall be deemed Buyer Indemnified Costs.
(c) LIMITATION AS TO TIME. No Indemnifying Party shall
be liable for any Indemnified Costs pursuant to this Article 11 unless a
written claim for indemnification in accordance with Section 11.3 or 11.4 is
given by the Indemnified Party to the Indemnifying Party with respect thereto
on or before 5:00 p.m., Dallas, Texas time on the date that is 547 days after
the Closing Date (the "Expiration Date"), except that this time limitation
shall not apply to Title Claims, claims for a breach of the representations
and warranties set forth in Section 3.2(f) or claims contemplated in Section
13.16.
(d) LIABILITY CAP. Without limiting any of the foregoing
provisions of this Section 11.5, the parties hereby agree that the maximum
aggregate liability of the Securityholders under this Article 11 shall in no
event exceed the Escrow Amount, except that this limitation shall not apply
to Title Claims or claims contemplated in Section 13.16.
55
(e) RECOURSE AGAINST ESCROWED FUNDS. (i) For purposes of
this Agreement, a Securityholder's "Maximum Securityholder Escrow Amount"
shall mean, at any time, such Securityholder's PRO RATA share of the Escrow
Amount, as set forth in column C of SCHEDULE I, less any amounts previously
deducted from such Securityholder's Maximum Securityholder Escrow Amount in
accordance with this Section 11.5(e). In determining whether a Buyer
Indemnified Party is entitled to any amounts from a Securityholder with
respect to Buyer Indemnified Company Costs or Buyer Indemnified
Securityholder Costs, Section 11.5(a) and Section 11.5(b) shall apply.
Parent hereby covenants and agrees that, with respect to any claim by a Buyer
Indemnified Party against any Securityholder for Buyer Indemnified
Securityholder Costs payable under this Article 11 other than Title Claims
and claims contemplated in Section 13.16, the Buyer Indemnified Party shall
seek payment only out of the Escrow Amount for all amounts due to the Buyer
Indemnified Party from such Securityholder with respect to such claim in an
amount not to exceed such Securityholder's Maximum Securityholder Escrow
Amount. In the event of any claim by a Buyer Indemnified Party against a
Securityholder for Buyer Indemnified Securityholder Costs related to a Title
Claim or a claim contemplated in Section 13.16, the Buyer Indemnified Party
shall seek payment first out of the amount held by the Escrow Agent pursuant
to the Indemnification Escrow Agreement from time to time in an amount not to
exceed such Securityholder's Maximum Securityholder Escrow Amount and, if
such Securityholder's Maximum Securityholder Escrow Amount has been reduced
to zero pursuant to this Section 11.5(e), the Buyer Indemnified Party shall
be entitled, subject to the terms and conditions of this Agreement, to seek
payment directly from such Securityholder for all amounts remaining due to
the Buyer Indemnified Party from such Securityholder with respect to such
Title Claim or claim contemplated in Section 13.16. In no event shall the
Buyer Indemnified Party be entitled to be paid out of the Escrow Amount in
respect of claims against a Securityholder for Buyer Indemnified
Securityholder Costs an amount in excess of such Securityholder's Maximum
Securityholder Escrow Amount. In the event of any claim by a Buyer
Indemnified Party against one or more Securityholders for Buyer Indemnified
Company Costs, each Securityholder's Maximum Securityholder Escrow Amount
shall be reduced (but not below zero) by such Securityholder's PRO RATA
portion (based upon the initial Maximum Securityholder Escrow Amounts of such
Securityholders) of the amount paid out of the Escrow Amount in respect of
such claim (or, if applicable, such Securityholder's Maximum Securityholder
Escrow Amount shall be reduced (but not below zero) by that portion of such
Securityholder's Maximum Securityholder Escrow Amount as may be set forth in
written release instructions executed and delivered to the Escrow Agent by
the Representative on behalf of such Securityholder), and, to the extent that
the portion of such claim for which such Securityholder is liable exceeds
such Securityholder's Maximum Securityholder Escrow Amount as of the time of
payment of such claim out of the Escrow Amount, then the Buyer Indemnified
Party shall not be entitled to seek payment from such Securityholder directly
for such excess; provided that the Buyer Indemnified Party shall then be
entitled to seek the remaining amount of any Buyer Indemnified Company Costs
from such other Securityholders whose respective Maximum Securityholder
Escrow Amounts exceed zero, PRO RATA based upon the Maximum Securityholder
Escrow Amounts of such Securityholders at the time of payment of such Buyer
Indemnified Company Costs, until such amounts have been paid in full or each
Securityholder's Maximum Securityholder Escrow Amount has been reduced to
zero, after which the Buyer
56
Indemnified Party shall not be entitled to seek payment from any
Securityholders directly for such excess.
(ii) On the first anniversary of the Closing Date
(the "First Anniversary"), Parent and the Representative shall give joint
written instructions to the Escrow Agent (A) to release to the Representative
the excess, if any, of $10,000,000 over the sum (the "Claims Amount") of (x)
all amounts previously paid from the Escrow Amount to resolve claims for
Buyer Indemnified Costs, and (y) the amount of all unresolved claims then
properly made by Parent for Buyer Indemnified Costs as of the First
Anniversary, (B) if any unresolved claims with respect to which a portion of
the Claims Amount was retained shall be resolved prior to the Expiration
Date, to release to the Representative the excess, if any, of such portion of
the Claims Amount over the amount necessary to satisfy such claim; and (C) to
hold the balance of the Escrow Amount pursuant to the terms of the
Indemnification Escrow Agreement. From and after the First Anniversary, the
aggregate amount of the funds held by the Escrow Agent pursuant to the
Indemnification Escrow Agreement shall, for all purposes of this Agreement,
be the "Escrow Amount."
(f) BUYER CONTROLLED CLAIMS. The Securityholders shall
not be required to indemnify a Buyer Indemnified Party for Buyer Indemnified
Costs with respect to a Buyer Controlled Claim unless and until the aggregate
amount of all damages, losses, liabilities, charges, penalties, costs and
expenses (including court costs and reasonably attorneys' fees and expenses
incurred in investigating and preparing for any litigation proceedings) paid
by the Buyer Indemnified Party with respect to such Buyer Controlled Claim
(the "Buyer Control Amount") exceeds (i) the then effective Escrow Amount if
such claim is for Buyer Indemnified Company Costs, or (ii) a Securityholder's
then effective Maximum Securityholder Escrow Amount, if such claim is for
Buyer Indemnified Securityholder Costs from such Securityholder. The Buyer
Indemnified Party shall then be entitled to be paid the entire amount of its
Buyer Indemnified Company Costs or Buyer Indemnified Securityholder Costs, as
applicable, with respect to such Buyer Controlled Claim in excess of (but not
including) the Buyer Control Amount, subject to the limitations on recovery
and recourse set forth in this Section 11.5.
(g) MATERIALITY. For purposes of determining (i) whether
an Indemnifying Party shall be required to indemnify an Indemnified Party
under this Article 11, (ii) the aggregate amount of Minimum Loss suffered by
a Buyer Indemnified Party, (iii) the aggregate amount of De Minimis Losses
suffered by a Buyer Indemnified Party, or (iv) the aggregate amount of Buyer
Indemnified Costs suffered by a Buyer Indemnified Party, each representation
and warranty (whether made as of the date of this Agreement or made on and as
of the Closing Date) contained in this Agreement for which indemnification is
sought hereunder shall be read (including for purposes of determining whether
a breach of such representation or warranty has occurred) without regard to,
and as if such representation or warranty did not contain, materiality
qualifications that may be contained therein (including Material Adverse
Effect).
57
(h) SOLE AND EXCLUSIVE REMEDY. Parent, Sub, the Company,
the Surviving Corporation and the Securityholders each acknowledge and agree
that, after the Closing, notwithstanding any other provision of this
Agreement to the contrary, such party's sole and exclusive remedy with
respect to Indemnified Costs and any and all other claims relating to the
subject matter of this Agreement and the transactions contemplated hereby and
by any of the other Transaction Documents shall be in accordance with, and
limited by, the provisions set forth in this Article 11 and in the
Indemnification Escrow Agreement.
11.6 BUYER INDEMNIFIED REDUCTIONS COSTS. Notwithstanding any of
the provisions set forth in Section 11.5, the parties hereby agree that the
obligations of the Securityholders to indemnify Parent for Buyer Indemnified
Reductions Costs shall not be subject to the provisions set forth in Section
11.5(a) or 11.5(b), but shall be subject to the other provisions set forth in
this Article 11, including the provisions of Section 11.5 other than those
set forth in Section 11.5(a) and 11.5(b). Notwithstanding the matters set
forth in the immediately preceding sentence, the parties also agree that the
Buyer Indemnified Parties shall be entitled to seek payment for Buyer
Indemnified Reductions Costs relating to Company Transactions Costs directly
from the Representative to the extent of the Company Transactions Costs
Holdback Amount that is then held by the Representative.
ARTICLE 12
THE REPRESENTATIVE
By their execution and delivery of this Agreement, each
Securityholder hereby agrees as follows:
12.1 AUTHORIZATION OF THE REPRESENTATIVE. Xxxxx, Muse Fund III
Incorporated, a Texas Corporation (the "Representative") (and each successor
appointed in accordance with Section 12.6), hereby is appointed, authorized
and empowered to act, on behalf of the Securityholders, in connection with,
and to facilitate the consummation of the transactions contemplated by, this
Agreement and the other Transaction Documents, and in connection with the
activities to be performed on behalf of the Securityholders under this
Agreement and the Indemnification Escrow Agreement, for the purposes and with
the powers and authority hereinafter set forth in this Article 12 and in the
Indemnification Escrow Agreement, which shall include the power and authority:
(a) To execute and deliver the Indemnification Escrow
Agreement (with such modifications or changes therein as to which the
Representative, in its reasonable discretion, shall have consented to) and to
agree to such amendments or modifications thereto as the Representative, in
its reasonable discretion, may deem necessary or desirable to give effect to
the matters set forth in this Article 12;
(b) To execute and deliver such waivers and consents in
connection with this Agreement and the consummation of the transactions
contemplated hereby as the Representative,
58
in its reasonable discretion, may deem necessary or desirable to give effect
to the intentions of this Agreement and the other Transaction Documents;
(c) As the Representative of the Securityholders, to
enforce and protect the rights and interests of the Securityholders and to
enforce and protect the rights and interests of the Representative arising
out of or under or in any manner relating to this Agreement, the
Indemnification Escrow Agreement and each other Transaction Document
(including, but not limited to, in connection with any and all claims for
indemnification brought by any Indemnified Party under Article 11 of this
Agreement) and, in connection therewith, to (i) assert by claim or institute
any action, proceeding or investigation; (ii) investigate, defend, contest or
litigate any claim, action, proceeding or investigation initiated by any
Indemnified Party, or any other Person, against the Representative and/or the
Escrow Amount, and receive process on behalf of any or all Securityholders in
any such claim, action, proceeding or investigation and compromise or settle
on such terms as the Representative shall determine to be appropriate, give
receipts, releases and discharges on behalf of all of the Securityholders
with respect to any such claim, action, proceeding or investigation; (iii)
file any proofs, debts, claims and petitions as the Representative may deem
advisable or necessary; (iv) settle or compromise any claims asserted under
Article 11 of this Agreement; (v) assume, on behalf of all of the
Securityholders, the defense of any claim that is the basis of any claim
asserted under Article 11 of this Agreement; and (vi) file and prosecute
appeals from any decision, judgment or award rendered in any of the foregoing
actions, proceedings or investigations, it being understood that the
Representative shall not have any obligation to take any such actions, and
shall not have liability for any failure to take such any action;
(d) to enforce payment from the Escrow Amount and any
other amounts payable to the Securityholders, in each case on behalf of the
Securityholders, in the name of the Representative or, if the Representative
so elects, upon at least fifteen (15) days' prior written notice to the
Securityholders and in the absence of written instructions to the contrary,
in the names of one or more of the Securityholders;
(e) to cause to be paid out of the Escrow Account the
full amount of any judgment or judgments and legal interest and costs awarded
in favor of any Buyer Indemnified Party arising out of the indemnification
provisions set forth in Article 11 of this Agreement;
(f) to refrain from enforcing any right of the
Securityholders or any of them and/or of the Representative arising out of or
under or in any manner relating to this Agreement, the Indemnification Escrow
Agreement or any other Transaction Documents;
(g) to cause to be paid out of the Company Transaction
Costs Holdback Amount the amount of any Company Transaction Costs not paid at
or prior to Closing; and
(h) to make, execute, acknowledge and deliver all such
other agreements, guarantees, orders, receipts, endorsements, notices,
requests, instructions, certificates, stock powers, letters and other
writings, and, in general, to do any and all things and to take any and all
action that
59
the Representative, in its sole and absolute direction, may consider
necessary or proper or convenient in connection with or to carry out the
activities described in paragraphs (a) through (g) above and the transactions
contemplated by this Agreement, the Indemnification Escrow Agreement and the
other Transaction Documents.
Notwithstanding anything to the contrary herein, the parties
acknowledge and agree that (i) the Representative may not enter into or grant
any amendments or modifications described in Section 12.1(a) or waivers or
consents described in Section 12.1(b) unless such amendments, modifications,
waivers or consents shall affect each Securityholder similarly and to the
same relative extent, and (ii) any such amendment, modification, waiver or
consent which does not affect any Securityholder similarly and to the same
relative extent as it affects other Securityholders must be executed by such
Securityholder to be binding on such Securityholder.
Notwithstanding anything to the contrary herein, the Representative
in its role as Representative shall have no liability whatsoever to the
Company, Parent, Sub or the Surviving Corporation, except to the extent
arising as a result of fraud or the breach of this Agreement on the part of
such Representative.
The grant of authority provided for in this Section 12.1 (i) is
coupled with an interest and is being granted, in part, as an inducement to
the Company, Parent and Sub to enter into this Agreement and shall be
irrevocable and survive the death, incompetency, bankruptcy or liquidation of
any Securityholder and shall be binding on any successor thereto; (ii)
subject to the provisions of Section 12.6 below, may be exercised by the
Representative acting by signing as a Representative of each of the
Securityholders; and (iii) shall survive any distribution from the Escrow
Agent.
12.2 PAYMENTS OF EXPENSES, HOLDBACKS.
(a) The Representative shall withhold and retain from any
distributions to, or on behalf of, the Securityholders or withdrawals by the
Representative on behalf of the Securityholders out of the Escrow Amount,
such amount or amounts as shall be sufficient to pay all known, or reasonably
anticipated, expenses which are required to be paid or borne by the
Securityholders pursuant to this Agreement, the Indemnification Escrow
Agreement and the other Transaction Documents or are otherwise incurred by
the Representative in performance of its duties hereunder, including, but not
limited to, the Representative's own out-of-pocket expenses and the payment
of any fees and expenses under the Indemnification Escrow Agreement to the
Escrow Agent, and shall pay all such expenses out of the amount or amounts so
withheld. In the event that the amounts so withheld (if any) are insufficient
to pay all such expenses, each Securityholder, upon written notification from
the Representative of any such deficiency, shall promptly deliver to the
Representative full payment of his, her or its ratable share of the amount of
such deficiency in accordance with the shares of Fully-Diluted Common Stock
held by such Securityholder.
(b) If a Securityholder fails to make a payment referred
to above or referred to in Section 12.5, or any portion thereof (a
"Defaulting Securityholder"), all other Securityholders
60
shall make such payment, or portion thereof, on behalf of each Defaulting
Securityholder in proportion to their respective Shares of Fully-Diluted
Common Stock (computed without reference to the Shares of Fully-Diluted
Common Stock of any Defaulting Securityholder). In no event shall a
Defaulting Securityholder be released from liability for failing to make such
payment hereunder. A Defaulting Securityholder shall be liable to each other
Securityholder, and to the Representative, for all payments, costs and
expenses incurred as a result of the failure of the Defaulting Securityholder
to comply with the terms hereof, including, but not limited to, any costs and
expenses incurred in enforcing the provisions of this Agreement.
(c) In connection with the performance of its obligations
hereunder, the Representative shall have the right at any time and from time
to time to select and engage, at the cost and expense of the Securityholders,
attorneys, accountants, investment bankers, advisors, consultants and
clerical personnel and obtain such other professional and expert assistance,
and maintain such records, as the Representative may deem necessary or
desirable and incur other out-of-pocket expenses.
12.3 DISBURSEMENTS.
(a) All payments to the Securityholders by the
Representative hereunder, and all sums, proceeds and other property held by
the Representatives, shall be allocated among the Securityholders in
proportion to the amounts of each such Securityholder's Maximum
Securityholder Escrow Amount.
(b) All money or other proceeds received by the
Representative for the benefit of the Securityholders, including those
distributed by the Escrow Agent, shall be distributed by the Representative
as promptly as practicable to each Securityholder as set forth in subsection
(a) hereof.
12.4 BANK ACCOUNTS; INVESTMENTS.
(a) The Representative shall have the right to open such
account or accounts in its own name as Representative of the Securityholders
in any bank or trust company as it may select in order to deposit all sums
which it may receive and hold hereunder and to issue checks or draw money
upon the signature of the Representative (or the signature of one or more
persons the Representative may designate) on each such account.
(b) The Representative shall have the right, in its sole
and absolute discretion, to invest and reinvest any of the proceeds held by
it under the terms of this Agreement in investments only of a type which the
Escrow Agent is permitted to make pursuant to the Indemnification Escrow
Agreement. Any securities or other property at any time held by the
Representative may be held by it in bearer or registered form or in the name
of any other person or persons it may designate, and the Representative may
deal with such securities or other property to the same extent and with the
same powers as an individual owner thereof might do. The Representative
shall have no responsibility or obligation whatsoever to any Securityholder,
or to any other person for the
61
performance of any investments made in accordance with the provisions of this
Agreement or for any losses realized.
12.5 COMPENSATION; EXCULPATION; INDEMNITY.
(a) The Representative shall not be entitled to any fee,
commission or other compensation for the performance of its service
hereunder, but shall be entitled to the payment of all of its out-of-pocket
expenses incurred as Representative, and in furtherance of the foregoing, may
pay or cause to be paid or reimburse itself for the payment of any and all
such expenses.
(b) In dealing with this Agreement, the Indemnification
Escrow Agreement and any instruments, agreements or documents relating
thereto, and in exercising or failing to exercise all or any of the powers
conferred upon the Representative hereunder or thereunder, (i) the
Representative shall not assume any, and shall incur no, responsibility
whatsoever to any Securityholder by reason of any error in judgment or other
act or omission performed or omitted hereunder or in connection with this
Agreement, the Indemnification Escrow Agreement or any Transaction Document
and (ii) the Representative shall be entitled to rely on the advice of
counsel, public accountants or other independent experts experienced in the
matter at issue, and any error in judgment or other act or omission of the
Representative pursuant to such advice shall in no event subject the
Representative to liability to any Securityholder, the Company, Parent, Sub,
the Surviving Corporation or any other person.
(c) Each Securityholder, severally, shall indemnify the
Representative up to, but not exceeding, an amount equal to the aggregate
portion of the Merger Consideration received by such Person hereunder, which
indemnification shall be paid by such Securityholder pro rata in accordance
with the portion of the Merger Consideration received by such person
hereunder, against all damages, liabilities, claims, obligations, costs and
expenses, including reasonable attorneys', accountants' and other experts'
fees and the amount of any judgment against it, of any nature whatsoever,
arising out of or in connection with any claim, investigation, challenge,
action or proceeding or in connection with any appeal thereof, relating to
the acts or omissions of the Representative hereunder, under the
Indemnification Escrow Agreement or otherwise, except for such damages,
liabilities, claims, obligations, costs and expenses, including reasonable
attorneys', accountants' and other experts' fees and the amount of any
judgment against the Representative that arise from the Representative's
gross negligence or willful misconduct, including the willful breach of this
Agreement or the Indemnification Escrow Agreement. The foregoing
indemnification shall not be deemed exclusive of any other right to which the
Representative may be entitled apart from the provisions hereof. In the
event of any indemnification under this Section 12.5(c), the Representative
shall first proceed against any distributions to the Representative on behalf
of the Securityholders. Thereafter, upon written notice from the
Representative to the Securityholders as to the existence of a deficiency
toward the payment of any such indemnification amount, each Securityholder
shall promptly deliver to the Representative full payment of his, her or its
ratable share of such deficiency.
62
(d) All of the indemnities, immunities and powers granted
to the Representative under this Agreement shall survive the Closing and/or
any termination of this Agreement and the Indemnification Escrow Agreement.
12.6 REMOVAL AND REPLACEMENT OF REPRESENTATIVE; SUCCESSOR
REPRESENTATIVE; ACTION BY REPRESENTATIVE.
(a) If Representative is unable or unavailable to perform
his duties hereunder, a Representative, who shall be a Securityholder or a
representative of a non-individual Securityholder, shall be appointed by
Securityholders who, immediately prior to the Effective Time, hold a majority
of the Outstanding Shares, unless such person is unable or unwilling to
accept such appointment.
(b) Any Representative or all of them may be removed at
any time by a written notice delivered by Securityholders who, immediately
prior to the Effective Time, hold a majority of the Outstanding Shares to the
Representative, the other Securityholders, Parent and the Surviving
Corporation. A Representative so removed shall be replaced promptly by
Securityholders who, immediately prior to the Effective Time, hold a majority
of the Outstanding Shares by written notice delivered to all of the
Securityholders and Parent.
(c) If any successor Representative is appointed as
contemplated in Sections 12.6(a) or 12.6(b), written notice of such
appointment executed by Securityholders who, immediately prior to the
Effective Time, hold a majority of the Outstanding Shares shall be delivered
to the Representative, the other Securityholders and Parent. Any successor
Representative shall have all of the authority and responsibilities conferred
upon or delegated to a Representative pursuant to this Article 12.
12.7 RELIANCE; LIMITATION AS TO PARENT, SUB AND THE SURVIVING
CORPORATION.
(a) Parent, Sub, the Company and the Surviving Company
may conclusively and absolutely rely, without inquiry, and until the receipt
of written notice of a change of the Representative under Section 12.6 may
continue to rely, without inquiry, upon the action of the Representative as
the action of each Securityholder in all matters referred to in this Article
12.
(b) Each of the parties hereto hereby acknowledges and
agrees that, except as set forth in this Section 12.7, the provisions of this
Article 12 create no binding obligations between Parent, Sub and the
Surviving Corporation, on the one hand, and the Securityholders, on the other
hand; provided, however, that if Parent is given written notice of the
appointment of a successor Representative as contemplated in Section 12.6,
Parent, Sub and the Surviving Corporation shall be obligated to recognize,
and shall only be able to so rely upon the action of, such successor
Representative as the Representative for all purposes under this Agreement.
ARTICLE 13
63
GENERAL PROVISIONS
13.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. None of the representations and warranties made by Parent or Sub
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Effective Time, except for the representations and
warranties set forth in Section 3.2(f), which representations and warranties
shall survive until the expiration of the applicable statute of limitations.
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, each of
the representations and warranties made by the Company or any Securityholder
hereunder or pursuant hereto or in connection with the transactions
contemplated hereby shall survive the Closing, but shall terminate at 5:00
p.m., Dallas, Texas time on the Expiration Date, other than the
representations and warranties made by the Securityholders in Section 3.3(a),
which representations and warranties shall survive until the expiration of
the applicable statute of limitations. Following the date of termination of a
representation or warranty, no claim can be brought with respect to a breach
of such representation or warranty, but no such termination shall affect any
claim for a breach of a representation or warranty that was asserted before
the date of termination. To the extent that such are performable after the
Closing, each of the covenants and agreements contained in each of the
Transaction Documents shall survive the Closing for the period stated or, if
no such period is stated, such covenant or agreement shall survive
indefinitely.
13.2 AMENDMENT AND MODIFICATION. This Agreement may not be
amended except by an instrument in writing signed by Parent and the Company
(or after the Effective Time, the Surviving Corporation); PROVIDED, HOWEVER,
that if any such amendment would affect in any way a Securityholder's rights
under this Agreement, including without limitation a change in the portion of
the Merger Consideration due to any such Securityholder at and after the
Effective Time or the relative portion of the Escrow Amount or the Company
Transaction Costs Holdback Amount withheld from the portion of the Merger
Consideration due to such Securityholder, such amendment must also be signed
by such Securityholder for such amendment to be binding on such
Securityholder; PROVIDED, FURTHER, that any amendment pursuant to which
Parent and certain members of Management agree that all or any portion of
Management's Outstanding Shares or Options shall not convert into the right
to receive a portion of the Merger Consideration may be entered into without
the consent of the Company or any Securityholder (other than such members of
Management) so long as such amendment does not reduce the portion of the
Merger Consideration due to such other Securityholders at and after the
Effective Time or the relative portion of the Escrow Amount or the Company
Transaction Costs Holdback Amount withheld from the portion of the Merger
Consideration due to all Securityholders.
13.3 WAIVER OF COMPLIANCE. Any failure of Parent or Sub on the
one hand, or the Company, on the other hand, to comply with any obligation,
covenant, agreement or condition contained herein may be waived only if set
forth in an instrument in writing signed by the party or parties to be bound
by such waiver, but such waiver or failure to insist upon strict compliance
with such obligation, covenant, agreement, or condition shall not operate as
a waiver of, or estoppel with respect to, any other failure.
64
13.4 SPECIFIC PERFORMANCE. The parties recognize that in the
event the Company should refuse to perform under the provisions of this
Agreement, monetary damages alone will not be adequate. Parent and Sub shall
therefore be entitled, in addition to any other remedies which may be
available, including money damages, to obtain specific performance of the
terms of this Agreement. In the event of any action to enforce this Agreement
specifically, the Company hereby waives the defense that there is an adequate
remedy at law.
13.5 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule of
applicable law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect. The parties
further agree that any court of competent jurisdiction is expressly
authorized to modify any such unenforceable provision of this Agreement in
lieu of severing such unenforceable provision from this Agreement in its
entirety, whether by rewriting the offending provision, deleting any or all
of the offending provision, adding additional language to this Agreement, or
by making such other modifications as it deems warranted to carry out the
intent and agreement of the parties as embodied herein to the maximum extent
permitted by law. The parties expressly agree that this Agreement as so
modified by a court of competent jurisdiction shall be binding upon and
enforceable against each of them.
13.6 EXPENSES AND OBLIGATIONS. Except as otherwise expressly
provided in this Agreement (including without limitation Sections 5.1, 6.2,
6.3, 6.6 and 7.1), all costs and expenses incurred by the parties hereto in
connection with the consummation of the transactions contemplated hereby and
in the other Transaction Documents shall be borne solely and entirely by the
party which has incurred such expenses. Notwithstanding the foregoing, (a)
the fees payable to the Escrow Agent shall be borne as provided in the
Indemnification Escrow Agreement, (b) the broker, finder or financial
advisory fees payable to any person retained by Parent or any of its
Subsidiaries or other Affiliates, shall be borne by Parent, (c) all sales,
documentary or stamp taxes arising out of the transactions contemplated by
this Agreement shall be paid one-half by Parent and one-half by the Company,
and (d) all fees, costs and other expenses of any kind incurred by or on
behalf of the Company or any of its Subsidiaries in connection with, or
relating to, any financing activity of Parent or any Affiliate thereof
(including without limitation all accounting and legal fees and expenses)
shall be the responsibility of and paid by Parent.
13.7 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their successors and
assigns. Nothing in this Agreement is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement except as expressly set forth herein. Without limiting the
generality of the foregoing, each of Sections 3.2(f), 6.4 and 6.6 are made
for the benefit of the Company's officers and directors and former officers
and directors, and the last sentence of Section 7.3(a) is made for the
benefit of the persons referenced therein, all of whom shall be entitled to
enforce such provisions and to avail themselves of the benefit of any remedy
for any breach of such provisions, all to the same extent as if such persons
were parties to this Agreement.
65
13.8 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, faxed
to the parties at the following facsimile numbers or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to Parent or Sub, to:
D and W Holdings, Inc.
c/o Ardshiel, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with copies to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxx
Xxxxx Xxxxxxxxxx
Facsimile: (000) 000-0000
and
Xxxxx Xxxxxxxxxx LLP
1301 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
(b) If to the Company, to:
Atrium Corporation
0000 Xxxx Xxxxxxxxxxx Xxxx, Xxxxx 0000X
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with copies to:
Hicks, Muse, Xxxx & Xxxxx Incorporated
000 Xxxxxxxx Xxxxx, Xxxxx 0000
00
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Xx.
Facsimile: (000) 000-0000
and
Xxxxxx & Xxxxxx L.L.P.
3700 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
(c) If to the Representative, to:
Xxxxx, Muse Fund III Incorporated
c/o Hicks, Muse, Xxxx & Xxxxx Incorporated
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Xx.
Facsimile: (000) 000-0000
with copies to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxxxx Xxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Any of the above addresses may be changed at any time by notice given
as provided above; provided, however, that any such notice of change of
address shall be effective only upon receipt. All notices, requests or
instructions given in accordance herewith shall be deemed received on the
date of delivery, if hand delivered, on the date of receipt, if faxed, three
Business Days after the date of mailing, if mailed by registered or certified
mail, return receipt requested, and one Business Day after the date of
sending, if sent by Federal Express or other recognized overnight courier.
13.9 COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, all of
which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each
67
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
13.10 ENTIRE AGREEMENT. This Agreement (which term shall be deemed
to include the exhibits and schedules hereto and the other certificates,
documents and instruments delivered hereunder) and the Confidentiality
Agreement constitute the entire agreement of the parties hereto and supersede
all prior agreements, letters of intent and understandings, both written and
oral, among the parties with respect to the subject matter hereof. There are
no representations or warranties, agreements, or covenants other than those
expressly set forth in this Agreement.
13.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
GIVING EFFECT TO ANY CONFLICTS OF LAW PROVISIONS.
13.12 PUBLIC ANNOUNCEMENTS. No party hereto shall issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby without the prior consent of Parent and the
Company, except that any party may make any disclosure required by
applicable law (including federal securities laws) if it determines in good
faith that it is required to do so and provides Parent and the Company with
prior notice and a reasonable opportunity to review the disclosure.
13.13 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of law or otherwise; provided, however, that
upon notice to the Company and the Representative and without releasing
Parent or Sub from any of their respective obligations or liabilities
hereunder, (a) Parent or Sub may assign or delegate any or all of its rights
or obligations under this Agreement to any Affiliate of Parent ; and (b)
nothing in this Agreement shall limit Parent's or Sub's ability to make a
collateral assignment of its rights under this Agreement to any institutional
lender that provides funds to Parent or Sub without the consent of the
Company or the Representative; provided, however, that unless written notice
is given to the Company and to the Representative that any such collateral
assignment has been foreclosed upon, the Company and the Representative shall
be entitled to deal exclusively with Parent and Sub as to any matters arising
under this Agreement or any of the other Transaction Documents. In the event
of such an assignment, the provisions of this Agreement shall inure to the
benefit of and be binding on the assigns of Parent and Sub. Any attempted
assignment in violation of this Section 13.13 shall be null and void.
13.14 DIRECTOR AND OFFICER LIABILITY. The directors, officers, and
stockholders of Parent and its Affiliates in their capacity as such shall not
have any personal liability or obligation arising under this Agreement
(including any claims that the Company may assert). The directors and
officers of the Company and its Affiliates in their capacity as such shall
not have any personal liability or obligation arising under this Agreement
(including any claims that Parent may assert). Except as otherwise provided
in this Agreement, no Securityholder shall have any personal liability or
obligation arising under this Agreement (including any claims that Parent may
assert).
68
13.15 HEADINGS. The headings of this Agreement are for convenience
of reference only and are not part of the substance of this Agreement.
13.16 NO WAIVER RELATING TO CLAIMS FOR FRAUD. The liability of any
party under Article 11 shall be in addition to, and not exclusive of, any
other liability that such party may have at law or equity based on such
party's fraudulent acts or omissions. None of the provisions set forth in
this Agreement, including but not limited to the provisions set forth in
Section 11.5(a) (relating to Minimum Loss), 11.5(b) (relating to De Minimis
Losses), 11.5(c) (relating to the limitations on the period of time during
which a claim for indemnification may be brought), 11.5(d) (relating to a cap
on liability) or 11.5(e) (relating to recourse against escrow funds), shall
be deemed a waiver by any party to this Agreement of any right or remedy
which such party may have at law or equity based on any other party's
fraudulent acts or omissions, nor shall any such provisions limit, or be
deemed to limit, (i) the amounts of recoveries sought or awarded in any such
claim for fraud, (ii) the time period during which a claim for fraud may be
brought, or (iii) the recourse which any party may seek against another party
with respect to a claim for fraud; provided, that with respect to such rights
and remedies at law or equity, the parties further acknowledge and agree that
none of the provisions of this Section 13.16 nor any reference to this
Section 13.16 throughout this Agreement, shall be deemed a waiver of any
defenses which may be available in respect of actions or claims for fraud,
including but not limited to, defenses of statutes of limitations or
limitations of damages.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Company, Parent and Sub have caused this
Agreement to be signed, all as of the date first written above.
THE COMPANY:
ATRIUM CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
PARENT:
D AND W HOLDINGS, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SUB:
D AND W ACQUISITION CORP.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
S-1
SECURITYHOLDERS:
HERITAGE FUND I, L.P.
By: HF Partners I, L.P., its general partner
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
HICKS, MUSE, XXXX & XXXXX
EQUITY FUND III, L.P.
By: HM3/GP Partners, L.P.,
its General Partner
By: Xxxxx, Muse GP Partners III, L.P.,
its General Partner
By: Xxxxx Muse Fund III Incorporated,
its General Partner
By:
----------------------------------------
Xxxxxx X. Xxxxxxxxxxxx
Vice President
HM3 COINVESTORS, L.P.,
By: Xxxxx, Xxxx XX Partners III, L.P.,
its General Partner
By: Xxxxx, Muse Fund III Incorporated,
its General Partner
By:
----------------------------------------
Xxxxxx X. Xxxxxxxxxxxx
Vice President
X-0
X-0
----------------------------------------
XXX XXXXXXXX
----------------------------------------
XXXXXXX X. XXXXXXXX
----------------------------------------
XXXXXXX X. XXXXXXXX
----------------------------------------
XXXX XXXXXXXX
----------------------------------------
XXXX XXXXXX XXXXXXXX TRUST
By:
-------------------------------------
O. Xxxxxx Xxxxxx, Jr., Trustee
----------------------------------------
XXXXXXX X. XXXXXXXX
XXX XXXXXXXX XX TRUST
By:
-------------------------------------
O. Xxxxxx Xxxxxx, Jr., Trustee
----------------------------------------
XXX XXXXXXXX, AS CUSTODIAN FOR XXXXXXX XXXXXXX
XXXXXXXX
----------------------------------------
XXXX X. XXXX
S-4
----------------------------------------
XXXXXXX XXXXXXXXX
----------------------------------------
DOW POINTER
----------------------------------------
XXXXX XXXXXXXXXX
----------------------------------------
XXXX XXXXXX
----------------------------------------
XXXXX XXXXXX
----------------------------------------
XXXXX XXXXXXX
J. XXXXX XXXXXXXXXXX
IRREVOCABLE TRUST
By:
-------------------------------------
Xxxxxxx X. Xxxxxx, Trustee
XXXX X. XXXXXXXXXXX
IRREVOCABLE TRUST
By:
-------------------------------------
Xxxxxxx X. Xxxxxx, Trustee
----------------------------------------
S-5
XXXXXX XXXXXX
S-6
----------------------------------------
XXXXXXX XXXXXXXX
----------------------------------------
XXXXX XXXXXXX
----------------------------------------
XXXXX XXXXXXX
----------------------------------------
XXXXXXX XXXXXX
----------------------------------------
XXXXXX XXXXX
P. XXXXXXX XXXXXXXX TRUST
By:
-------------------------------------
O. Xxxxxx Xxxxxx, Jr., Trustee
----------------------------------------
XXXXX X. XXXX, XX.
----------------------------------------
XXXXXXX XXXXXXXX
----------------------------------------
XXXXXX XXXXX
----------------------------------------
XXXXXX XXXXX
S-7
----------------------------------------
C. XXXX XXXXXXXXXXX
----------------------------------------
XXXXXXX XXXXXXXX
----------------------------------------
XXXX X. XXXX
----------------------------------------
XXXX XXXXXXXX
----------------------------------------
XXXXX XXXXXXXX
----------------------------------------
XXXXXX XXXXXXXXX
----------------------------------------
XXXXXX XXXX
----------------------------------------
XX XXXX
----------------------------------------
XXXXX XXXXXX
----------------------------------------
XXXXXX XXXXXXX
----------------------------------------
XXXX XXXXXXX
S-8
