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AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 13, 2007
BY AND AMONG
KELLWOOD COMPANY
("PARENT"),
NEWKELL V, INC.
("MERGER SUB")
XXXXX XXXXXXXXX CORPORATION
(THE "COMPANY")
AND
CASTANEA PARTNERS, INC.
(THE "EQUITYHOLDERS' REPRESENTATIVE")
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TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS............................................................................................2
SECTION 1.1 Certain Definitions................................................................2
SECTION 1.2 Certain Additional Definitions.....................................................7
ARTICLE II. THE MERGER............................................................................................9
SECTION 2.1 The Merger.........................................................................9
SECTION 2.2 Effects of the Merger..............................................................9
SECTION 2.3 Closing............................................................................9
SECTION 2.4 Effective Time.....................................................................9
SECTION 2.5 Certificate of Incorporation and Bylaws; Directors and Officers....................9
SECTION 2.6 Conversion of Securities..........................................................10
SECTION 2.7 Treatment of Company Options......................................................11
SECTION 2.8 Post-Closing Merger Consideration Adjustment......................................11
ARTICLE III. EXCHANGE OF COMPANY CERTIFICATES....................................................................14
SECTION 3.1 Exchange of Company Certificates..................................................14
SECTION 3.2 Dissenting Shares.................................................................15
SECTION 3.3 No Further Ownership Rights in Shares of Company Capital Stock; Closing of
Company Transfer Books............................................................15
SECTION 3.4 Withholding Rights................................................................15
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................16
SECTION 4.1 Authority.........................................................................16
SECTION 4.2 Organization......................................................................17
SECTION 4.3 Company Capital Stock.............................................................17
SECTION 4.4 Conflicts.........................................................................18
SECTION 4.5 Consents, Approvals, Etc..........................................................18
SECTION 4.6 Financial Statements..............................................................18
SECTION 4.7 Undisclosed Liabilities...........................................................18
SECTION 4.8 Certain Changes or Events.........................................................18
SECTION 4.9 Tax Matters.......................................................................19
SECTION 4.10 Litigation and Governmental Orders................................................21
SECTION 4.11 Compliance with Laws..............................................................21
SECTION 4.12 Permits...........................................................................21
SECTION 4.13 Tangible Property.................................................................21
SECTION 4.14 Proprietary Rights................................................................21
SECTION 4.15 Certain Contracts.................................................................22
SECTION 4.16 Employee Benefit Matters..........................................................23
SECTION 4.17 Labor Matters.....................................................................24
SECTION 4.18 Environmental Matters.............................................................24
SECTION 4.19 Related Party Transactions........................................................24
SECTION 4.20 Brokers...........................................................................24
SECTION 4.21 Accounts Receivable...............................................................24
SECTION 4.22 Bank Accounts.....................................................................24
SECTION 4.23 Inventory.........................................................................24
SECTION 4.24 Suppliers.........................................................................25
SECTION 4.25 Product Liability.................................................................25
SECTION 4.26 Insurance.........................................................................25
SECTION 4.27 No Other Representations or Warranties............................................25
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............................................26
SECTION 5.1 Authority.........................................................................26
SECTION 5.2 Organization......................................................................26
SECTION 5.3 Conflicts.........................................................................26
SECTION 5.4 Consents, Approvals, Etc..........................................................27
SECTION 5.5 Litigation and Governmental Orders................................................27
SECTION 5.6 Solvency..........................................................................27
SECTION 5.7 Financing.........................................................................28
SECTION 5.8 Due Diligence Investigation.......................................................28
SECTION 5.9 Brokers...........................................................................28
SECTION 5.10 No Prior Activities...............................................................28
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF THE EQUITYHOLDERS..................................................28
SECTION 6.1 Authorization.....................................................................28
SECTION 6.2 Ownership.........................................................................28
ARTICLE VII. ADDITIONAL AGREEMENTS...............................................................................29
SECTION 7.1 No Solicitation...................................................................29
SECTION 7.2 Conduct of the Company Prior to the Effective Time................................29
SECTION 7.3 Access to Information.............................................................31
SECTION 7.4 Confidentiality...................................................................31
SECTION 7.5 Efforts; Consents; Regulatory and Other Authorizations............................31
SECTION 7.6 Further Action....................................................................32
SECTION 7.7 Indemnification; Directors' and Officers' Insurance...............................32
SECTION 7.8 Employee Benefit Matters..........................................................33
SECTION 7.9 Provision Respecting Legal Representation.........................................34
SECTION 7.10 Transfer Taxes....................................................................34
SECTION 7.11 Disclosure Schedules; Supplementation and Amendment of Schedules..................34
SECTION 7.12 Continued Association with the Company............................................34
SECTION 7.13 Letters of Credit.................................................................34
SECTION 7.14 Code Section 280G Matters.........................................................34
SECTION 7.15 Drag-Along Rights.................................................................35
SECTION 7.16 Payment of Closing Debt and Unpaid Company Transaction Expenses...................35
ARTICLE VIII. CONDITIONS TO CLOSING..............................................................................35
SECTION 8.1 Conditions to Obligations of the Company..........................................36
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER....................................................................37
SECTION 9.1 Termination.......................................................................37
SECTION 9.2 Effect of Termination.............................................................38
ARTICLE X. INDEMNIFICATION.......................................................................................38
SECTION 10.1 Survival of Representations.......................................................38
SECTION 10.2 Right to Indemnification..........................................................38
SECTION 10.3 Limitations on Liability..........................................................39
SECTION 10.4 Defense of Third-Party Claims.....................................................40
SECTION 10.5 Limitation on Damages.............................................................41
SECTION 10.6 Characterization of Indemnification Payments......................................41
SECTION 10.7 Allocation of Certain Indemnification Obligations; Special Payment................41
ARTICLE XI. GENERAL PROVISIONS...................................................................................42
SECTION 11.1 Equityholders' Representative.....................................................42
SECTION 11.2 Expenses..........................................................................43
SECTION 11.3 Costs and Attorneys' Fees.........................................................43
SECTION 11.4 Notices...........................................................................43
SECTION 11.5 Public Announcements..............................................................44
SECTION 11.6 Interpretation....................................................................45
SECTION 11.7 Severability......................................................................45
SECTION 11.8 Entire Agreement..................................................................45
SECTION 11.9 Assignment........................................................................45
SECTION 11.10 No Third-Party Beneficiaries......................................................45
SECTION 11.11 Waivers and Amendments............................................................46
SECTION 11.12 Governing Law; Consent to Jurisdiction............................................46
SECTION 11.13 Waiver of Jury Trial..............................................................46
SECTION 11.14 Exclusivity of Representations and Warranties.....................................47
SECTION 11.15 Equitable Remedies................................................................47
SECTION 11.16 Counterparts......................................................................47
EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B - Escrow Agreement
SCHEDULES
Schedule 1.1(a) - Company Debt
Schedule 1.1(b) - Closing Net Working Capital Amount
Schedule 1.1(c) - Transaction Tax Benefit Schedule
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of June 13, 2007 by and among Kellwood Company, a Delaware
corporation ("Parent"), Newkell V, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), Xxxxx Xxxxxxxxx Corporation, a
Delaware corporation (the "Company"), and Castanea Partners, Inc., a Delaware
corporation, as the Equityholders' Representative.
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each determined that the merger of Merger Sub with and into the
Company (the "Merger") is advisable and in the best interests of their
respective stockholders, and such Boards of Directors have approved the Merger,
upon the terms and subject to the conditions set forth in this Agreement,
pursuant to which each share of common stock, par value $0.01 per share of the
Company (the "Company Common Stock"), Series A-1 Preferred Stock, par value
$0.01 per share of the Company (the "Series A-1 Preferred Stock"), Series A-2
Preferred Stock, par value $0.01 per share of the Company (the "Series A-2
Preferred Stock"), Series A-3 Preferred Stock, par value $0.01 per share of the
Company (the "Series A-3 Preferred Stock"), and Series A-4 Preferred Stock, par
value $0.01 per share of the Company (the "Series A-4 Preferred Stock" and,
together with the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and
the Series A-3 Preferred Stock, the "Company Preferred Stock"), issued and
outstanding immediately prior to the Effective Time, other than shares owned or
held directly or indirectly by Parent or the Company and other than Dissenting
Shares, shall be converted into the right to receive the consideration set forth
in this Agreement;
WHEREAS, as a condition and an inducement to Parent and Merger Sub
entering into this Agreement, Xxxxxx X. Xxxxx, Castanea Family Investments LLC,
Castanea Family Holdings LLC, Castanea Partners Fund II, L.P. and Dorset
Capital, L.P. have entered into a Voting Agreement with Parent (the "Voting
Agreement"), pursuant to which each such Equityholder has agreed to vote all of
their respective Company Common Stock and Company Preferred Stock in favor of
this Agreement and the Merger.
WHEREAS, immediately following the execution and delivery of this
Agreement, the respective Boards of Directors of Merger Sub and the Company
shall present this Agreement for adoption by the respective stockholders of
Merger Sub and the Company, and such stockholders shall adopt this Agreement,
thereby approving the Merger and the other transactions contemplated by this
Agreement; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated by this Agreement and also prescribe various
conditions to the transactions contemplated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, promises and agreements hereinafter set forth, the mutual benefits to
be gained by the performance thereof, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged and
accepted, the parties to this Agreement, intending to be legally bound, hereby
agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Acquisition Proposal" means, with respect to a party, any
offer or proposal, relating to any transaction or a series of related
transactions involving: (i) any purchase or acquisition by any Person or "group"
(as defined under Section 13(d) of the Securities Exchange Act of 1934, as
amended, in the rules and regulations promulgated thereunder) of more than
fifteen percent (15%) interested in the total outstanding voting securities of
such party or any tender offer or exchange offer or other proposed acquisition
of voting securities of such party that, if consummated, would result in any
Person or "group" beneficially owning fifteen percent (15%) or more of the total
outstanding voting securities of such party, (ii) any merger, consolidation,
business combination or similar transaction in which the stockholders of such
party immediately preceding such transaction hold, directly or indirectly, less
than eighty-five percent (85%) of the equity interest in the surviving entity or
resulting entity of such transaction or in any parent entity immediately
following such transaction, (iii) any purchase from such party of more than a
fifteen percent (15%) interest in the total outstanding voting securities of
such party or the granting or issuance of rights to acquire more than a fifteen
percent (15%) interest in the total outstanding voting securities of such party,
including pursuant to options, warrants or similar rights to purchase voting
securities or the issuance of debt or other instruments convertible,
exchangeable or exercisable for voting securities of such party, (iv) any sale,
lease (other than in the ordinary course of business), transfer, distribution,
acquisition or disposition of more than fifteen percent (15%) of the assets of
such party (including its subsidiaries taken as whole), or (v) liquidation or
dissolution of such party (provided, however, that the transactions contemplated
hereby shall not be deemed an Acquisition Proposal in any case).
"Action" means any claim, action, suit or proceeding, arbitral
action, governmental inquiry, criminal prosecution or other investigation as to
which written notice has been provided to the applicable party.
"Affiliate" means, when used with respect to a specified
Person, another Person that either directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
specified Person.
"Aggregate Exercise Price" means the sum of all of the
exercise prices for outstanding Company Options that are exercisable at the
Effective Time multiplied by the number of shares of Company Common Stock for
which such Company Options are exercisable at each such exercise price.
"Ancillary Document" means the Escrow Agreement, the Company
Closing Certificate, the FIRPTA Certificate and the Letter of Direction.
"Applicable Percentage" means, with respect to any
Equityholder, a ratio, expressed as a percentage (rounded to four decimal
places), equal to (x) the sum of (i) the aggregate number of shares of Company
Common Stock held by such holder immediately prior to the Effective Time, plus
(ii) the aggregate number of shares of Company Common Stock issuable upon the
exercise in full of all outstanding Company Options of such holder that are
exercisable immediately prior to the Effective Time, plus (iii) the aggregate
number of shares of Company Common Stock held by such holder issuable upon the
conversion of all shares of Company Preferred Stock held by such holder, divided
by (y) the Fully Diluted Common Number.
"Business" means the business and operations of the Company,
as conducted as of the date of this Agreement by the Company.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which banks are required or authorized by Law to be closed in New
York, New York or Portland, Oregon.
"Cash" means cash and Cash Equivalents determined in
accordance with GAAP, using the policies, conventions, methodologies and
procedures used by the Company in preparing the Company Financial Statements and
for avoidance of doubt shall be calculated net of checks, drafts or other items
issued, but shall include deposits made but that have not cleared the bank.
"Cash Equivalents" means investment securities with original
maturities of ninety (90) days or less and credit card receivables that are
readily collectible into cash.
"CIBC" means CIBC World Markets Corp.
"Closing Cash" means the aggregate amount of all Cash of the
Company as of the close of business on the day immediately preceding the Closing
Date.
"Closing Debt" means the aggregate principal amount of, and
accrued interest on, all Debt of the Company as of the close of business on the
day immediately preceding the Closing Date. Schedule 1.1(a) sets forth the
Closing Debt as if the Closing occurred on the day after the Balance Sheet Date.
"Closing Net Working Capital Amount" means (i) the aggregate
dollar amount of all assets properly characterized as current assets of the
Company under GAAP (but excluding Cash and prepaid Company Transaction Expenses
and the Transaction Tax Benefit), less (ii) the aggregate dollar amount of all
liabilities properly characterized as current liabilities of the Company under
GAAP (but excluding Closing Debt, Unpaid Company Transaction Expenses and
accrued interest), in the case of each of clause (i) and clause (ii), as of the
close of business on the day immediately preceding the Closing Date. Schedule
1.1(b) sets forth the Closing Net Working Capital Amount as if the Closing
occurred on the Balance Sheet Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Capital Stock" means the Company Common Stock and the
Company Preferred Stock.
"Company Employee" means each employee of the Company.
"Company Option Plan" means the Xxxxx Xxxxxxxxx Corporation
2001 Stock Option Plan.
"Company Options" means all outstanding options to purchase or
otherwise acquire shares of Company Common Stock, whether vested or unvested,
granted pursuant to the Company Option Plan or pursuant to individual stock
option agreements.
"Company Transaction Expenses" means (i) the fees and
disbursements payable by the Company to CIBC referenced in Section 4.20; (ii)
the fees and disbursements payable to legal counsel or accountants of the
Company that are payable by the Company in connection with the transactions
contemplated by this Agreement; (iii) $100,000, such amount to be delivered to
the Equityholders' Representative to cover expenses; and (iv) all other
miscellaneous expenses or costs, in each case, incurred by the Company in
connection with the transactions contemplated by this Agreement; provided,
however, that the foregoing clauses (ii) and (iv) shall not include any fees,
expense or disbursements incurred by Parent, or by the Surviving Corporation
which are on behalf of Parent, including without limitation, the advisory fee
payable to X.X. Xxxxxx Securities, Inc. and the fees and expenses of Parent's
attorneys, accountants and other advisors.
"Confidentiality Agreement" means the letter agreement between
CIBC and Parent, dated as of March 15, 2007.
"Contract" means any legally binding contract, agreement,
indenture, note, bond, loan, instrument, lease, conditional sales contract,
mortgage or other arrangement, whether written or oral.
"Damages" means any out of pocket liabilities, losses,
damages, penalties, fines, costs or expenses (including reasonable attorneys
fees and expenses), but excluding any special, indirect, consequential,
exemplary and punitive damages and any damages associated with any lost profits
or lost opportunities.
"Debt" means, without duplication, both the current and
long-term portions of any amount owed (including unpaid interest thereon and all
penalties, fees or expenses associated with the prepayment of any Debt) (i) in
respect of borrowed money or with respect to deposits or advances of any kind,
(ii) in respect of capitalized lease obligations, (iii) all obligations under
interest rate or currency hedging transactions (valued at the termination value
thereof), (iv) any loans or notes payable to any officer, director or
Equityholder or any Affiliate or family member thereof, and (v) guarantees of
obligations of the type described in clauses (i) through (iv); provided,
however, that notwithstanding the foregoing, Debt shall not be deemed to include
any accounts payable incurred in the ordinary course of business or any
obligations under open letters of credit.
"DGCL" means the General Corporation Law of the State of
Delaware.
"Encumbrance" means any security interest, pledge, mortgage,
lien, charge, adverse claim of ownership or use, restriction on transfer (such
as a right of first refusal or other similar rights), defect of title or other
similar encumbrance.
"Environmental Law" means any Law pertaining to land use, air,
soil, surface water, groundwater (including the protection, cleanup, removal,
remediation or damage thereof), or any other environmental matter as in effect
as of the date of this Agreement.
"Equityholder" means any holder of Company Capital Stock or
Company Options that is entitled to receive Per Share Merger Consideration or an
Option Payment under Section 2.6 or Section 2.7 and that has not perfected its
appraisal rights pursuant to Section 3.2.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, any successor statute thereto, and the rules and regulations
promulgated thereunder.
"Fully Diluted Common Number" shall equal (i) the aggregate
number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time, plus (ii) the aggregate number of shares of Company
Common Stock issuable upon the exercise in full of all outstanding Company
Options that are exercisable at the Effective Time, plus (iii) the aggregate
number of shares of Company Common Stock issuable upon the conversion of all
Company Preferred Stock issued and outstanding immediately prior to the
Effective Time, less (iv) the aggregate number of shares of Company Common Stock
to be cancelled at the Effective Time pursuant to Section 2.6(a).
"GAAP" means generally accepted accounting principles in the
United States.
"Governmental Authority" means any government, any
governmental entity, commission, board, agency or instrumentality, and any
court, tribunal or judicial body, whether federal, state, county, local or
foreign.
"Governmental Order" means any order, judgment, injunction or
decree issued, promulgated or entered by or with any Governmental Authority of
competent jurisdiction.
"Hazardous Material" means any material or substance that is
prohibited or regulated by any Environmental Law as of the date of this
Agreement.
"Hazardous Materials Activity" means the handling,
transportation, transfer, recycling, storage, use, treatment, investigation,
removal, remediation, release, exposure of others to, or distribution of any
Hazardous Material.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, any successor statute thereto, and the rules and
regulations promulgated thereunder.
"IRS" means the United States Internal Revenue Service, and
any successor agency thereto.
"Knowledge of the Company" or "known to the Company" and any
other phrases of similar import means, with respect to any matter in question
relating to the Company, the actual knowledge after due inquiry of Xxxxxx Xxxxx,
Xxxx Xxxxx, Xxxxx XxXxx, Xxxxxx Xxxxxx and Xxxxxx Xxxxxxx.
"Law" means any federal, state, county, local or foreign
statute, law, ordinance, Governmental Order or regulation or code of any
Governmental Authority of competent jurisdiction.
"Liability" means any and all debts, liabilities and
obligations of any kind or nature, whether accrued or fixed, absolute or
contingent, matured or unmatured, or determined or determinable.
"Material Adverse Effect" means any change or effect, taken
alone or in conjunction with other changes and effects, that is, or would
reasonably be expected to be, materially adverse to (a) the business,
operations, assets, financial condition or results of operations of the Company
or (b) the ability of the Company or the Equityholders to perform their
obligations under, or consummate the transactions contemplated by this Agreement
(without reference to the ability of the Company to obtain any necessary
consents from third parties); provided, however, that none of the following
shall be deemed, either alone or in combination, to constitute, and no change or
effect arising from or attributable or relating to any of the following shall be
taken into account in determining whether there has been a Material Adverse
Effect: (i) the negotiation (including activities relating to due diligence),
execution, delivery, public announcement or pendency of this Agreement or any of
the transactions contemplated herein or any actions taken in compliance
herewith, including the impact thereof on the relationships of the Company with
customers, suppliers, distributors, consultants, employees or independent
contractors or other third parties with whom the Company has any relationship;
(ii) conditions, that do not have a materially disproportionate impact on the
Company or its business in relation to other companies or businesses, affecting
the industries in which the Company operates or participates, the U.S. economy
or financial markets or any foreign markets or any foreign economy or financial
markets in any location where the Company has material operations or sales;
(iii) compliance with the terms of, or the taking of any action required by,
this Agreement, or otherwise taken with the consent of Parent; (iv) any breach
by Parent or Merger Sub of this Agreement or the Confidentiality Agreement; (v)
the taking of any action by Parent or any of Parent's Subsidiaries; (vi) any
change in GAAP or applicable Laws (or interpretation thereof) that does not have
a materially disproportionate impact on the Company or its business in relation
to other companies or businesses in the industries in which the Company operates
or participates; (vii) any item or items set forth in the Company Disclosure
Schedule; or (viii) any action required to be taken under applicable Laws,
including any actions taken or required to be taken by the Company in order to
obtain any approval or authorization for the consummation of the Merger under
applicable antitrust or competition Laws.
"Permit" means any license, franchise or permit with any
Governmental Authority required by applicable Law for the operation of the
Business.
"Permitted Encumbrances" means (i) all statutory or other
liens for current Taxes or assessments which are not yet due and payable or
Taxes the validity of which are being contested in good faith by appropriate
proceedings; (ii) all landlords', workmen's, repairmen's, warehousemen's and
carriers' liens and other similar liens imposed by Law and incurred in the
ordinary course of business for sums not yet due or that are being contested in
good faith or for which lien releases are in process; (iii) all Governmental
Orders set forth on the Company Disclosure Schedule; (iv) all pledges or
deposits in connection with workers compensation, unemployment insurance and
other social security legislation; (v) Encumbrances that will be released and
discharged at or prior to the Closing; and (vi) all other liens and mortgages,
covenants, imperfections in title, charges, easements, restrictions and other
Encumbrances which do not materially detract from the value of, or materially
interfere with, the present use and enjoyment of the asset or property subject
thereto or affected thereby.
"Person" means any individual, general or limited partnership,
firm, corporation, limited liability company, association, trust, unincorporated
organization or other entity.
"Proprietary Rights" means collectively, (i) all trademarks,
service marks, trade dress, logos, trade names and corporate names, copyrights
and URL and domain names (whether registered, unregistered or existing at common
law) and the goodwill associated therewith, and registrations and applications
for registration thereof; (ii) all trade secrets, know-how and confidential or
proprietary information of any kind or nature; and (iii) licenses and rights to
use any of the foregoing.
"Related Party" means: (i) each Person who owns beneficially
or of record at least 5% of the outstanding Company Capital Stock; (ii) each
individual who is an officer or director of the Company; (iii) each family
member or Affiliate of any of the Persons referred to in clauses (i) or (ii)
above; (iv) any trust or other Person (other than the Company) in which any one
of the individuals referred to in clauses (i), (ii) and (iii) above holds (or in
which more than one of such individuals collectively hold), beneficially or
otherwise, a material voting, proprietary or equity interest.
"Subsidiary" means with respect to any entity, that such
entity shall be deemed to be a "Subsidiary" of another Person if such other
Person directly or indirectly owns, beneficially or of record, (a) an amount of
voting securities or other interests in such entity that is sufficient to enable
such Person to elect at least a majority of the members of such entity's board
of directors or other governing body, or (b) at least a majority of the
outstanding equity interests of such entity.
"Targeted Net Working Capital Amount" means $11,645,000.
"Tax" or "Taxes" means any and all taxes, assessments, levies,
tariffs, duties or other charges or impositions in the nature of a tax (together
with all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any Governmental Authority, including income,
estimated income, gross receipts, profits, business, license, occupation,
franchise, capital stock, real or personal property, sales, use, transfer, value
added, employment or unemployment, social security, disability, alternative or
add-on minimum, customs, excise, stamp, environmental, commercial rent or
withholding taxes.
"Tax Return" means any return (including any information
return), report, statement, schedule, notice, form, election, estimated Tax
filing, claim for refund or other document (including any attachments thereto
and amendments thereof) filed with or submitted to, or required to be filed with
or submitted to, any Governmental Authority with respect to any Tax.
"Technology" means tangible embodiments of Proprietary Rights,
including know-how and works of authorship.
"Transaction Tax Benefit" is defined in, and shall be
calculated in accordance with, the "Transaction Tax Benefit Schedule" attached
as Schedule 1.1(c).
"Transfer Taxes" means any and all transfer, documentary,
sales, use, gross receipts, stamp, registration, value added, recording, escrow
and other similar Taxes and fees (including any penalties and interest) incurred
in connection with the transactions contemplated by this Agreement (including
any real property or leasehold interest transfer tax and any similar Tax).
"Unpaid Company Transaction Expenses" means Company
Transaction Expenses, but only to the extent they have not been paid by the
Company in Cash on or prior to the close of business on the day immediately
preceding the Closing Date and have, accordingly, not reduced the Closing Cash.
SECTION 1.2 Certain Additional Definitions. As used in this Agreement, the
following terms shall have the respective meanings ascribed thereto in the
respective sections of this Agreement set forth opposite each such term below:
Term Section
Accounting Firm 2.8(c)
Adjustment Escrow Fund 3.1
Agreement Preamble
Alternative Financing 7.12
Balance Sheet Date 4.6
Certificate of Merger 2.4
Closing 2.3
Closing Balance Sheet 2.8(b)
Closing Date 2.3
Closing Date Schedule 2.8(b)
Company Preamble
Company Benefit Plans 4.16(a)
Company Bylaws 4.2
Company Certificate of Incorporation 4.2
Company Certificates 3.1(a)
Company Common Stock Recitals
Company Disclosure Schedule Article IV
Company Financial Statements 4.6
Company Indemnified Parties 7.7(a)
Company Pre-Closing Certificate 2.8(a)
Company Preferred Stock Recitals
Company Representatives 7.1(a)
Company Stockholder Meeting/Consent 7.5(c)
Continuing Employees 7.8(b)
Current Balance Sheet 4.6
Dispute Notice 2.8(c)
Dissenting Shares 3.2
Effective Time 2.4
Employee Benefits 7.8(b)
Environmental Notice 9.1
Equityholders' Representative 11.1(a)
Escrow Agent 3.1(a)
Escrow Agreement 3.1(a)
Escrow Fund 3.1(a)
Estimated Closing Cash 2.8(a)
Estimated Closing Debt 2.8(a)
Estimated Net Working Capital Amount 2.8(a)
Estimated Transaction Tax Benefit 2.8(a)
Estimated Unpaid Company Transaction Expenses 2.8(a)
Expert Calculations 2.8(c)
Expiration Date 10.1
Financing 5.7
FIRPTA Certificate 8.2(g)
Fundamental Representation 10.1
Holder Group 7.9
Indemnitee 10.4(a)
Indemnitor 10.4(a)
Indemnity Escrow fund 3.1
Insurance 4.27
Leased Real Property 4.13(a)
Letter of Direction 7.16
Listed Contract 4.15(a)
Merger Recitals
Merger Consideration 2.6(b)
Merger Sub Preamble
Optionholder 2.7(a)
Option Payment 2.7(a)
Parent Preamble
Parent Subsidiaries 5.5
Per Share Common Merger Consideration 2.6(b)
Per Share Merger Consideration 2.6(c)
Per Share Preferred Merger Consideration 2.6(c)
Phase I Studies 9.1
Pre-2005 Indemnified Stockholders 10.7
Pre-2005 Stockholders 10.7
Pre-Closing Period 7.2(a)
Recommendations 4.1
Required Company Stockholder Vote 4.1
Review Period 2.8(c)
Series A-1 Preferred Stock Recitals
Series A-2 Preferred Stock Recitals
Series A-3 Preferred Stock Recitals
Series A-4 Preferred Stock Recitals
Solvent 5.6
Special Allocated Loss 10.7
Stockholders Agreement 4.3
Surviving Corporation 2.1
Third-Party Claim 10.4(a)
Voting Agreement Recitals
ARTICLE II.
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the DGCL, Merger Sub shall be merged with and
into the Company at the Effective Time. Following the Merger, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Merger Sub in accordance with the DGCL.
SECTION 2.2 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in the DGCL.
SECTION 2.3 Closing(a) . The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxx & Xxxxxxx
LLP, 000 Xxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx on the third (3rd) Business Days)
after the satisfaction or waiver of the conditions set forth in Article VIII
(such date hereinafter, the "Closing Date").
SECTION 2.4 Effective Time. Contemporaneously with or as promptly as practicable
after the Closing, Parent and the Company shall cause to be filed with the
Secretary of State of the State of Delaware a properly executed certificate of
merger conforming to the requirements of the DGCL and in the form attached
hereto as Exhibit A, executed in accordance with the relevant provisions of the
DGCL (the "Certificate of Merger"). The Merger shall become effective when the
Certificate of Merger is accepted for recording by the Secretary of State of the
State of Delaware (the "Effective Time").
SECTION 2.5 Certificate of Incorporation and Bylaws; Directors and Officers.
(a) At the Effective Time and without any further action on the part of the
Company or Merger Sub, the Company Certificate of Incorporation shall be
amended to read in its entirety as the certificate of incorporation of Merger
Sub reads as in effect immediately prior to the Effective Time, until
thereafter changed or amended as provided therein or by applicable Law,
provided, that such certificate of incorporation shall reflect as of the
Effective Time "Xxxxx Xxxxxxxxx Corporation" as the name of the Surviving
Corporation. The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by the Certificate of
Incorporation and applicable Law.
(b) The directors of Merger Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation as of the Effective Time, until
the earlier of their resignation or removal or otherwise ceasing to be a
director or until their respective successors are duly elected and qualified,
as the case may be.
(c) The officers of the Merger Sub immediately prior to the Effective Time shall
be the officers of the Surviving Corporation as of the Effective Time, until
the earlier of their resignation or removal or otherwise ceasing to be an
officer or until their respective successors are duly elected and qualified,
as the case may be.
SECTION 2.6 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Capital Stock or any shares of capital stock of Merger Sub:
(a) Each share of Company Capital Stock that is held in the treasury of the
Company and each share of Company Capital Stock owned by Parent, Merger Sub
or any other wholly-owned subsidiary of Parent shall be canceled and retired
and no consideration shall be delivered in exchange therefor.
(b) Each share of Company Common Stock issued and outstanding immediately prior
to the Effective Time (other than shares of Company Common Stock to be
canceled in accordance with Section 2.6(a) and other than Dissenting Shares)
shall be converted at the Effective Time into the right to receive an amount
in cash, without interest, equal to the quotient of (i) (1) $175,000,000 (the
"Merger Consideration"), plus (2) the Closing Cash, plus (3) the Aggregate
Exercise Price, plus (4) the Transaction Tax Benefit, plus (5) the amount, if
any, by which the Estimated Net Working Capital Amount exceeds the Targeted
Net Working Capital Amount, less the sum of (x) Unpaid Company Transaction
Expenses, plus (y) all Closing Debt, plus (z) the amount, if any, by which
the Targeted Net Working Capital Amount exceeds the Estimated Net Working
Capital Amount, divided by (ii) the Fully Diluted Common Number (such result,
the "Per Share Common Merger Consideration"). All such shares of Company
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired, and each holder of a Company
Certificate representing any such shares of Company Common Stock, as
applicable, shall cease to have any rights with respect thereto, except the
right to receive the Per Share Common Merger Consideration with respect to
such shares of Company Common Stock.
(c) Each share of Company Preferred Stock issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares) shall be converted
at the Effective Time into the right to receive an amount in cash (adjusted
to the nearest one-hundredth of a cent), without interest, equal to (i) the
number of shares of Company Common Stock into which such share of Company
Preferred Stock would have been convertible immediately prior to the
Effective Time, multiplied by (ii) the Per Share Common Merger Consideration
(the "Per Share Preferred Merger Consideration," and together with the Per
Share Common Merger Consideration, the "Per Share Merger Consideration")).
All such shares of Company Preferred Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and retired, and
each holder of a Company Certificate representing any such shares of Company
Preferred Stock shall cease to have any rights with respect thereto, except
the right to receive the Per Share Preferred Merger Consideration with
respect to such shares of Company Preferred Stock.
(d) Each issued and outstanding share of the capital stock of Merger Sub shall
be converted into and become as of the Effective Time one (1) fully paid and
nonassessable share of common stock, par value $0.001 per share, of the
Surviving Corporation.
SECTION 2.7 Treatment of Company Options.
(a) Vested Company Options. At the Effective Time, each
Company Option that is vested and that has not been exercised prior to the
Effective Time shall be cancelled in consideration of payment to the holder
thereof (each, an "Optionholder") of an amount in cash equal to the product
obtained by multiplying (i) the aggregate number of shares of Company Common
Stock issuable upon the exercise of each unexercised vested Company Option held
by such Optionholder as of immediately prior to the Effective Time, by (ii) the
excess, if any, of (x) the Per Share Common Merger Consideration less (y) the
exercise price per share of such Company Option (such amount an "Option
Payment"). The Company shall take all necessary actions, including providing any
required notice to Optionholders, necessary to effect the transactions described
in this Section 2.7(a) pursuant to the terms of the Company Option Plan and any
agreement evidencing a vested Company Option.
(b) Unvested Company Options. Each unvested Company Option
shall be deemed vested as of the Effective Time and shall be treated as a vested
Company Option in accordance with Section 2.7(a).
SECTION 2.8 Post-Closing Merger Consideration Adjustment.
(a) Estimated Merger Consideration. Not later than three
Business Days before the Closing, the Company shall deliver to Parent and the
Equityholders' Representative a certificate of the Company (the "Company
Pre-Closing Certificate") executed on its behalf by the Chief Financial Officer
of the Company that sets forth in reasonable detail the Company's estimates of
the Company Net Working Capital Amount (the "Estimated Net Working Capital
Amount"), Closing Cash ("Estimated Closing Cash"), Closing Debt ("Estimated
Closing Debt") and Unpaid Company Transaction Expenses ("Estimated Unpaid
Company Transaction Expenses"), along with the supporting detail therefor, such
estimates to be prepared in accordance with GAAP, using the policies,
conventions, methodologies and procedures used by the Company in preparing the
Company Financial Statements, and the Company's estimate of the Transaction Tax
Benefit ("Estimated Transaction Tax Benefit") along with supporting detail
therefor, such estimate to be prepared in accordance with the Transaction Tax
Benefit Schedule. Prior to Closing, the Company and Parent shall cooperate in
good faith to agree upon the calculation of the Estimated Net Working Capital
Amount, Estimated Closing Cash, Estimated Closing Debt, Estimated Transaction
Tax Benefit and Estimated Unpaid Company Transaction Expenses upon which the Per
Share Merger Consideration to be paid at Closing shall be based; provided, that,
if the Company and Parent are unable to agree as to any item set forth on the
Company Pre-Closing Certificate, then the amount set forth as the Estimated Net
Working Capital Amount, Estimated Closing Cash, Estimated Closing Debt,
Estimated Transaction Tax Benefit or Estimated Unpaid Company Transaction
Expenses, as applicable, on the Company Pre-Closing Certificate shall be an
estimate of Estimated Net Working Capital Amount, Estimated Closing Cash,
Estimated Closing Debt, Estimated Transaction Tax Benefit or Estimated Unpaid
Company Transaction Expenses, as applicable, agreed to by the parties.
(b) Calculation. As promptly as practicable, but in no event
later than 45 days following the Closing Date, the Surviving Corporation shall,
at its expense, (i) cause to be prepared, in accordance with GAAP, using the
policies, conventions, methodologies and procedures used by the Company in
preparing the Company Financial Statements, an unaudited balance sheet of the
Company on or prior to the close of business on the day immediately preceding
the Closing Date, but which shall not reflect the transactions occurring at the
Closing (the "Closing Balance Sheet"), together with a statement (the "Closing
Date Schedule") setting forth in reasonable detail the Surviving Corporation's
calculation of the Closing Net Working Capital Amount, Closing Cash, Closing
Debt, Transaction Tax Benefit and Unpaid Company Transaction Expenses and (ii)
deliver to the Equityholders' Representative the Closing Balance Sheet and the
Closing Date Schedule, together with a certificate of the Surviving Corporation
executed on its behalf by its Chief Financial Officer confirming that the
Closing Balance Sheet and the Closing Date Schedule were properly prepared in
good faith and in accordance with GAAP, using the policies, conventions,
methodologies and procedures used by the Company in preparing the Company
Financial Statements and that the Transaction Tax Benefit was calculated in
accordance with the Transaction Tax Benefit Schedule.
(c) Review; Disputes.
(i) From and after the Effective Time, the Surviving
Corporation shall provide the Equityholders' Representative and any accountants
or advisors retained by the Equityholders' Representative with full access to
the books and records of the Surviving Corporation for the purposes of: (A)
enabling the Equityholders' Representative and its accountants and advisors to
calculate, and to review the Surviving Corporation's calculation of, the Closing
Net Working Capital Amount, Closing Cash, Closing Debt, Transaction Tax Benefit
and Unpaid Company Transaction Expenses; and (B) identifying any dispute related
to the calculation of any of the Closing Net Working Capital Amount, Closing
Cash, Closing Debt, Transaction Tax Benefit and Unpaid Company Transaction
Expenses in the Closing Date Schedule.
(ii) If the Equityholders' Representative disputes
the calculation of any of the Closing Net Working Capital Amount, Closing Cash,
Closing Debt, Transaction Tax Benefit or Unpaid Company Transaction Expenses set
forth in the Closing Date Schedule, then the Equityholders' Representative shall
deliver a written notice (a "Dispute Notice") to the Surviving Corporation and
the Escrow Agent at any time during the 40-day period commencing upon receipt by
the Equityholders' Representative of the Closing Balance Sheet, the Closing Date
Schedule and the related certificate of the Surviving Corporation's Chief
Financial Officer, all as prepared by the Surviving Corporation in accordance
with the requirements of Section 2.8(b) (subject to extension for any period of
inadequate access to the underlying records) (the "Review Period"). The Dispute
Notice shall set forth the basis for the dispute of any such calculation in
reasonable detail.
(iii) If the Equityholders' Representative does not
deliver a Dispute Notice to the Surviving Corporation prior to the expiration of
the Review Period, the Surviving Corporation's calculation of the Closing Net
Working Capital Amount, Closing Cash, Closing Debt, Transaction Tax Benefit and
Unpaid Company Transaction Expenses set forth in the Closing Date Schedule shall
be deemed final and binding on Parent, the Surviving Corporation, the
Equityholders' Representative and the Equityholders for all purposes of this
Agreement.
(iv) If the Equityholders' Representative delivers a
Dispute Notice to the Surviving Corporation prior to the expiration of the
Review Period, then the Equityholders' Representative and the Surviving
Corporation shall use commercially reasonable efforts to reach agreement on the
Closing Net Working Capital Amount, Closing Cash, Closing Debt, Transaction Tax
Benefit and Unpaid Company Transaction Expenses. If the Equityholders'
Representative and the Surviving Corporation are unable to reach agreement on
the Closing Net Working Capital Amount, Closing Cash, Closing Debt, Transaction
Tax Benefit and Unpaid Company Transaction Expenses within 30 days after the end
of the Review Period, either party shall have the right to refer such dispute to
an independent accountant of national standing reasonably acceptable to Parent
and Equityholders' Representative (such firm, or any successor thereto, being
referred to herein as the "Accounting Firm") after such 30th day. In connection
with the resolution of any such dispute by the Accounting Firm: (i) each of the
Surviving Corporation and the Equityholders' Representative shall have a
reasonable opportunity to meet with the Accounting Firm to provide their views
as to any disputed issues with respect to the calculation of any of the Closing
Net Working Capital Amount, Closing Cash, Closing Debt, Transaction Tax Benefit
and Unpaid Company Transaction Expenses; (ii) the Accounting Firm shall
determine the Closing Net Working Capital Amount, Closing Cash, Closing Debt,
Transaction Tax Benefit and Unpaid Company Transaction Expenses in accordance
with the terms of this Agreement within 30 days of such referral and upon
reaching such determination shall deliver a copy of its calculations (the
"Expert Calculations") to the Equityholders' Representative, Surviving
Corporation and the Escrow Agent; and (iii) the determination made by the
Accounting Firm of the Closing Net Working Capital Amount, Closing Cash, Closing
Debt, Transaction Tax Benefit and Unpaid Company Transaction Expenses shall be
final and binding on Parent, the Surviving Corporation, the Equityholders'
Representative and the Equityholders for all purposes of this Agreement, absent
manifest error. In calculating the Closing Net Working Capital Amount, Closing
Cash, Closing Debt, Transaction Tax Benefit and Unpaid Company Transaction
Expenses, the Accounting Firm (i) shall be limited to addressing any particular
disputes referred to in the Dispute Notice and (ii) such calculation shall, with
respect to any disputed item, be no greater than the higher amount calculated by
the Equityholders' Representative or the Surviving Corporation, and no lower
than the amount calculated by the Equityholders' Representative or the Surviving
Corporation, as the case may be. The Expert Calculations shall reflect in detail
the differences, if any, between the Closing Net Working Capital Amount, Closing
Cash, Closing Debt, Transaction Tax Benefit and Unpaid Company Transaction
Expenses reflected therein and the Closing Net Working Capital Amount, Closing
Cash, Closing Debt, Transaction Tax Benefit and Unpaid Company Transaction
Expenses set forth in the Closing Date Schedule. The fees and expenses of the
Accounting Firm shall be borne equally by the Surviving Corporation and the
Equityholders' Representative.
(d) Payment Upon Final Determination of Adjustments.
(i) If (A) the sum of the Closing Net Working Capital Amount,
Transaction Tax Benefit and Closing Cash, less Closing Debt and Unpaid Company
Transaction Expenses, as finally estimated in accordance with Section 2.8(a), is
less than (B) the sum of the Estimated Net Working Capital Amount, Estimated
Transaction Tax Benefit and Estimated Closing Cash, less Estimated Closing Debt
and Estimated Unpaid Company Transaction Expenses, as finally determined in
accordance with Section 2.8(c), by an amount greater than $100,000 then the
Surviving Corporation shall receive the amount of such deficiency (from dollar
one) first from the Adjustment Escrow Fund and then, to the extent necessary,
from the Indemnity Escrow Fund. For the avoidance of doubt, no payment shall be
made by Escrow Agent to the Surviving Corporation in the event that such
difference is not greater than $100,000.
(ii) If (A) the sum of the Closing Net Working Capital Amount,
Transaction Tax Benefit and Closing Cash, less Closing Debt and Unpaid Company
Transaction Expenses, as finally determined in accordance with Section 2.8(c),
is greater than (B) the sum of the Estimated Net Working Capital Amount,
Estimated Transaction Tax Benefit and Estimated Closing Cash, less Estimated
Closing Debt and Estimated Unpaid Company Transaction Expenses, as finally
estimated in accordance with Section 2.8(a), by an amount greater than $100,000,
then the Surviving Corporation shall, no later than three Business Days after
such determination (or, if such Equityholder has not exchanged such
Equityholder's Company Certificates pursuant to Article III, then upon such
exchange by such Equityholder), cause to be paid to each Equityholder by
delivery of immediately available funds to such Equityholder an amount equal to
the product of such excess (from dollar one) multiplied by such Equityholder's
Applicable Percentage. For the avoidance of doubt, no payment shall be made by
the Surviving Corporation to the Equityholders in the event that such difference
is not greater than $100,000.
(iii) To the extent that any amounts remain in the Adjustment
Escrow Fund after any payment to the Surviving Corporation pursuant to Section
2.8(d)(i) or to the Equityholders pursuant to Section 2.8(d)(ii), then such
remaining amount multiplied by the respective Equityholders' Applicable
Percentage shall immediately be released from the Adjustment Escrow Fund and
paid to the respective Equityholders.
ARTICLE III.
EXCHANGE OF COMPANY CERTIFICATES
SECTION 3.1 Exchange of Company Certificates.
(a) Payment. At the Closing, (i) each Equityholder shall deliver to the
Surviving Corporation for cancellation the stock certificates and/or
agreements representing such Equityholder's shares of Company Capital Stock
and Company Options (collectively, such Equityholder's "Company
Certificates"), (ii) Parent shall, or shall cause the Surviving Corporation
to pay the aggregate amount to be paid to Equityholders pursuant to Section
2.6 and Section 2.7 to the account or accounts designated by the
Equityholders' Representative by means of a wire transfer of immediately
available funds, against delivery of a duly executed letter of transmittal,
in a form agreed upon by Parent and the Company prior to the execution of
this Agreement, and surrender of Company Certificates for cancellation,
except that the sums of $500,000 (the "Adjustment Escrow Fund") and
$8,750,000 (the "Indemnity Escrow Fund," and together with the Adjustment
Escrow Fund, the "Escrow Fund") shall be deducted, pro rata in proportion to
each Equityholder's Applicable Percentage, from such aggregate amount and
delivered to the escrow agent mutually agreed upon by the Company and Parent
prior to the Closing (the "Escrow Agent") to hold in accordance with the
terms of the escrow agreement to be executed at Closing by Parent, the Escrow
Agent and the Equityholders' Representative in substantially the form
attached hereto as Exhibit B (the "Escrow Agreement"), and (iii) Parent
shall, or shall cause the Surviving Corporation to deliver the Escrow Fund to
the Escrow Agent pursuant to the Escrow Agreement. Without limiting the
generality of the foregoing, upon the request of Parent, the Equityholders'
Representative shall appoint a payment agent to which Parent shall make a
lump sum payment in satisfaction of its obligations pursuant to Section 2.6
and to facilitate the payment of Closing Debt and Company Transaction
Expenses; provided, however, that all obligations pursuant to Section 2.7
shall be remitted through the Company's payroll system in accordance with
Section 3.4.
(b) Exchange Procedures. To the extent that an Equityholder has not delivered
the Company Certificates representing all of such Equityholder's shares of
Company Capital Stock or Company Options as of the Closing, then, promptly
after the Effective Time, the Surviving Corporation shall mail to such
Equityholder: (i) a letter of transmittal which shall specify that the
delivery of the consideration to be paid to such Equityholder under this
Agreement shall be effected, and risk of loss and title to Company Capital
Stock and Company Options held by such Equityholder shall pass, only upon
delivery of the applicable Company Certificates and shall contain
representations and warranties as to ownership and title to such Company
Capital Stock or Company Options, and (ii) instructions for effecting the
surrender of each Company Certificate in exchange for the amount to be paid
to such Equityholder pursuant to Section 2.6 and Section 2.7. Upon surrender
of a Company Certificate for cancellation to the Surviving Corporation,
together with such letter of transmittal, duly completed and validly executed
in accordance with the instructions thereto, the Company Certificates so
surrendered shall forthwith be canceled, and the holder of the Company
Certificate shall be entitled to receive in exchange therefor, subject to
Section 3.1(a), the consideration payable to such holder pursuant to Section
2.6 and/or Section 2.7, as the case may be, without interest thereon, as such
amounts may be adjusted pursuant to Section 2.8. Until so surrendered, each
outstanding Company Certificate shall be deemed from and after the Effective
Time, for all corporate purposes, to evidence only the right to receive the
payments pursuant to Section 2.6 and/or Section 2.7, as such amounts may be
adjusted pursuant to Section 2.8.
(c) Lost, Stolen or Destroyed Company Certificates. If any Company Certificate
shall have been lost, stolen or destroyed, upon (i) the making of an
affidavit of that fact by the Person claiming such Company Certificate to be
lost, stolen or destroyed and (ii) the execution and delivery to the
Surviving Corporation by such Person of an indemnity agreement in customary
form and substance, Parent or the Surviving Corporation shall, subject to
Section 3.1(a), issue, in exchange for such lost, stolen or destroyed Company
Certificate, the amount of cash, without interest, that such Person would
have been entitled to receive had such Person surrendered such lost, stolen
or destroyed Company Certificate to the Surviving Corporation pursuant to
Section 2.6(b), Section 2.6(c), Section 2.6(d) or Section 2.7, as such
amounts may be adjusted pursuant to Section 2.8.
(d) No Liability. Notwithstanding anything to the contrary in this Section 3.1,
neither the Company, Parent nor the Surviving Corporation shall be liable to
any Person for any amount properly paid to a public official pursuant to any
abandoned property, escheat or similar Law.
SECTION 3.2 Dissenting Shares. Notwithstanding any provision of this Agreement
to the contrary and subject to Section 8.2(f), if required by the DGCL, but only
to the extent required thereby, shares of Company Capital Stock which are issued
and outstanding immediately prior to the Effective Time and which are held by
holders of such shares of Company Capital Stock who have properly exercised
appraisal rights with respect thereto in accordance with the DGCL (the
"Dissenting Shares") shall not be exchangeable for the right to receive the Per
Share Merger Consideration, and holders of such shares of Company Capital Stock
shall be entitled to receive payment of the appraised value of such shares of
Company Capital Stock in accordance with the provisions of the DGCL unless and
until such holders fail to perfect or effectively withdraw or lose their rights
to appraisal and payment under the DGCL; provided however the appraised value,
including any interest thereon, of such shares in excess of the Per Share Merger
Consideration along with all costs associated with the appraisal process
(including, but not limited to, reasonable attorney fees of Parent and Merger
Sub and all court costs) shall be paid from the Indemnity Escrow Fund without
regard to the limitations contained in Section 10.3(b). If, after the Effective
Time, any such holder fails to perfect or effectively withdraws or loses such
right, such shares of Company Capital Stock shall thereupon be treated as if
they had been converted into and to have become exchangeable for, at the
Effective Time, the right to receive the Per Share Merger Consideration, without
any interest thereon. The Company shall give Parent and Merger Sub prompt notice
of any written demands for appraisal, withdrawals of demands for appraisal and
any other related instruments received by the Company. The Company shall not,
except with the prior written consent of Parent, voluntarily make any payment
with respect to any demands for appraisal or settle or offer to settle any such
demand.
SECTION 3.3 No Further Ownership Rights in Shares of Company Capital Stock;
Closing of Company Transfer Books. At and after the Effective Time, each holder
of Company Capital Stock shall cease to have any rights as a stockholder of the
Company, except for, in the case of a holder of Company Capital Stock (other
than shares to be cancelled pursuant to Section 2.6(a) or Dissenting Shares),
the right to surrender his or her Company Certificate in exchange for payment of
the Per Share Merger Consideration or, in the case of a holder of Dissenting
Shares, to perfect his or her right to receive payment for his or her shares of
Company Capital Stock pursuant to the DGCL, and no transfer of shares of Company
Capital Stock shall be made on the stock transfer books of the Surviving
Corporation. At the Effective Time, the stock transfer books of the Company
shall be closed, and no transfer of shares of Company Capital Stock shall
thereafter be made. If, after the Effective Time, Company Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged as
provided for in this Agreement.
SECTION 3.4 Withholding Rights. Parent and t(a) he Surviving Corporation shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any Equityholder such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any applicable provision of state, local or foreign Tax Law (including under
Section 1445 of the Code, if applicable); provided, however, that Parent or the
Surviving Corporation shall notify any Equityholder from whom funds are properly
withheld of the amount of such withholding. To the extent that amounts are so
withheld by Parent or the Surviving Corporation in accordance with the
foregoing, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Equityholder in respect of which such
deduction and withholding was made by Parent or the Surviving Corporation.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Contemporaneously with the execution and delivery of this Agreement by
the Company to Parent and Merger Sub, the Company shall deliver to Parent and
Merger Sub a disclosure schedule with numbered sections corresponding to the
relevant sections in this Agreement (the "Company Disclosure Schedule"). Any
exception or qualification set forth in the Company Disclosure Schedule with
respect to a particular representation, warranty or covenant contained herein
shall be deemed to be an exception or qualification with respect to all other
applicable representations, warranties and covenants contained in this
Agreement. Nothing in the Company Disclosure Schedule is intended to broaden the
scope of any representation, warranty or covenant of the Company contained in
this Agreement. Subject to the exceptions and qualifications set forth in the
Company Disclosure Schedule, the Company hereby represents and warrants to
Parent and Merger Sub as follows:
SECTION 4.1 Authority(a) .
(a) The Company has all requisite corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder, and the consummation by the Company of the transactions contemplated
by this Agreement, have been duly authorized by the Board of Directors of the
Company, and no other corporate action on the part of the Company is necessary
to authorize the execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder or the consummation by
the Company of the transactions contemplated by this Agreement, other than the
Required Company Stockholder Vote. This Agreement has been duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by the other parties to this Agreement, this Agreement constitutes a legally
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms. The affirmative vote or consent of (i) the holders of
a majority of the shares of the outstanding Company Capital Stock voting or
consenting, as the case may be, on an as-if-converted to Company Common Stock
basis, (ii) the holders of a majority of the shares of the outstanding Company
Series A-1 Preferred Stock and (iii) the holders of a majority of the shares of
the outstanding Company Series A-3 Preferred Stock are the only votes of the
holders of any Company Capital Stock necessary under the DGCL and the Company
Certificate of Incorporation to adopt this Agreement (the "Required Company
Stockholder Vote").
(b) The Board of Directors of the Company, at a meeting duly called and held,
has unanimously duly adopted resolutions (i) determining that this Agreement and
the transactions contemplated hereby, including the Merger, are advisable and
are fair to and in the best interest of the Company's stockholders, (ii)
approving this Agreement and the transactions contemplated hereby, including the
Merger which approval satisfies in full the requirements of the DGCL that the
Agreement be approved by the Company's Board of Directors, and (iii) resolving
to recommend approval and adoption of this Agreement by the Company's
stockholders at the Company Stockholders Meeting (the recommendations referred
to in this clause (iii) are collectively referred to in this Agreement as the
"Recommendations" and are subject to the right of the Board of Directors of the
Company to make subsequent determinations in accordance with Section 7.5(c)
below). The Company has been orally advised that all of its directors who hold
Company Common Stock intend to vote in favor of the Merger.
SECTION 4.2 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware, and has
all requisite corporate power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it, and to carry on the
Business in all material respects. The Company is duly qualified to do business
as a foreign corporation, and is in good standing, under the Laws of each
jurisdiction in which the character of its properties owned, operated or leased,
or the nature of its activities, makes such qualification necessary, except in
those jurisdictions where the failure to be so qualified or in good standing,
when taken together with all other failures by the Company to be so qualified or
in good standing, would not have a Material Adverse Effect. True and complete
copies of the Certificate of Incorporation (the "Company Certificate of
Incorporation") and Bylaws (the "Company Bylaws") of the Company, each as
amended and in effect as of the date of this Agreement, have been made available
to Parent or its advisors. The Company has no Subsidiaries.
SECTION 4.3 Company Capital Stock.
(a) As of the date of this Agreement, the Company Capital Stock consists of
15,225,000 shares, of which 8,000,000 shares have been designated Company Common
Stock and 7,225,000 shares have been designated Company Preferred Stock, of
which 1,000,000 shares have been designated Series A-1 Preferred Stock,
1,657,000 shares have been designated Series A-2 Preferred Stock, 2,284,000
shares have been designated Series A-3 Preferred Stock and 2,284,000 shares have
been designated Series A-4 Preferred Stock. As of the date of this Agreement,
253,740 shares of Company Common Stock, 1,000,000 shares of Series A-1 Preferred
Stock, 636,650 shares of Series A-2 Preferred Stock, 2,283,581 shares of Series
A-3 Preferred Stock and no shares of Series A-4 Preferred Stock have been issued
and are outstanding. All such issued and outstanding shares of Company Capital
Stock have been duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights created by statute, the Company Certificate of Incorporation, the Company
Bylaws or any agreement to which the Company is a party or by which it is bound,
and have been issued in compliance with applicable federal and state securities
or "blue sky" Laws. Section 4.3(a) of the Company Disclosure Schedule sets
forth, as of the date of this Agreement, the name of each holder of shares of
Company Capital Stock and the number of shares of Company Common Stock, Company
Series A-1 Preferred Stock, Company Series A-2 Preferred Stock, Company Series
A-3 Preferred Stock and Company Series A-4 Preferred Stock held of record by
each such stockholder. There are no accrued or unpaid dividends with respect to
any issued and outstanding shares of Company Capital Stock that will not be
satisfied by the payment of the Merger Consideration hereunder. (b) As of the
date of this Agreement, there are no outstanding options, warrants, calls,
rights of conversion or other rights, agreements, arrangements or commitments of
any kind or character, relating to the Company Capital Stock to which the
Company is a party, or by which it is bound, obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, any shares of Company
Capital Stock, other than outstanding Company Options representing the right to
purchase an aggregate of 445,023 shares of Company Common Stock.
(c) There are (i) no rights, agreements, arrangements or commitments of any kind
or character, whether written or oral, relating to the Company Capital Stock to
which the Company is a party, or by which it is bound, obligating the Company to
repurchase, redeem or otherwise acquire any issued and outstanding shares of
Company Capital Stock, except as set forth in the Company Certificate of
Incorporation; (ii) no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to the Company
and (iii) no voting trusts, stockholder agreements, proxies or other agreements
or understandings in effect to which the Company is a party with respect to the
governance of the Company or the voting or transfer of any shares of Company
Capital Stock, except for the Amended and Restated Stockholders and Registration
Rights Agreement, dated as of December 6, 2004, by and among the Company and the
stockholders listed therein (the "Stockholders Agreement").
SECTION 4.4 Conflicts. Assuming all consents, waivers, approvals,
authorizations, orders, permits, declarations, filings, registrations and
notifications and other actions set forth in Section 4.5 have been obtained or
made, the execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder, and the consummation by
the Company of the transactions contemplated by this Agreement, does not and
will not (i) conflict with or result in a violation of the Company Certificate
of Incorporation or Company Bylaws; (ii) conflict with or result in a violation
of any Governmental Order or Law applicable to the Company or its assets or
properties or (iii) result in a material breach of, or constitute a material
default (or event which with the giving of notice or lapse of time, or both,
would become a material default) under, or give rise to any rights of
termination, amendment, modification, acceleration or cancellation of or loss of
any benefit under, or result in the creation of any Encumbrance on any of the
assets or properties of the Company pursuant to, any Contract to which the
Company is a party, or by which any of the assets or properties of the Company
is bound or affected, except, in the case of clauses (ii) and (iii) of this
Section 4.4, as would not have a Material Adverse Effect.
SECTION 4.5 Consents, Approvals, Etc. No consent, waiver, approval,
authorization, order or permit of, or declaration, filing or registration with,
or notification to, any Governmental Authority or other Person is required to be
made or obtained by the Company in connection with the execution and delivery of
this Agreement by the Company, the performance by the Company of its obligations
hereunder, or the consummation by the Company of the transactions contemplated
by this Agreement, except: (i) the filing of the Certificate of Merger pursuant
to the DGCL; (ii) applicable requirements, if any, under the DGCL, federal or
state securities or "blue sky" Laws; (iii) such filings as may be required under
the HSR Act; and (iv) where the failure to obtain such consent, waiver,
approval, authorization, order or permit, or to make such declaration, filing,
registrations or notification would not when taken together with all other such
failures by the Company have a Material Adverse Effect.
SECTION 4.6 Financial Statements. The Company has prepared, or caused to be
prepared, and made available to Parent or its advisors the audited financial
statements of the Company (including the balance sheet and the related
statements of income and cash flows of the Company) as of and for each of the
52-week periods ended January 28, 2007, January 29, 2006 and January 30, 2005,
respectively, (the "Company Financial Statements"). Except as set forth therein,
the Company Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods indicated therein and with
each other, and present fairly, in all material respects, the financial
position, results of operations and cash flows of the Company as of the
respective dates and during the respective periods indicated therein. The
audited balance sheet of the Company as of January 28, 2007 shall be referred to
in this Agreement as the "Current Balance Sheet" and the date thereof shall be
referred to in this Agreement as the "Balance Sheet Date."
SECTION 4.7 Undisclosed Liabilities. The Company has no Liability that is of a
type required to be reflected on the face of a balance sheet in accordance with
GAAP, except (i) as reflected in, reserved against or disclosed in the Company
Financial Statements; (ii) as incurred in the ordinary course of business since
the Balance Sheet Date; (iii) for Liabilities arising from matters disclosed in
the Company Disclosure Schedule; or (iv) as incurred under this Agreement or in
connection with the transactions contemplated hereby.
SECTION 4.8 Certain Changes or Events. Except as contemplated by this Agreement,
between the Balance Sheet Date and the date of this Agreement, there has not
been, occurred or arisen:
(a) any event or condition of any kind or character that has had or would
reasonably be expected to have a Material Adverse Effect;
(b) any issuance of (i) Company Capital Stock, except upon the exercise of
Company Options or upon the conversion of Company Preferred Stock into Company
Common Stock, or (ii) any options, warrants, rights of conversion or other
rights, agreements, arrangements or commitments obligating the Company to issue,
deliver or sell any Company Capital Stock;
(c) any declaration, setting aside or payment of any dividend, or other
distribution or capital return in respect of any shares of Company Capital
Stock, or any redemption, repurchase or other acquisition by the Company of any
shares of Company Capital Stock;
(d) any sale, assignment, transfer, lease, license or other disposition, or
agreement to sell, assign, transfer, lease, license or otherwise dispose of, any
of the fixed assets of the Company having a net book value, in any individual
case, in excess of $50,000 or in the aggregate in excess of $250,000;
(e) any acquisition (by merger, consolidation or other combination, or
acquisition of stock or assets or otherwise) by the Company of any corporation,
partnership or other business organization, or any division thereof;
(f) any material change in any method of financial or Tax accounting or
financial or Tax accounting practice used by the Company, other than such
changes as are required by GAAP or Tax law, as applicable;
(g) any material Tax election (including any change in election);
(h) (i) any employment, deferred compensation, severance or similar agreement
entered into or amended by the Company, except any employment agreement
providing for compensation of less than $100,000 per annum; (ii) any increase in
the compensation payable, or to become payable, by the Company to any directors
or officers of the Company; (iii) any payment of or provision for any bonus,
stock option, stock purchase, profit sharing, deferred compensation, pension,
retirement or other similar payment or arrangement to any director or officer of
the Company; or (iv) any increase in the coverage or benefits available under
any benefit plan, payment or arrangement made to, for or with such directors,
officers, Company Employees, agents or representatives, other than increases,
payments or provisions which are in normal amounts and are made in the ordinary
course of business consistent with past practice, or which are made pursuant to
a contractual obligation or are required by applicable Law; or
(i) any agreement, other than this Agreement, to take any actions specified in
this Section 4.8.
SECTION 4.9 Tax Matters.
(a) All Tax Returns required to be filed by or with respect to the Company have
been timely filed (taking into account applicable extensions of time to file)
with the appropriate Governmental Authority, and all such Tax Returns are
complete and accurate in all material respects. All Taxes with respect to
taxable periods covered by such Tax Returns have been paid. No claim has ever
been made by a Governmental Authority in a jurisdiction where the Company
does not presently file Tax Returns that the Company is or may be subject to
taxation by that jurisdiction.
(b) To the Knowledge of the Company, no basis exists for which any Governmental
Authority may reasonably be expected to assess any additional Taxes for any
period for which Tax Returns have been filed. No deficiency for any material
amount of Taxes has been proposed, asserted or assessed in writing by any
Governmental Authority against the Company, which remains unpaid, except for
any deficiencies that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in the
Company Financial Statements and the Company Net Working Capital Amount in
accordance with GAAP. There are no audits, examinations or other
administrative or judicial proceedings currently ongoing or pending with
respect to any Taxes of the Company. There are no waivers or extensions of
any statute of limitations currently in effect with respect to Taxes of the
Company. The Company Disclosure Schedule lists all federal, state and foreign
income Tax Returns filed with respect to the Company for taxable periods
ended on or after February 1, 2004. The Company has delivered or made
available to Parent correct and complete copies of all federal and state
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company filed or received since February
1, 2004.
(c) There are no Encumbrances, other than Permitted Encumbrances, for Taxes upon
the assets of the Company.
(d) All material Taxes required to be withheld or collected by the Company have
been withheld and collected and, to the extent required by Law, timely paid
to the appropriate Governmental Authority.
(e) The Company is not a party to, nor has any obligation under, any Tax
sharing, Tax allocation, Tax indemnity or similar agreement or arrangement.
(f) The Company has not been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
described in Code Section 897(c)(1)(A)(ii).
(g) The Company is not a party to any agreement, contract, arrangement or plan
that has resulted or could result, separately or in the aggregate, in the
payment of any "excess parachute payment" within the meaning of Code Section
280G (or any corresponding provision of state, local or foreign Tax law).
(h) The Company has (i) disclosed on its federal income Tax Return all material
positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Code Section 6662 or (ii)
believes it has substantial authority for such positions.
(i) The Company (i) has not been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common parent
of which is the Company) and (ii) does not have any Liability for the Taxes
of any Person under Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(j) The unpaid Taxes of the Company do not exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Current
Balance Sheet (rather than in any notes thereto).
(k) The Company will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i) change
in method of accounting for a taxable period ending on or prior to the
Closing Date, (ii) "closing agreement" as described in Code Section 7121 (or
any corresponding provision of state, local or foreign Tax law) executed on
or prior to the Closing Date, (iii) intercompany transaction or any excess
loss accounts described in Treasury Regulations under Code Section 1502; or
(iv) installment sale or open transaction disposition made on or prior to the
Closing Date.
SECTION 4.10 Litigation and Governmental Orders. As of the date of this
Agreement, (i) there are no Actions pending or, to the Knowledge of the Company,
threatened against the Company, any of the assets or properties of the Company,
or any of the directors and officers of the Company in their capacity as
directors or officers of the Company that would have a Material Adverse Effect,
and (ii) the Company and its assets and properties are not subject to any
Governmental Order relating specifically to the Company or any of its assets or
properties.
SECTION 4.11 Compliance with Laws. The Company is conducting the Business in
compliance with applicable Law, except where the failure to so comply, when
taken together with all other such failures by the Company to so comply, would
not have a Material Adverse Effect. Since January 1, 2005, the Company has not
received any written notice, and to the Knowledge of the Company, it has not
received any oral notice, from any Governmental Authority to the effect that the
Company is not in material compliance with any applicable material Law.
SECTION 4.12 Permits. As of the date of this Agreement the Company has all
Permits required to permit the Company to conduct the Business, except for such
failures to have such Permits, when taken together with all other such failures
by the Company to have such Permits, would not have a Material Adverse Effect.
As of the date of this Agreement, all of the Permits held by or issued to the
Company are in full force and effect, and the Company is in compliance with each
such Permits held by or issued to it, except for such failures to so comply,
when taken together with all other such failures by the Company to so comply, as
would not have a Material Adverse Effect.
SECTION 4.13 Tangible Property.
(a) Section 4.13(a) of the Company Disclosure Schedule contains a true, correct
and complete list of each item of real property that, as of the date of this
Agreement, is leased from or to a third party by the Company ("Leased Real
Property"), the name of the third party lessor(s) or lessee(s) thereof, as the
case may be, the date of the lease contract relating thereto and all amendments
thereof. The Company has a valid and subsisting leasehold interest in all Leased
Real Property leased by it, in each case free and clear of all Encumbrances,
other than Permitted Encumbrances. The Company does not own any real property.
(b) The Company has valid and subsisting ownership or leasehold interests in all
of the material tangible personal assets and properties used or leased for use
by the Company in connection with the conduct of the Business, free and clear of
all Encumbrances, other than Permitted Encumbrances.
(c) As of the date of this Agreement, there are no pending, or to the Knowledge
of the Company, threatened, condemnation or similar proceedings against the
Company or otherwise relating to any of the Leased Real Property and the Company
has not received any written notice of the same.
SECTION 4.14 Proprietary Rights.
(a) Section 4.14(a) of the Company Disclosure Schedule sets forth, as of the
date of this Agreement, a true, correct and complete list of all registrations
and applications for registration of Proprietary Rights owned by the Company as
follows: (i) for each registered trademark, tradename or service xxxx, the
application serial number or registration number thereof, if applicable, the
class of goods or the description of the goods or services covered thereby, the
countries in which such tradename or trademark is registered, and the expiration
date for each country in which such trademark or tradename has been registered;
and (ii) for each registered copyright, the number and date of registration
thereof for each country in which a copyright has been registered. Each
registration is in force and in good standing, and, to the Knowledge of Company,
without challenge of any kind, except where the Company in its reasonable
judgment has determined to let such application or registration lapse.
(b) The Company does not own any patents or patent application.
(c) The Company is the sole and exclusive owner of the Proprietary Rights listed
in the Company Disclosure Schedule free and clear of any Encumbrance, other than
Permitted Encumbrances, and except as set forth in the Company Disclosure
Schedule, all such registrations and applications for registration of such
Proprietary Rights are recorded in the name of the Company and all such
Proprietary Rights are fully transferable.
(d) Except as set forth in the Company Disclosure Schedule: (i) to the Knowledge
of the Company, the use of the Proprietary Rights as currently used by the
Company do not infringe, dilute, misappropriate or otherwise violate the
Proprietary Rights of any other Person; (ii) no action, suit, proceeding or
investigation is pending and to the Knowledge of the Company the Company has not
received any notice that asserts that the registered Proprietary Rights (A)
interfere with, infringe upon, conflict with or otherwise violate the rights of
others, (B) are being interfered with or infringed upon by others or (C)
challenges the ownership by the Company of the Proprietary Rights or the
validity or enforceability of any Proprietary Rights owned or used by the
Company; (iii) there are no royalty, commission or similar arrangements
requiring any further payment by or to the Company with respect to the
Proprietary Rights; (iv) the Company has not agreed to indemnify any Person for
or against any infringement of or by the Proprietary Rights, other than in the
ordinary course of business; and (v) the Company has a valid right to use all
enterprise systems and software currently in use by the Company. All applicable
software license agreements and user numbers are current in all material
respects.
SECTION 4.15 Certain Contracts.
(a) Section 4.15 of the Company Disclosure Schedule contains a true, correct and
complete list of all Contracts referred to in clauses (i) through (vii),
inclusive, of this Section 4.15 to which the Company is a party (each, a "Listed
Contract" and, collectively, the "Listed Contracts"). True, correct and complete
copies of each Listed Contract have been made available to Parent or its
advisors:
(i) notes, debentures, other evidences of indebtedness, guarantees, loans,
credit or financing agreements or instruments, or other Contracts for money
borrowed, including any agreements or commitments for future loans, credit or
financing;
(ii) employment agreements involving annual salary and guaranteed bonus payments
by the Company in excess of $100,000;
(iii) leases, rental or occupancy agreements, installment and conditional sale
agreements, and other Contracts affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real property involving
annual payments in excess of $200,000 and which are not terminable by the
Company with 30 days notice;
(iv) joint venture Contracts, partnership agreements or limited liability
company agreements;
(v) Contracts explicitly requiring expenditures after the date of this Agreement
in an amount in excess of $200,000 which are not terminable by the Company with
30 days notice;
(vi) Contracts between the Company, on the one hand, and any director, officer
or Affiliate of the Company, on the other hand (other than employment
arrangements, including stock option agreements, entered into in the ordinary
course of business); and
(vii) Contracts containing covenants presently limiting, in any material
respect, the freedom of the Company to compete with any Person in any line of
business or in any area or territory.
(b) (i) each Listed Contract is in full force and effect and represents a
legally valid and binding obligation of the Company; (ii) the Company has
performed, in all material respects, all obligations required to be performed by
it under each of the Listed Contracts to which it is a party; and (iii) the
Company is not in material breach or violation of, or material default under,
any of the Listed Contracts, nor has the Company received any written notice,
and to the Knowledge of Company, it has not received any oral notice, that it
has materially breached, violated or defaulted under any of the Listed
Contracts.
SECTION 4.16 Employee Benefit Matters.
(a) Section 4.16(a) of the Company Disclosure Schedule contains a true, correct
and complete list of each employee benefit plan (including any "employee benefit
plan" as defined in Section 3(3) of ERISA) maintained or contributed to by the
Company, or under which current or former employees of the Company benefit
(each, a "Company Benefit Plan" and, collectively, the "Company Benefit Plans").
The Company has made available to Parent and its agents and representatives
copies of (i) each Company Benefit Plan, including schedules and financial
statements attached thereto; (ii) the most recent annual report (Form 5500)
filed with the IRS with respect to each such Company Benefit Plan; (iii) each
trust agreement and any other material written agreement relating to each such
Company Benefit Plan; (iv) the most recent summary plan description for each
such Company Benefit Plan for which a summary plan description is required,
together with any summary of material modifications thereto and (v) the most
recent determination letter issued by the IRS with respect to any such Company
Benefit Plan qualified under Section 401(a) of the Code. No Company Benefit Plan
is subject to Title IV of ERISA or is a multiemployer plan as defined in Section
3(37) of ERISA.
(b) Each Company Benefit Plan is in compliance in all material respects with the
applicable requirements of ERISA and the Code and no event has occurred and
there exists no condition or set of circumstances in connection with which the
Company or any Company Benefit Plan could be subject to any material liability
under the terms of such Company Benefit Plans, ERISA, the Code or any other
material applicable Law other than in the ordinary course. There are no audits,
inquiries or proceedings pending or, to the Knowledge of the Company, threatened
by the IRS or any other Governmental Authority with respect to any Company
Benefit Plan (other than routine claims for benefits in the normal course).
(c) Each Company Benefit Plan that is intended to be qualified under Section
401(a) of the Code either is a prototype plan or has received a determination
letter from the IRS that it is so qualified, and to the Knowledge of the Company
no fact or event has occurred since the date of such determination letter that
could materially adversely affect the qualified status of any such Company
Benefit Plan.
(d) For purposes of this Section 4.16, any reference to the Company shall be
deemed to refer also to any entity which is under common control or affiliated
with the Company within the meaning of Section 4001 of ERISA and/or Section 414
of the Code.
SECTION 4.17 Labor Matters(a) . The Company is not a party to any labor
agreement with respect to its employees with any labor organization, group or
association, nor, to the Knowledge of the Company, have there been any attempts
to organize the employees of the Company during the one (1) year period prior to
the date of this Agreement. As of the date of this Agreement, there is no labor
strike, labor disturbance or work stoppage pending against the Company and to
the Knowledge of Company, none is threatened or pending. Within the past year,
the Company has not incurred any liability or obligation under the Workers
Adjustment and Retraining Notification Act or any other similar state or local
law that remains unsatisfied.
SECTION 4.18 Environmental Matters. Except for such violations, activities and
Actions as would not have a Material Adverse Effect, (i) no Hazardous Material
is present at any of the real property leased by the Company in violation of any
applicable Environmental Law; (ii) the Company has not engaged in any Hazardous
Materials Activity in violation of any applicable Environmental Law; and (iii)
no Action is pending or has been threatened against the Company concerning any
of the Hazardous Materials Activities of the Company, or Hazardous Materials
Activity on any of the real property leased by the Company.
SECTION 4.19 Related Party Transactions. No Related Party (i) has any direct or
indirect interest in any material asset used in or otherwise relating to the
Business, (ii) has entered into any material Contract, transaction or business
dealing involving the Company, (iii) is competing with the Company or (iv) has
any claim or right against the Company (other than rights to receive
compensation for services performed as an officer, director or employee of the
Company). Except as disclosed in the Company Disclosure Schedule, none of the
Contracts between the Company on the one hand, and any Equityholder or
Affiliates thereof, on the other hand, will continue in effect subsequent to the
Closing, and all obligations of the Company thereunder will have been satisfied.
SECTION 4.20 Brokers. Except for CIBC, which is entitled to certain advisory
fees in connection with this Agreement and the transactions contemplated by this
Agreement, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon any arrangements made by or on behalf
of the Company or any Equityholder.
SECTION 4.21 Accounts Receivable. No receivables of the Company are subject to
any prior assignment, claim, lien or security interest.
SECTION 4.22 Bank Accounts. The Company Disclosure Schedule contains an accurate
and complete list of the names and addresses of all banks and financial
institutions in which the Company has an account, lock box or other arrangement
for the collection of accounts receivable with the names of all persons
authorized to draw thereon or with access thereto.
SECTION 4.23 Inventory. All inventories reflected in the Financial Statements
are, and on the Closing Balance Sheet will consist of inventories of the kind
and quality regularly and currently used in the business in the ordinary course
of business consistent in all material respects with past practices. All
inventories disposed of subsequent to the Balance Sheet Date, have been disposed
of only in the ordinary course of business and at prices and under terms that
are normal and consistent with past practice. The Company does not hold title to
any inventory held by others, except inventory in transit in the ordinary course
of business.
SECTION 4.24 Suppliers.
(a) All sales contracts and orders with suppliers were entered into by or on
behalf of the Company and were entered into in the ordinary course of
business for usual quantities and at normal prices, except where the failure
to do so would not be material to the Company. To the Knowledge of the
Company, no supplier intends to cease doing business with the Company or
significantly change or alter its relationship with the Company after the
consummation of any transactions contemplated hereby.
(b) To the Knowledge of the Company, neither the Company nor any of its
employees or agents, has, directly or indirectly, given or agreed to give any
rebate, gift or similar benefit to any supplier, customer, distributor,
broker, governmental employee or other person, who was, is or may be in a
position to help or hinder the Company (or assist in connection with any
actual or proposed transaction), which would reasonably be expected to
subject Parent, Merger Sub or the Company to any damage or penalty in any
civil, criminal or governmental litigation, investigation or proceeding or
which would reasonably be expected to have a Material Adverse Effect.
(c) No material supplier has, to the Knowledge of the Company, (i) threatened to
cancel or otherwise terminate its relationship with the Company, or (ii)
during the last twelve months decreased or, threatened to materially decrease
or materially limit its supplies to. There is no outstanding purchase
commitment requiring the Company to purchase the entire output of a material
supplier or to use any material supplier as the exclusive supplier of any
item.
SECTION 4.25 Product Liability. To the Knowledge of the Company and except as
set forth on the Company Disclosure Schedule, the Company does not have any
material Liability arising out of any claim that has been presented to the
Company as a result of the ownership, possession, or use of any product
manufactured or sold by the Company. Since January 1, 2005, except as set forth
on the Company Disclosure Schedule and adequately reflected in the Company
Financial Statements or the Closing Balance Sheet, there have been no recalls,
and, to the Knowledge of the Company, none is threatened or pending, and no
report has been filed or is required to have been filed with respect to any
products of the Company under the Consumer Products Safety Act, as amended, or
under any other Laws. To the Knowledge of the Company, no circumstances exist
involving the safety aspects of the Company's products which would reasonably be
expected to cause any obligation to report to any federal, state or local
agency. To the Knowledge of the Company, there are no, and within the last
twelve months there have not been any, actions or claims relating to product
liability against or involving Company or any of its products and no actions or
claims have been settled, adjudicated or otherwise disposed of.
SECTION 4.26 Insurance. The Company Disclosure Schedule sets forth an accurate
and complete list of all material binders, policies of insurance, self insurance
programs or fidelity bonds ("Insurance") maintained by the Company. There are no
pending or asserted material claims against any Insurance as to which any
insurer has denied liability, and there are no claims under any Insurance that
have been disallowed or improperly filed. Except as disclosed on the Company
Disclosure Schedule there are no claims pending or, to the Knowledge of the
Company, threatened against any Insurance maintained by the Company. As of the
date of this Agreement, no written notice of cancellation or non-renewal with
respect to, or written notice of a material increase of premium for, any
Insurance has been received by the Company.
SECTION 4.27 No Other Representations or Warranties. Except for the
representations and warranties contained in this Agreement (as modified by the
Company Disclosure Schedule) and in the Ancillary Documents, neither the Company
nor any other Person makes any other express or implied representation or
warranty with respect the Company or the transactions contemplated by this
Agreement, and the Company disclaims any other representations or warranties,
whether made by the Company or any of its Affiliates, officers, directors,
employees, agents or representatives. Except for the representations and
warranties contained in Article IV hereof (as modified by the Company Disclosure
Schedule) and in the Ancillary Documents, the Company hereby disclaims all
liability and responsibility for any representation, warranty, projection,
forecast, statement, or information made, communicated, or furnished (orally or
in writing) to Parent or its Affiliates or representatives (including any
opinion, information, projection, or advice that may have been or may be
provided to Parent by any director, officer, employee, agent, consultant, or
representative of the Company or any of its Affiliates). The Company makes no
representations or warranties to Parent regarding the probable success or
profitability of the Company.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
SECTION 5.1 Authority. Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by each of Parent and Merger Sub, the
performance by each of Parent and Merger Sub of its respective obligations
hereunder, and the consummation by each of Parent and Merger Sub of the
transactions contemplated by this Agreement, have been duly authorized by the
Board of Directors of each of Parent and Merger Sub and no other corporate or
other action on the part of either Parent or Merger Sub is necessary to
authorize the execution and delivery of this Agreement by each of Parent and
Merger Sub, the performance by each of Parent and Merger Sub of its respective
obligations hereunder or the consummation by each of Parent and Merger Sub of
the transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and, assuming due
authorization, execution and delivery by the Company, this Agreement constitutes
a legally valid and binding obligation of each of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms.
SECTION 5.2 Organization. Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization, and has all requisite corporate power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it, and to carry on its business in all material respects as
currently conducted. Parent is duly qualified to do business as a foreign
corporation, and is in good standing, under the Laws of each jurisdiction in
which the character of its properties owned, operated or leased, or the nature
of its activities, makes such qualification necessary, except in those
jurisdictions where the failure to be so qualified or in good standing, when
taken together with all other failures by Parent to be so qualified or in good
standing, would not have a material adverse effect on the ability of Parent to
perform its obligations under this Agreement or consummate the transactions
contemplated by this Agreement.
SECTION 5.3 Conflicts. Assuming all consents, approvals, authorizations, filings
and notifications and other actions set forth in Section 5.4 have been obtained
or made, the execution and delivery of this Agreement by each of Parent and
Merger Sub, the performance by each of Parent and Merger Sub of its obligations
hereunder, and the consummation by each of Parent and Merger Sub of the
transactions contemplated by this Agreement, does not and will not (i) conflict
with or result in a violation of the organizational documents of Parent or
Merger Sub; (ii) conflict with or result in a violation of any Governmental
Order or Law applicable to Parent or Merger Sub or their respective assets or
properties; or (iii) result in a material breach of, or constitute a material
default (or event which with the giving of notice or lapse of time, or both,
would become a material default) under, or give rise to any rights of
termination, amendment, modification, acceleration or cancellation of or loss of
any benefit under, or result in the creation of any Encumbrance on any of the
assets or properties of Parent or Merger Sub pursuant to, any Contract to which
Parent or Merger Sub is a party, or by which any of the assets or properties of
Parent or Merger Sub is bound or affected, except, in the case of clauses (ii)
and (iii) of this Section 5.3, as would not have a material adverse effect on
the ability of Parent or Merger Sub to perform its respective obligations under
this Agreement or consummate the transactions contemplated by this Agreement.
SECTION 5.4 Consents, Approvals, Etc. No consent, waiver, approval,
authorization, order or permit of, or declaration, filing or registration with,
or notification to, any Governmental Authority or third party is required to be
made or obtained by Parent or Merger Sub in connection with the execution and
delivery of this Agreement by each of Parent and Merger Sub, the performance by
each of Parent and Merger Sub of its respective obligations hereunder, or the
consummation by each of Parent and Merger Sub of the transactions contemplated
by this Agreement, except (i) the filing of the Certificate of Merger pursuant
to the DGCL; (ii) applicable requirements, if any, under the DGCL, federal or
state securities or "blue sky" Laws; (iii) such filings as may be required under
the HSR Act; and (iv) where the failure to obtain such consent, approval,
authorization or action, or to make such filing or notification would not, when
taken together with all other such failures by Parent and Merger Sub, have a
material adverse effect on the ability of Parent or Merger Sub to perform its
respective obligations under this Agreement or consummate the transactions
contemplated by this Agreement.
SECTION 5.5 Litigation and Governmental Orders. As of the date of this
Agreement, (i) there are no Actions pending against Parent, Merger Sub or any
other Subsidiaries of Parent ("Parent Subsidiaries"), or any of the assets or
properties of Parent, Merger Sub or any Parent Subsidiaries, or any of the
directors or officers of Parent, Merger Sub or any Parent Subsidiaries in their
capacity as directors or officers of Parent, Merger Sub or any Parent
Subsidiaries that would have a material adverse effect on the ability of Parent
or Merger Sub to perform its respective obligations under this Agreement or
consummate the transactions contemplated by this Agreement and (ii) Parent,
Merger Sub and the Parent Subsidiaries and their respective assets and
properties are not subject to any material Governmental Order that would prevent
either Parent or Merger Sub from performing its respective obligations under
this Agreement or consummating the transactions contemplated by this Agreement.
SECTION 5.6 Solvency. As of the Closing, and after giving effect to all of the
transactions contemplated by this Agreement, the Surviving Corporation will be
Solvent. For purposes of this Section 5.6, "Solvent" means that, with respect to
any Person and as of any date of determination, (i) the amount of the "present
fair saleable value" of the assets of such Person, will, as of such date, exceed
the amount of all "liabilities of such Person, contingent or otherwise," as of
such date, as such quoted terms are generally determined in accordance with
applicable federal laws governing determinations of the insolvency of debtors,
(ii) the present fair saleable value of the assets of such Person will, as of
such date, be greater than the amount that will be required to pay the liability
of such Person on its indebtedness as its indebtedness becomes absolute and
matured, (iii) such Person will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business and (iv) such Person will
be able to pay its indebtedness as it matures. For purposes of the foregoing
definition only, "indebtedness" means a liability in connection with another
Person's (y) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (z) right to any
equitable remedy for breach of performance if such breach gives rise to a right
of payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
SECTION 5.7 Financing. Parent has sufficient funds or financing in place to fund
the Merger Consideration to be paid at Closing and its other obligations
hereunder.
SECTION 5.8 Due Diligence Investigation. Parent has had an opportunity to
discuss the business, management, operations and finances of the Company with
the Company's officers, directors, employees, agents, representatives and
affiliates, and has had an opportunity to inspect the facilities of the Company.
Parent has conducted its own independent investigation of the Company. In making
its decision to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement, Parent has relied solely upon the
representations and warranties of the Company set forth in Article IV (and
acknowledges that such representations and warranties are the only
representations and warranties made by the Company) and has not relied upon any
other information provided by, for or on behalf of the Company, or its agents or
representatives, to Parent in connection with the transactions contemplated by
this Agreement. Parent has entered into the transactions contemplated by this
Agreement with the understanding, acknowledgement and agreement that no
representations or warranties, express or implied, are made with respect to
future prospects (financial or otherwise) of the Company. Parent acknowledges
that, except as expressly provided in Article VI, no current or former
stockholder, director, officer, employee, affiliate or advisor of the Company
has made or is making any representations, warranties or commitments whatsoever
regarding the subject matter of this Agreement, express or implied.
SECTION 5.9 Brokers. Except for X.X. Xxxxxx Securities, Inc. (the fees and
expenses of which shall be paid in full by Parent), no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon any arrangements made by or on behalf of Parent, Merger Sub or any of
their respective Affiliates.
SECTION 5.10 No Prior Activities. Merger Sub has not incurred nor will it incur
any liabilities or obligations, except those incurred in connection with its
organization and with the negotiation of this Agreement and the performance of
its obligations hereunder and the consummation of the transactions contemplated
by this Agreement, including the Merger. Except as contemplated by this
Agreement, Merger Sub had not engaged in any business activities of any type or
kind whatsoever, or entered into any agreements or arrangements with any Person,
or become subject to or bound by any obligation or undertaking. As of the date
of this Agreement, all of the issued and outstanding capital stock of Merger Sub
is owned beneficially and of record by Parent, free and clear of all
Encumbrances (other than those created by this Agreement and the transactions
contemplated by this Agreement).
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF THE EQUITYHOLDERS
Each Equityholder represents and warrants to Parent, severally and not
jointly, as follows:
SECTION 6.1 Authorization. Such Equityholder has full legal capacity, power and
authority to enter into the other documents contemplated hereby to which such
Equityholder is a party, and to perform its obligations thereunder. The other
documents contemplated hereby to which such Equityholder is a party, including
the Voting Agreement, have been or will be duly executed and delivered by such
Equityholder and constitute, or when executed and delivered will constitute, the
valid and binding agreements of such Equityholder, enforceable in accordance
with their terms.
SECTION 6.2 Ownership. Such Equityholder holds of record and owns beneficially
that number of Company Capital Stock and is due the Applicable Percentage
described in Section 4.3(a) of the Company Disclosure Schedule, free and clear
of any Encumbrances and any other restrictions on transfer (other than such
Encumbrances and/or restrictions that shall be released, waived or otherwise
terminated in connection with the Closing and other than any restrictions under
the Securities Act of 1933, as amended, and state securities laws). Except as
set forth in Section 4.3(a) of the Company Disclosure Schedule or the Company
Options described in Section 4.3(b), such Equityholder is not a party to any
option, warrant, right, contract, call, pledge, put or other agreement or
commitment providing for the disposition or acquisition of such Equityholder's
interest in Parent or the Company, as the case may be. Such Equityholder is not
a party to any voting trust, proxy or other agreement or understanding with
respect to the voting of any of the Company Capital Stock, except for the
Amended and Restated Stockholders and Registration Rights Agreement, dated as of
December 6, 2004, by and among the Company and the stockholders listed therein.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.1 No Solicitation.
(a) During the Pre-Closing Period, the Company shall not, and shall direct its
officers, directors, affiliates, stockholders and employees and any
investment banker, attorney or other advisor or representative retained by
the Company (all of the foregoing collectively being the "Company
Representatives") not to, directly or indirectly, (i) solicit, initiate,
seek, entertain, encourage, facilitate, support or induce the making,
submission or announcement of any inquiry, expression of interest, proposal
or offer that constitutes, or would reasonably be expected to lead to, an
Acquisition Proposal, (ii) enter into, participate in, maintain or continue
any communications (except solely to provide written notice as to the
existence of these provisions) or negotiations regarding, or deliver or make
available to any Person any non-public information with respect to, or take
any other action regarding, any inquiry, expression of interest, proposal or
offer that constitutes, or would reasonably be expected to lead to, an
Acquisition Proposal, (iii) agree to, accept, approve, endorse or recommend
(or publicly propose or announce any intention or desire to agree to, accept,
approve, endorse or recommend) any Acquisition Proposal, (iv) enter into any
letter of intent or any other Contract contemplating or otherwise relating to
any Acquisition Proposal or (v) submit any Acquisition Proposal to the vote
of the stockholders of the Company. The Company shall immediately cease and
cause to be terminated any and all existing activities, discussions or
negotiations with any Persons conducted prior to or on the date of this
Agreement with respect to any Acquisition Proposal. The Company shall also
request the return or destruction of any confidential information from all
such Persons.
(b) The Company shall immediately notify Parent orally and in writing after
receipt by the Company (or, to the knowledge of the Company, by any of the
Company Representatives), of (i) any Acquisition Proposal, or (ii) any
inquiry, expression of interest, proposal or offer that constitutes, or would
reasonably be expected to lead to, an Acquisition Proposal by any Person or
Persons other than Parent.
SECTION 7.2 Conduct of the Company Prior to the Effective Time.
(a) Unless Parent otherwise consents in writing (which consent shall not be
unreasonably withheld, conditioned or delayed) and except as otherwise
contemplated by this Agreement or set forth in the Company Disclosure Schedule,
during the period commencing with the execution and delivery of this Agreement
and terminating upon the earlier to occur of the Effective Time and the
termination of this Agreement pursuant to and in accordance with Section 9.1
(the "Pre-Closing Period"), the Company shall conduct the Business in the usual,
regular and ordinary course.
(b) Except as otherwise contemplated by this Agreement or set forth in the
Company Disclosure Schedule, during the Pre-Closing Period, the Company shall
not do or cause to be done any of the following without the prior written
consent of Parent (which consent shall not be unreasonably withheld, conditioned
or delayed):
(i) issue (A) any Company Capital Stock, except upon the exercise of Company
Options outstanding on the date of this Agreement or upon the conversion of
Company Preferred Stock into Company Common Stock, or (B) any options, warrants,
rights of conversion or other rights, agreements, arrangements or commitments
obligating the Company to issue, deliver or sell any Company Capital Stock;
(ii) except in the ordinary course of business, create any Encumbrance on any
assets or properties (whether tangible or intangible) of the Company, other than
Permitted Encumbrances;
(iii) except in the ordinary course of business, sell, assign, transfer, lease,
license or otherwise dispose of, or agree to sell, assign, transfer, lease,
license or otherwise dispose of, any of the fixed assets of the Company having a
value in excess of $100,000 in the aggregate;
(iv) acquire (by merger, consolidation or combination, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof;
(v) (A) enter into or amend any employment, deferred compensation, severance or
similar agreement, except any employment agreement providing for compensation of
less than $100,000 per annum; (B) increase the compensation payable, or to
become payable, by the Company to directors or officers of the Company; (C) pay
or make provision for the payment of any bonus, stock option, stock purchase,
profit sharing, deferred compensation, pension, retirement or other similar
payment or arrangement to any Company Employee, or any director or officer of
the Company; or (D) increase the coverage or benefits available under any
employee benefit plan, payment or arrangement made to, for or with any director,
officer, Company Employee, agent or representative, other than increases,
payments or provisions which are in normal amounts and are made in the ordinary
course of business consistent with past practice, or which are made pursuant to
a contractual obligation or are required by applicable Law;
(vi) materially change any method of financial accounting or financial
accounting practice used by the Company, other than such changes required by
GAAP;
(vii) amend the Company Certificate of Incorporation or Company Bylaws;
(viii) declare, set aside or pay any dividend or distribution or other capital
return in respect of any shares of Company Capital Stock, or redeem, purchase or
acquire any shares of Company Capital Stock (except in connection with the
repurchase of any Company Capital Stock in accordance with the terms of any
agreements entered into with employees or consultants to the Company); or
(ix) enter into any agreement to take, or cause to be taken, any of the actions
set forth in this Section 7.2(b).
(x) make or change any election, change an annual accounting period, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment, or take any other similar action relating to the filing of any Tax
Return or the payment of any Tax, if such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action would have the effect
of materially increasing the Tax liability of the Company for any period ending
after the Closing Date or materially decreasing any Tax attribute existing on
the Closing Date.
SECTION 7.3 Access to Information. Subject to the terms of the Confidentiality
Agreement (which Parent and Merger Sub each acknowledge is fully applicable to
it), during the Pre-Closing Period, upon reasonable notice and during normal
business hours, the Company shall, and shall cause the officers, employees,
auditors and agents of the Company to, (i) afford the officers, employees and
authorized agents and representatives of Parent reasonable access to the
offices, properties, books and records of the Company and (ii) furnish to the
officers, employees and authorized agents and representatives of Parent such
additional financial and operating data and other information regarding the
assets, properties and business of the Company as Parent may from time to time
reasonably request in order to assist Parent in fulfilling its obligations under
this Agreement and to facilitate the consummation of the transactions
contemplated by this Agreement; provided, however, that Parent shall not
interfere with any of the operations or business activities of the Company.
SECTION 7.4 Confidentiality. Parent and Merger Sub hereby agree to be bound by
and comply with the terms of the Confidentiality Agreement, which are hereby
incorporated into this Agreement by reference and shall continue in full force
and effect until the Effective Time, such that the information obtained by
Parent and Merger Sub, or their respective officers, employees, agents or
representatives, during any investigation conducted pursuant to Section 7.3, or
in connection with the negotiation and execution of this Agreement or the
consummation of the transactions contemplated by this Agreement, or otherwise,
shall be governed by the terms of the Confidentiality Agreement.
SECTION 7.5 Efforts; Consents; Regulatory and Other Authorizations.
(a) Each party to this Agreement shall use its commercially reasonable efforts
to (i) take, or cause to be taken, all appropriate action, and do, or cause to
be done, all things necessary, proper or advisable under applicable Law or
otherwise to promptly consummate and make effective the transactions
contemplated by this Agreement; (ii) obtain all authorizations, consents, orders
and approvals of, and give all notices to and make all filings with, all
Governmental Authorities and other third parties that may be or become necessary
for the performance of its obligations under this Agreement and the consummation
of the transactions contemplated by this Agreement, including those consents set
forth in the Company Disclosure Schedule; (iii) lift or rescind any injunction
or restraining order or other order adversely affecting the ability of the
parties to this Agreement to consummate the transactions contemplated by this
Agreement; and (iv) fulfill all conditions to such party's obligations under
this Agreement. Each party to this Agreement shall cooperate fully with the
other parties to this Agreement in promptly seeking to obtain all such
authorizations, consents, orders and approvals, giving such notices, and making
such filings. Notwithstanding the foregoing or anything to the contrary set
forth in this Agreement, in connection with obtaining such consents from third
parties, no party to this Agreement shall be required to make payments, commence
litigation or agree to modifications of the terms and conditions of any
agreements with third parties, and except for modifications which would not have
a Material Adverse Effect, no such modifications shall be made to any Contract
of the Company without the consent of Parent, which consent shall not be
unreasonably withheld, conditioned or delayed. The parties to this Agreement
shall not take any action that is reasonably likely to have the effect of
unreasonably delaying, impairing or impeding the receipt of any required
authorizations, consents, orders or approvals.
(b) In furtherance and not in limitation of the terms of Section 7.5(a), to the
extent required by applicable Law, each of Parent and the Company shall file, or
cause to be filed, a Notification and Report Form pursuant to the HSR Act with
respect to the transactions contemplated by this Agreement within five (5)
Business Days of the date of this Agreement (including, in the case of Parent, a
request for early termination of the applicable waiting period under the HSR
Act), shall supply promptly any additional information and documentary material
that may be requested by any Governmental Authority (including the Antitrust
Division of the United States Department of Justice and the United States
Federal Trade Commission) pursuant to the HSR Act, and shall cooperate in
connection with any filing under applicable antitrust Laws and in connection
with resolving any investigation or other inquiry concerning the transactions
contemplated by this Agreement commenced by any Governmental Authority,
including the United States Federal Trade Commission, the Antitrust Division of
the United States Department of Justice, or the office of any state attorney
general.
(c) In furtherance of and not in limitation of the terms of Section 7.5(a), the
Company shall use commercially reasonable efforts to obtain the adoption of this
Agreement by its stockholders to the extent required by the DGCL for the
consummation of the Merger. Without limiting the generality of the foregoing, as
promptly as practicable following the execution and delivery of this Agreement,
the Company shall submit this Agreement to the Company's stockholders for
adoption at a meeting of the Company's stockholders or by written consent of the
Company's stockholders, which shall be called and held or solicited, as the case
may be, in accordance with the requirements of the DGCL and the Company
Certificate of Incorporation and Company Bylaws (the "Company Stockholder
Meeting/Consent"). The materials submitted to the Company's stockholders in
connection with the Company Stockholder Meeting/Consent shall include
information regarding the Company, the terms of this Agreement and the Merger
and the unanimous recommendation of the Company's Board of Directors that the
Company's stockholders vote their shares of Company Capital Stock in favor of
the adoption of this Agreement; provided, however, that the Company's Board of
Directors may change such Recommendation only if the Company's Board of
Directors determines that it must take such action in order to comply with its
fiduciary duties under applicable Law; and provided further, that no such change
shall relieve the Company of its obligation to call and hold or seek, as the
case may be, the Company Stockholder Meeting/Consent pursuant to this Section
7.5(c).
SECTION 7.6 Further Action. Subject to the terms and conditions provided in this
Agreement, each of the parties to this Agreement shall use its commercially
reasonable efforts to deliver, or cause to be delivered, such further
certificates, instruments and other documents, and to take, or cause to be
taken, such further actions, as may be necessary, proper or advisable under
applicable Law to consummate and make effective the transactions contemplated by
this Agreement.
SECTION 7.7 Indemnification; Directors' and Officers' Insurance.
(a) Subject to, and contingent on the Equityholders obtaining the insurance
policy required in Section 7.7(b), until the sixth anniversary of the Effective
Time, Parent shall, and shall cause the Surviving Corporation to, (i) indemnify
and hold harmless each present and former director and officer of the Company
(collectively, the "Company Indemnified Parties"), against any and all Damages
incurred or suffered by any of the Company Indemnified Parties in connection
with any Liabilities or any Action, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company would have been
permitted under applicable Law and under the Company Certificate of
Incorporation and Company Bylaws, in each case as in effect on the date of this
Agreement, to indemnify such Company Indemnified Parties and (ii) advance
expenses as incurred by any Company Indemnified Party in connection with any
matters for which such Company Indemnified Party is entitled to indemnification
from Parent pursuant to this Section 7.7(a) to the fullest extent permitted
under applicable Law or, if greater, under the Company Certificate of
Incorporation and Company Bylaws; provided, however, that the Company
Indemnified Party to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately and finally determined by a court of competent
jurisdiction and all rights of appeal have lapsed that such Company Indemnified
Party is not entitled to indemnification under applicable Law, the Company
Certificate of Incorporation and Company Bylaws, and pursuant to this Section
7.7(a).
(b) For a period of six (6) years following the Effective Time, Parent shall
maintain, or shall cause the Surviving Corporation for itself to maintain, in
effect a directors' and officers' liability insurance policy covering those
persons who are currently covered by the Company's directors' and officers'
liability insurance policy (copies of which have been heretofore delivered by
the Company to Parent and its agents and representatives) with coverage in
amount and scope at least as favorable as the Company's existing coverage;
provided, however, that in no event shall Parent or the Surviving Corporation be
required to expend in the aggregate in excess of two hundred fifty percent
(250%) of the annual premium currently paid by the Company for such coverage,
and if such premium would at any time exceed two hundred fifty percent (250%) of
such amount, then Parent or the Surviving Corporation shall maintain insurance
policies which provide the maximum and best coverage available at an annual
premium equal to two hundred fifty percent (250%) of such amount; and provided,
further, that this Section 7.7(b) shall be deemed to have been satisfied if a
prepaid policy or policies (i.e., "tail coverage") have been obtained by the
Company which policy or policies provide such directors and officers with the
coverage described in this Section 7.7(b) for an aggregate period of not less
than six (6) years with respect to claims arising from facts or events that
occurred on or before the Closing Date, including with respect to the
transactions contemplated by this Agreement.
(c) The terms and provisions of this Section 7.7 are intended to be in addition
to the rights otherwise available to the Company Indemnified Parties by
applicable Law, charter, bylaw or agreement, and shall operate for the benefit
of, and shall be enforceable by, the Company Indemnified Parties and their
respective heirs and representatives, each of whom is an intended third party
beneficiary of this Section 7.7.
SECTION 7.8 Employee Benefit Matters.
(a) For purposes of determining eligibility to participate, vesting and
entitlement to benefits where length of service is relevant under any benefit
plan or arrangement of Parent, the Surviving Corporation or any of their
respective Subsidiaries, Company Employees as of the Effective Time shall
receive service credit for service with the Company to the same extent such
service credit was granted under the Company Benefit Plans, subject to offsets
for previously accrued benefits and no duplication of benefits. Parent and the
Surviving Corporation shall (i) to the extent Company Employees provide Parent
with a HIPAA certificate waive all limitations as to preexisting conditions
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Company Employees under any welfare benefit plans
that such employees may be eligible to participate in after the Effective Time,
other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the Effective
Time under any welfare benefit plan maintained for the Company Employees
immediately prior to the Effective Time and (ii) to the extent such expense
information can be obtained, verified by the insurance company and entered into
the insurance company's system, provide each Company Employee with credit for
any co-payments and deductibles paid prior to the Effective Time in satisfying
any applicable deductible or out-of-pocket requirements under any welfare plans
(other than a Company Benefit Plan) that such employees are eligible to
participate in immediately after the Effective Time.
(b) For a period of twelve (12) months following the Closing, Parent shall
provide (or cause the Surviving Corporation or another Affiliate of Parent to
provide) to employees of the Surviving Corporation or any other Affiliate of
Parent who were employees of the Company immediately prior to the Effective Time
("Continuing Employees") base compensation, bonus opportunities and employee
benefits (other than equity-based compensation arrangements) ("Employee
Benefits") which are substantially comparable in the aggregate to the Employee
Benefits provided to the employees of the Company immediately prior to the
Closing. Thereafter, Parent shall cause the Surviving Corporation (or other
Affiliate of Parent) to provide Employee Benefits to the Continuing Employees
which are comparable in all material respects to those employee benefits
generally provided to employees employed by Parent or other Subsidiaries of
Parent and are consistent with industry standards for companies of similar size.
SECTION 7.9 Provision Respecting Legal Representation. Each of the parties to
this Agreement hereby agrees, on its own behalf and on behalf of its directors,
members, partners, officers, employees and Affiliates, that Xxxxxx & Xxxxxxx LLP
may serve as counsel to each and any holder of Company Capital Stock and their
respective Affiliates (individually and collectively, the "Holder Group"), on
the one hand, and the Company, on the other hand, in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and that, following
consummation of the transactions contemplated hereby, Xxxxxx & Xxxxxxx LLP (or
any successor) may serve as counsel to the Holder Group or any director, member,
partner, officer, employee or Affiliate of the Holder Group, in connection with
any litigation, claim or obligation arising out of or relating to this Agreement
or the transactions contemplated by this Agreement notwithstanding such
representation and each of the parties hereto hereby consents thereto and waives
any conflict of interest arising therefrom, and each of such parties shall cause
any Affiliate thereof to consent to waive any conflict of interest arising from
such representation.
SECTION 7.10 Transfer Taxes. All Transfer Taxes, if any, arising out of or in
connection with the transactions contemplated by this Agreement shall be borne
by Parent.
SECTION 7.11 Disclosure Schedules; Supplementation and Amendment of Schedules.
From time to time prior to the Closing, the Company shall have the right to
supplement or amend the Company Disclosure Schedule with respect to any matter
hereafter arising or discovered after the delivery of the Company Disclosure
Schedule pursuant to this Agreement; provided, however, that such supplements or
amendments to the Company Disclosure Schedule shall not be deemed to amend or
otherwise modify the Company Disclosure Schedule delivered on the date hereof or
the representations and warranties of the Company contained herein; provided,
further, if the Closing shall occur, then Parent and Merger Sub shall be deemed
to have waived any right or claim pursuant to the terms of this Agreement or
otherwise with respect to any and all matters disclosed pursuant to any such
supplement or amendment at or prior to the Closing.
SECTION 7.12 Continued Association with the Company. During the Pre-Closing
Period, the Company shall use commercially reasonable efforts in collaboration
with Parent and Merger Sub to encourage all of the senior management of the
Company to continue their employment until the Closing and thereupon to accept
and continue employment with the Surviving Corporation.
SECTION 7.13 Letters of Credit. To the extent necessary, Parent shall, or shall
cause one of its Affiliates to, guaranty or place cash on deposit with the
issuing bank effective upon the Closing in respect of its then-outstanding but
undrawn letters of credit issued on behalf of the Company in the ordinary course
of business.
SECTION 7.14 Code Section 280G Matters. Prior to the Effective Time, the Company
shall submit to a stockholder vote (along with adequate disclosure satisfying
the requirements of Code Section 280G(b)(5)(B)(ii) and any regulations
promulgated thereunder) the right of any "disqualified individual" with respect
to the Company (within the meaning of Code Section 280G(c)) to receive any
payment that would constitute a "parachute payment" (within the meaning of Code
Section 280G(b)(2)(A)(i)) and as to which such individual waives his or her
rights as described in the following sentence in a manner that satisfies the
shareholder approval requirements of Code Section 280G(b)(5) and any regulations
promulgated thereunder to the extent necessary to cause any such payment to not
constitute an "excess parachute payment" within the meaning of Code Section
280G(b)(1). To the extent that any such "disqualified individual" has the right
to receive payments that could constitute "parachute payments" and elects to
waive such rights, the Company shall obtain waivers of such rights prior to
soliciting the vote described in the immediately preceding sentence such that
the vote shall, if successful, establish each "disqualified individual's" right
to the payment. The Company shall provide, or cause to be provided, to Parent a
draft of all stockholder vote related documents, including, but not limited to,
any disclosure documents and "disqualified individual" waivers. The Company
shall incorporate any reasonable comments that are made by Parent. Parent shall
reasonably cooperate with the Company in connection with the preparation of such
stockholder vote related documents.
SECTION 7.15 Drag-Along Rights. The Company shall use commercially reasonable
efforts to cause Equityholders holding a sufficient number of shares of Company
Preferred Stock to exercise their "drag-along rights" as described in the
Stockholders Agreement.
SECTION 7.16 Payment of Closing Debt and Unpaid Company Transaction Expenses.
With respect to the Closing Debt and Unpaid Company Transaction Expenses
described in the definition of Merger Consideration, Parent shall pay those
funds to (a) holders of Closing Debt and (b) those persons entitled to payment
of Unpaid Company Transaction Expenses as directed in writing by the
Equityholders' Representative (the "Letter of Direction").
ARTICLE VIII.
CONDITIONS TO CLOSING
SECTION 8.1 Conditions to Obligations of the Company. The obligations of the
Company to consummate the Merger and the other transactions contemplated by this
Agreement shall be subject to the satisfaction, fulfillment or written waiver by
the Company, at or prior to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The representations and
warranties of Parent and Merger Sub set forth in Article V shall be true and
correct at and as of the date of this Agreement and as of the Closing Date as
though then made (except that those representations and warranties that are made
as of a specific date need only be true and correct in all respects as of such
date), except where the failure of such representations and warranties to be
true and correct has not had, individually or in the aggregate, a material
adverse effect on the part of Parent to consummate the transactions contemplated
hereby; (ii) the covenants and agreements set forth in this Agreement to be
performed or complied with by Parent and Merger Sub at or prior to the Effective
Time shall have been performed or complied with in all material respects; and
(iii) the Company shall have received an officer's certificate of each of Parent
and Merger Sub, dated as of the Closing Date, certifying as to the matters set
forth in clauses (i) and (ii) of this Section 8.1(a).
(b) No Governmental Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Governmental Order which is in effect and
has the effect of making the Merger or any other transactions contemplated by
this Agreement illegal or otherwise restraining or prohibiting the consummation
of the Merger or any of the other material transactions contemplated by this
Agreement.
(c) HSR Act. The waiting period under the HSR Act, if applicable, shall have
expired or been terminated.
(d) Stockholder Approval. This Agreement shall have been adopted by the Required
Company Stockholder Vote.
(e) Escrow Agreement. Parent, the Equityholders' Representative and the Escrow
Agent shall have executed and delivered the Escrow Agreement.
SECTION 8.2 Conditions to Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction, fulfillment
or written waiver by Parent, at or prior to the Closing, of each of the
following conditions:
(a) Representations and Warranties; Covenants. (i) The representations and
warranties of the Company set forth in Article IV and the Equityholders set
forth in Article VI shall be true and correct at and as of the date of this
Agreement and as of the Closing Date (except that those representations and
warranties that are made as of a specific date need only be true and correct in
all respects as of such date), except where the failure of Article IV
representations and warranties to be true and correct has not had, individually
or in the aggregate, a Material Adverse Effect; (ii) the covenants and
agreements set forth in this Agreement to be performed or complied with by the
Company at or prior to the Closing shall have been performed or complied with in
all material respects; and (iii) Parent shall have received an officer's
certificate of the Company, dated as of the Closing Date, certifying as to the
matters set forth in clauses (i) and (ii) of this Section 8.2(a) (the "Company
Closing Certificate"). If any supplement or amendment of the Company Disclosure
Schedules delivered pursuant to Section 7.11 discloses an event, change or
circumstance which constitutes a Material Adverse Effect or is reasonably likely
to result in a Material Adverse Effect, Parent shall have the right to terminate
this Agreement as provided in Section 9.1(f).
(b) No Governmental Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Governmental Order which is in effect and
has the effect of making the Merger or any of the other material transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
the consummation of the Merger or any of the other transactions contemplated by
this Agreement.
(c) HSR Act. The waiting period under the HSR Act, if applicable, shall have
expired or been terminated.
(d) Stockholder Approval. This Agreement shall have been adopted by the Required
Company Stockholder Vote.
(e) Escrow Agreement. The Equityholders' Representative and the Escrow Agent
shall have executed and delivered the Escrow Agreement.
(f) No Dissenting Shares. Equityholders with a right to receive no more than 5%
of the Merger Consideration shall have exercised dissenters' rights in
accordance with the terms of the DGCL.
(g) Termination of all Company Debt. Payoff and release letters from all banks,
factors and other creditors of the Company indicating that all Debt of the
Company, including but not limited to the Debt set forth in Schedule 1.1(a) has
been paid or cancelled upon completion of the remittances provided for in the
Letter of Direction, together with UCC-3 termination statements with respect to
financing statements filed against the Company or any of the Company's assets,
if any, and releases in proper form for filing with the Patent and Trademark
Office for any security interests in all Proprietary Rights shall be delivered
to Parent.
(h) FIRPTA Certificate. The Company shall have delivered to Parent a
certificate, in form and substance reasonably satisfactory to Parent and meeting
the requirements of regulation Section 1.897-2(h), stating that the Company is
not currently, and has not at any time during the five year period ending on the
Closing Date been, a "United States real property holding corporation" within
the meaning of Code Section 897(c)(2) (the "FIRPTA Certificate").
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of Parent, Merger Sub and the Company;
(b) by either the Company, on the one hand, or Parent and Merger Sub, on the
other hand, by written notice to the other party if any Governmental Authority
with jurisdiction over such matters shall have issued a Governmental Order
permanently restraining, enjoining or otherwise prohibiting the Merger or any of
the other transactions contemplated by this Agreement, and such Governmental
Order shall have become final and unappealable; provided, however, that the
terms of this Section 9.1(b) shall not be available to any party unless such
party shall have used commercially reasonable efforts to oppose any such
Governmental Order or to have such Governmental Order vacated or made
inapplicable to the Merger or other transaction contemplated by this Agreement
to which such Governmental Order relates;
(c) by either the Company, on the one hand, or Parent and Merger Sub, on the
other hand, by written notice to the other party if the Merger shall not have
been consummated on or before August 31, 2007, unless the failure to consummate
the Merger on or prior to such date is the result of any breach of this
Agreement by the party seeking to terminate the Agreement pursuant to the terms
of this Section 9.1(c);
(d) by either Parent or the Company, if the other shall have breached, or failed
to comply with, in any material respect any of its obligations under this
Agreement, or any representation or warranty made in this Agreement by such
other party shall have been incorrect in any material respect when made or shall
have since ceased to be true and correct in any material respect, and such
breach, failure or misrepresentations is not cured within fifteen (15) days
after written notice thereof and such breaches, failures or misrepresentations,
individually or in the aggregate and without regard to materiality qualifiers
contained therein, result or would be reasonably likely to result in a Material
Adverse Effect;
(e) by Parent, if the approval of the stockholders of the Company is not
obtained at the applicable stockholders meeting, including adjournments thereof,
or if a written consent of stockholders in a form reasonably acceptable to
Parent, executed by each of the stockholders that has executed a Voting
Agreement has not been delivered to Parent within 24 hours after the execution
of this Agreement; or
(f) by Parent if, prior to June 22, 2007, the Company and the Equityholders'
Representative shall have received from Parent a written notice (the
"Environmental Notice") that the Phase I environmental studies conducted on the
Company's warehouse in Louisville, Kentucky and the Company's headquarters in
Portland, Oregon (the "Phase I Studies") revealed a material environmental
uncertainty of the Company, which Environmental Notice shall include true and
correct copies of the Phase I Studies; provided, however, that Parent shall not
be permitted to terminate this Agreement if the Company and the Equityholders'
Representative deliver a written notice to Parent, within fifteen (15) Business
Days after receipt of the Environmental Notice, in which the Company and the
Equityholders' Representative notify Parent that the Equityholders shall be
responsible for one-half of the liability described in the Environmental Notice
relating to the environmental uncertainty identified in the Phase I Studies.
Without limiting the generality of the foregoing, Parent and the Equityholders'
Representative shall use commercially reasonable efforts to cause the respective
landlord to provide for any indemnification of the Company specified in any
Contract between such landlord and the Company prior to, or as offset by, any
payments by the Equityholders to Parent.
Any right of termination set forth above shall be exercised by
written notice from the terminating party to the other party.
SECTION 9.2 Effect of Termination. In the event of termination of this Agreement
and abandonment of the Merger and the other transactions contemplated by this
Agreement pursuant to and in accordance with Section 9.1, this Agreement shall
forthwith become void and of no further force or effect whatsoever and, subject
to Section 9.3, there shall be no liability on the part of any party to this
Agreement; provided, however, that notwithstanding the foregoing, nothing
contained in this Agreement shall relieve any party to this Agreement from any
liability resulting from or arising out of any intentional, material breach of
any agreement or covenant hereunder; and provided, further, that notwithstanding
the foregoing, the terms of Section 7.4, this Section 9.2 and Article XI shall
remain in full force and effect and shall survive any termination of this
Agreement, whether in accordance with Section 9.1 or otherwise.
ARTICLE X.
INDEMNIFICATION
SECTION 10.1 Survival of Representations. The representations and warranties
made by the Company and/or the Equityholders in Article IV, Article VI or in the
Ancillary Documents and the covenants and agreements contained in this Agreement
shall survive the Closing and shall expire on the first anniversary of the
Closing Date (the "Expiration Date"); provided, however, that the
representations contained in Sections 4.1, 4.2, 4.3, 6.1 and 6.2 shall survive
indefinitely (each such representation a "Fundamental Representation"); and
further, provided, that if, at any time prior to the applicable Expiration Date,
(a) Parent (acting in good faith) delivers to the Equityholders' Representative
a written notice alleging the existence of an inaccuracy in or a breach of any
of the representations and warranties made by the Company in Article IV or in
the Ancillary Documents, or by an Equityholder in Article VI, setting forth in
reasonable detail the basis for Parent's belief that such an inaccuracy or
breach may exist and asserting a claim for recovery under Section 10.2 based on
such alleged inaccuracy or breach, or (b) the Equityholders' Representative
(acting in good faith) delivers to the Parent a written notice alleging the
existence of an inaccuracy in or a breach of any of the representations and
warranties made by Parent and Merger Sub in Article V setting forth in
reasonable detail the basis for the belief of the Equityholders' Representative
that such an inaccuracy or breach may exist and asserting a claim for recovery
under Section 10.2 based on such alleged inaccuracy or breach then, in the case
of clause (a) or clause (b), the claim asserted in such notice shall survive the
Expiration Date until such time as such claim is fully and finally resolved.
SECTION 10.2 Right to Indemnification.
(a) Subject to the limitations set forth in this Article X, from and after the
Effective Time, Parent shall be entitled to be indemnified, solely from the
Indemnity Escrow Fund, against any Damages actually incurred by Parent as a
proximate result of: (i) any breach of any representation or warranty made by
the Company or an Equityholder set forth in Article IV, Article VI or in the
Ancillary Documents; or (ii) any material breach of any covenant or agreement of
the Company or an Equityholder set forth in this Agreement or in the Ancillary
Documents. Subject to the limitations set forth in this Article X, to the extent
the Escrow Fund is not available, from and after the Effective Time, Parent
shall be entitled to be indemnified by the individual Equityholders, severally
and not jointly, against any Damages actually incurred by Parent as a proximate
result of any breach of any representation or warranty of such Equityholder set
forth in Article VI.
(b) Subject to the limitations set forth in this Article X, from and after the
Effective Time, the Equityholders shall be entitled to be indemnified by Parent
and the Surviving Corporation against any Damages actually incurred by any of
the Equityholders as a proximate result of: (i) any breach of any representation
or warranty made by the Parent or the Merger Sub set forth in Article V or in
the Ancillary Documents; or (ii) any material breach of any covenant or
agreement of Parent or Merger Sub set forth in this Agreement.
SECTION 10.3 Limitations on Liability.
(a) From and after the Effective Time, the right of Parent to be indemnified
from the Indemnity Escrow Fund pursuant to this Article X shall be the sole and
exclusive remedy with respect to any breach of any representation or warranty of
the Company contained in, or any other breach by the Company of, this Agreement.
The right of Parent to be indemnified solely and exclusively from the Indemnity
Escrow Fund shall not apply to claims relating to the breach of a Fundamental
Representation; provided, that in no event shall any Equityholder be liable to
Parent for Damages relating to the breach of Fundamental Representations in
excess of the Merger Consideration actually received by such Person. Except as
provided with respect to the Equityholders in the immediately preceding
sentence, no current or former stockholder, director, officer, employee,
affiliate or advisor of the Company shall have any Liability of any nature to
Parent, the Surviving Corporation or any Affiliate of Parent or the Surviving
Corporation with respect to any breach of any representation or warranty
contained in, or any other breach of, this Agreement. From and after the
Effective Time, the right of the Equityholders to be indemnified pursuant to
this Article X shall be the sole and exclusive remedy with respect to any breach
of any representation or warranty of Parent or Merger Sub contained in, or any
other breach by Parent or Merger Sub of, this Agreement. No current or former
stockholder, director, officer, employee, affiliate or advisor of Parent or
Merger Sub shall have any Liability of any nature to any Equityholder or any
Affiliate of any Equityholder with respect to any breach of any representation
or warranty contained in, or any other breach of, this Agreement.
(b) Without limiting the effect of any other limitation contained in this
Article X, and except for the breach of a Fundamental Representation, the
indemnification provided for in Section 10.2 shall not apply except to the
extent that the aggregate Damages against which Parent would otherwise be
entitled to be indemnified under this Article X exceeds $1,750,000, in which
event Parent shall, subject to the other limitations contained herein, be
entitled to be indemnified only against the portion of such Damages in excess of
$1,750,000. Any amounts payable by the Equityholders to Parent or Merger Sub
pursuant to this Section 10.3 shall be paid solely and exclusively from the
Indemnity Escrow Fund in accordance with the terms of the Escrow Agreement, and
no holder of Company Capital Stock, Company Option or any other Person shall be
liable for any deficiency with respect to indemnity pursuant to this Section
10.3 except with respect to the breach of a Fundamental Representation.
(c) Without limiting the effect of any other limitation contained in this
Article X, for purposes of computing the amount of any Damages incurred by
Parent under this Article X, there shall be deducted an amount equal to the
amount of any insurance proceeds, indemnification payments, contribution
payments or reimbursements received by Parent or any of its Affiliates in
connection with such Damages or any of the circumstances giving rise thereto (it
being understood that Parent and any of its Affiliates shall use commercially
reasonable efforts to obtain such proceeds, payments or reimbursements prior to
seeking indemnification under this Article X). The calculation of Damages shall
not include losses arising because of a change after Closing in Law or
accounting policy. To the extent that a claim for indemnification by Parent or
Merger Sub hereunder relates to a Liability incurred by the Company and there is
an accrual on the Current Balance Sheet in respect of such Liability, then the
determination of Damages in respect of such claim shall be net of such accrual.
(d) Without limiting the effect of any other limitation contained in this
Article X, Parent shall not be entitled to indemnification under this Article X
to the extent that such right of indemnification is addressed in the adjustments
to the Per Share Merger Consideration made following the Closing pursuant to
Section 2.8 or as otherwise referenced on the Closing Balance Sheet.
(e) Without limiting the effect of any other limitation contained in this
Article X, for purposes of this Agreement, no representation or warranty of the
Company or an Equityholder, on the one hand, or Parent and Merger Sub, on the
other hand, shall be deemed to be or to have been breached if: (A) Parent or the
Company, as the case may be, had actual knowledge, on or prior to the date of
this Agreement, of the breach of such representation or warranty, or of any
facts or circumstances rendering such representation or warranty inaccurate; or
(B) during the Pre-Closing Period, Parent or the Company, as the case may be,
obtained actual knowledge of the breach of such representation or warranty, or
of any facts or circumstances rendering such representation or warranty
inaccurate, and elected nonetheless to proceed with the Closing.
(f) Nothing in this Section 10.3 shall limit any remedy Parent or any of the
Equityholders may have against any Person for actual fraud involving a knowing
and intentional misrepresentation of a fact material to the transactions
contemplated by this Agreement upon which such other party has relied.
SECTION 10.4 Defense of Third-Party Claims.
(a) Upon receipt by any Person seeking to be indemnified pursuant to Section
10.2 (the "Indemnitee") of notice of any actual or possible claim, demand, suit,
action, arbitration, investigation, inquiry or proceeding that has been or may
be brought or asserted by a third party against such Indemnitee and that may be
subject to indemnification hereunder (a "Third-Party Claim"), the Indemnitee
shall promptly give notice of such Third-Party Claim to the Person from whom
indemnification is sought under Section 10.2 (the "Indemnitor") indicating the
nature of such Third-Party Claim and the stated basis therefor and the amount of
Damages claimed pursuant to such Third-Party Claim, to the extent known.
(b) The Indemnitor shall have 30 days after receipt of the Indemnitee's notice
of a given Third-Party Claim to elect, at its option, to assume the defense of
any such Third-Party Claim, in which case: (i) the attorneys' fees, other
professionals' and experts' fees and court or arbitration costs incurred by the
Indemnitor in connection with defending such Third-Party Claim shall be payable
by such Indemnitor; (ii) the Indemnitee shall not be entitled to be indemnified
for any costs or expenses incurred by the Indemnitee in connection with the
defense of such Third-Party Claim; (iii) the Indemnitee shall be entitled to
monitor such defense at its sole expense; (iv) the Indemnitee shall make
available to the Indemnitor all books, records and other documents and materials
that are under the direct or indirect control of the Indemnitee or any of its
Subsidiaries or other Affiliates and that the Indemnitor considers necessary or
desirable for the defense of such Third-Party Claim; (v) the Indemnitee shall
execute such documents and take such other actions as the Indemnitor may
reasonably request for the purpose of facilitating the defense of, or any
settlement, compromise or adjustment relating to, such Third-Party Claim; (vi)
the Indemnitee shall otherwise fully cooperate as reasonably requested by the
Indemnitor in the defense of such Third-Party Claim; (vii) the Indemnitee shall
not admit any liability with respect to such Third Party Claim; and (viii) the
Indemnitor shall not enter into any agreement providing for the settlement or
compromise of such Third-Party Claim or the consent to the entry of a judgment
with respect to such Third-Party Claim without the prior written consent of
Indemnitee (which consent shall not be unreasonably withheld, conditioned or
delayed). If the Indemnitor elects not to defend such Third-Party Claim, then
(i) the Indemnitee shall diligently defend such Third-Party Claim and (ii) the
Indemnitee shall have no right to seek indemnification under this Article X in
respect of such Third-Party Claim for any agreement providing for the settlement
or compromise of such Third-Party Claim or the consent to the entry of a
judgment with respect to such Third-Party Claim entered into without the prior
written consent of the Indemnitor (which consent shall not be unreasonably
withheld, conditioned or delayed), provided, however, in no event shall the
maximum aggregate Liability of the Equityholders for indemnification claims
payable by the Equityholders hereunder exceed the Indemnity Escrow Fund.
SECTION 10.5 Limitation on Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY
PROVIDED FOR UNDER ANY APPLICABLE LAW, EXCEPT AS PROVIDED IN THIS AGREEMENT, NO
PARTY NOR ANY EQUITYHOLDER OR EQUITYHOLDERS' REPRESENTATIVE SHALL, IN ANY EVENT,
BE LIABLE TO ANY OTHER PARTY FOR ANY CONSEQUENTIAL, SPECIAL, EXEMPLARY OR
PUNITIVE DAMAGES RELATING TO THE BREACH OR ALLEGED BREACH HEREOF (EXCEPT THOSE
INCURRED AS A RESULT OF A THIRD PARTY CLAIM).
SECTION 10.6 Characterization of Indemnification Payments. The parties agree
that any indemnification payments made pursuant to this Article X shall be
treated for all Tax purposes as an adjustment to the purchase price unless
otherwise required by Law.
SECTION 10.7 Allocation of Certain Indemnification Obligations; Special Payment
Procedures. In the event that any claim for Damages made by Parent pursuant to
Section 10.2 constitutes Damages for which the Equityholders who were holders of
Company Capital Stock prior to December 6, 2004 (such Equityholders, with
respect to such shares, the "Pre-2005 Indemnified Stockholders") are entitled to
contribution or indemnification from certain prior stockholders of the Company
in accordance with the Contribution Agreement dated December 6, 2004 (a "Special
Allocated Loss"), then such Special Allocated Loss shall, to the extent Parent
is entitled to indemnification therefor pursuant to the terms of Section 10.2,
be the obligation of the Pre-2005 Indemnified Equityholders and not the other
Equityholders. The Equityholders' Representative shall notify the Parent in
writing if any claim for Damages constitutes such Special Allocated Loss. Prior
to the payment from the Indemnity Escrow Fund of any amount to Parent in respect
of any such Special Allocated Loss, the Equityholders' Representative or its
designee shall have thirty (30) days in which to seek contribution from persons
who were stockholders of the Company prior to December 6, 2004 ("Pre-2005
Stockholders"), which payment (if any) will be made directly to Parent and shall
offset dollar-for-dollar the Parent's claim on the Indemnity Escrow Fund for any
Special Allocated Loss or any other Damages for which the Parent may be entitled
to indemnification pursuant to Section 10.2. If any amount of Special Allocated
Loss is not paid pursuant to the immediately preceding sentence within the
specified time period, such amount shall then be payable from the Escrow
Indemnity Fund in accordance with this Article X and the Escrow Agreement;
provided, however, that the amounts (if any) paid from the Indemnity Escrow Fund
with respect to a Special Allocated Loss shall be an obligation of the
Indemnified Pre-2005 Stockholders and accordingly shall be allocated, pro rata,
among the Indemnified Pre-2005 Stockholders, with the actual allocation to be in
accordance with a schedule to be provided by the Equityholders Representative to
the Parent and the Escrow Agent in writing; provided, further, that in the event
the portion of the Indemnity Escrow Fund allocated to the Indemnified Pre-2005
Stockholders shall be entirely exhausted, any then unpaid Special Allocated Loss
shall be recovered by Parent from the remaining Indemnity Escrow Fund, if any.
Without limiting the generality of Article XI, Parent is expressly authorized to
rely on any written notice of the Equityholders' Representative contemplated by
this Section 10.7, and no Equityholder or any other Person shall have any claim
of any sort whatsoever against Parent or the Escrow Agent for acting in reliance
thereon. FOR THE AVOIDANCE OF DOUBT, THE SOLE PURPOSE OF THIS SECTION 10.7 IS TO
FACILITATE THE ALLOCATION OF CERTAIN INDEMNIFICATION OBLIGATIONS PROVIDED FOR IN
THIS ARTICLE X BY AND AMONG THE PRESENT EQUITYHOLDERS AND CERTAIN PRIOR
STOCKHOLDERS OF THE COMPANY AS A FINANCIAL MATTER, AND SHALL NOT ADVERSELY
AFFECT IN ANY MANNER THE ULTIMATE RIGHT OF THE PARENT TO RECOVER DAMAGES FROM
THE INDEMNIFICATION ESCROW FUND UPON THE TERMS AND SUBJECT TO THE CONDITIONS AND
OTHER LIMITATIONS OF THIS AGREEMENT.
ARTICLE XI.
GENERAL PROVISIONS
SECTION 11.1 Equityholders' Representative.
(a) Appointment. By virtue of the adoption of this Agreement by the Company's
stockholders, and without further action of any Company stockholder, each
Equityholder shall be deemed to have irrevocably constituted and appointed
Castanea Partners, Inc. (and by execution of this Agreement it hereby accepts
such appointment) as agent and attorney-in-fact ("Equityholders'
Representative") for and on behalf of the Equityholders (in their capacity as
such), with full power of substitution, to act in the name, place and stead of
each Equityholder with respect to Section 2.8, Article X and the Escrow
Agreement and the taking by the Equityholders' Representative of any and all
actions and the making of any decisions required or permitted to be taken by the
Equityholders' Representative under Section 2.8, Article X or the Escrow
Agreement (it being understood that the Equityholders' Representative shall have
no right to pursue any claim on behalf of any Company Indemnified Party in
respect of the rights granted to Company Indemnified Parties under Section 7.7).
The power of attorney granted in this Section 11.1 is coupled with an interest
and is irrevocable, may be delegated by the Equityholders' Representative and
shall survive the death or incapacity of each Equityholder. Such agency may be
changed by the holders of a majority in interest of the Indemnity Escrow Fund
from time to time (including in the event of the liquidation or dissolution of
the Equityholders' Representative), and any such successor shall succeed the
Equityholders' Representative as Equityholders' Representative hereunder. No
bond shall be required of the Equityholders' Representative, and the
Equityholders' Representative shall receive no compensation for its services.
(b) Limitation on Liability. The Equityholders' Representative shall not be
liable to any Person for any act of the Equityholders' Representative taken in
good faith and in the exercise of its reasonable judgment and arising out of or
in connection with the acceptance or administration of its duties under this
Agreement and the Escrow Agreement (it being understood that any act done or
omitted pursuant to the advice of legal counsel shall be conclusive evidence of
such good faith and reasonable judgment), except to the extent any liability,
loss, damage, penalty, fine, cost or expense is actually incurred by such Person
as a proximate result of the gross negligence or bad faith of the Equityholders'
Representative. The Equityholders' Representative shall not be liable for, and
may seek indemnification from the Equityholders for, any liability, loss,
damage, penalty, fine, cost or expense incurred by the Equityholders'
Representative while acting in good faith and in the exercise of its reasonable
judgment and arising out of or in connection with the acceptance or
administration of his duties under this Agreement and the Escrow Agreement,
except to the extent that any such liability, loss, damage, penalty, fine, cost
or expense is the proximate result of the gross negligence or bad faith of the
Equityholders' Representative. The Equityholders' Representative shall be
entitled to recover any out-of-pocket costs and expenses reasonably incurred by
the Equityholders' Representative in connection with actions taken by the
Equityholders' Representative pursuant to the terms of Section 2.8, Article X or
the Escrow Agreement (including the hiring of legal counsel and the incurring of
legal fees and costs) from the Equityholders. The Equityholders' Representative
shall be permitted to withhold an amount equal to $100,000 from the Merger
Consideration, which amount shall be treated as Transaction Expenses hereunder.
The Equityholders' Representative shall also be entitled to recover from each
Equityholder such Equityholder's ratable share of any and all liabilities,
losses, damages, claims, costs or expenses suffered or incurred by the
Equityholders' Representative arising out of or resulting from any action taken
or omitted to be taken by the Equityholders' Representative under this Agreement
or the Escrow Agreement.
(c) Access. From and after the Effective Time, Parent shall cause the Surviving
Corporation to provide the Equityholders' Representative with reasonable access
to information about the Surviving Corporation and the reasonable assistance of
the officers and employees of Parent and the Surviving Corporation for purposes
of performing his duties and exercising his rights under this Agreement,
provided, that the Equityholders' Representative shall treat confidentially any
nonpublic information about the Surviving Corporation (except in connection with
the performance by the Equityholders' Representative of its duties or the
exercise of its rights under this Agreement).
(d) Actions of the Equityholders' Representative. From and after the Effective
Time, a decision, act, consent or instruction of the Equityholders'
Representative shall constitute a decision of all Equityholders and shall be
final, binding and conclusive upon each Equityholder, and the Escrow Agent and
Parent may rely upon any decision, act, consent or instruction of the
Equityholders' Representative as being the decision, act, consent or instruction
of each Equityholder. Parent is hereby relieved from any liability to any Person
for any acts done by Parent in accordance with any such decision, act, consent
or instruction of the Equityholders' Representative.
SECTION 11.2 Expenses. Except as otherwise expressly provided in this Agreement,
all costs and expenses (including all fees and disbursements of counsel,
financial advisors and accountants) incurred in connection with the negotiation
and preparation of this Agreement, the performance of the terms of this
Agreement and the consummation of the transactions contemplated by this
Agreement, shall be paid by the respective party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 11.3 Costs and Attorneys' Fees. Subject to the limitations set forth
herein, including Article X, in the event that any action, suit or other
proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall recover all of such party's costs and reasonable
attorneys' fees incurred in connection with each and every such action, suit or
other proceeding, including any and all appeals and petitions therefrom.
SECTION 11.4 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given or made as follows: (i) if sent by registered nationally recognized
receipted overnight air courier, one (1) Business Day after mailing; (ii) if
sent by facsimile transmission, with a copy sent on the same day in the manner
provided in clause (i) of this Section 11.4, when transmitted and receipt is
confirmed by telephone and (iii) if otherwise actually personally delivered,
when delivered; provided, that such notices, requests, demands and other
communications are delivered to the address set forth below, or to such other
address as any party shall provide by like notice to the other parties to this
Agreement:
(a) if to the Company (prior to the Closing), to:
Xxxxx Xxxxxxxxx Corporation
0000 XX Xxxxxxxx
Xxxxxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxx X. Xxxxxxx, Esq.
(b) if to Parent or Merger Sub or, if after the Closing, to the Company, to:
Kellwood Company
000 Xxxxxxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx,
General Counsel
with a copy (which shall not constitute notice) to:
XxXxxxxxx Will & Xxxxx LLP
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Xx.
(c) if to the Equityholders' Representative, to:
Castanea Partners, Inc.
Three Xxxxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxx
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
SECTION 11.5 Public Announcements. Unless otherwise required by applicable Law
or applicable stock exchange rules and regulations, no party to this Agreement
shall make any public announcements in respect of this Agreement or the
transactions contemplated by this Agreement, or otherwise communicate with any
news media regarding this Agreement or the transactions contemplated by this
Agreement, without the prior written consent of the other parties to this
Agreement. If a public statement is required to be made pursuant to applicable
Law or applicable stock exchange rules and regulations, the parties shall
consult with each other, to the extent reasonably practicable, in advance as to
the contents and timing thereof.
SECTION 11.6 Interpretation. The Article and Section headings in this Agreement
are for convenience of reference only and shall not be deemed to alter or affect
the meaning or interpretation of any provision of this Agreement. References to
Articles, Sections, Schedules or Exhibits in this Agreement, unless otherwise
indicated, are references to Articles, Sections, Schedules and Exhibits of or to
this Agreement. The parties to this Agreement have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises with respect to any term or
provision of this Agreement, this Agreement shall be construed as if drafted
jointly by the parties to this Agreement, and no presumption or burden of proof
shall arise favoring or disfavoring any party to this Agreement by virtue of the
authorship of any of the terms or provisions of this Agreement. Any reference to
any federal, state, county, local or foreign statute or Law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. For all purposes of and under this Agreement, (i) the word
"including" shall be deemed to be immediately followed by the words "without
limitation;" (ii) words (including defined terms) in the singular shall be
deemed to include the plural and vice versa; (iii) words of one gender shall be
deemed to include the other gender as the context requires; (iv) the terms
"hereof," "herein," "hereto," "herewith" and any other words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole (including all of the Schedules and Exhibits to this Agreement) and not to
any particular term or provision of this Agreement, unless otherwise specified
and (v) unless otherwise defined in this Agreement, accounting terms shall have
the respective meanings assigned to them in accordance with GAAP consistently
applied with the Company Financial Statements.
SECTION 11.7 Severability. In the event that any one or more of the terms or
provisions contained in this Agreement or in any other certificate, instrument
or other document referred to in this Agreement, shall, for any reason, be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or any other such certificate, instrument or other document
referred to in this Agreement, and the parties to this Agreement shall use their
commercially reasonable efforts to substitute one or more valid, legal and
enforceable terms or provisions into this Agreement which, insofar as
practicable, implement the purposes and intent of this Agreement. Any term or
provision of this Agreement held invalid or unenforceable only in part, degree
or within certain jurisdictions shall remain in full force and effect to the
extent not held invalid or unenforceable to the extent consistent with the
intent of the parties as reflected by this Agreement. To the extent permitted by
applicable Law, each party waives any term or provision of Law which renders any
term or provision of this Agreement to be invalid, illegal or unenforceable in
any respect.
SECTION 11.8 Entire Agreement. This Agreement (including the Company Disclosure
Schedule, the other Schedules and the Exhibits to this Agreement) and the
Confidentiality Agreement constitute the entire agreement of the parties to this
Agreement with respect to the subject matter of this Agreement and the
Confidentiality Agreement, and supersede all prior agreements and undertakings,
both written and oral, among the parties to this Agreement with respect to the
subject matter of this Agreement and the Confidentiality Agreement, except as
otherwise expressly provided in this Agreement.
SECTION 11.9 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties to this
Agreement (whether by operation of law or otherwise) without the prior written
consent of the other parties to this Agreement, and any purported assignment or
other transfer without such consent shall be void and unenforceable. Subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties to this Agreement and their
respective successors and assigns.
SECTION 11.10 No Third-Party Beneficiaries. Except for Article II, Section 7.7
and Section 7.8, this Agreement is for the sole benefit of the parties to this
Agreement and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 11.11 Waivers and Amendments. This Agreement may be amended or modified
only by a written instrument executed by all of the parties to this Agreement.
Any failure of the parties to this Agreement to comply with any obligation,
covenant, agreement or condition in this Agreement may be waived by the party
entitled to the benefits thereof only by a written instrument signed by the
party granting such waiver. No delay on the part of any party to this Agreement
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party to this Agreement of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. Unless
otherwise provided, the rights and remedies provided for in this Agreement are
cumulative and are not exclusive of any rights or remedies which the parties to
this Agreement may otherwise have at law or in equity. Whenever this Agreement
requires or permits consent by or on behalf of a party, such consent shall be
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 11.11.
SECTION 11.12 Governing Law; Consent to JurisdictionThis Agreement shall be
governed by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed entirely within such
State. Each of the parties to this Agreement hereby irrevocably and
unconditionally submits, for itself and its assets and properties, to the
exclusive jurisdiction of any Delaware State court, or Federal court of the
United States of America, sitting within the State of Delaware, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, the agreements delivered in connection with this
Agreement, or the transactions contemplated hereby or thereby, or for
recognition or enforcement of any judgment relating thereto, and each of the
parties to this Agreement hereby irrevocably and unconditionally (i) agrees not
to commence any such action or proceeding except in such courts; (ii) agrees
that any claim in respect of any such action or proceeding may be heard and
determined in such Delaware State court or, to the extent permitted by Law, in
such Federal court; (iii) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such action or proceeding in any such Delaware State or
Federal court; and (iv) waives, to the fullest extent permitted by Law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such Delaware State or Federal court. Each of the parties to this
Agreement hereby agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law. Each of the parties to this
Agreement hereby irrevocably consents to service of process in the manner
provided for notices in Section 11.4. Nothing in this Agreement shall affect the
right of any party to this Agreement to serve process in any other manner
permitted by applicable Law.
SECTION 11.13 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY
TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE, IT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS
AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF
SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11.13.
SECTION 11.14 Exclusivity of Representations and Warranties. It is the explicit
intent and understanding of each of the parties to this Agreement that no party
to this Agreement, nor any of their respective Affiliates, representatives or
agents, is making any representation or warranty whatsoever, oral or written,
express or implied, other than those set forth in this Agreement and any
Ancillary Document (as qualified by the Company Disclosure Schedule), and none
of the parties to this Agreement is relying on any statement, representation or
warranty, oral or written, express or implied, made by another party to this
Agreement or such other party's Affiliates, representatives or agents, except
for the representations and warranties set forth in this Agreement.
SECTION 11.15 Equitable Remedies. Each of the parties to this Agreement
acknowledges and agrees that the other parties to this Agreement would be
irreparably damaged in the event that any of the terms or provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Therefore, notwithstanding anything to the contrary set forth in
this Agreement, each of the parties to this Agreement hereby agrees that the
other parties to this Agreement shall be entitled to an injunction or
injunctions to prevent breaches of any of the terms or provisions of this
Agreement, and to enforce specifically the performance by such first party under
this Agreement, and each party to this Agreement hereby agrees to waive the
defense in any such suit that the other parties to this Agreement have an
adequate remedy at law and to interpose no opposition, legal or otherwise, as to
the propriety of injunction or specific performance as a remedy, and hereby
agrees to waive any requirement to post any bond in connection with obtaining
such relief. The equitable remedies described in this Section 11.15 shall be in
addition to, and not in lieu of, any other remedies at law or in equity that the
parties to this Agreement may elect to pursue.
SECTION 11.16 Counterparts(a). This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original,
but all of which taken together shall constitute one and the same agreement.
(Remainder of Page Intentionally Left Blank)
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the
Equityholders' Representative have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above
written.
KELLWOOD COMPANY,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Vice President, Secretary
and General Counsel
NEWKELL V, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President, Secretary and
General Counsel
XXXXX XXXXXXXXX CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive
Officer
CASTANEA PARTNERS, INC.,
a Delaware corporation
solely in its capacity as Equityholders' Representative
By: /s/
Name:
Title:
