STOCK PURCHASE AGREEMENT by and among PAV REPUBLIC, INC., THE SHAREHOLDERS OF PAV REPUBLIC, INC. SIMREP CORPORATION and INDUSTRIAS CH, S.A. de C.V.
Exhibit
10.1
EXECUTION
COPY
by
and
among
PAV
REPUBLIC, INC.,
THE
SHAREHOLDERS OF PAV REPUBLIC, INC.
SIMREP
CORPORATION
and
INDUSTRIAS
CH, S.A. de
C.V.
JULY
22, 2005
TABLE
OF
CONTENTS
Page | ||
i
Page | ||
Exhibit
A -
|
Capitalization
of the Company
|
|||||
Exhibit
B -
|
Historical
Financial Statements
|
|||||
Exhibit
C -
|
Form
of Amendment between Republic Engineered Products, Inc. and Perry
Principals Investment, L.L.C. to the 11% Senior Secured Promissory
Note
due August 20, 2009
|
|||||
Exhibit
D -
|
Schedule
of Known Matters
|
|||||
Disclosure
Schedule -
|
Exceptions
to Representations and Warranties Concerning Company and Its
Subsidiaries
|
This
Stock Purchase Agreement (this “Agreement”) is entered into as of July 22, 2005,
by and among PAV Republic, Inc., a Delaware corporation (the “Company”), the
shareholders and option holders of the Company listed on the signature pages
hereto (collectively, the “Sellers” and each individually, a “Seller”), SimRep
Corporation, a Delaware corporation (the “Purchaser”) and Industrias CH, S.A. de
C.V., a Mexican limited liability company with variable capital “sociedad
anónima de capital variable” (the “Purchaser Guarantor”). Purchaser and Sellers
are referred to collectively herein as the “Parties.”
The
Sellers are all the shareholders and optionholders of the Company and own
beneficially and of record all of the issued and outstanding shares of capital
stock or options to purchase shares of stock of the Company, as set forth on
Exhibit A attached hereto. Each Seller desires to sell to Purchaser, and
Purchaser desires to purchase from each Seller, all of such shares owned by
such
Seller (in the case of Sellers holding options, after exercise thereof) upon
the
terms and conditions hereinafter set forth.
In
consideration of the mutual covenants contained herein and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows.
“Additional
Purchase Price”
has
the
meaning set forth in Section 2(b).
“Adverse
Consequences”
means
all actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages
(excluding consequential and punitive damages), dues, penalties, fines, costs,
reasonable amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs reasonable attorneys’ fees and
expenses and reasonable consultant’s fees and expenses, adjusted for Tax
benefits and Tax costs and insurance coverage that may be
available.
“Affiliate”
has
the
meaning set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.
“Affiliated
Group”
means
any affiliated group within the meaning of Code Section 1504(a) or any similar
group defined under a similar provision of state, local or foreign
law.
“Applicable
Rate”
means
the corporate base rate of interest publicly announced from time to time by
Citibank, N.A.’s prime rate, as published from time to time in the Wall Street
Journal.
“Asbestos
Liabilities”
means
any Liabilities arising from, relating to, or based on the presence or alleged
presence of asbestos or asbestos-containing materials in any product or item
designed, manufactured, sold, marketed, installed, stored, transported, handled,
or distributed by the Company prior to the Closing Date or otherwise based
on
any personal or bodily injury or illness based on exposure to asbestos or
asbestos-containing materials at any Real Property prior to the Closing
Date.
“Basis”
means
any past or present fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction that forms or could form the basis for any specified
consequence.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which commercial banks in New York
City
and Mexico are open for the general transaction of business.
“Closing”
has
the
meaning set forth in Section 2(c) below.
“Closing
Date”
has
the
meaning set forth in Section 2(c) below.
“Closing
Purchase Price”
has
the
meaning set forth in Section 2(b).
“COBRA”
means
the requirements of Part 6 of Subtitle B of Title I of ERISA and Code
Section 4980B and of any similar state law.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Collective
Bargaining Agreement”
means
any written or oral agreement between the Company or any Subsidiary and a Labor
Organization.
“Company”
has
the
meaning set forth in the preface above.
“Confidential
Information”
means
any information concerning the businesses and affairs of the Company and its
Subsidiaries that is not already generally available to the public.
“Disclosure
Schedule”
has
the
meaning set forth in Section 4 below.
“Employee
Benefit Plan”
means
any “employee benefit plan” (as such term is defined in ERISA Section 3(3)) and
any other employee benefit plan, program or arrangement of any
kind.
“Employee
Pension Benefit Plan”
has
the
meaning set forth in ERISA Section 3(2).
“Employee
Welfare Benefit Plan”
has
the
meaning set forth in ERISA Section 3(1).
“Encumbrance
Documents”
has
the
meaning set forth in Section 4(l) below.
“Environmental,
Health, and Safety Requirements”
shall
mean, as in effect on the Closing Date, all federal, state, local, and foreign
statutes, regulations, ordinances, and other provisions having the force or
effect of law, all judicial and administrative orders and determinations,
including but not limited to any requirements imposed by U.S. EPA or any similar
state or local agency, all contractual obligations, and all common law
concerning the protection of public health and safety from exposure to hazardous
substances or environmental hazards, the protection of worker health and safety,
pollution, or protection of the environment, including, without limitation,
all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of
any
hazardous materials, substances, or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, toxic mold, polychlorinated biphenyls, noise, or
radiation.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate”
means
each entity that is treated as a single employer with Company for purposes
of
Code Section 414.
“Fiduciary”
has
the
meaning set forth in ERISA Section 3(21).
2
“Financial
Statements”
has
the
meaning set forth in Section 4(g) below.
“FIRPTA
Affidavit”
has
the
meaning set forth in Section 7(a) below.
“GAAP”
means
United States generally accepted accounting principles as in effect from time
to
time, consistently applied.
“GE
Credit Facility”
means
the Credit Agreement dated as of May 20, 2004, among Republic Engineered
Products, Inc., as borrower, the other credit parties signatory thereto, the
lenders signatory thereto from time to time, General Electric Capital
Corporation as agent and lender, GECC Capital Markets Group, Inc. and UBS
Securities, LLC as lead arrangers, UBS Securities, LLC as syndication agent
and
Bank One, NA (Main Office Chicago) and Xxxxxxx Xxxxx Capital, a division of
Xxxxxxx Xxxxx Business Financial Services Inc. as documentation agents, as
amended.
“Xxxx-Xxxxx-Xxxxxx
Act”
means
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
“Indemnified
Party”
has
the
meaning set forth in Section 8(c) below.
“Indemnifying
Party”
has
the
meaning set forth in Section 8(c) below.
“Insurance
Proceeds”
means
all of the proceeds received by the Company and its Subsidiaries from any
insurer in connection with the pending claims for business interruption,
property damage or loss and any related loss under any policy of insurance
relating to the multiple incidents involving the No. 3 blast furnace in the
Company’s Lorain, Ohio facility.
“Intellectual
Property”
means
all of the following in any jurisdiction throughout the world: (a) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications,
and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, slogans, trade names,
corporate names, and Internet domain names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all
mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and
business and marketing plans and proposals), (f) all computer software
(including source code, executable code, data, databases, and related
documentation) and (g) all other proprietary rights.
“Knowledge”
an
individual will be deemed to have “Knowledge” of a particular fact or other
matter if:
(a) such
individual is actually aware of such fact or other matter; or
(b) a
prudent individual would reasonably be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting his or her duties
in the ordinary course.
3
A
Person
(other than an individual) will be deemed to have “Knowledge” of a particular
fact or other matter if any individual who is serving as a director, officer,
partner, executor, or trustee of such Person (or in any similar capacity) has,
or at any time had, Knowledge of such fact or other matter.
“Labor
Organization”
means
any labor organization (including as such term is defined in Section 2(2) of
the
NLRA) representing all or a portion of the Company’s employees.
“Lease
Consents”
has
the
meaning set forth in Section 7(a) below.
“Leased
Real Property”
means
all leasehold or subleasehold estates and other rights to use or occupy any
land, buildings, structures, improvements, fixtures, or other interest in real
property held by Company or any of its Subsidiaries.
“Leases”
means
all leases, subleases, licenses, concessions and other agreements (written
or
oral), including all amendments, extensions, renewals, guaranties, and other
agreements with respect thereto, pursuant to which Company or any of its
Subsidiaries holds any Leased Real Property, including the right to all security
deposits and other amounts and instruments deposited by or on behalf of Company
or any of its Subsidiaries thereunder.
“Liability”
means
any liability or obligation of whatever kind or nature (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or
to
become due), including any liability for Taxes.
“Lien”
means
any mortgage, pledge, lien, encumbrance, charge, or other security interest,
other than (a) liens for Taxes not yet due and payable, (b) purchase money
liens
and liens securing rental payments under capital lease arrangements, and (c)
other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
“Material”
means
Adverse
Consequences and/or Liabilities to
the
Company or its Subsidiaries of greater than $35,000 when applied to any single
event, breach, failure to comply, inaccuracy or other occurrence or series
of
related events, breaches, failures to comply, inaccuracies or other
occurrences.
“Material
Adverse Effect”
or
“Material
Adverse Change”
means
any effect or change that would be (or could reasonably be expected to be)
materially adverse to the business, assets, condition (financial or otherwise),
results of operations, or operations of Company and its Subsidiaries, taken
as a
whole, or to the ability of Sellers to consummate timely the transactions
contemplated hereby (regardless of whether Purchaser has knowledge of such
effect or change on the date hereof), including any adverse change, event,
development, or effect arising from or relating to (a) national or international
political or social conditions, including the engagement by the United States
or
Canada in hostilities, whether or not pursuant to the declaration of a national
emergency or war, or the occurrence of any military or terrorist attack upon
the
United States or Canada, or any of its territories, possessions, or diplomatic
or consular offices or upon any military installation, equipment or personnel
of
the United States and (b) a discovery of a Liability for an environmental
condition other than those listed on Section 4(aa) of the Disclosure Schedule,
which is reasonably likely to exceed $20,000,000.
“Most
Recent Balance Sheet”
means
the balance sheet contained within the Most Recent Financial
Statements.
“Most
Recent Financial Statements”
has
the
meaning set forth in Section 4(g) below.
“Most
Recent Fiscal Month End”
has
the
meaning set forth in Section 4(g) below.
4
“Most
Recent Fiscal Year End”
has
the
meaning set forth in Section 4(g) below.
“Multiemployer
Plan”
has
the
meaning set forth in ERISA Section 3(37).
“NLRA”
means
the National Labor Relations Act of 1935, as amended.
“Option”
means
each exercisable stock option to purchase Shares.
“Option
Exercise”
has
the
meaning set forth in Section 2(a)(i).
“Option
Shares”
has
the
meaning set forth in Section 2(a)(i).
“Option
Withholding Tax”
has
the
meaning set forth in Section 2(a)(i).
“Optionholder”
has
the
meaning set forth in Section 2(a)(i).
“Ordinary
Course of Business”
means
the ordinary course of business consistent with past custom and practice
(including with respect to quantity and frequency).
“Owned
Real Property”
means
all land, together with all buildings, structures, improvements, and fixtures
located thereon, including all electrical, mechanical, plumbing and other
building systems, fire protection, security and surveillance systems,
telecommunications, computer, wiring, and cable installations, utility
installations, water distribution systems, and landscaping, together with all
easements and other rights and interests appurtenant thereto (including air,
oil, gas, mineral, and water rights), owned by Company or any of its
Subsidiaries.
“Party”
has
the
meaning set forth in the preface above.
“PBGC”
means
the Pension Benefit Guaranty Corporation.
“Permitted
Encumbrances”
means
(a) taxes, assessments and other governmental levies, fees, or charges imposed
with respect to each parcel of Real Property and all other assets owned by
the
Company and its Subsidiaries that are (i) not due and payable as of the Closing
Date or (ii) being contested in good faith and for which appropriate reserves
have been established in accordance with GAAP; (b) mechanics’ liens and similar
liens for labor, materials, or supplies provided with respect to each parcel
of
Real Property and all other assets owned by the Company and its Subsidiaries
incurred in the Ordinary Course of Business for amounts that are (i) not due
and
payable as of the Closing Date or (ii) being contested in good faith and for
which appropriate reserves have been established in accordance with GAAP; (c)
zoning, building codes and other land use laws regulating the use or occupancy
of such Real Property or the activities conducted thereon which are imposed
by
any governmental authority having jurisdiction over such Real Property and
are
not violated by the current use or occupancy of such Real Property or the
operation of Company’s or any of its Subsidiaries’ business as currently
conducted thereon; (d) easements, covenants, conditions, restrictions, and
other
similar matters of record affecting title to such Real Property that do not
or
would not impair the use or occupancy of such Real Property in the operation
of
Company’s or its Subsidiaries’ business as currently conducted thereon and (e)
all Liens set forth on Section 4(e) of the Disclosure Schedule.
“Person”
means
an individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, any other business entity, or a governmental entity (or any
department, agency, or political subdivision thereof).
5
“Pre-Closing
Tax Return”
has
the
meaning set forth in Section 9(a).
“Pre-Sale
Distribution”
has
the
meaning set forth in Section 2(a)(ii).
“Predecessor”
means
any predecessor to the business of the Company and each of its
Subsidiaries.
“Purchase
Price”
has
the
meaning set forth in Section 2(b) below.
“Purchaser”
has
the
meaning set forth in the preface above.
“Prohibited
Transaction”
has
the
meaning set forth in ERISA Section 406 and Code Section 4975.
“Real
Property”
has
the
meaning set forth in Section 4(l) below.
“Reportable
Event”
has
the
meaning set forth in ERISA Section 4043, other than any such event for which
the
notice requirement has been waived under applicable regulations.
“Representative”
means
Perry Partners LP, a Delaware limited partnership.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“Seller”
has
the
meaning set forth in the preface above.
“Subsidiary”
means,
with respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of
directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation),
a
majority of the partnership or other similar ownership interests thereof is
at
the time owned or controlled, directly or indirectly, by that Person or one
or
more Subsidiaries of that Person or a combination thereof and for this purpose,
a Person or Persons own a majority ownership interest in such a business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of such business entity’s gains or losses or shall be or control any
managing director or general partner of such business entity (other than a
corporation). The term “Subsidiary” shall include all Subsidiaries of such
Subsidiary.
“Share”
shall
mean each share of capital stock of the Company, and Shares shall mean all
such
Shares.
“Tax”
or
“Taxes”
shall
mean all taxes, charges fees, levies, penalties or other assessments imposed
by
any United States federal, state, local or foreign taxing authority, including,
but not limited to, income, gross receipts, excise, real property, personal
property, ad valorem, value added, sales, use (or similar taxes), transfer,
franchise, payroll, withholding, social security (or similar), business,
license, fees, severance, stamp, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock,
profits, employment, unemployment, disability, registration, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not and including
any obligations to indemnify or otherwise assume or succeed to the Tax liability
of any other Person.
6
“Tax
Return”
means
any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
“Third-Party
Claim”
has
the
meaning set forth in Section 8(c) below.
“WARN
Act”
has
the
meaning set forth in Section 4(x) below.
Section
2. Purchase
and Sale of Shares.
(a) Transactions
on the Closing
Date.
Upon the terms and subject to the
conditions of this Agreement, the following transactions shall occur on the
Closing Date in the order specified:
(i) Option
Exercise.
Each
Seller who holds Options (an “Optionholder”)
shall,
and the Company shall cause each Optionholder to, fully exercise (on a cashless
basis) his or her Options (the “Option
Exercise”)
so
that all Optionholders become holders of Shares (the “Option
Shares”).
Each
Optionholder’s exercise of his or her Options shall be subject to applicable
U.S. federal, state and local withholding tax (“Option
Withholding Tax”).
The
amount of the Option Withholding Tax shall be determined in good faith by the
Company prior to the Closing. The Purchaser shall pay to the Company at the
Closing cash in an amount equal to the aggregate Option Withholding Tax with
respect to the Option Exercise by all Optionholders, and the Company shall
(and
after the Closing the Purchaser shall cause the Company to) timely pay such
amount to the applicable taxing authorities. The portion of the Purchase Price
otherwise payable to each Optionholder pursuant to clause (iii) below with
respect to such Optionholder’s Option Shares shall be reduced by the amount of
Option Withholding Tax paid by the Purchaser to the Company with respect to
such
Option holder pursuant to this clause (i). Each Optionholder and the Company
agree, subject to the approval of the board of directors of the Company, that
all Options shall become fully vested and exercisable as of the Closing Date
in
connection with the transactions contemplated by this Agreement.
(ii) Pre-Sale
Distribution.
Immediately after the Option Exercise, the Company shall make a cash
distribution to the Representative, for the benefit of the Sellers (including
the Optionholders in respect of their Option Shares) in the amount of
$2,242,694.80 (the “Pre-Sale
Distribution”).
To
the extent that any portion of the Pre-Sale Distribution is payable to an
Optionholder in respect of his Option Shares (an “Option
Share Distribution”),
such
portion shall be subject to Option Withholding Tax. The Company shall withhold
from the Option Share Distribution all applicable Option Withholding Taxes
and
the Company shall (and after Closing the Purchaser shall cause the Company
to)
timely pay such amount to the applicable taxing authorities. The Option Share
Distribution otherwise payable to each Optionholder pursuant to this clause
(ii)
shall be reduced by the amount of Option Withholding Tax paid by the Company
pursuant to this clause (ii).
(iii) Purchase
and Sale of the Shares.
Immediately after the Pre-Sale Distribution, each Seller severally shall sell
to
Purchaser the Shares owned by such Seller as set forth opposite such Seller’s
name on Exhibit
A,
and
Purchaser shall purchase such Shares from each Seller.
(b) Purchase
Price.
The aggregate consideration payable by Purchaser at the
Closing for the purchase of the Shares and Option Shares (including the Option
Withholding Tax payable by Purchaser to the Company
7
pursuant
to Section 2(a)(i)) shall be equal to US$229,000,000.00 (the “Closing
Purchase Price”).
In
addition, the Purchaser shall pay to the Representative for the benefit of
the
Sellers, promptly upon receipt of any such amounts by the Company or any of
its
Subsidiaries or the Purchaser and as an additional purchase price (“Additional
Purchase Price,”
together with Closing Purchase Price the “Purchase
Price”)
for
the Shares and Option Shares, 34.1% of all Insurance Proceeds received after
the
Closing Date.
(c) Closing.
The closing of the transactions contemplated hereby (the
“Closing”)
shall
take place at the offices of Xxxxxxx Xxxxxxxx & Xxxx, llp,
Two
World Financial Center, Xxx Xxxx, XX 00000, at 10:00 A.M. on the Business Day
on
or before July 27, 2005 following the satisfaction or waiver of the conditions
set forth in Section
7
(other
than those conditions that by their terms cannot be satisfied until the
Closing), or on such other date and time as Sellers and Purchaser shall mutually
agree. The time and date of the Closing is herein called the “Closing
Date.”
(d) Deliveries
at Closing.
At the Closing, (i) Sellers will deliver to
Purchaser the various certificates, instruments, and documents referred to
in
Section 7(a) below, (ii) Purchaser will deliver to Sellers the various
certificates, instruments, and documents referred to in Section 7(b) below,
(iii) each Seller will deliver to Purchaser stock certificates representing
all
of his, her, or its Shares, endorsed in blank or accompanied by duly executed
assignment documents and (iv) Purchaser will pay the aggregate Option
Withholding Tax to the Company in accordance with Section 2(a)(i), and (v)
Purchaser will pay an amount equal to the excess of the Closing Purchase Price
over the aggregate Option Withholding Tax to Sellers and/or the Representative
in accordance with Exhibit A, which Sellers and the Company will cause to be
attached hereto prior to the Closing.
(a) Sellers’
Representations
and
Warranties.
Each
Seller represents and warrants to Purchaser that the statements contained in
this Section 3(a) are correct and complete as of the date of this Agreement
and
will be correct and complete as of the Closing Date (as though made then and
as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to himself, herself, or
itself.
(i) Organization
of Certain Sellers. Seller, if a corporation or other entity, is duly organized,
validly existing, and in good standing under the laws of the jurisdiction of
its
incorporation or other formation.
(ii) Authorization
of Transaction. Seller has full power and authority (including, if a corporation
or other entity, full corporate or other entity power and authority) to execute
and deliver this Agreement and to perform his, her, or its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of Seller, enforceable in accordance with its terms and conditions. Except
for
the filing of a pre-merger notification report and other filings required under
the Xxxx-Xxxxx-Xxxxxx Act and the expiration or termination of the applicable
waiting period in connection therewith, Seller need not give any notice to,
make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement. The execution, delivery, and performance of
this
Agreement and all other agreements contemplated hereby have been duly authorized
by Seller.
(iii) Non-contravention.
Neither the execution and delivery of this Agreement, nor the consummation
of
the transactions contemplated hereby, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Seller is subject or, if Seller is an entity, any provision of its charter,
bylaws, or other governing
8
documents,
(B) conflict with, result in a breach of, constitute a default under, result
in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which Seller is a party or by
which
he, she, or it is bound or to which any of his, her, or its assets are subject,
or (C) result in the imposition or creation of a Lien upon or with respect
to
the Shares.
(iv) Brokers’
Fees. Seller has no Liability to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(v) Shares
and Options. Each Seller holds of record and owns beneficially the number of
Shares and/or Options set forth next to his or its name in Exhibit A, and in
the
case of any Optionholder, on the Closing Date immediately after the Option
Exercise such Seller will hold of record and own beneficially the number of
Shares set forth next to his or its name in Exhibit A, in all cases free and
clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Liens, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. Seller
is not a party to any option, warrant, purchase right, or other contract or
commitment (other than this Agreement) that could require Seller to sell,
transfer, or otherwise dispose of any capital stock of Company. Except for
the
Stockholders Agreement dated January 20, 2004, Seller is not a party to any
voting trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of Company.
(b) Purchaser’s
Representations and
Warranties.
Purchaser represents and warrants to Sellers that the statements contained
in
this Section 3(b) are correct and complete as of the date of this Agreement
and
will be correct and complete as of the Closing Date (as though made then and
as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)).
(i) Organization
of Purchaser. Purchaser is a corporation (or other entity) duly organized,
validly existing, and in good standing under the laws of the jurisdiction of
its
incorporation. Purchaser Guarantor is the owner, directly or indirectly, of
at
least 51% of the voting securities of the Purchaser.
(ii) Authorization
of Transaction. Purchaser has full power and authority (including full corporate
or other entity power and authority) to execute and deliver this Agreement
and
to perform its obligations hereunder. This Agreement constitutes the valid
and
legally binding obligation of Purchaser, enforceable in accordance with its
terms and conditions. Except for (A) the filing of a pre-merger notification
report and other filings required under the Xxxx-Xxxxx-Xxxxxx Act and the
expiration or termination of the applicable waiting period in connection
therewith and (B) a post-Closing notification pursuant to the Investment Canada
Act, Purchaser need not give ny
notice
to, make any filing with, or obtain any authorization, consent, or approval
of
any government or governmental agency in order to consummate the transactions
contemplated by this Agreement. The execution, delivery, and performance of
this
Agreement and all other agreements contemplated hereby have been duly authorized
by Purchaser.
(iii) Non-contravention.
Neither the execution and delivery of this Agreement, nor the consummation
of
the transactions contemplated hereby, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Purchaser is subject or any provision of its charter, bylaws, or other governing
documents or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease,
9
license,
instrument, or other arrangement to which Purchaser is a party or by which
it is
bound or to which any of its assets are subject.
(iv) Brokers’
Fees. Purchaser has no Liability to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement
for which any Seller could become liable or obligated.
(v) Investment.
Purchaser is not acquiring the Shares with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities
Act.
Section
4. Representations
and Warranties Concerning Company
and Its Subsidiaries.
The
Company and the Sellers,
jointly and severally, represent and warrant to Purchaser that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as set forth in the disclosure
schedule executed and delivered by Sellers to Purchaser on the date hereof
(the
“Disclosure
Schedule”).
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the
Disclosure Schedule identifies the exception with particularity and describes
the relevant facts in detail. Without limiting the generality of the foregoing,
the mere listing (or inclusion of a copy) of a document or other item shall
not
be deemed adequate to disclose an exception to a representation or warranty
made
herein (unless the representation or warranty pertains to the existence of
the
document or other item itself). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained
in
this Section 4.
(a) Organization,
Qualification, and Corporate Power.
Each of
Company and its Subsidiaries are corporations duly organized, validly existing,
and in good standing under the laws of the jurisdiction of their incorporation,
as identified in Section 4(a) of the Disclosure Schedule. Each of Company and
its Subsidiaries are duly authorized to conduct business and are in good
standing under the laws of each jurisdiction where such qualification is
required except where the lack of such qualification would not be Material
to
the Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries
has any assets or operations in Mexico. Each of Company and its Subsidiaries
have full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which they are engaged
and to own and use the properties owned and used by them. Section 4(a) of the
Disclosure Schedule lists the directors and officers of Company and each of
its
Subsidiaries. Sellers have delivered to Purchaser correct and complete copies
of
the charter and bylaws for each of Company and its Subsidiaries (as amended
to
date). The minute books (containing the records of meetings of the stockholders,
the board of directors, and any committees of the board of directors), the
stock
certificate books, and the stock record books for each of Company and its
Subsidiaries are correct and complete in all material respects. Neither Company
nor any of its Subsidiaries is in default under or in violation of any provision
of its charter or bylaws.
(b) Capitalization.
The
entire authorized capital stock of Company consists of (i) 57,000 shares of
the
Company’s Class A Common Stock, par value $0.01 per share (the “Common
Stock”),
of
which 50,074.10 shares are issued and outstanding and no shares are held in
treasury and (ii) 3,000 shares of the Company’s Class B Common Stock, par value
$0.01 per share, of which no shares are issued and outstanding and no shares
are
held in treasury. The Common Stock constitutes 100% of the Shares. All of the
issued and outstanding Shares have been or, in the case of the Option Shares,
will be, duly authorized, validly issued, fully paid, and non-assessable, and
are, or in the case of the Option Shares will be, held of record by the
respective Sellers as set forth on Exhibit A. There are no outstanding or
authorized options (other than the Options held by some of the Sellers to
purchase 4,374.99 Shares),
10
warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Company. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of Company.
(c) Non-contravention.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which any of
Company and its Subsidiaries is subject or any provision of the charter or
bylaws of any of Company and its Subsidiaries or (ii) conflict with, result
in a
breach of, constitute a default under, result in the acceleration of, create
in
any party the right to accelerate, terminate, modify, or cancel, or require
any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which any of Company and its Subsidiaries is a party or by which
it is bound or to which any of its assets is subject (or result in the
imposition of any Lien upon any of its assets), except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice or Lien would not be
Material to the Company or its Subsidiaries.
Neither
Company nor any of its Subsidiaries needs to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency or Labor Organization in order for the Parties to consummate
the transactions contemplated by this Agreement, except where the failure to
give notice, to file, or to obtain any authorization, consent or approval would
not be Material to the Company or its Subsidiaries.
(d) Brokers’
Fees.
Neither
Company nor any of its Subsidiaries has any Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(e) Title
to Assets.
Company
and its Subsidiaries have good and marketable title to, or a valid leasehold
interest in, or valid license or right to use, the material properties and
assets used by them, located on their premises, shown on the Most Recent Balance
Sheet or acquired after the date thereof, free and clear of all Liens (other
than Permitted Encumbrances), except for properties and assets disposed of
in
the Ordinary Course of Business since the date of the Most Recent Balance Sheet
and, with respect to such properties or assets which constitute Real Property,
subject to Permitted Encumbrances.
(f) Subsidiaries.
Section
4(f) of the Disclosure Schedule sets forth for each Subsidiary of Company (i)
its name and jurisdiction of incorporation, (ii) the number of authorized shares
for each class of its capital stock, (iii) the number of issued and outstanding
shares of each class of its capital stock, the names of the holders thereof,
and
the number of shares held by each such holder, and (iv) the number of shares
of
its capital stock held in treasury. All of the issued and outstanding shares
of
capital stock of each Subsidiary of Company have been duly authorized and are
validly issued, fully paid, and non-assessable. Company or one or more of its
Subsidiaries holds of record and owns beneficially all of the outstanding shares
of each Subsidiary of Company, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws),
Taxes, Liens, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of Company
and
its Subsidiaries to sell, transfer, or otherwise dispose of any capital stock
of
any of its Subsidiaries or that could require any Subsidiary of Company to
issue, sell, or otherwise cause to become outstanding any of its own capital
stock. There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary of Company.
There are no voting trusts, proxies, or other agreements or understandings
with
respect to the voting of any capital stock of any Subsidiary of Company. Neither
Company nor any of its Subsidiaries controls directly or indirectly or has
any
direct or indirect
11
equity
participation in any corporation, partnership, trust, or other business
association that is not a Subsidiary of Company. Except for the Subsidiaries
set
forth in Section 4(f) of the Disclosure Schedule, neither Company nor any of
its
Subsidiaries owns or has any right to acquire, directly or indirectly, any
outstanding capital stock of, or other equity interests in, any
Person.
(g) Financial
Statements.
Attached hereto as Exhibit B are the following financial statements
(collectively the “Financial
Statements”):
(i)
audited consolidated and Company’s internal consolidating balance sheets and
statements of income, changes in stockholders’ equity, and cash flow as of and
for the fiscal year ended December 31, 2004 (the “Most
Recent Fiscal Year End”)
for
Company and its Subsidiaries; and (ii) Company’s internal consolidated and
consolidating balance sheets and statements of income, changes in stockholders’
equity, and cash flow (the “Most
Recent Financial Statements”)
as of
and for the months ended June 30, 2005 (the “Most
Recent Fiscal Month End”)
for
Company and its Subsidiaries. The Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP throughout the periods
covered thereby, present fairly the financial condition of Company and its
Subsidiaries as of such dates and the results of operations of Company and
its
Subsidiaries for such periods, are correct and complete, and are consistent
with
the books and records of Company and its Subsidiaries (which books and records
are correct and complete); provided,
however,
that the
Most Recent Financial Statements are subject to normal year-end adjustments
and
lack footnotes and other presentation items.
(h) Events
Subsequent to Most Recent Fiscal Year End.
Since
the Most Recent Fiscal Year End, there has not been any Material Adverse Change.
Without limiting the generality of the foregoing, since that date except as
set
forth on the Most Recent Financial Statements:
(i) neither
Company nor any of its Subsidiaries has sold, leased, transferred, or assigned
any of its Material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) neither
Company nor any of its Subsidiaries has entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $1,000,000 or outside the Ordinary Course
of Business;
(iii) no
party
(including Company and any of its Subsidiaries) has accelerated, terminated,
modified, or cancelled any agreement, contract, lease, or license (or series
of
related agreements, contracts, leases, and licenses) involving more than
$1,000,000 to which Company or any of its Subsidiaries is a party or by which
any of them is bound;
(iv) neither
Company nor any of its Subsidiaries has imposed or permitted any Material Liens
(other than Permitted Encumbrances) upon any of its assets, tangible or
intangible;
(v) neither
Company nor any of its Subsidiaries has made any capital expenditure (or series
of related capital expenditures) either involving more than $10,000,000 or
outside the Ordinary Course of Business;
(vi) neither
Company nor any of its Subsidiaries has made any capital investment in, any
loan
to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either involving
more than $1,000,000 or outside the Ordinary Course of Business;
12
(vii) neither
Company nor any of its Subsidiaries has issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation causing the Company’s total
consolidated long-term debt to be in an amount greater than $182,000,000, less
scheduled payments thereon since March 31, 2005;
(viii) neither
Company nor any of its Subsidiaries has delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) neither
Company nor any of its Subsidiaries has cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than $1,000,000 or outside the Ordinary Course of
Business;
(x) neither
Company nor any of its Subsidiaries has transferred, assigned, or granted any
license or sublicense of any rights under or with respect to any material
Intellectual Property outside the Ordinary Course of Business;
(xi) there
has
been no change made or authorized in the charter or bylaws of any of Company
and
its Subsidiaries;
(xii) neither
Company nor any of its Subsidiaries has issued, sold, or otherwise disposed
of
any of its capital stock, or granted any options, warrants, or other rights
to
purchase or obtain (including upon conversion, exchange, or exercise) any of
its
capital stock;
(xiii) neither
Company nor any of its Subsidiaries has declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether
in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock, other than the Pre-Closing Distribution;
(xiv) neither
Company nor any of its Subsidiaries has experienced any Material damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(xv) neither
Company nor any of its Subsidiaries has made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvi) neither
Company nor any of its Subsidiaries has entered into any collective bargaining
agreement (or any Material employment agreement), written or oral, or materially
modified the terms of any existing such contract or agreement, other than at
Purchaser’s written request;
(xvii) neither
Company nor any of its Subsidiaries has granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii) neither
Company nor any of its Subsidiaries has adopted, amended, modified, or
terminated any Material bonus, profit sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors, officers,
and employees (or taken any such action with respect to any other Employee
Benefit Plan);
13
(xix) neither
Company nor any of its Subsidiaries has made any change in employment terms
for
any of its directors, officers, and employees outside the Ordinary Course of
Business, other than at Purchaser’s written request;
(xx) neither
Company nor any of its Subsidiaries has made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of
Business;
(xxi) there
has
not been any other occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving Company or any
of
its Subsidiaries that could reasonably be expected to have a Material Adverse
Effect;
(xxii) neither
Company nor any of its Subsidiaries has discharged a Material Liability or
Lien
outside the Ordinary Course of Business;
(xxiii) neither
Company nor any of its Subsidiaries has made any Material loans or advances
of
money;
(xxiv) neither
Company nor any of its Subsidiaries has created, added to or increased any
reserve for environmental Liabilities or otherwise;
(xxv) neither
Company nor any of its Subsidiaries has disclosed any Confidential Information
other than in the Ordinary Course of Business consistent with past practice;
and
(xxvi) neither
Company nor any of its Subsidiaries has committed to any of the
foregoing.
(i) Undisclosed
Liabilities.
To the
Knowledge of the Sellers, Company and the Subsidiaries, neither Company nor
any
of its Subsidiaries has any Liability, except for (i) Liabilities set forth
on
the face of the Most Recent Balance Sheet (rather than in any notes thereto),
(ii) Liabilities that have arisen after the Most Recent Fiscal Month End in
the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law, except where a breach of
contract or warranty, tort, infringement or violation of law would not be
Material to the Company or its Subsidiaries) and (iii) Liabilities expressly
and
specifically disclosed on the Disclosure Schedules.
(j) Legal
Compliance.
Each of
any Seller, Company and its Subsidiaries have, since December 19, 2003, complied
in all Material respects with all applicable laws (including all applicable
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
and
rulings, and charges thereunder of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to
comply.
(k) Tax
Matters.
(i) Except
as
listed on Schedule 4(k)(i) of the Disclosure Schedule, each of Company and
its
Subsidiaries have filed with the appropriate federal, state, local and foreign
taxing authorities all federal Tax Returns and all Material state, local and
foreign Tax Returns that were required to be filed by or with respect to each
of
Company and its Subsidiaries under applicable laws and regulations. All such
Tax
Returns were true, correct and complete in all Material respects, and were
prepared in substantial compliance with all applicable laws and regulations.
Except as listed on Schedule 4(k)(i) of the Disclosure Schedule, each of Company
and its ubsidiaries
has
14
paid
in
full all Taxes (whether or not shown on any Tax Return) which are due and owing
by them, except for Taxes that are being disputed in good faith for which
adequate reserves have been established on the Most Recent Financial Statements.
There are no Liens for Taxes upon the assets of Company or any of its
Subsidiaries except for statutory liens for current Taxes not yet due and
payable.
(ii) Each
of
Company and its Subsidiaries have withheld and paid all Taxes required to have
been withheld and paid in connection with any amounts paid or owing to any
employee, independent contractor, creditor, Seller, current or former
stockholder, or other third party.
(iii) Section
4(k)(iii) of the Disclosure Schedule lists all federal, state, local and foreign
income Tax Returns filed with respect to Company and each of its Subsidiaries
for taxable periods ending on or after December 31, 2003, and indicates those
Tax Returns that have been audited or that are currently the subject of any
audit. Sellers have delivered or have caused Company and each of its
Subsidiaries to deliver to Purchaser true, correct and complete copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by Company or any of its Subsidiaries since
December 31, 2003. Each of Company and its Subsidiaries have disclosed on their
federal income Tax Returns all positions taken therein that could give rise
to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662. Neither Company nor any of its Subsidiaries has received any
request for information related to Tax matters or any notice of deficiency
or
assessment from any federal, state, local or foreign taxing authority (including
jurisdictions where Company or any of its Subsidiaries have not filed Tax
Returns) with respect to liabilities proposed, asserted or assessed for Taxes
of
Company or any of its Subsidiaries which has not been fully paid or finally
settled and, to the Knowledge of any Seller, director or officer (or employee
responsible for Tax matters) of Company or any of its Subsidiaries, there are
no
existing or prior facts, circumstances or conditions that would form the basis
for such a notice of deficiency or assessment. Except as provided on Schedule
4(k)(iii) of the Disclosure Schedule, no power of attorney has been executed
by,
or on behalf of, Company or any of its Subsidiaries with respect to any matter
relating to Taxes which is currently in force.
(iv) Except
as
listed on Schedule 4(k)(iv) of the Disclosure Schedule, neither Company nor
any
of its Subsidiaries has requested any extension of time within which to file
any
Tax Return, which Tax Return has not since been filed, and neither Company
nor
any of its Subsidiaries has waived any statute of limitations for, or agreed
to
any extension of time with respect to, the assessment of Taxes of Company or
any
of its Subsidiaries. No claim has ever been made by any authority in a
jurisdiction where Company or any of its Subsidiaries does not file Tax Returns
that Company or any of its Subsidiaries is or may be subject to taxation by
that
jurisdiction.
(v) Neither
Company nor any of its Subsidiaries is a party to any agreement, contract,
arrangement or plan that has resulted or could result, separately or in the
aggregate, in the requirement to pay any “excess parachute payment” within the
meaning of Code Section 280G (or any corresponding provision of state, local
or
foreign Tax law). Neither Company nor any of its Subsidiaries is a party to
any
Tax sharing, Tax allocation or Tax indemnity agreement or any other agreement
of
a similar nature that remains in effect. Neither Company nor any of its
Subsidiaries has been a United States real property holding corporation within
the meaning of Code Section 897(c)(2) during the applicable period specified
in
Code Section 897(c)(1)(A)(ii). Neither Company nor any of its Subsidiaries
is or
ever has been a member of an Affiliated Group filing a consolidated federal
income Tax Return, other than a group the common parent of which is Company,
or
has any Liability for the Taxes of any Person (other than Company and each
of
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any
15
similar
provision of state, local or foreign law), as a transferee, or successor, by
contract or otherwise.
(vi) The
unpaid Taxes of Company and its Subsidiaries (A) did not, as of the Most Recent
Fiscal Month End, 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 Most Recent Balance Sheet (rather
than
in any notes thereto) and (B) will not exceed, as of the Closing Date, that
reserve as adjusted for operations and transactions through the Closing Date
in
accordance with the past custom and practice of Company and its Subsidiaries
in
filing their Tax Returns. Since the date of the Most Recent Balance Sheet,
neither Company nor any of its Subsidiaries has incurred any liability for
Taxes
arising from extraordinary gains or losses, as that term is used in GAAP,
outside the Ordinary Course of Business consistent with past custom and practice
(other than gains or losses arising from the receipt of Insurance Proceeds
or
the transaction contemplated by this Agreement).
(vii) Except
as
listed on Section 4(k)(vii) of the Disclosure Schedule, neither Company nor
any
of its Subsidiaries will 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:
(A) change
in
method of accounting for a taxable period ending on or prior to the Closing
Date;
(B) “closing
agreement” as described in Code Section 7121 (or any corresponding or similar
provision of state, local or foreign income Tax law) executed on or prior to
the
Closing Date;
(C) intercompany
transaction (except for those properly accrued on the Company’s and its
Subsidiaries books and records and set forth in the Most Recent Balance Sheet)
or excess loss account described in Treasury Regulations under Code Section
1502
(or any corresponding or similar provision of state, local or foreign income
Tax
law); or
(D) installment
sale or open transaction disposition made on or prior to the Closing
Date.
(viii) Neither
Company nor any of its Subsidiaries has distributed stock of another Person,
or
has had its stock distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by Code Section 355
or
Code Section 361.
(ix) Neither
Company nor any of its Subsidiaries is a party to or member of any joint
venture, partnership, limited liability company or other arrangement or contract
which could be treated as a partnership for income Tax purposes.
(x) Neither
Company nor any of its Subsidiaries has any net operating loss or losses or
other tax attributes presently subject to limitation under Code Sections 382,
383, or 384, or the federal consolidated return regulations (other than
limitations imposed as a result of the transactions contemplated by this
Agreement). Neither Company nor any of its Subsidiaries has agreed to make
any
adjustment under Code Section 481(a) (or any corresponding provision of state,
local or foreign Tax law) by reason of a change in accounting method or
otherwise, and will not be required to make such an adjustment as a result
of
the transactions contemplated by this
16
Agreement.
(l) Real
Property.
(i) Section
4(l)(i) of the Disclosure Schedule sets forth the address and description of
each parcel of Owned Real Property. With respect to each parcel of Owned Real
Property:
(A) Company
or one of its Subsidiaries has good and marketable fee simple title, free and
clear of all Liens, except Permitted Encumbrances;
(B) neither
Company nor any of its Subsidiaries has leased or otherwise granted to any
Person the right to use or occupy such Owned Real Property or any portion
thereof; and
(C) other
than the right of Purchaser pursuant to this Agreement, there are no outstanding
options, rights of first offer or rights of first refusal to purchase such
Owned
Real Property or any portion thereof or interest therein.
(ii) Section
4(l)(ii) of the Disclosure Schedule sets forth the address of each parcel of
Leased Real Property, and a true and complete list of all Leases for each such
Leased Real Property (including the date and name of the parties to such Lease
document). Each of Company and its Subsidiaries has delivered to Purchaser
a
true and complete copy of each such Lease document, and in the case of any
oral
Lease, a written summary of the material terms of such Lease. Except as set
forth in Section 4(l)(ii) of the Disclosure Schedule, with respect to each
of
the Leases:
(A) such
Lease is legal, valid, binding, enforceable and in full force and effect,
subject to proper authorization and execution of such Lease by the other party
thereto and the application of any bankruptcy or creditor’s rights
laws;
(B) to
the
Knowledge of any Seller, Company or any of its Subsidiaries, neither Company’s
nor any of its Subsidiaries’ possession and quiet enjoyment of the Leased Real
Property under such Lease has been disturbed and there are no disputes with
respect to such Lease;
(C) neither
Company nor any of its Subsidiaries, and to the Knowledge of any Seller, Company
or any of its Subsidiaries, no other party to the Lease, is in breach of or
default under such Lease, and no event has occurred or circumstance exists
that,
with the delivery of notice, the passage of time or both, would constitute
such
a default, or permit the termination, modification or acceleration of rent
under
such Lease;
(D) no
security deposit or portion thereof deposited with respect to such Lease has
been applied in respect of a breach of or default under such Lease that has
not
been redeposited in full;
(E) neither
Company nor any of its Subsidiaries owes, or will owe in the future, any
brokerage commissions or finder’s fees with respect to such Lease;
(F) the
other
party to such Lease is not an Affiliate of, and otherwise does not have any
economic interest in, Company or any of its Subsidiaries; and
17
(G) neither
Company nor any of its Subsidiaries has collaterally assigned or granted any
other Lien in such Lease or any interest therein.
(iii) The
Owned
Real Property identified in Section 4(l)(i) of the Disclosure Schedule and
the
Leased Real Property identified in Section 4(l)(ii) of the Disclosure Schedule
(collectively, the “Real
Property”),
comprise all of the real property used or intended to be used in, or otherwise
related to, Company’s and its Subsidiaries’ business; and neither Company nor
any of its Subsidiaries is a party to any agreement or option to purchase any
real property or interest therein.
(iv) Since
the
date of the surveys given to the Seller in connection with the acquisition
of
the Real Property, dated on our about August 2, 2003, other than as indicated
thereon, if any, no parcel of Real Property has had any material change on
it
which would affect direct vehicular and pedestrian access to a public street
adjoining the Real Property, or vehicular and pedestrian access to a public
street via an insurable, permanent, irrevocable and appurtenant easement
benefiting such parcel of Real Property.
(v) All
water, oil, gas, electrical, steam, compressed air, telecommunications, sewer,
storm and waste water systems and other utility services or systems which are
material for the operation of the Company’s or its Subsidiaries’ business for
the Real Property are operational and sufficient therefor.
(vi) Since
the
date of the title policy issued to the Company on or about December 19, 2003,
the Company has not received any written notice of a material change with
respect to any applicable zoning laws, ordinances and regulations (i) permitting
the use and occupancy of such parcel and the operation of Company’s and its
Subsidiaries’ business as currently conducted thereon, and the Improvements
located thereon as currently constructed, used and occupied; or (ii) affecting
parking spaces, loading docks and other facilities.
(vii) Since
the
date of the title policy issued to the Company on or about December 19, 2003,
the Company has not received any written notice that the current use and
occupancy of the Real Property and the operation of Company’s and its
Subsidiaries’ business as currently conducted thereon materially violates any
easement, covenant, condition, restriction or similar provision in any
instrument of record or other unrecorded agreement affecting such Real Property
(the “Encumbrance Documents).
(viii) Since
the
date of the surveys given to Seller in connection with its acquisition of the
Real Property, dated on or about August 2, 2003, the Company has not (i)
received any written notice that any of the Improvements encroaches on any
land
that is not included in the Real Property, or on any easement affecting such
Real Property, or violates any building lines or set-back lines (other than
as
disclosed on such surveys), or (ii) given any written notice that there are
encroachments onto the Real Property, or any portion thereof (other than as
disclosed on such surveys), that, in each case, would interfere with the use
or
occupancy of such Real Property or the continued operation of Company’s or its
Subsidiaries’ business as currently conducted thereon.
(ix) Since
the
date of the title policy issued to Company on or about December 19, 2003, the
Company has not received any written notice regarding: (i) the status of the
Real Property as a separate tax lot, or (ii) additional taxes, assessments,
fees, charges or similar costs or expenses imposed by any governmental
authority, association or other entity having jurisdiction over the Real
Property that is not of the type set forth in such title policy.
18
(m) Intellectual
Property.
(i) Company
and its Subsidiaries own and possess or have the right to use pursuant to a
valid and enforceable license, sublicense, agreement, or other permission all
Intellectual Property necessary for the operation of the business of Company
and
its Subsidiaries as presently conducted. Each item of Material Intellectual
Property owned or used by Company or any of its Subsidiaries immediately prior
to the Closing will be owned or available for use by Company or its Subsidiaries
on substantially the same terms and conditions immediately subsequent to the
Closing. Each of Company and its Subsidiaries have taken all reasonably
necessary action to maintain and protect each item of Material Intellectual
Property that they own.
(ii) Except
as
set forth in Section 4(m)(ii) of the Disclosure Schedule, during the two
(2)-year period prior to the date hereof, neither Company nor any of its
Subsidiaries (A) has, to the Knowledge of any of Sellers, Company, or any of
its
Subsidiaries, interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of third parties in
any
Material respect, and (B) has received any written charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or other conflict (including any claim that Company or any
of
its Subsidiaries must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of any of Sellers, Company, or
any
of its Subsidiaries, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights owned by Company or any of its Subsidiaries in any Material
respect.
(iii) Section
4(m)(iii) of the Disclosure Schedule identifies each Material patent or
registration that has been issued to Company or any of its Subsidiaries with
respect to any of its Intellectual Property, identifies each Material pending
patent application or application for registration that Company or any of its
Subsidiaries has made with respect to any of its Intellectual Property, and
identifies each Material license, sublicense, agreement, or other permission
that Company or any of its Subsidiaries has granted to any third party with
respect to any of its Intellectual Property. Section 4(m)(iii) of the Disclosure
Schedule also identifies each Material computer software item owned by the
Company or any of its Subsidiaries. With respect to each item of Intellectual
Property required to be identified in Section 4(m)(iii) of the Disclosure
Schedule, except as set forth in Schedule 4(m)(iii) of the Disclosure
Schedule:
(A) Company
and its Subsidiaries own and possess all right, title, and interest in and
to
the item, free and clear of any Lien, license, or other restriction or
limitation regarding use or disclosure;
(B) the
item
is not subject to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(C) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is pending or, to the Knowledge of any of Sellers, Company, or any of
its
Subsidiaries, is threatened that challenges the legality, validity,
enforceability, use, or ownership of the item;
(D) to
the
Knowledge of any Sellers, Company, or any of its Subsidiaries, no loss or
expiration of the item is threatened, pending, or reasonably foreseeable, except
for patents or copyrights expiring at the end of their statutory terms (and
not
as a result of any act or omission by Sellers, Company, or its Subsidiaries,
including without limitation, a failure by Sellers, Company, or its Subsidiaries
to pay any required
19
maintenance
fees).
(iv) Section
4(m)(iv) of the Disclosure Schedule identifies each Material item of
Intellectual Property that any third party owns and that Company or any of
its
Subsidiaries uses pursuant to license, sublicense, agreement, or other
permission. Sellers have delivered to Purchaser correct and complete copies
of
all such licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property required to be
identified in Section 4(m)(iv) of the Disclosure Schedule, to the Knowledge
of
any of Sellers, Company, or any of its Subsidiaries:
(A) the
license, sublicense, agreement, or permission covering the item is legal, valid,
binding, enforceable, and in full force and effect;
(B) the
license, sublicense, agreement, or permission will continue to be legal, valid
binding, enforceable, and in full force and effect on identical terms following
consummation of the transactions contemplated hereby;
(C) no
party
to the license, sublicense, agreement, or permission is in breach or default,
and no event has occurred that with notice or lapse of time would constitute
a
breach or default or permit termination, modification, or acceleration
thereunder;
(D) no
party
to the license, sublicense, agreement, or permission has repudiated any
provision thereof; and
(E) neither
Company nor any of its Subsidiaries has granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(n) Tangible
Assets.
Company
and its Subsidiaries own or lease all buildings, machinery, equipment and other
tangible assets necessary for the conduct of their respective businesses as
presently conducted.
(o) Condition
and Sufficiency of Assets.
The
building, plants, structures, machinery, equipment and other tangible assets
necessary for the conduct of the business of the Company and its Subsidiaries
as
presently conducted are structurally sound, in reasonably good operating
condition and repair (subject to ordinary wear and tear), and are adequate
for
the uses to which they are being put, are free from defects (patent and, to
the
Knowledge of the Sellers, Company and its Subsidiaries, latent) and none of
such
buildings, plants, structures, machinery, equipment or other tangible assets
is
in need of maintenance or repairs except for ordinary, routine maintenance
or
repairs that are not Material; all such building, plants, structures, machinery,
equipment and other tangible assets are owned or leased by the Company or its
Subsidiaries and to the Knowledge of any Seller, Company or any of its
Subsidiaries are sufficient for the continued conduct of the Company’s and
Subsidiaries’ businesses after the Closing in substantially the same manner as
conducted prior to the Closing.
(p) Inventory.
The
inventory of Company and its Subsidiaries consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth
on
the face of the Most Recent Balance Sheet (rather than in any notes
thereto).
20
(q) Contracts.
Section
4(q) of the Disclosure Schedule lists the following contracts and other
agreements to which Company or any of its Subsidiaries is a party:
(i) any
agreement (or group of related agreements) for the purchase or sale of raw
materials, commodities, supplies, products, or other personal property, or
for
the furnishing or receipt of services, the performance of which will extend
over
a period of more than 1 year, result in a Material loss to Company or any of
its
Subsidiaries, or involve consideration in excess of $500,000;
(ii) any
agreement concerning a partnership or joint venture;
(iii) any
agreement (or group of related agreements) under which it has created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $1,000,000 or under which it has imposed a Lien
on any of its assets, tangible or intangible;
(iv) any
Material agreement concerning confidentiality or non-competition;
(v) any
agreement with any of Sellers and their Affiliates (other than Company and
its
Subsidiaries);
(vi) any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other plan or arrangement for the benefit of its
current or former directors, officers, and employees;
(vii) any
Collective Bargaining Agreement;
(viii) any
agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $100,000
or providing severance benefits;
(ix) any
agreement under which it has advanced or loaned any amount to any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(x) any
agreement under which it has granted any Person any registration rights
(including, without limitation, demand and piggyback registration
rights);
(xi) any
settlement, conciliation or similar agreement, the performance of which will
involve payment after the Closing Date of consideration in excess of
$100,000;
(xii) any
agreement under which Company or any of its Subsidiaries has advanced or loaned
any other Person amounts in the aggregate exceeding $25,000;
(xiii) any
other
agreement (or group of related agreements) the performance of which involves
consideration in excess of $100,000; or
(xiv) any
other
agreement with a remaining term longer than three months that, if terminated
by
the Company, would result in a Liability or Adverse Consequence to the Company
greater than $50,000.
21
The
Company has made available to Purchaser a correct and complete copy of each
written agreement (as amended to date) listed in Section 4(q) of the Disclosure
Schedule and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 4(q) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue
to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C)
none of the Company or its Subsidiaries are, and to the Knowledge of any Seller,
the Company or any of its Subsidiaries no other party is, in breach or default,
and no event has occurred that with notice or lapse of time would constitute
a
breach or default, or permit termination, modification, or acceleration, under
the agreement; and (D) no party has repudiated any provision of the
agreement.
(r) Notes
and Accounts Receivable.
All
notes and accounts receivable of Company and its Subsidiaries are reflected
properly on their books and records, are valid receivables subject, to the
Knowledge of any Seller, the Company or any of its Subsidiaries, to no current
set offs or counterclaims, are current and collectible and, to the Knowledge
of
the Sellers, Company or any of the Subsidiaries, there is Basis to believe
that
all will be collected in accordance with their terms at their recorded amounts,
subject only to any unused portion of the reserve for bad debts set forth on
the
face of the Most Recent Balance Sheet (rather than in any notes thereto)
increased or decreased by an amount, if any, added to or subtracted from, as
the
case may be, such reserve since June 30, 2005, which amount shall not exceed
the
net increase or decrease, as the case may be, in the aggregate notes and
accounts receivable (after write-offs or write-downs of aged or uncollectible
notes and accounts receivable in the Ordinary Course of Business) multiplied
by
a fraction the numerator of which is the amount of the reserve for bad debts
set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and the denominator of which is the amount of all notes and accounts
receivable set forth on the Most Recent Balance Sheet (rather than in any notes
thereto).
(s) Powers
of Attorney.
There
are no outstanding powers of attorney executed on behalf of Company or any
of
its Subsidiaries.
(t) Insurance.
Section
4(t) of the Disclosure Schedule sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, Liability, and workers’ compensation coverage and bond and surety
arrangements) to which Company or any of its Subsidiaries has been a party,
a
named insured, or otherwise the beneficiary of coverage at any time within
the
past 5 years:
(i) the
name,
address, and telephone number of the agent;
(ii) the
name
of the insurer, the name of the policyholder, and the name of each covered
insured;
(iii) the
policy number and the period of coverage;
(iv) the
scope
(including an indication of whether the coverage was on a claims made,
occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage;
and
(v) a
description of any retroactive premium adjustments or other loss-sharing
arrangements.
With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect; (B) the policy will continue to
be
legal, valid, binding, enforceable, and in full force and effect on identical
22
terms
following the consummation of the transactions contemplated hereby; (C) neither
the Company nor any of its Subsidiaries are, and to the Knowledge of any Seller,
the Company or any of its Subsidiaries, no other party to the policy is, in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred that, with notice or the lapse
of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. Each of Company and its Subsidiaries,
have
been covered since December 19, 2003 during the past 5 years by insurance in
scope and amount customary and reasonable for the businesses in which they
have
engaged during the aforementioned period. Section 4(t) of the Disclosure
Schedule describes any self-insurance arrangements affecting Company or any
of
its Subsidiaries.
(u) Litigation.
Section
4(u) of the Disclosure Schedule sets forth each instance in which Company or
any
of its Subsidiaries (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or, to the Knowledge of
the
Company, its Subsidiaries and any of Sellers, is threatened to be made a party,
to any action, suit, proceeding, hearing, or investigation of, in, or before
any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the Company, its
Subsidiaries or any of the Sellers has any reason to reasonably believe that
any
such action, suit, proceeding, hearing, or investigation may be brought or
threatened against Company or any of its Subsidiaries; except where any such
action, suit, proceeding, hearing or investigation would not be Material to
the
Company or its Subsidiaries.
(v) Product
Warranty.
To the
Knowledge of any Seller, Company or its Subsidiaries, each product manufactured,
sold, leased, or delivered by Company or any of its Subsidiaries has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and neither Company nor any of its Subsidiaries has any
Liability for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims set forth
on
the face of the Most Recent Balance Sheet (rather than in any notes thereto).
Section 4(v) of the Disclosure Schedule includes copies of the standard terms
and conditions of sale or lease for each of Company and its Subsidiaries
(containing applicable guaranty, warranty, and indemnity provisions). No product
manufactured, sold, leased, or delivered by Company or any of its Subsidiaries
is subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease set forth in Section 4(v) of
the
Disclosure Schedule.
(w) Product
Liability. Neither
Company nor any of its Subsidiaries has any Liability (and, to the Knowledge
of
any Seller, Company or its Subsidiaries, there is no Basis for any present
or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability) arising
out
of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered
by
Company or any of its Subsidiaries.
(x) Employees.
(i) With
respect to the business of Company and its Subsidiaries:
(A) there
is
no Collective Bargaining Agreement or relationship with any Labor
Organization;
(B) to
the
Knowledge of any of Sellers, no key executive of Company or any of its
Subsidiaries (1) has any present intention to terminate his or her employment,
or (2) is a party to any confidentiality, non-competition, proprietary rights
or
other such agreement between such employee and any Person besides such entity
that would be Material to the performance of such employee’s employment duties,
or the ability of
23
such
entity or Purchaser to conduct the business of such entity;
(C) no
Labor
Organization or group of employees has made any written or oral demand for
recognition, and neither the Company nor any of its Subsidiaries has received
notice of the filing of any representation petition;
(D) to
the
Knowledge of any of Sellers, Company, or any of its Subsidiaries, no union
organizing or decertification efforts are underway or threatened and no other
question concerning representation exists;
(E) no
labor
strike, work stoppage, slowdown, or other Material labor dispute has occurred
within the past two years, and none is underway or, to the Knowledge of Company
or any of its Subsidiaries, threatened;
(F) except
as
accrued on the Most Recent Balance Sheet, there is no workmans compensation
Liability, experience or matter that would be Material to the Company and its
Subsidiaries;
(G) there
is
no material employment-related charge, complaint, grievance, investigation,
arbitration, inquiry or obligation of any kind pending or, to the Knowledge
of
any of Sellers, Company or any of its Subsidiaries, threatened, in any forum,
relating to an alleged violation or breach by Company or any of its Subsidiaries
(or its or their officers or directors) of any law, regulation or contract;
and,
(H) no
employee or agent of Company or any of its Subsidiaries has committed any act
or
omission giving rise to Material Liability for any violation or breach
identified in subsection (G) above.
(ii) Except
as
set forth in Section 4(x) of the Disclosure Schedule, (A) there are no
employment contracts or severance agreements with any employees of Company
or
any of its Subsidiaries, requiring payments in excess of $100,000, and (B)
there
are no material written personnel policies, rules or procedures, and no employee
handbooks or affirmative action plans, applicable to employees of Company or
any
of its Subsidiaries.
(iii) With
respect to this Agreement and the transactions contemplated thereby, any notice
required under any Collective Bargaining Agreement has been given and any rights
resulting from any such notice or obligation have expired without exercise.
Any
notice or bargaining obligations with respect to any employee representative
arising by operation of law have been, or prior to the Closing Date will be,
satisfied. Notwithstanding any failure of the Company to issue preferred stock
to any Labor Organization, any right of any Labor Organization to elect, remove
or replace a Director of the Company or its Subsidiaries has been satisfied.
Within the past two years, neither the Company nor any of its Subsidiaries
has
implemented any plant closing or layoff of employees that could implicate the
Worker Adjustment and Retraining Notification Act of 1998, as amended, or any
similar foreign, state, or local law, regulation, or ordinance (collectively
the
“WARN Act”).
(iv) Each
of
any Seller, Company and its Subsidiaries have complied in all Material respects
with all applicable laws relating to employees and former employees in
connection with the business of the Company and
24
its
Subsidiaries including respecting all applicable rules, regulations, statutes,
codes, plans, injunctions, orders, decrees, awards, rulings, and charges of
any
federal, state, local and foreign governments and all agencies
thereof.
(y) Employee
Benefits.
(i) Section
4(y) of the Disclosure Schedule lists each Employee Benefit Plan that Company
or
any of its Subsidiaries maintains, to which Company or any of its Subsidiaries
contributes or has any obligation to contribute, or with respect to which
Company or any of its Subsidiaries has any Material Liability.
(A) Each
such
Employee Benefit Plan (and each related trust, insurance contract, or fund)
has
been maintained, funded and administered in accordance in all Material respects
with the terms of such Employee Benefit Plan and the terms of any applicable
Collective Bargaining Agreement and complies in form and in operation in all
Material respects with the applicable requirements of ERISA, the Code, and
other
applicable laws.
(B) All
Material required reports and descriptions (including Form 5500 annual reports,
summary annual reports, and summary plan descriptions) have been timely filed
and/or distributed in accordance with the applicable requirements of ERISA
and
the Code with respect to each such Employee Benefit Plan. The requirements
of
COBRA have been met in all Material respects with respect to each such Employee
Benefit Plan and each Employee Benefit Plan maintained by an ERISA Affiliate
that is an Employee Welfare Benefit Plan subject to COBRA.
(C) All
contributions (including all employer contributions and employee salary
reduction contributions) that are due have been made within the time periods
prescribed by ERISA and the Code to each such Employee Benefit Plan that is
an
Employee Pension Benefit Plan and all contributions for any period ending on
or
before the Closing Date that are not yet due have been made to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom
and
practice of Company and its Subsidiaries. All premiums or other payments for
all
periods ending on or before the Closing Date that are due have been paid with
respect to each such Employee Benefit Plan that is an Employee Welfare Benefit
Plan.
(D) Other
than as set forth on Schedule 4(y)(i)(D), each such Employee Benefit Plan that
is intended to meet the requirements of a “qualified plan” under Code Section
401(a) has received a favorable determination letter from the Internal Revenue
Service, and, to the Knowledge of any Seller, Company or any of its
Subsidiaries, nothing has occurred since the date of such determination that
could reasonably be expected to adversely affect the qualified status of any
such Employee Benefit Plan. All such Employee Benefit Plans have been or will
be
timely amended for the requirements of the Tax legislation commonly known as
“GUST” and “EGTRRA” and have been or will be submitted to the Internal Revenue
Service for a favorable determination letter on the GUST requirements within
the
remedial amendment period prescribed by GUST.
(E) None
of
the Company, its Subsidiaries or any employees of the Company or its
Subsidiaries have, and to the Knowledge of any Seller, the Company or any of
its
Subsidiaries no other Person has, engaged in a non-exempt Prohibited Transaction
with respect to any such Employee Benefit Plan that could result in a Material
Liability to Company. To the Knowledge of any Seller, Company or any of
its
25
Subsidiaries,
no Fiduciary has, or is reasonably expected to have, any Material Liability
for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect to
the
administration or the investment of the assets of any such Employee Benefit
Plan
(other than routine claims for benefits) is pending or, to the Knowledge of
any
Seller, Company or any of its Subsidiaries, threatened.
(F) Sellers
have delivered to Purchaser correct and complete copies of the plan documents,
Material employee communications and most recent summary plan descriptions,
the
most recent determination letter received from the Internal Revenue Service,
the
most recent annual report (Form 5500, with all applicable attachments) for
the
past three years, and the most recent related trust agreements, insurance
contracts, and other funding arrangements that implement each such Employee
Benefit Plan.
(ii) Company
and its Subsidiaries do not have any Liability under Title IV of ERISA on
account of any Employee Benefit Plan of an ERISA Affiliate other than Company
and its Subsidiaries. Except as could not result in a Material Liability to
the
Company or any of its Subsidiaries, none of the Company nor any of its
Subsidiaries nor any ERISA Affiliate has ever maintained, or had any obligation
with respect to, an Employee Pension Benefit Plan subject to Title IV of
ERISA.
(iii) With
respect to each Employee Benefit Plan that any of Company or its Subsidiaries
maintains, to which any of them contributes or has any obligation to contribute,
or with respect to which any of them has any Material Liability:
(A) No
such
Employee Benefit Plan that is an Employee Pension Benefit Plan (other than
any
Multiemployer Plan) has been completely or partially terminated or been the
subject of a Reportable Event. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
instituted or threatened.
(B) Neither
Company nor any ERISA Affiliate nor any of its Subsidiaries has incurred, and
none of Sellers and the directors and officers (and employees with
responsibility for employee benefits matters) of Company and its Subsidiaries
has any reason to expect that any of Company and its Subsidiaries will incur,
any Liability to the PBGC (other than with respect to PBGC premium payments
not
yet due) or otherwise under Title IV of ERISA with respect to any such Employee
Benefit Plan that is an Employee Pension Benefit Plan that could have a Material
Liability to the Company or any of its Subsidiaries.
(C) No
such
Employee Benefit Plan has an accumulated funding deficiency within the meaning
of the Code or ERISA, or has applied for or received a waiver of an accumulated
funding deficiency or an extension of any amortization period, within the
meaning of Section 412 of the Code or Section 303 or 304 of ERISA; neither
the
Company, nor any of its Subsidiaries nor any ERISA Affiliate has incurred any
Material liability to or on account of such an Employee Benefit Plan pursuant
to
Section 409, 502(i), 502(l) or 515 of ERISA or Section 401(a)(29), or 4971
of
the Code or reasonably expects to incur any such liability under any of the
foregoing sections with respect to any such Employee Benefit Plan; no lien
or
security interest has been imposed under the Code or ERISA on the assets of
the
Company, or any of its Subsidiaries or is likely to
26
arise
on
account of any such Employee Benefit Plan.
(iv) Neither
Company, nor any of its Subsidiaries, nor any ERISA Affiliate has incurred
any
Material Liability on account of a “partial withdrawal” or a “complete
withdrawal” (within the meaning of ERISA Sections 4205 and 4203, respectively)
from any Multiemployer Plan, no such Liability has been asserted, and there
are
no events or circumstances that could reasonably be expected to result in any
such partial or complete withdrawal; and neither Company nor any of its
Subsidiaries is bound by any contract or agreement or has any Liability
described in ERISA Section 4204. To the Knowledge of the Company, its
Subsidiaries, and each of the Sellers, each Multiemployer Plan complies in
form
and has been administered in accordance with the requirements of ERISA and,
where applicable, the Code, and each Multiemployer Plan is qualified under
Code
Section 401(a). To the Knowledge of any Seller, the Company or any of its
Subsidiaries, the Company and its Subsidiaries and their ERISA Affiliates will
have no Liability in the event of a complete withdrawal from any Multiemployer
Plan as of the close of the fiscal year of each such Multiemployer Plan ending
on December 31, 2004. No Multiemployer Plan is insolvent or in reorganization.
(v) The
present value of any obligation (as calculated in accordance with FASB 135)
of
the Company and its Subsidiaries to contribute to, or any Liability with respect
to, any Employee Welfare Benefit Plan providing health or life insurance or
other welfare-type benefits for current or future retired or terminated
directors, officers or employees (or any spouse or other dependent thereof)
of
Company or any of its Subsidiaries or of any other Person did not exceed
$700,000 as of December 31, 2004.
(z) Guaranties.
Neither
Company nor any of its Subsidiaries is a guarantor or otherwise is liable for
any Liability (including indebtedness) of any other Person who is not Company
or
a Subsidiary of Company.
(aa) Environmental,
Health, and Safety Matters.
(i) Each
of
Company, its Subsidiaries, have since December 19, 2003 complied in all Material
respects with and are in Material compliance with all applicable Environmental,
Health, and Safety Requirements.
(ii) Without
limiting the generality of the foregoing, each of Company, its Subsidiaries,
and
their respective Affiliates have obtained and since December 19, 2003 have
complied in all Material respects with, and are in Material compliance with,
all
permits, licenses and other authorizations that are required pursuant to
Environmental, Health, and Safety Requirements for the occupation of the Real
Property and the operation of their business.
(iii) Neither
Company, nor any of its Subsidiaries, nor their respective Predecessors or
Affiliates has received any written or oral notice, report, complaint,
directive, demand, information request, investigation, or other information
regarding any actual or alleged violation by Company or of Environmental,
Health, and Safety Requirements, or any investigatory, remedial or corrective
obligations of Company arising under Environmental, Health, and Safety
Requirements.
(iv) Neither
Company, nor any of its Subsidiaries has treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled, manufactured,
distributed, or released any hazardous substance, at any off-site disposal
facility or at any property or facility owned or operated by the Company or
its
Subsidiaries and none of the Real Property is contaminated by any such
substance, in each case as would give rise to any
27
Material
investigatory, remedial or corrective obligations of the Company or the
Subsidiaries under Environmental Law.
(v) Neither
this Agreement nor the consummation of the transactions that are the subject
of
this Agreement will result in any Liabilities for investigation or cleanup
of
the Real Property, or notification to or consent of government agencies or
third
parties, pursuant to any of the so-called “transaction-triggered” or
“responsible property transfer” or “environmental transfer” Environmental,
Health, and Safety Requirements.
(vi) Neither
Company, nor any of its Subsidiaries, has designed, manufactured, sold,
marketed, installed, or distributed products or other items containing asbestos
and none of such entities is subject to any Asbestos Liabilities.
(vii) Neither
Company, nor any of its Subsidiaries has assumed, or has otherwise become
subject to any Liability of any other Person relating to Environmental, Health,
and Safety Requirements, including without limitation any obligation for
corrective or remedial action.
(viii) No
facts,
events or conditions occurring or existing on or prior to the Closing Date
relating to the past or present facilities, properties or operations of Company,
its Subsidiaries, or their respective Predecessors or Affiliates will prevent,
hinder or limit continued compliance with Environmental, Health, and Safety
Requirements or give rise to any Liabilities for compliance, investigatory,
remedial or corrective obligations pursuant to Environmental, Health, and Safety
Requirements.
(ix) Sellers,
Company, and its Subsidiaries have made available to Purchaser all environmental
audits, site assessments and other material environmental documents relating
to
Company’s or its Subsidiaries’, past or current properties, facilities, or
operations that are in their possession or under their reasonable
control.
This
Section 4(aa) contains the sole and exclusive representations and warranties
of
the Sellers and the Company with respect to any environmental, health or safety
matters, including without limitation, any arising under Environmental, Health
and Safety Requirements.
(bb) Reserved.
(cc) Reserved.
(dd) Certain
Business Relationships with Company and Its Subsidiaries.
Except
as set forth on Section 4(dd) of the Disclosure Schedule, none of Sellers,
their
Affiliates, Sellers’ directors, officers, employees and shareholders and
Company’s and its Subsidiaries’ respective directors, officers, employees, and
shareholders has been involved in any business arrangement or relationship
with
Company or any of its Subsidiaries within the past 12 months, and none of
Sellers, their Affiliates, Seller’s directors, officers, employees and
shareholders and Company’s and its Subsidiaries’ respective directors, officers,
employees, and shareholders owns any asset, tangible or intangible, that is
used
in the business of Company or any of its Subsidiaries.
(ee) Customers
and Suppliers.
28
(i) Section
4(ee) of the Disclosure Schedule lists the 10 largest customers of Company
(on a
consolidated basis) for each of the three most recent fiscal years and sets
forth opposite the name of each such customer the percentage of consolidated
net
sales attributable to such customer.
(ii) Since
the
date of the Most Recent Balance Sheet, no Material supplier of Company or any
of
its Subsidiaries has indicated that it may stop, or decrease the rate of,
supplying materials, products or services to Company or any of its Subsidiaries,
and no customer listed on Section 4(ee) of the Disclosure Schedule has indicated
that it may stop, or Materially decrease the rate of, buying materials, products
or services from Company or any of its Subsidiaries.
(ff) Filings
with the SEC.
The
Company’s Form S-1, as amended by Amendment No. 1, as filed with the SEC and
delivered by the Company to the Purchaser, and Amendment No. 2 as delivered
by
the Company to the Purchaser, as of their respective dates, did not contain
any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
(gg) Pre-Closing
Insurance Proceeds.
Since
May 20, 2005 through the Closing Date, the entire amount of Insurance Proceeds
received by the Company and its Subsidiaries is $4,352,674.01.
(hh) Disclaimer
of Other Representations and Warranties.
Except
as expressly set forth in this Agreement and except as contained in certificates
delivered to the Purchaser or its agents prior to or at the Closing pursuant
to
any provision of this Agreement, Sellers, the Company or its Subsidiaries make
no representation or warranty, express or implied, at law or in equity, in
respect of Company, its Subsidiaries, or any of their respective assets,
liabilities or operations, and any such other representations or warranties
are
hereby expressly disclaimed.
Section
5. Pre-Closing
Covenants.
The
Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing:
(a) General.
Each of the Parties will use his, her, or its best efforts to
take all actions and to do all things necessary in order to consummate and
make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the Closing conditions set forth in Section
7
below).
(b) Notices
and Consents.
The
Company and the Subsidiaries will, and Sellers
will cause each of Company and its Subsidiaries to, give any notices to third
parties, and the Company and the Subsidiaries will, and Sellers will cause
each
of Company and its Subsidiaries to, use their best efforts to obtain any
third-party consents referred to in Sections 3(a)(ii) and 4(c) above, the Lease
Consents, and the items set forth on Section 5(b) of the Disclosure Schedule.
Each of the Parties will (and Sellers will cause each of Company and its
Subsidiaries to) give any notices to, make any filings with, and use its best
efforts to obtain any authorizations, consents, and approvals of governments
and
governmental agencies in connection with the matters referred to in Section
3(a)(ii), Section 3(b)(ii), and Section 4(c) above.
(c) Operation
of Business.
Except
as consented to in writing by the Purchaser, neither the Company nor any of
its
Subsidiaries will, and Sellers will not cause or permit Company or any of its
Subsidiaries to, engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Company and its Subsidiaries will not, and
Sellers will not cause or permit Company or any of its Subsidiaries to, (i)
except for the Pre-Sale Distribution, declare, set aside, or pay any dividend
or
make any distribution with respect to its capital stock or redeem, purchase,
or
otherwise acquire any of its capital stock or
29
(ii)
otherwise engage in any practice, take any action, or enter into any transaction
of the sort described in Section 4(h) above.
(d) Preservation
of Business.
The
Company and its Subsidiaries will, and Sellers will cause each of Company and
its Subsidiaries to, keep their business and properties substantially intact,
including its present operations, physical facilities, working conditions,
insurance policies, and relationships with lessors, licensors, suppliers,
customers, and employees.
(e) Full
Access.
The Company and its Subsidiaries will permit, and Sellers
will cause each of Company and its Subsidiaries to permit, representatives
of
Purchaser (including legal counsel and accountants) to have full access at
all
reasonable times, and in a manner so as not to interfere with the normal
business operations of Company and its Subsidiaries, to all premises,
properties, personnel, books, records (including Tax records), contracts, and
documents of or pertaining to each of Company and its Subsidiaries.
(f) Notice
of Developments.
The Company and Sellers will give prompt written
notice to Purchaser of any material adverse development causing a breach of
any
of the representations and warranties in Section 4 above. Each Party will give
prompt written notice to the others of any material adverse development causing
a breach of any of his, her, or its own representations and warranties in
Section 3 above. No disclosure by any Party pursuant to this Section 5(f),
however, shall be deemed to amend or supplement the Disclosure Schedule or
to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g) Exclusivity.
None of Sellers will (and the Company and its
Subsidiaries will not, nor will Sellers cause or permit Company or any of its
Subsidiaries to) (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets,
of
Company or any of its Subsidiaries (including any acquisition structured as
a
merger, consolidation, or share exchange) or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist
or
participate in, or facilitate in any other manner any effort or attempt by
any
Person to do or seek any of the foregoing. None of Sellers will vote their
Shares in favor of any such acquisition. The Company and Sellers will notify
Purchaser immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(h) Maintenance
of Real Property.
The Company and its Subsidiaries will, and
Sellers will cause each of Company and its Subsidiaries to, maintain the Real
Property, in substantially the same condition as existed on the date of this
Agreement, ordinary wear and tear excepted, and shall not demolish or remove
any
of the existing Improvements, or erect new improvements on the Real Property
or
any portion thereof (provided
that
Company and its Subsidiaries shall not be prohibited from (i) continuing
the erection of new improvements that are in process as of the date hereof
and
(ii) erecting new improvements pursuant to Company’s capital improvements
program), without the prior written consent of Purchaser.
(i) Leases.
The Company and its Subsidiaries will not, and Sellers will
not cause or permit, any of Company’s or its Subsidiaries’ Leases to be amended,
modified, extended, renewed or terminated, nor shall Company or its Subsidiaries
enter into any new lease, sublease, license or other agreement for the use
or
occupancy of any Real Property, without the prior written consent of
Purchaser.
(j) Title
Insurance and Surveys.
The Company and its Subsidiaries will, and
Sellers will cause each of Company and its Subsidiaries to, use their reasonable
best efforts to assist Purchaser in obtaining the title commitments, title
policies, updated title policies and surveys in form and substance reasonably
satisfactory to the Purchaser, including removing from title any Liens or
encumbrances that are not Permitted Encumbrances. Sellers
30
shall
provide the title company with any affidavits, indemnities, memoranda or other
assurances reasonably requested by the title company to issue the title
policies, provided that any Seller shall not be required to undertake or incur
any Liability under any such affidavits, indemnities, memoranda or other
assurances in excess of any Liability that it would otherwise have pursuant
to
Section 8 of this Agreement.
(k) Tax
Matters.
Without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld or delayed, neither Company nor
any
of its Subsidiaries shall make or change any election, change an annual
accounting period, adopt or change any accounting method, file any amended
Tax
Return, enter into any closing agreement, settle any Tax claim or assessment
relating to Company or any of its Subsidiaries, 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 relating to Company or any of its
Subsidiaries, 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 increasing the Tax liability of Company or any of its Subsidiaries for any
period ending after the Closing Date or decreasing any Tax attribute of Company
or any of its Subsidiaries existing on the Closing Date.
(l) Stockholders
Agreement.
The
Sellers and the Company, being all the
parties to that certain Stockholders Agreement dated January 20, 2004 do hereby
waive their rights thereunder unless and until and only if this Agreement is
duly terminated by the Sellers in accordance with Section 11 hereof, in which
case all such waivers shall terminate as of such termination.
Section
6. Post-Closing
Covenants.
The
Parties agree as follows with respect to the period following the
Closing:
(a) General.
In case at any time after the Closing any further actions
are necessary to carry out the purposes of this Agreement, each of the Parties
will take such further actions (including the execution and delivery of such
further instruments and documents) as any other Party may reasonably request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 8
below).
Sellers
acknowledge and agree that from and after the Closing Purchaser will be entitled
to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to Company and its
Subsidiaries (the “Company Information”), provided, however, that Purchaser
shall, and shall cause the Company to, until the seventh anniversary of the
Closing Date, retain the Company Information and make it available for
inspection and copying by the Sellers or any representative of the Sellers
at
the expense of Sellers during normal business hours of Purchaser or the Company,
as applicable, upon reasonable request and upon reasonable notice.
(b) Litigation
Support.
In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing
Date
involving Company or any of its Subsidiaries, each of the other Parties will
cooperate with him, her, or it and his, her, or its counsel in the contest
or
defense, make available his, her, or its personnel, and provide such testimony
and access to his, her, or its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of
the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below).
31
(c) Transition.
None of Sellers will take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of Company or any of its Subsidiaries
from
maintaining the same business relationships with Company and its Subsidiaries
after the Closing as it maintained with Company and its Subsidiaries prior
to
the Closing. Each of Sellers will refer all customer inquiries relating to
the
business of Company and its Subsidiaries to Purchaser from and after the
Closing.
(d) Confidentiality.
Each Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and, following expiration of the
indemnity periods contained in Section 8 hereof, and assuming no outstanding
claims, deliver promptly to Purchaser or destroy, at the request and option
of
Purchaser, all tangible embodiments (and all copies) of the Confidential
Information that are in his, her, or its possession. In the event that any
Seller is requested or required pursuant to written or oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process to disclose any Confidential
Information, such Seller will notify Purchaser promptly of the request or
requirement so that Purchaser may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(d). If, in the absence of
a
protective order or the receipt of a waiver hereunder, any of Sellers is
requested, required or compelled to disclose any Confidential Information to
any
tribunal, such Seller may disclose the Confidential Information to the tribunal;
provided,
however,
that
the disclosing Seller shall use his, her, or its reasonable efforts to obtain,
at the request of Purchaser, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as Purchaser shall designate. The foregoing provisions
shall not apply to any Confidential Information that is generally available
to
the public immediately prior to the time of disclosure unless such Confidential
Information is so available due to the actions of a Seller.
(e) Covenant
Not to Compete.
For a period of 18 months from and after the
Closing Date, none of Sellers (other than Contrarian Funds LLC (“Contrarian”) or
any of Xxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxxxxx and Xxxx
Xxxxxxxxxx (the “Managers”) in the event such Manager is terminated without
severance of at least 18 months) will engage directly or indirectly in the
production and sale of special bar quality steel (the “Business”), other than as
an officer or director of the Company, in any geographic area in which Company
or any of its Subsidiaries conducts the Business as of the Closing Date.
Purchaser acknowledges that the foregoing restriction shall not restrict any
Seller from (i) owning less than 10% of the outstanding stock of any publicly
traded corporation that is engaged in the Business, (ii) providing debt
financing to any Person engaged in the Business or (iii) having an ownership
interest in any Person that derives less than twenty percent (20%) of sales
revenue from the Business. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 6(e) is invalid
or unenforceable, the Parties agree that the court making the determination
of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing
the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(f) Non-solicitation.
For a period of 18 months from and after the Closing
Date, none of the Sellers (other than Contrarian) will solicit, attempt to
solicit, encourage or otherwise induce, directly or indirectly, any of the
Company’s customers (or any contemplated future customers), vendors, suppliers,
distributors, contractors or other third parties to terminate or adversely
modify any existing business relationship with the Company, or to establish
a
business relationship with another person or entity engaged in the Business.
This restriction applies to any person or entity that any of the Sellers know,
or reasonably should know, is one of the Company’s customers as well as
any
32
person
or
entity that any of the Sellers know, or reasonably should know, is in
discussions with the Company about a potential or actual business
relationship.
(g) Insurance
Proceeds.
The Company and each Seller agree that the
Representative will have sole control and decision-making authority with respect
to the negotiation and resolution of the claims to which the Insurance Proceeds
relate (including selection of legal counsel and other outside consultants)
and
will receive the full cooperation of the Company’s management, in each case
consistent with past custom and practice; provided,
however,
that in
the negotiation and resolution of the claims, the Representative may only
contact Xxxxxx Xxxxxxxx (“Xxxxxxxx”), who will manage the Company’s time and
resources spent on matters related to the Insurance Proceeds; provided,
further,
however, that in the event that Xxxxxxxx becomes unavailable, the Company shall
provide another person reasonably acceptable to Representative that the
Representative may contact. If the Representative fails to respond in a timely
manner or otherwise fails to act to timely resolve the claims relating to the
Insurance Proceeds, the Purchaser, following 30 days notice to the
Representative (with an opportunity within that period by Representative to
cure, provided,
however,
that if
any relevant statute of limitations or contract right will terminate within
30
days of such notice with the consequence that the claims relating to the
Insurance Proceeds may be adversely effected, Representative will have no right
to cure and Purchaser or the Company will assume control), will assume sole
control and decision-making authority (including selection of legal counsel
and
other outside consultants) with respect to the negotiation and resolution of
such claims. The Parties may not settle any claims relating to the Insurance
Proceeds without the consent of either the Company or the Representative, as
the
case may be, which consent shall not be unreasonably withheld, conditioned
or
delayed. The Representative will give prompt notice to the Company of all
material developments relating to the Insurance Proceeds. The actual third
party
costs incurred by the Company or its Subsidiaries that are directly associated
with the negotiation and resolution of the claims to which the Insurance
Proceeds relate shall be borne 55% by the Representative and 45% by the Company.
Representative shall promptly reimburse the Company for all such expenses upon
receipt of an invoice from the Company.
(h) Maintenance
of Net Worth.
Perry Partners LP and Perry Partners International
Inc. covenant that until December 31, 2008, each will remain in good standing
and retain a net worth based on GAAP sufficient to satisfy the maximum of its
possible indemnification obligations under this Agreement.
(i) Tax
Returns.
Without
the prior written consent of the Sellers, which consent will not be unreasonably
withheld, delayed or conditioned, Purchaser shall not make or change any Tax
election of Company or its Subsidiaries, or file any amended Tax Return for
Company and its Subsidiaries, in each case if such election or amended Tax
Return would have the effect of increasing the Sellers’ indemnification
liability under Section 8, except as otherwise required by law.
(j) Security
for Additional Purchase
Price.
As soon
as permitted under the Company’s or any of its Subsidiaries’ debt documentation,
the Purchaser will, at the Representative’s election, either (a) cause Republic
Engineered Products, Inc. to grant a security interest, in the portion of the
Insurance Proceeds payable to the Sellers,to the Representative to secure
payment of the Additional Purchase Price to the Sellers or (b) covenant not
to
encumber such portion of the Insurance Proceeds.
Section
7. Conditions
to Obligation to Close.
(a) Conditions
to Purchaser’s
Obligation.
Purchaser’s obligation to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
33
(i) The
representations and warranties set forth in Section 3(a) and Section 4 above
shall be true and correct in all material respects at and as of the Closing
Date, and no breach of the representations and warranties, individually or
in
the aggregate, will cause a Material Adverse Effect except to the extent that
such representations and warranties are qualified by the terms “material” or
“Material,” or contain terms such as “Material Adverse Effect” or “Material
Adverse Change,” in which case such representations and warranties (as so
written, including the term “material” or “Material”) shall be true and correct
in all respects at and as of the Closing Date;
(ii) Sellers
and Company shall have performed and complied with all of their covenants
hereunder in all material respects through the Closing, except to the extent
that such covenants are qualified by the terms “material” or “Material” or
contain terms such as “Material Adverse Effect” or “Material Adverse Change,” in
which case Sellers shall have performed and complied with all of such covenants
(as so written, including the term “material” or “Material”) in all respects
through the Closing;
(iii) Company
and its Subsidiaries shall have procured all of the third-party consents
specified in Section 5(b) above;
(iv) no
action, suit, or proceeding shall be pending or, to the Knowledge of the Company
and its Subsidiaries or any of the Sellers, threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of
any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) adversely affect the right of Purchaser to own the Shares
and
to control Company and its Subsidiaries, or (D) adversely affect the right
of
Company or any of its Subsidiaries to own its assets and to operate its business
(and no such injunction, judgment, order, decree, ruling, or charge shall be
in
effect);
(v) Sellers
and Company shall have delivered to Purchaser a certificate to the effect that
each of the conditions specified above in Section 7(a)(i)-(iv) is satisfied
in
all respects;
(vi)
all
applicable waiting periods (and any extensions thereof) under the
Xxxx-Xxxxx-Xxxxxx Act shall have expired or otherwise been terminated and the
Parties, Company, and its Subsidiaries shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
referred to in Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above;
(vii) the
relevant parties shall have executed the amendment relating to the waiver of
prepayment penalties in form and substance as set forth in Exhibits C attached
hereto and the same shall be in full force and effect;
(viii) Purchaser
shall have received from counsel to Company and Sellers an opinion in form
and
substance reasonably satisfactory to Purchaser dated as of the Closing
Date;
(ix) Purchaser
shall have received the resignations, effective as of the Closing, of each
director of Company and its Subsidiaries other than those whom Purchaser shall
have specified in writing prior to the Closing;
34
(x) all
actions to be taken by Sellers in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to
Purchaser;
(xi) Purchaser
shall have obtained, or received evidence of already existing, title policies
and surveys for all Owned Real Property of the Company and its Subsidiaries,
in
all cases in form and substance reasonably satisfactory to the
Purchaser;
(xii) Company
and its Subsidiaries shall have obtained and delivered to Purchaser a written
consent with respect to the transactions contemplated by this Agreement for
each
of the Leases set forth on Schedule 4(e)(ii) which may require a consent from
the other party to the Lease pursuant to the terms thereof, and, if requested
by
Purchaser’s lender, a waiver of landlord liens, collateral assignment of lease
or leasehold mortgage from the landlord or other party whose consent thereto
is
required under such Lease (the “Lease
Consents”),
in
form and substance reasonably satisfactory to Purchaser and Purchaser’s
lender;
(xiii) Company
and its Subsidiaries shall have executed mutual releases with each Seller and
each director and officer of the Company and Subsidiaries;
(xiv) Sellers
and the Company shall have delivered to Purchaser a properly executed statement
from the Company satisfying the requirements of Treasury Regulation Sections
1.897-2(h) and 1.1445-2(c)(3) in a form reasonably acceptable to Purchaser
(the
“FIRPTA Affidavit”);
(xv) no
damage
or destruction or other change has occurred with respect to any of the Real
Property or any portion thereof that, individually or in the aggregate, would
materially impair the use or occupancy of the Real Property or the operation
of
Company’s or its Subsidiaries’ business as currently conducted
thereon;
(xvi) Company
and Subsidiaries shall have delivered to Purchaser copies of the certificate
of
incorporation or
formation, as
applicable, certified on or soon before the Closing Date by the Secretary of
State (or comparable officer) of the jurisdiction of each such Person’s
incorporation (or formation);
(xvii) Company
and Sellers shall have delivered to Purchaser copies of the certificate of
good
standing of each entity Seller, Company, and Company Subsidiary issued on or
soon before the Closing Date by the Secretary of State (or comparable officer)
of the jurisdiction of each such Person’s organization;
(xviii) Company
and Sellers shall have delivered to Purchaser a certificate of the secretary
or
an assistant secretary of each of entity Sellers, dated the Closing Date, in
form and substance reasonably satisfactory to Purchaser, as to: (i) the
resolutions of the board of directors or other authorizing body (or a duly
authorized committee thereof) of such Seller authorizing the execution,
delivery, and performance of this Agreement and the transactions contemplated
hereby; and (ii) incumbency and signatures of the officers of such Seller
executing this Agreement or any other agreement contemplated by this Agreement;
and
(xix) The
executive officers of the Company or any Subsidiary shall have waived their
rights to any payments of compensation or vesting of stock awards or options
to
the extent that such payment or vesting would result in an excess parachute
payment within the meaning of Section 280G of the Code.
35
Purchaser
may waive any condition specified in this Section 7(a) if it executes a writing
so stating at or prior to the Closing.
(b) Conditions
to Sellers’
Obligation.
The
obligation of Sellers to consummate
the transactions to be performed by them in connection with the Closing is
subject to satisfaction of the following conditions:
(i) the
representations and warranties set forth in Section 3(b) above shall be true
and
correct in all material respects at and as of the Closing Date, the except
to
the extent that such representations and warranties are qualified by the terms
“material” or “Material” or contain terms such as “Material Adverse Effect” or
“Material Adverse Change,” in which case such representations and warranties (as
so written, including the term “material” or “Material”) shall be true and
correct in all respects at and as of the Closing Date;
(ii) Purchaser
shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing, except to the extent that such covenants
are qualified by the term “material,” or contain terms such as “Material Adverse
Effect” or “Material Adverse Change,” in which case Purchaser shall have
performed and complied with all of such covenants (as so written, including
the
term “material” or “Material”) in all respects through the Closing;
(iii) no
action, suit, or proceeding shall be pending, or to the Knowledge of the
Purchaser, threatened, before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge would (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(iv) Purchaser
shall have delivered to Sellers a certificate to the effect that each of the
conditions specified above in Section 7(b)(i)-(iii) is satisfied in all
respects;
(v) all
applicable waiting periods (and any extensions thereof) under the
Xxxx-Xxxxx-Xxxxxx Act shall have expired or otherwise been terminated and the
Parties, Company, and its Subsidiaries shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
referred to in Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above;
(vi) the
relevant parties shall have executed the amendment relating to the waiver of
prepayment penalties in form and substance as set forth in Exhibit C and the
same shall be in full force and effect;
(vii) Sellers
shall have received from counsel to Purchaser an opinion in form and substance
as set forth in Exhibit E attached hereto, addressed to Sellers, and dated
as of
the Closing Date; and
(viii) all
actions to be taken by Purchaser in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be satisfactory in form and substance to Sellers.
36
Sellers
may waive any condition specified in this Section 7(b) if they execute a writing
so stating at or prior to the Closing.
Section
8. Remedies
for Breaches of This Agreement.
All
of
the representations and warranties and covenants of Sellers contained in this
Agreement shall survive the Closing hereunder (even if Purchaser knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of one year
thereafter, except, however, that the survival period for breach of
representations and warranties contained in Section 3 shall be indefinite and
the survival period for the indemnities provided in Sections 8(b)(i)(B) and
(C)
below shall be until and including December 31, 2008. The representations,
warranties and covenants of the Company shall not survive the closing of the
transaction.
(i) If
Purchaser makes a written claim for indemnification against any Seller pursuant
to Section 12(h) below within the applicable survival period, if any,
with
respect to an Adverse Consequence resulting from, arising out of, relating
to,
in the nature of, or caused by:
(A) the
breach by any Seller (or in the event any third party alleges facts that, if
true, would mean any Seller has breached) of any of his, her, or its
representations, warranties, and covenants contained herein, other than those
representations and warranties contained in Section 4(aa) (Environmental, Health
and Safety Matters);
(B) any
pre-Closing condition or other non-compliance with the Environmental, Health
and
Safety Requirements not
set
forth on Exhibit D attached hereto; or
(C) any
condition or other non-compliance with Environmental, Health and Safety
Requirements with respect to the matters set forth on Exhibit D attached hereto;
then
each
Seller shall be obligated, in the case of Perry Partners LP and Perry Partners
International Inc., jointly and severally for each other’s proportionate share
of the Purchase Price, and in the case of each other Seller, severally, to
indemnify Purchaser from and against the entirety of any Adverse Consequences
Purchaser may suffer (including any Adverse Consequences Purchaser may suffer
after the end of any applicable survival period with respect to claims for
indemnification against any Seller within the applicable survival
period);
except,
however,
that
(D) in
the
case of Section 8(b)(i)(A) (non-environmental, health and safety matters) above,
Sellers shall not have any obligation to indemnify Purchaser from and against
any Adverse Consequences resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or alleged breach) of any representation
or
warranty of Sellers contained in this Agreement until and then only to the
extent that Purchaser has suffered Adverse Consequences by reason of all such
breaches (or alleged breaches) in excess of a $1,000,000 in the aggregate;
provided,
further,
that,
the maximum amount of indemifiable Adverse Consequences
37
which
may
be recovered pursuant to Section 8(b)(i)(A) shall be $10,000,000;
(E) in
the
case of Section 8(b)(i)(B) and (C) above, Sellers shall not have any obligation
to indemnify Purchaser from and against any Adverse Consequences in excess
of
$20,000,000, and only after giving effect to the insurance policy deductibles
already in place at the Closing Date, the application of net insurance proceeds,
the current unused reserve for environmental remediation Liabilities as set
forth on the Most Recent Balance Sheet and, in the case of Section 8(b)(i)(C),
the Sellers shall not have any obligation to indemnify Purchaser from and
against any Adverse Consequences in excess of 50% of such Adverse Consequences
and after a deductible of $1,000,000; and
(F) neither
Contrarian nor any Seller who is an individual shall have any obligation to
indemnify Purchaser in excess of such Seller’s proportionate share of the
indemnification obligation of all Sellers based on such Seller’s proportionate
share of the Purchase Price.
(ii) The
indemnification obligations of Seller set forth in Section 8(b)(i)(B) and(C)
hereof, as they relate to any environmental investigative, remedial, corrective,
cleanup, or compliance action and any Adverse Consequences arising therefrom,
shall be limited to those actions that are (a) affirmatively required by
Environmental, Health and Safety Requirements, (b) necessary to reduce levels
of
contamination at the relevant Real Property to comply with applicable cleanup
standards established under Environmental, Health and Safety Requirements,
or
(c) necessary for the Company and its Subsidiaries to attain compliance with
Environmental Laws; in each case assuming continued industrial use of the
relevant Real Property and employing risk based standards and institutional
controls where available. The indemnification obligation of Seller shall not
include Adverse Consequences arising from any action, not otherwise required
by
law, of Purchaser or Company to initiate or prompt a claim against Company
or
any action where the primary purpose is to trigger Seller’s indemnification
obligation provided in this Agreement.
(i) If
any
third party notifies any Party (the “Indemnified
Party”)
with
respect to any matter (a “Third-Party
Claim”)
that
may give rise to a claim for indemnification against any other Party (the
“Indemnifying
Party”)
under
this Section 8, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided,
however,
that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party is thereby
prejudiced.
(ii) Any
Indemnifying Party will have the right to defend the Indemnified Party against
the Third-Party Claim with counsel of his, her, or its choice reasonably
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the Indemnified
Party has given notice of the Third-Party Claim that the Indemnifying Party
will
indemnify the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third-Party Claim, (B) the
Third-Party Claim involves only money damages and does not seek an injunction
or
other equitable relief, (D) settlement of, or an adverse judgment with respect
to, the Third-Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to
38
establish
a precedential custom or practice materially adverse to the continuing business
interests or the reputation of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third-Party Claim actively and
diligently.
(iii) So
long
as the Indemnifying Party is conducting the defense of the Third-Party Claim
in
accordance with Section 8(c)(ii) above, the Indemnified Party may retain
separate co-counsel at his, her, or its sole cost and expense and participate
in
the defense of the Third-Party Claim. In any event, the Indemnified Party will
not consent to the entry of any judgment on or enter into any settlement with
respect to the Third-Party Claim without the prior written consent of the
Indemnifying Party (not to be unreasonably withheld), and (C) the Indemnifying
Party will not consent to the entry of any judgment on or enter into any
settlement with respect to the Third-Party Claim without the prior written
consent of the Indemnified Party (not to be unreasonably withheld).
(iv) In
the
event any of the conditions in Section 8(c)(ii) above is or becomes unsatisfied,
however, (A) the Indemnified Party may defend against, and consent to the entry
of any judgment on or enter into any settlement with respect to, the Third-Party
Claim in any manner his, her, or it may reasonably deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third-Party Claim (including reasonable attorneys’ fees
and expenses), and (C) the Indemnifying Parties will remain responsible for
any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third-Party Claim,
subject to the limitations set forth in Section 8(b).
(d) Exclusive
Remedy.
Purchaser and Sellers acknowledge and agree that, except in the (i) event of
fraud, willful breach, or violation of securities laws, and (ii) the application
of any equitable remedies, the foregoing indemnification provisions in this
Section 8 are the exclusive remedy of Purchaser and Sellers under or in
connection with this Agreement and the transactions contemplated
hereby.
(e) Determination
of Adverse
Consequences.
The
Parties shall take into account the time cost of money (using the Applicable
Rate as the discount rate) in determining Adverse Consequences for purposes
of
this Section 8, which Applicable Rate shall begin to accrue on the date the
claim is made through the final resolution and payment of such claim. All
indemnification payments under this Section 8 shall be deemed adjustments to
the
Purchase Price.
(f) Nature
of Sellers’
Obligations.
The
covenants of each Seller in Section 2(a) above concerning the sale of his,
her,
or its Shares to Purchaser and the representations and warranties of each Seller
in Section 3(a) above concerning the transaction are individual, and not joint
and several, obligations. This means that the particular Seller making the
representation, warranty, or covenant shall be solely responsible to the extent
provided in Section 8(b)(ii) above for any Adverse Consequences Purchaser may
suffer as a result of any breach thereof, except, however, that the obligation
of each Seller shall not be limited as provided by Section 8(b)(ii) but shall
be
limited to the extent of the proportionate share of the Purchase Price paid
or
owed to such Seller.
Section
9. Tax
Matters.
The following provisions shall govern the allocation of
responsibility as between Purchaser and Sellers for certain tax matters
following the Closing Date:
(a) Responsibility
for Filing Tax
Returns.
Purchaser
shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for Company and its
Subsidiaries that are filed after the Closing Date. Any such Tax Return relating
in whole or in part to a period prior to or including the Closing Date (each,
“Pre-Closing
Tax Return”)
shall
be prepared in accordance with past custom and practice of the Company and
its
Subsidiaries except as
39
otherwise
required by law. Each Pre-Closing Tax Return shall be subject to review and
approval by the Representative prior to filing, which approval shall not be
unreasonably withheld, delayed or conditioned.
(i) Purchaser,
Company and its Subsidiaries, and Sellers shall cooperate fully, as and to
the
extent reasonably requested by the other Party, in connection with the filing
of
Tax Returns pursuant to this Section 9(c) and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other Party’s request) the provision of records and information
that are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Company and its Subsidiaries and Sellers agree (A) to retain all books and
records with respect to Tax matters pertinent to Company and its Subsidiaries
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
Purchaser or Sellers, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any taxing
authority, and (B) to give the other Party reasonable written notice prior
to
transferring, destroying or discarding any such books and records and, if the
other Party so requests, Company and its Subsidiaries or Sellers, as the case
may be, shall allow the other Party to take possession of such books and
records.
(ii) Purchaser
and Sellers further agree, upon request, to use their best efforts to obtain
any
certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) Purchaser
and Sellers further agree, upon request, to provide the other Party with all
information that either Party may be required to report pursuant to Code Section
6043 and all Treasury Regulations promulgated thereunder.
(c) Tax-Sharing
Agreements.
All
tax-sharing agreements or similar agreements with respect to or involving
Company and its Subsidiaries shall be terminated as of the Closing Date and,
after the Closing Date, Company and its Subsidiaries shall not be bound thereby
or have any liability thereunder.
(d) Certain
Taxes and Fees.
All transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred
in
connection with consummation of the transactions contemplated by this Agreement
shall be paid equally by Sellers and Purchaser when due, and Sellers and
Purchaser, as the case may be, will file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges, and, if required
by applicable law. All expenses in connection with filing such Tax Returns
shall
be shared equally by the Sellers and the Purchaser.
Section
10. Authorization
of Representative.
(a) Representative
is hereby appointed, authorized and empowered to act as a representative, for
the benefit of the Sellers, as the exclusive agent and attorney-in-fact to
act
on behalf of the Sellers, in connection with and to facilitate the consummation
of the transactions contemplated hereby, which shall include the power and
authority:
40
(i) to
execute and deliver such waivers and consents in connection with this Agreement
and the consummation of the transactions contemplated hereby as Representative,
in its sole discretion, may deem necessary or desirable;
(ii) as
Representative, to enforce and protect the rights and interests of the Sellers
and to enforce and protect the rights and interests of Representative arising
out of or under or in any manner relating to this Agreement and each other
agreement, document, instrument or certificate referred to herein or the
transactions provided for herein, and to take any and all actions which
Representative believes are necessary or appropriate under this Agreement for
and on behalf of the Sellers, including asserting or pursuing any claim, action,
proceeding or investigation (a “Claim”)
against Purchaser and/or the Company (after the Closing), conducting
negotiations with Purchaser or the Company (after the Closing) and their
respective representatives regarding such Claims, and, in connection therewith,
to (A) assert any claim or institute any action, proceeding or
investigation; (B) investigate, defend, contest or litigate any claim, action,
proceeding or investigation initiated by Purchaser, the Company or any other
person, or by any federal, state or local governmental authority against
Representative and/or any of the Sellers, and receive process on behalf of
any
or all Sellers in any such claim, action, proceeding or investigation and
compromise or settle on such terms as Representative shall determine to be
appropriate, and give receipts, releases and discharges with respect to, any
such claim, action, proceeding or investigation; (C) file any proofs of debt,
claims and petitions as Representative may deem advisable or necessary; and
(D)
file and prosecute appeals from any decision, judgment or award rendered in
any
such action, proceeding or investigation, it being understood that
Representative shall not have any obligation to take any such actions, and
shall
not have any Liability for any failure to take any such actions;
(iii) to
refrain from enforcing any right of the Sellers or any of them and/or
Representative arising out of or under or in any manner relating to this
Agreement or any other agreement, instrument or document in connection with
the
foregoing; provided,
however,
that no
such failure to act on the part of Representative, except as otherwise provided
in this Agreement, shall be deemed a waiver of any such right or interest by
Representative or by the Sellers unless such waiver is in writing signed by
the
waiving party or by Representative; and
(iv) to
make,
execute, acknowledge and deliver all such other agreements, guarantees, orders,
receipts, endorsements, notices, requests, instructions, certificates, stock
powers, letters and other writings, and, in general, to do any and all things
and to take any and all action that Representative, in its sole and absolute
discretion, may consider necessary or proper or convenient in connection with
or
to carry out the transactions contemplated by this Agreement, and all other
agreements, documents or instruments referred to herein or executed in
connection herewith.
(b) Sellers
authorize Representative to withhold the amount specified to be withheld on
Exhibit A from the Purchase Price for the payment by Representative on behalf
of
Sellers of certain transactional expenses, including Taxes, fees, financial
advisor fees and legal expenses owed by Sellers pursuant to or in connection
with this Agreement and as a reserve with respect to post-Closing
expenses.
(c) Representative
shall not be entitled to any fee, commission or other compensation for the
performance of its services hereunder. In connection with this Agreement, and
any instrument, agreement or document relating hereto, and in exercising or
failing to exercise all or any of the powers conferred upon Representative
hereunder (i) Representative shall incur no responsibility whatsoever to any
of
the Sellers by reason of any error in judgment or other act or omission
performed or omitted hereunder or any such other agreement, instrument or
document, excepting only responsibility for any act or failure to act which
represents willful misconduct, and (ii) Representative shall
41
be
entitled to rely on the advice of counsel, public accountants or other
independent experts experienced in the matter at issue, and any error in
judgment or other act or omission of Representative pursuant to such advice
shall in no event subject Representative to Liability to any of the Sellers.
Each Seller shall indemnify, pro rata based upon such Seller’s share of the
number of Shares outstanding as of immediately prior to the Closing (on a
fully-diluted basis), Representative against all losses, damages, liabilities,
claims, obligations, costs and expenses, including reasonable attorneys’,
accountants’ and other experts’ fees and the amount of any judgment against
them, of any nature whatsoever (including any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened or any claims whatsoever), arising out
of or
in connection with any claim, investigation, challenge, action or proceeding
or
in connection with any appeal thereof, relating to the acts or omissions of
Representative hereunder or otherwise.
(d) All
of
the indemnities, immunities and powers granted to Representative under this
Agreement shall survive the Closing Date and/or any termination of this
Agreement.
(e) Purchaser
shall have the right to rely upon all actions taken or omitted to be taken
by
Representative pursuant to this Agreement, all of which actions or omissions
shall be legally binding upon the Sellers.
(f) The
grant
of authority provided for herein (i) is coupled with an interest and shall
be
irrevocable and survive the death, incompetency, bankruptcy or liquidation
of
any of the Sellers; and (ii) shall survive the Closing.
Section
11. Termination.
(a) Termination
of Agreement.
Certain
of the Parties may terminate this Agreement as provided below:
(i) Purchaser
and Sellers, for itself and on behalf of the Company, may terminate this
Agreement by mutual written consent by Purchaser and Sellers at any time prior
to the Closing; and
(ii) Either
Party may terminate this Agreement by giving written notice to the other at
any
time prior to the Closing (A) in the event the other party has breached any
material representation, warranty, or covenant contained in this Agreement
in
any material respect ignoring for this purpose the extent to which such
representation, warranty or covenant is qualified by the term “Material” or
“material” or contains terms such as “Material Adverse Effect” or “Material
Adverse Change,” or (B) if the Closing shall not have occurred on or before
August 10, 2005, by reason of the failure of any condition precedent under
Section 7 hereof (unless the failure results primarily from the notifying party
itself breaching any representation, warranty, or covenant contained in this
Agreement).
(b) Effect
of Termination.
If any
Party terminates this Agreement pursuant to Section 11(a) above, all rights
and
obligations of the Parties hereunder shall terminate without any Liability
of
any Party to any other Party (except for any Liability of any Party then in
breach); except that, the Confidentiality Agreement between the Company and
Purchaser Guarantor, dated April 12, 2005, shall survive
termination.
42
Section
12. Miscellaneous.
(a) Press
Releases and Public
Announcements.
No Party shall issue any press release or make
any public announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of Purchaser and
Representative; provided,
however,
that
any Party may make any public disclosure it believes in good faith is required
by applicable law or any listing or trading agreement concerning its publicly
traded securities (in which case the disclosing Party will provide a copy of
any
such disclosure to the other Parties and give the other Parties an opportunity
(which may require a very timely response depending on the circumstances) to
comment timely prior to making the disclosure).
(b) Purchaser
Guarantor.
The Purchaser Guarantor hereby guarantees to the
Sellers payment and performance by the Purchaser of its obligations under this
Agreement.
(c) No
Third-Party
Beneficiaries.
This Agreement shall not confer any rights
or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire
Agreement.
Except
for that certain Confidentiality Agreement between Company and Purchaser
Guarantor, dated April 12, 2005, this Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they relate in any way to the
subject matter hereof. To the extent that any provision in the Confidentiality
Agreement conflicts with any provision of this Agreement, the provision
contained in this Agreement shall govern.
(e) Succession
and Assignment.
This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of
his,
her, or its rights, interests, or obligations hereunder without the prior
written approval of Purchaser and Representative; provided,
however,
that
Purchaser may (i) assign any or all of its rights and interests hereunder to
one
or more of its Affiliates and (ii) designate one or more of its Affiliates
to
perform its obligations hereunder (in any or all of which cases Purchaser
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(f) Counterparts.
This
Agreement may be executed in one or more counterparts (including by means of
facsimile), each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
(g) Headings.
The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices.
All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered personally to the recipient, (ii) one business day after being sent
to
the recipient by reputable overnight courier service (charges prepaid), (iii)
one business day after being sent to the recipient by facsimile transmission
or
electronic mail, or (iv) four business days after being mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid,
and addressed to the intended recipient as set forth below:
If
to
Purchaser:
SimRep
Corporation
c/o
Industrias CH, S.A. de C.V.
00
Xxxxxxx
Xxxxxx #00
Fracc:
Industrial Xxxxx Xxxxxx, Xxxxxxxxxxxx
Xxx
xx
Xxxxxx 00000
Facsimile:
011
52 55
53 1027 15
Attention:
Xxxxxx
Xxxxx Xxxxxxxx
with
a
mandatory copy to:
Xxxxxxx
Xxxxxxxx & Wood LLP
Two
World
Financial Center
Xxx
Xxxx,
XX 00000
Facsimile:
(000)
000-0000
Attention:
Xxxx
X.
Xxxxxxx, Esq.
Xxxxxx
X.
Xxxxxx, Esq.
If
to
Purchaser Guarantor to:
Industrias,
CH, S.A. de C.V.
Xxxxxxx
Xxxxxx #23
Fracc: Xxxxxxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxxxx
Xxx
xx
Xxxxxx 00000
Facsimile:
011 52 55 53 102715
Attention:
Xxxxxx Xxxxx Xxxxxxxx
with
a
mandatory copy to:
Xxxxxxx,
Angoitia, Xxxxxx x Xxxxxxx, S.C.
Xxxxxx
Urales 505, Piso 3
Xxxxx
xx
Xxxxxxxxxxx
00000
Xxxxxx, X.X.
Facsimile:
52 (55) 5520 1065 / 1075
Attention:
Xxxxxxx Xxxxxxxxx Yáňcz
If
to the
Company:
PAV
Republic, Inc.
0000
Xxxxxxx Xxxxxxx
Xxxxxxxx,
XX 00000-0000
Facsimile:
(000)
000-0000
Attention:
Xxxxxx
Xxxxxxxx
with
a
mandatory copy to (if prior to the Closing):
Xxxxxxxx &
Xxxxx LLP
000
Xxxx
00xx Xxxxxx
Xxx
Xxxx,
XX 00000-0000
Facsimile:
(000)
000-0000
Attention:
Xxxxxx
xxx Xxxxx
44
If
to
Representative (notice to Representative will be deemed notice to
Sellers):
Perry
Capital LLC
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Facsimile: (000)
000-0000
Attention:
Xxxxxxx
Xxxx
with
a
mandatory copy to:
Xxxxxxxx &
Xxxxx LLP
000
Xxxx
00xx Xxxxxx
Xxx
Xxxx,
XX 00000-0000
Facsimile: (000)
000-0000
Attention:
Xxxxxx
xxx Xxxxx
Any
Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(i) Governing
Law.This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of New
York without
giving effect to any choice or conflict of law provision or rule (whether of
the
State of New
York
or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New
York.
(j) Amendments
and Waivers.
No
amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by Purchaser
and
Representative. No waiver by any Party of any provision of this Agreement or
any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty
or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such default, misrepresentation, or breach of warranty
or
covenant.
(k) Severability.
Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or
the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses.
Each
Purchaser, Seller, Company, and any Subsidiary shall bear his, her, or its
own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby; provided,
however,
that
Sellers shall also bear the costs and expenses of Company and its Subsidiaries
(including all of their legal fees and expenses and excluding any of their
costs
and expenses associated with the amendment of the GE Credit Facility) in
connection with this Agreement and the transactions contemplated hereby in
the
event that the transactions contemplated by this Agreement are consummated.
Sellers shall hold Company and Purchaser harmless for all fees and expenses
owed
UBS Investment Bank with respect to the transactions contemplated by this
Agreement.
(m) Incorporation
of Exhibits, Annexes, and
Schedules.
The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
45
(n) Specific
Performance.
Each
Party acknowledges and agrees that the other Parties would be damaged
irreparably in the event any provision of this Agreement is not performed in
accordance with its specific terms or otherwise is breached, so that a Party
shall be entitled to injunctive relief to prevent breaches of this Agreement
and
to enforce specifically this Agreement and the terms and provisions hereof
in
addition to any other remedy to which such Party may be entitled, at law or
in
equity. In particular, the Parties acknowledge that the business of Company
and
its Subsidiaries is unique and recognize and affirm that in the event Sellers
breach this Agreement, money damages would be inadequate and Purchaser would
have no adequate remedy at law, so that Purchaser shall have the right, in
addition to any other rights and remedies existing in its favor, to enforce
its
rights and the other Parties’ obligations hereunder not only by action for
damages but also by action for specific performance, injunctive, and/or other
equitable relief.
(o) Submission
to Jurisdiction.
Each of
the Parties submits to the jurisdiction of any state or federal court sitting
in
New York, New York, in any action or proceeding arising out of or relating
to
this Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to this Agreement
in
any other court. Each of the Parties waives any defense of inconvenient forum
to
the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with respect
thereto. Any Party may make service on any other Party by sending or delivering
a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Section 11(h) above. Nothing in this
Section 11(p), however, shall affect the right of any Party to bring any action
or proceeding arising out of or relating to this Agreement in any other court
or
to serve legal process in any other manner permitted by law or at equity. The
Sellers hereby constitute and appoint Representative as the agent of the Sellers
to accept all service of legal process. Each Party agrees that a final judgment
in any action or proceeding so brought shall be conclusive and may be enforced
by suit on the judgment or in any other manner provided by law or at
equity.
(p) Tax
Disclosure
Authorization.
Notwithstanding anything herein to the contrary, the Parties (and each Affiliate
and Person acting on behalf of any Party) agree that each Party (and each
employee, representative, and other agent of such Party) may disclose to any
and
all Persons, without limitation of any kind, the transaction’s tax treatment and
tax structure (as such terms are used in Code Sections 6011 and 6112 and
regulations thereunder) contemplated by this Agreement and all materials of
any
kind (including opinions or other tax analyses) provided to such Party or such
Person relating to such tax treatment and tax structure, except to the extent
necessary to comply with any applicable federal or state securities laws;
provided,
however,
that
such disclosure may not be made until the execution of this Agreement. This
authorization is not intended to permit disclosure of any other information
including (without limitation) (A) any portion of any materials to the extent
not related to the transaction’s tax treatment or tax structure, (B) the
identities of participants or potential participants, (C) the existence or
status of any negotiations, (D) any pricing or financial information (except
to
the extent such pricing or financial information is related to the transaction’s
tax treatment or tax structure), or (E) any other term or detail not relevant
to
the transaction’s tax treatment or the tax structure.
*
* * *
*
46
IN
WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to
be duly executed as of the day and year first above written.
SIMREP
CORPORATION
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By: | ||
Name:
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Title: |
INDUSTRIAS
CH, S.A. de C.V.,
solely
for the purpose
set
forth in Section 12(b)
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By: | ||
Name:
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Title: |
PAV
REPUBLIC, INC.
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By: | ||
Its: |
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PERRY
PARTNERS LP, in its individual capacity
and
as Representative
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By: | ||
Its: |
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PERRY
PARTNERS INTERNATIONAL INC.
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By: | ||
Its: |
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CONTRARIAN
FUNDS LLC
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By: | ||
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Its: |
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XXXXXX X. XXXXXXXX |
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XXXXXX X. XXXXXXXXX |
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XXXX XXXXXX |
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XXXXXX XXXXXX |
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XXXX XXXXXXXXXX |
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XXXXX X. XXXXXXXX |
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XXXX XXXXXXXX |
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XXXX XXXXXXXX |
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XXXXXXX XXXXXX |
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XXXXXX XXXXXX |
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