EXECUTION COPY
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STOCK PURCHASE AGREEMENT
among
RATHGIBSON, INC.,
THE SELLERS NAMED HEREIN,
RGCH HOLDINGS LLC,
and
THE REPRESENTATIVE NAMED HEREIN
December 6, 2005
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TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE....................................................1
1.01 Purchase and Sale and Cancellation of Equity Interests.............1
1.02 The Closing........................................................4
1.03 Contingent Payment.................................................5
1.04 Second Contingent Payment..........................................6
ARTICLE II CONDITIONS TO CLOSING...............................................7
2.01 Conditions to the Buyer's Obligations..............................7
2.02 Conditions to the Sellers' Obligations.............................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH SELLER......................9
3.01 Execution, Delivery; Valid and Binding Agreements..................9
3.02 Authority.........................................................10
3.03 No Breach.........................................................10
3.04 Ownership.........................................................10
3.05 Litigation........................................................10
3.06 Brokerage.........................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................11
4.01 Organization and Power............................................11
4.02 Subsidiaries......................................................11
4.03 Authorization; No Breach..........................................11
4.04 Capitalization....................................................11
4.05 Financial Statements..............................................12
4.06 Absence of Certain Developments...................................12
4.07 Title to Properties...............................................13
4.08 Tax Matters.......................................................15
4.09 Material Contracts................................................16
4.10 Intellectual Property.............................................17
4.11 Litigation........................................................18
4.12 Brokerage.........................................................18
4.13 Governmental Consents, etc........................................18
4.14 Employee Benefit Plans............................................18
4.15 Compliance with Laws..............................................19
4.16 Environmental Compliance..........................................20
4.17 Undisclosed Liabilities...........................................20
4.18 Labor and Employment Matters......................................21
4.19 Suppliers and Customers...........................................21
4.20 Inventory.........................................................21
4.21 Transactions with Related Persons. Except as set forth on
the Related Persons Schedule:.....................................21
4.22 Sales Practices; Accounts Receivable..............................22
4.23 Condition of Assets...............................................23
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4.24 Insurance.........................................................23
4.25 Foreign Corrupt Practices Act Compliance..........................24
4.26 Indebtedness......................................................24
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER.........................24
5.01 Organization and Corporate Power..................................24
5.02 Authorization.....................................................24
5.03 No Violation......................................................25
5.04 Governmental Authorities; Consents................................25
5.05 Litigation........................................................25
5.06 Brokerage.........................................................25
5.07 Investment Representation.........................................25
5.08 Financing.........................................................25
5.09 Solvency..........................................................26
ARTICLE VI COVENANTS OF THE COMPANY AND SELLERS...............................26
6.01 Conduct of the Business...........................................26
6.02 Transaction Proposal..............................................27
6.03 Non-Competition; Non-Solicitation.................................28
6.04 Access to Books and Records.......................................28
6.05 Financing.........................................................28
6.06 Notification......................................................29
6.07 Regulatory Filings................................................30
6.08 Conditions........................................................30
6.09 Release...........................................................30
6.10 Interim Periodic Financial Statements.............................30
ARTICLE VII COVENANTS OF THE BUYER............................................31
7.01 Access to Books and Records.......................................31
7.02 Notification......................................................31
7.03 Director and Officer Liability and Indemnification................31
7.04 Regulatory Filings................................................32
7.05 Conditions........................................................32
ARTICLE VIII TERMINATION......................................................32
8.01 Termination.......................................................32
8.02 Effect of Termination.............................................33
ARTICLE IX REPRESENTATIVE.....................................................33
9.01 Designation.......................................................33
9.02 Authority.........................................................33
9.03 No Fiduciary Relationship; Exculpation; Reliance..................33
ARTICLE X ADDITIONAL COVENANTS................................................34
10.01 Survival..........................................................34
10.02 Indemnification...................................................35
10.03 Limitation of Recourse............................................38
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10.04 Disclosure Generally..............................................39
10.05 No Additional Representations; Disclaimer.........................39
10.06 Certain Tax Matters...............................................40
10.07 Further Assurances................................................42
ARTICLE XI DEFINITIONS........................................................42
ARTICLE XII MISCELLANEOUS.....................................................52
12.01 Press Releases and Communications.................................52
12.02 Expenses..........................................................52
12.03 Notices...........................................................52
12.04 Assignment........................................................54
12.05 Severability......................................................54
12.06 No Strict Construction............................................55
12.07 Amendment and Waiver..............................................55
12.08 Complete Agreement................................................55
12.09 Counterparts......................................................55
12.10 No Third-Party Beneficiaries......................................55
12.11 Governing Law; Jurisdiction.......................................55
12.12 Waiver of Jury Trial..............................................55
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EXHIBITS
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Exhibit A Company Certificate
Exhibit B Buyer Certificate
Exhibit C Form of Purchase Price Escrow Agreement
Exhibit D Form of Opinion of Counsel to the Company
Exhibit E Debt Commitment Letter and Equity Commitment Letter
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SCHEDULES
Schedule Section Reference
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Equityholders (XX.XX. 1.01, 3.03, 4.04)
Indebtedness (SS. 1.02)
Third Party Consents (SS. 2.01)
Governmental Consents (XX.XX. 2.01, 2.02, 4.13)
Equityholders Authorization (SS. 3.03)
Subsidiaries (SS. 4.02)
Company Authorization (SS. 4.03)
Capitalization (SS. 4.04)
Accounting (SS. 4.05)
Developments (SS. 4.06)
Leased Real Property (SS. 4.07)
Owned Real Property (SS. 4.07)
Taxes (SS. 4.08)
Material Contracts (SS. 4.09)
Suppliers and Customers (SS. 4.19)
Inventory (SS. 4.20)
Indebtedness (SS. 4.26)
Product Warranty Schedule (SS. 4.13)
Intellectual Property (SS. 4.10)
Litigation (SS. 4.11)
Employee Benefits (SS. 4.14)
Environmental Compliance (SS. 4.16)
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Related Persons (SS. 4.21)
Product Warranty (SS. 4.22)
Insurance (SS. 4.24)
Closing Costs (Article XI)
Targeted Working Capital (Article XI)
Transaction Tax Deduction Benefits (Article XI)
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of December 6, 2005, by and
among RGCH Holdings LLC, a Delaware limited liability company (the "Buyer"),
RathGibson, Inc., a Delaware corporation (the "Company"), and the Persons listed
as "Sellers" on the signatures pages attached hereto (collectively referred to
herein as the "Sellers" and individually as a "Seller"). Unless otherwise
provided, capitalized terms used herein are defined in Article XI below.
The Persons listed on the Equityholders Schedule attached hereto
(collectively referred to herein as the "Equityholders" and individually as an
"Equityholder") own (i) all of the issued and outstanding capital stock of the
Company, which as of the date hereof consists of 215,462.25 shares of common
stock ("Common Stock"), par value $0.01 per share (collectively, the "Shares"),
(ii) all of the granted and outstanding Stock Options, which consist of 256
Stock Options and (iii) all of the granted and outstanding Phantom Rights, which
consist of 9,375 Phantom Rights.
Subject to the terms and conditions set forth herein, the Buyer
desires to acquire from the Sellers all of the Shares, and the Sellers desire to
sell to the Buyer all of such Shares owned by the Sellers as of the Closing
Date. In addition, subject to the terms and conditions set forth herein, the
Equityholders shall surrender all Stock Options and Phantom Rights for
cancellation on the Closing Date in accordance with the Stock Option Plan and
the Phantom Rights Plan.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale and Cancellation of Equity Interests.
(a) Closing Transactions. At the Closing, upon the terms and
subject to the conditions set forth in this Agreement, (i) the Sellers shall
sell, assign, transfer and convey to the Buyer, and the Buyer shall purchase and
acquire from the Sellers, all of the Sellers' rights, title and interest in and
to the Shares, free and clear of all Liens and transfer restrictions (other than
restrictions under applicable federal and state securities laws) and (ii) the
Equityholders shall cancel and surrender all of the Equityholders' rights, title
and interest in and to their Stock Options and Phantom Rights, in the aggregate,
against payment by the Buyer of the Initial Purchase Price as determined
pursuant to Section 1.01(b) and Section 1.01(e) below.
(b) Initial Purchase Price. The "Initial Purchase Price" shall
be an amount equal to (i) $260,000,000, minus (ii) the Indebtedness repaid by
Buyer pursuant to Section 1.02(b)(iii) below, minus (iii) the Closing Costs paid
by Buyer pursuant to Section 1.02(b)(ii).
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The Initial Purchase Price shall be subject to adjustment as set forth in
Section 1.01(g) below, and as so adjusted shall be the "Final Purchase Price".
(c) Escrow Amount. At the Closing, the Buyer shall pay or cause
to be paid (by wire transfer of immediately available funds) $2,000,000 of the
Initial Purchase Price (the "Escrow Amount") into an escrow account as a source
for any payment by the Representative on behalf of the Equityholders to the
Buyer as required by Section 1.01(g). The Escrow Amount shall be held in escrow
and disbursed pursuant to the terms hereof and an escrow agreement between the
Buyer, the Representative and the Escrow Agent, dated as of the Closing Date
(the "Escrow Agreement"), in substantially the form attached hereto as Exhibit
C.
(d) Additional Escrow Amount. In the event that the Wisconsin
Tax Audit is not settled prior to the Closing in a manner reasonably
satisfactory to Buyer, at the Closing, the Buyer shall pay or cause to be paid
(by wire transfer of immediately available funds) $1,350,000 of the Initial
Purchase Price (the "Additional Escrow Amount") into an escrow account as a
source for any payment owing by the Company to the Wisconsin Department of
Revenue in respect of the Wisconsin Tax Audit. The Additional Escrow Amount
shall be held in escrow and disbursed pursuant to the terms of an escrow
agreement between the Buyer, the Representative and the Escrow Agent, dated as
of the Closing Date (the "Additional Escrow Agreement"), in form and substance
reasonably satisfactory to the Buyer and the Representative.
(e) Allocation of the Initial Purchase Price. At the Closing,
the remainder of the Initial Purchase Price shall be allocated and distributed
by the Representative among the Equityholders with respect to their Shares and
with respect to their Stock Options and Phantom Rights (as applicable) pursuant
to Section 1.02(b).
(f) Post-Closing Determination. The Final Purchase Price shall
be an amount (as finally determined pursuant to this Section l.0l(f)) equal to
the Initial Purchase Price, plus (or minus) (i) the amount by which the Closing
Working Capital exceeds (or is less than) the Target Working Capital, plus (ii)
the Cash and Cash Equivalents, minus (iii) any Indebtedness not repaid by the
Buyer pursuant to Section 1.02(b)(iii).
(i) Following the Closing Date, the Buyer will conduct a
review of the Company's Closing Working Capital, Target Working Capital,
Indebtedness and Cash and Cash Equivalents, and within 90 days after the
Closing Date, the Buyer will prepare and deliver to the Representative (A)
a consolidated balance sheet of the Company and its Subsidiaries as of the
close of business on the Closing Date, prepared in accordance with GAAP
but without giving effect to the transactions contemplated hereby and the
financing thereof (the "Draft Balance Sheet"), and (B) a computation of
the Final Purchase Price based upon the Draft Balance Sheet. The Buyer
will make available to the Representative all records and work papers used
in preparing the Draft Balance Sheet.
(ii) If the Representative approves in writing the
Buyer's determination of the Final Purchase Price or if the Representative
fails to deliver an Objection Notice as provided below, then the Buyer's
determination of the Final Purchase Price shall be conclusive and binding
on all parties to this Agreement. If the Representative disagrees with the
computation of the Final Purchase Price reflected on the Draft Balance
Sheet,
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the Representative may, within 30 days after receipt of the Draft Balance
Sheet, deliver a written notice (an "Objection Notice") to the Buyer
setting forth the Representative's calculation of the Final Purchase Price
and the basis, with reasonable specificity, for the differences identified
by the Representative. The Representative and the Buyer shall use
reasonable efforts to resolve any disagreements as to the computation of
the Final Purchase Price, but if the parties do not obtain a final
resolution within 45 days after the Representative has received the
Objection Notice, the Representative and the Buyer will jointly retain
Xxxxx Xxxxxxxx LLP (or its successor) (the "Firm") to resolve any
remaining disagreements. The Buyer and the Representative will direct the
Firm to render a determination within 30 days of its retention, and the
Buyer, the Representative and their respective employees or agents will
cooperate with, and provide reasonable access to all relevant records and
work papers to, the Firm during its engagement. The Firm will consider
only those items and amounts in the Draft Balance Sheet set forth in the
Objection Notice which the Buyer and the Representative are unable to
resolve. The Buyer and the Representative shall each submit a binder to
the Firm promptly (and in any event within 15 days after the Firm's
engagement), which binder shall contain such party's computation of
Closing Working Capital, Target Working Capital, Indebtedness and Cash and
Cash Equivalents and information, arguments and support for such party's
position. The Firm shall review such binders and base its determination
solely on such materials in accordance with GAAP and in accordance with
the definitions and other terms and conditions set forth herein. In
resolving any disputed item, the Firm may not assign a value to any item
greater than the greatest value for such item claimed by either party or
less than the smallest value for such item claimed by either party. The
determination of the Firm will be conclusive and binding upon the Buyer,
the Company, the Representative and the Equityholders. For purposes
hereof, the "Closing Balance Sheet" shall mean the Draft Balance Sheet
together with any revisions made thereto pursuant to this Section
1.01(f)(ii).
(iii) The cost of the resolution of the disputed items by
the Firm shall be borne 50% by the Representative (on behalf of the
Equityholders), on the one hand, and 50% by the Buyer, on the other hand.
(g) Post-Closing Adjustment. If Final Purchase Price is greater
than the Initial Purchase Price, the Buyer will, within five (5) business days
after the determination thereof, pay to the Representative (on behalf of the
Equityholders) an amount equal to the Final Purchase Price minus the Initial
Purchase Price. If the Initial Purchase Price exceeds the Final Purchase Price,
the Representative and the Buyer shall deliver joint written instructions to the
Escrow Agent to pay to the Buyer from the Escrow Amount an amount equal to the
Initial Purchase Price minus the Final Purchase Price. To the extent funds
available under the Escrow Agreement are insufficient to make such payment to
the Buyer in full, each Seller shall pay such deficiency (based on such Seller's
Indemnification Share) to the Buyer at the same time as payment is required to
be made from escrow under the Escrow Agreement. Payment of any such amounts
owing pursuant to this Section l.0l(g) shall be by wire transfer of immediately
available funds to the account specified by the payee and shall include simple
interest on such amount at a rate per annum equal to five percent (5%),
commencing on the Closing Date and continuing until the date of full payment.
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(h) Treatment of Stock Options and Phantom Rights. At the
Closing, each holder of outstanding options to acquire Shares and/or phantom
rights issued pursuant to the Stock Option Plan and Phantom Rights Plan,
respectively (each, a "Stock Option" or "Phantom Right," respectively), shall
surrender for cancellation all such Stock Options and Phantom Rights, whether or
not then exercisable, in exchange for a cash payment made by the Representative,
on behalf of the Company, pursuant to Section 1.02(b) (subject to any applicable
withholding tax).
1.02 The Closing
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxx Xxxx &
Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 A.M. on the
third Business Day to occur following full satisfaction or due waiver of all of
the closing conditions set forth in Article II hereof (other than those required
to be satisfied, or only capable of being satisfied, at the Closing) or on such
other date as is mutually agreeable to the Buyer and the Representative. The
date and time of the Closing are herein referred to as the "Closing Date."
(b) Subject to the terms and conditions set forth in this
Agreement, the parties hereto shall consummate the following "Closing
Transactions" at the Closing:
(i) the Representative (on behalf of the Equityholders)
shall deliver to the Buyer certificates representing the Shares duly
endorsed for transfer and instruments evidencing the cancellation and
surrender of the Stock Options and Phantom Rights;
(ii) the Buyer (on behalf of the Company and the
Equityholders) shall pay the Closing Costs by wire transfer of immediately
available funds to the account(s) designated by the Company prior to the
Closing Date;
(iii) the Buyer shall repay (on behalf of the Company) all
amounts necessary to discharge fully the Indebtedness of the Company
identified with an asterisk ("*") on the Indebtedness Schedule (including
all principal, accrued interest, premiums and related fees and expenses)
by wire transfer of immediately available funds to the accounts designated
by the Company prior to the Closing Date, and the Company shall deliver to
the Buyer all appropriate payoff letters, which shall include customary
provisions regarding the releases of all Liens related to such
Indebtedness, and shall make arrangements reasonably satisfactory to the
Buyer for the holders of such Indebtedness to deliver Lien releases and
cancelled notes, as appropriate at the Closing;
(iv) the Buyer shall deliver the Escrow Amount and, if
applicable, the Additional Escrow Amount to the Escrow Agent by wire
transfer of immediately available funds to the account designated by the
Escrow Agent prior to the Closing Date;
(v) the Buyer shall deliver to the Representative (on
behalf of the Equityholders) the amount of the Initial Purchase Price less
the Escrow Amount and, if applicable, the Additional Escrow Amount by wire
transfer of immediately available funds to the accounts designated by the
Representative prior to the Closing Date;
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(vi) the Representative shall deliver to each holder of
Stock Options an amount equal to (A) the product of (1) the number of
shares of Common Stock for which such Stock Option is exercisable
immediately prior to the Closing, multiplied by (2) the excess (if any) of
the Per Share Initial Purchase Price over the applicable per share
exercise price for such Stock Option (less any withholding obligations
described in Section 1.01(h)) minus (B) such Person's Pro Rata Share of
the Escrow Amount and, if applicable, the Additional Escrow Amount by wire
transfer of immediately available funds to the accounts designated by each
holder of Stock Options prior to the Closing Date;
(vii) the Representative shall deliver to each holder of
Phantom Rights that has provided to the Representative a cancellation of
such Phantom Right an amount equal to (A) the product of (1) the number of
Phantom Rights held by such Person immediately prior to the Closing,
multiplied by (2) the Per Share Initial Purchase Price (less any
withholding obligations described in Section 1.01(h)), minus (B) such
Person's Pro Rata Share of the Escrow Amount and, if applicable, the
Additional Escrow Amount by wire transfer of immediately available funds
to the accounts designated by each holder of Phantom Rights prior to the
Closing Date;
(viii) the Representative shall deliver to the each holder
of Shares an amount equal to (A) the product of (1) the number of Shares
held by such Person immediately prior to the Closing, multiplied by (2)
the Per Share Initial Purchase Price minus (B) such Person's Pro Rata
Share of the Escrow Amount and, if applicable, the Additional Escrow
Amount by wire transfer of immediately available funds to the accounts
designated by each such holder prior to the Closing Date; and
(ix) the Buyer, the Company and the Representative (on
behalf of the Equityholders) shall make such other deliveries as are
required by and in accordance with Article II hereof.
1.03 Contingent Payment.
(a) Calculation of Adjusted Consolidated EBITDA. Following the
completion of the Company's fiscal year ending January 31, 2007 (the "2007
Fiscal Year"), the Company shall cause to be calculated and delivered to the
Representative by the earlier of (i) 10 Business Days following the delivery by
the Company's auditors to the Company of the Company's consolidated audited
financial statements for the 2007 Fiscal Year prepared in accordance with GAAP
consistent with the Company's past practices (to the extent such past practices
are in accordance with GAAP) (the "2007 Audited Financial Statements") and (ii)
May 31, 2007, a statement of the Company's Adjusted Consolidated EBITDA for the
2007 Fiscal Year that shall set forth such Adjusted Consolidated EBITDA (such
calculation, the "2007 Adjusted Consolidated EBITDA Statement"), which shall be
derived from the 2007 Audited Financial Statements. The 2007 Adjusted
Consolidated EBITDA Statement will (i) present fairly, in all material respects,
the Adjusted Consolidated EBITDA of the Company and its Subsidiaries for the
2007 Fiscal Year and (ii) include the Buyer's good faith estimate of the
Contingent Amount together with a schedule setting forth in detail the
calculations supporting the computation thereof (the "Estimated Contingent
Amount"). If, within 15 days following its
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receipt of the 2007 Adjusted Consolidated EBITDA Statement, the Representative
does not dispute the Estimated Contingent Amount, the Estimated Contingent
Amount shall be deemed to be the Contingent Amount for all purposes of this
Agreement. In the event the Representative has any dispute with regard to the
calculation of the Estimated Contingent Amount, such dispute shall be resolved
in the same manner as any dispute regarding the Final Purchase Price in
accordance with the provisions of Section l.0l(f) hereof.
(b) Payment Procedures. Subject to Section 1.03(e) hereof, in
the event that (i) Adjusted Consolidated EBITDA of the Company for the 2007
Fiscal Year (as set forth in the 2007 Adjusted Consolidated EBITDA Statement)
exceeds forty-five million dollars ($45,000,000.00), and (ii) the Contingent
Payment shall be equal to a positive amount, the Buyer shall make the Contingent
Payment by causing the Contingent Payment to be paid in immediately available
funds to the Representative (to an account designated by the Representative to
the Company) within five (5) days following the final determination of the
Contingent Amount. The Representative shall promptly thereafter pay each
Equityholder their respective Pro Rata Share of the Contingent Payment.
(c) Contingent Payment Interest. Any portion of the Contingent
Payment or Second Contingent Payment that has not been paid in cash at such time
as each may be otherwise due and payable shall accrue interest at a rate of 10%
per annum, compounded annually.
(d) Continuing Obligations. The Company may take any actions
that it deems appropriate in its sole discretion with regard to the operation of
its business during the period from the Closing Date through the end of the 2007
Fiscal Year, provided that any such actions are not intentionally and primarily
for the purpose of reducing Adjusted Consolidated EBITDA during the 2007 Fiscal
Year.
(e) Reservation of Rights. Notwithstanding anything herein to
the contrary, the Buyer Indemnitees hereby reserve and shall be entitled to
exercise at their sole discretion any and all of their remedies against the
Equityholders with respect to any good faith indemnification claims pursuant to
Article X hereof, including, without limitation, any rights of offset against
amounts that would otherwise be payable as the Contingent Payment or Second
Contingent Payment hereunder.
1.04 Second Contingent Payment.
(a) Subject to Section 1.03(e) hereof, in the event any good
faith claims are outstanding pursuant to Article X on the date the Contingent
Payment is to be made pursuant to Section 1.03 hereto, and such claims are
subsequently resolved, the Buyer shall make a second contingent payment (such
payment, the "Second Contingent Payment"), which shall be equal to the
difference of (i) the aggregate dollar value of any of the claims by the Buyer
Indemnitees that had not been fully resolved to satisfaction pursuant to Section
10.02 on the date the Contingent Payment was made minus (ii) the sum of all
indemnification claims pursuant to Article X that had been resolved since the
date the Contingent Payment was made.
(b) Payment Procedures. Subject to Section 1.03(e) hereof,
should there be a Second Contingent Payment, the Buyer shall cause the Second
Contingent Payment to be paid in
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immediately available funds to the Representative (to an account designated by
the Representative to the Company) as soon as reasonably practicable following
the resolution of all claims pursuant to Article X. The Representative shall
promptly thereafter pay each Equityholder their respective Pro Rata Share of the
Second Contingent Payment.
ARTICLE II
CONDITIONS TO CLOSING
2.01 Conditions to the Buyer's Obligations. The obligation of the
Buyer to consummate the transactions contemplated by this Agreement is subject
to the satisfaction or waiver of the following conditions as of the Closing:
(a) the representations and warranties set forth in Articles III
and IV hereof shall be true and correct in all material respects (without taking
into account any materiality or Material Adverse Effect qualifiers therein
(other than such qualifiers contained in the first sentence of Section 4.06)) at
and as of the Closing Date as though then made and as though the Closing Date
were substituted for the date of this Agreement throughout such representations
and warranties except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct in all material respects (without taking
into account any materiality or Material Adverse Effect qualifiers therein
(other than such qualifiers contained in the first sentence of Section 4.06) as
of such earlier date), in each case after giving effect to all disclosures on
the Updated Schedules delivered to the Buyer pursuant to Section 6.06 which have
not had or would not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect;
(b) the Company and the Sellers shall have performed in all
material respects all of the covenants and agreements required to be performed
by them under this Agreement at or prior to the Closing;
(c) no judgment, decree or order of any court or government body
of competent jurisdiction shall have been issued which would, and no action or
proceeding before any court or government body of competent jurisdiction shall
be pending wherein an unfavorable judgment, decree or order would, in each case,
prevent or restrict the performance of this Agreement or the consummation of any
of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded;
(d) all consents that are set forth on the Third-Party Consents
Schedule attached hereto shall have been obtained;
(e) the applicable waiting periods, if any, under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx") shall have
expired or been terminated, and all other governmental filings, consents,
authorizations and approvals that are set forth on the Governmental Consents
Schedule attached hereto shall have been duly made and obtained; and
(f) the Company or the Representative (on behalf of the
Equityholders), as the case may be, shall have delivered to the Buyer each of
the following:
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(i) a certificate of the Company in the form set forth
in Exhibit A attached hereto, dated the Closing Date, stating that the
preconditions specified in Sections 2.01 (a), (b) and (c) hereof
have been satisfied;
(ii) certified copies of the certificate of incorporation
and bylaws of the Company and each of its Subsidiaries and the resolutions
of the Company's board of directors approving this Agreement and the
transactions contemplated hereby;
(iii) an affidavit, under penalties of perjury, certifying
that the Company is not and has not been a United States real property
holding corporation, dated as of the Closing Date and in form and
substance required under Treasury Regulation SS.1.1445-2(c)(3) and
SS.1.897-2(h);
(iv) copies of the third party and governmental consents
required by subsections (d) and (e) above and the payoff letters,
Lien releases and cancelled notes required pursuant to Section
1.02(b)(iii) above;
(v) the instruments representing the Shares duly
endorsed for transfer;
(vi) the instruments evidencing the cancellation and
surrender of all Stock Options and Phantom Rights;
(vii) resignations effective as of the Closing Date from
all directors of the Company and its Subsidiaries;
(viii) a certificate of good standing from the Secretary of
State of Delaware evidencing the Company's good standing in such
jurisdiction, and a copy of each Subsidiary's certificate of
incorporation, certified by the Secretary of State of Delaware and a
certificate of good standing from the Secretary of State of Delaware
evidencing such Subsidiary's good standing in such jurisdiction; and
(ix) the Escrow Agreement and, if applicable, the
Additional Escrow Agreement executed by the Representative and the Escrow
Agent.
(g) Buyer shall have obtained debt financing adequate to pay in
full, in cash, at Closing the Initial Purchase Price, all on terms substantially
consistent with the Debt Commitment Letter;
(h) There shall have been no Material Adverse Change since the
date of this Agreement;
(i) Buyer shall have received an opinion of Xxxxxxxx & Xxxxx
LLP, counsel to the Company, to the effect set forth in Exhibit D, which
opinions may be relied upon by the Buyer and the lenders providing the financing
for the Buyer to consummate the transactions contemplated hereby; and
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(j) The Company shall have delivered to Buyer payoff letters (in
a form reasonably satisfactory to Buyer) for each item of Indebtedness of the
Company and its Subsidiaries identified with an asterisk ("*") on the
Indebtedness Schedule.
2.02 Conditions to the Sellers' Obligations. The obligations of
the Sellers to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions as of the Closing:
(a) the representations and warranties set forth in Article V
hereof shall be true and correct in all material respects at and as of the
Closing Date as though then made and as though the Closing Date were substituted
for the date of this Agreement throughout such representations and warranties,
except to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date);
(b) the Buyer shall have performed in all material respects all
the covenants and agreements required to be performed by it under this Agreement
at or prior to the Closing;
(c) no judgment, decree or order of any court or government body
of competent jurisdiction shall have been issued which would, and no action or
proceeding before any court or government body of competent jurisdiction shall
be pending wherein an unfavorable judgment, decree or order would, in each case,
prevent or restrict the performance of this Agreement or the consummation of any
of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded;
(d) the applicable waiting periods, if any, under the HSR Act
shall have expired or been terminated, and all other governmental filings,
consents, authorizations and approvals that are set forth on the Governmental
Consents Schedule attached hereto shall have been duly made and obtained; and
(e) the Buyer shall have delivered to the Representative (on
behalf of the Equityholders) (i) a certificate in the form set forth as Exhibit
B attached hereto, dated the Closing Date, stating that the preconditions
specified in subsections (a), (b) and (c) hereof have been satisfied and (ii)
certified copies of the certificate of formation of the Buyer and the
resolutions of the Buyer's managing member approving the transactions
contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Each Seller, solely for himself, herself or itself (on a several,
and not joint and several, basis), represents to the Buyer as follows:
3.01 Execution, Delivery; Valid and Binding Agreements. This
Agreement has been duly executed and delivered by such Seller, and assuming that
this Agreement is the valid and binding agreement of the Buyer, this Agreement
constitutes the valid and binding obligation of such Seller, enforceable in
accordance with its terms (subject to the effects of bankruptcy,
9
insolvency, reorganization, moratorium, fraudulent conveyance or other laws not
or hereafter in effect relating to creditors' rights generally and general
principles of equity).
3.02 Authority. Such Seller has all requisite power and authority
and full legal capacity to execute and deliver this Agreement and to perform
his, her or its obligations hereunder (including, without limitation, all right,
power, capacity and authority to sell, transfer, convey and surrender the
Shares, Stock Options and Phantom Rights as provided by this Agreement, free and
clear of all Liens other than Liens imposed by applicable federal and state
securities law restrictions).
3.03 No Breach. Except as set forth on the attached Equityholders
Authorization Schedule, the execution, delivery and performance of this
Agreement by each Seller and the consummation of the transactions contemplated
hereby do not conflict with or result in any breach of, constitute a default
under, result in a violation of, result in the creation of any Lien upon the
Shares held by such Seller, or require any authorization, consent, approval,
exemption or other action by or notice to any court or other governmental body,
under the provisions of such Seller's governing organizational documents (i.e.,
limited liability company operating agreement, certificate of incorporation,
bylaws), if applicable, or any indenture, mortgage, lease, loan agreement or
other agreement or instrument to which such Seller is bound, or any law,
statute, rule or regulation or order, judgment or decree to which such Seller is
subject.
3.04 Ownership. Such Seller is the record owner of the number of
Shares, Stock Options and Phantom Rights as set forth opposite his, her or its
name on the attached Equityholders Schedule. On the Closing Date, such Seller
shall transfer to the Buyer good title to such Shares, free and clear of all
Liens, other than applicable federal and state securities law restrictions, and
surrender for cancellation the Stock Options and Phantom Rights in accordance
with the Stock Option Plan and Phantom Rights Plan, respectively.
3.05 Litigation. Except as set forth on the attached
Equityholders Litigation Schedule, there are no actions, suits or proceedings
pending or, to such Sellers' knowledge, threatened against such Seller, at law
or in equity, or before or by any domestic or foreign, federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, and the Sellers are not subject to any outstanding judgment,
order or decree of any court or governmental body that would prevent or restrict
such Seller's performance of its obligations under this Agreement or the
consummation of the transactions contemplated hereby.
3.06 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Sellers, except for the fees and expenses of Xxxxxx Xxxxxxxx &
Co., which shall be paid by the Buyer (on behalf of the Company and the Sellers)
as a Closing Cost pursuant to Section 1.02(b)(ii).
10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that:
4.01 Organization and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and the Company has all requisite corporate power and authority
necessary to own, lease, license and operate its properties and to carry on its
businesses as now conducted. The Company is qualified and licensed to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified would reasonably be expected to have a Material Adverse Effect.
4.02 Subsidiaries. Except as set forth on the attached
Subsidiaries Schedule, neither the Company nor any of its Subsidiaries owns or
holds the right to acquire any stock, equity interest, partnership interest or
joint venture interest or other equity ownership interest in any other
corporation, organization or entity. The Subsidiaries Schedule sets forth the
name of each Subsidiary, the jurisdiction of its incorporation or organization
and the Persons owning the outstanding capital stock of such Subsidiary. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and each Subsidiary has all
requisite corporate power and authority necessary to own, lease, license and
operate its properties and to carry on its businesses as now conducted.
4.03 Authorization. No Breach. Except as set forth on the
attached Company Authorization Schedule, the execution, delivery and performance
of this Agreement by the Company and the Sellers and the consummation of the
transactions contemplated hereby do not conflict with or (with or without due
notice or lapse of time or both) result in any material breach of, constitute a
material default under, result in a material violation of, give rise to any
right of termination, cancellation, payment or acceleration under, result in the
creation of any Lien, upon any material assets or properties of the Company or
any of its Subsidiaries, or require any material authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the Company's or any of its
Subsidiaries' governing organizational documents (i.e., limited liability
company operating agreement, certificate of incorporation, bylaws) or any
material Contract, Permit or Law to or by which the Company or any of its
Subsidiaries is subject or bound. Assuming that this Agreement is a valid and
binding obligation of the Buyer, this Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms (subject to
the effects of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws not or hereafter in effect relating to creditors'
rights generally and general principles of equity).
4.04 Capitalization. 215,462.25 Shares are issued and outstanding
and are owned of record by the Sellers in the amounts as set forth on the
Equityholders Schedule. All issued and outstanding shares of capital stock of
each of the Subsidiaries are owned of record and beneficially by the Company or
one of its Subsidiaries, in each case free and clear of all Liens, except as set
forth on the attached Capitalization Schedule. All of the Shares, and the
outstanding shares of capital stock of each of its Subsidiaries, have been duly
authorized and are validly issued, fully paid and nonassessable. Except as set
forth on the Capitalization Schedule,
11
neither the Company nor any Subsidiary has any other capital stock, equity
securities or securities containing any equity features authorized, issued or
outstanding, and there are no agreements, options, warrants or other rights or
arrangements existing or outstanding which provide for the sale, grant or
issuance of any of the foregoing by the Company or any Subsidiary. Except as set
forth on the Capitalization Schedule, there are no rights, subscriptions,
warrants, options, conversion rights or agreements of any kind outstanding to
purchase or otherwise acquire any shares of capital stock or other equity
securities of the Company or any Subsidiary of any kind. Except as set forth on
the Capitalization Schedule, there are no agreements or other obligations
(contingent or otherwise) which require the Company or any Subsidiary to
repurchase or otherwise acquire any shares of the Company's capital stock or
other equity securities.
4.05 Financial Statements. Attached to the Financial Statements
are true and correct copies of (i) the Company's unaudited consolidated balance
sheets as of April 30, 2005, July 31, 2005 (the "Latest Balance Sheet") and
October 31, 2005, and the related statements of income and cash flow for the
three-, six- and nine-month periods then ended (all of the foregoing statements
referred to herein as the "Unaudited Financial Statements") and (ii) the
Company's audited consolidated balance sheet and statements of income, cash flow
and shareholders' equity for the fiscal years ended January 31, 2003, January
31, 2004 and January 31, 2005 (collectively the "Audited Financial Statements"
and together with the Unaudited Financial Statements, collectively, the
"Financial Statements"). Except as set forth on the attached Accounting
Schedule, the Financial Statements have been based upon the information
contained in the Company's and its Subsidiaries' books and records, have been
prepared in accordance GAAP and present fairly in all material respects the
financial condition, cash flows and results of operations of the Company and its
Subsidiaries as of the times and for the periods referred to therein, subject in
the case of the Unaudited Financial Statements to the absence of footnote
disclosures and other presentation items and changes resulting from normal
year-end adjustments that will not be material in nature or amount.
4.06 Absence of Certain Developments. Since January 31, 2005,
there has not been any Material Adverse Change. Except as set forth on the
attached Developments Schedule and except as expressly contemplated by this
Agreement, since the date of the Latest Balance Sheet, neither the Company nor
any Subsidiary has:
(a) borrowed any amount or incurred or become subject to any
material liabilities, except liabilities incurred in the ordinary course of
business, liabilities under contracts entered into in the ordinary course of
business and borrowings from banks (or similar financial institutions) necessary
to meet ordinary course working capital requirements;
(b) mortgaged, pledged or subjected to any Lien, any portion of
its assets, except Liens for current property taxes not yet due and payable;
(c) sold, assigned or transferred any portion of its tangible
assets, except in the ordinary course of business;
(d) sold, assigned or transferred any material patents,
trademarks, trade names, copyrights, trade secrets or other intangible assets;
12
(e) suffered any extraordinary losses or waived any rights of
material value;
(f) issued, sold or transferred any of its equity interests or
other equity securities, securities convertible into its equity interests or
other equity securities or warrants, options or other rights to acquire its
equity interests or other equity securities, or any bonds or debt securities;
(g) declared or paid any dividends or made any distributions on
the Company's equity interests or other equity securities or redeemed or
purchased any of the Company's equity interests or other equity securities;
(h) made any capital expenditures or commitments exceeding
$100,000, individually or $500,000 in the aggregate, per expenditure or
commitment;
(i) acquired or agreed to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in, a substantial portion
of the assets of, or by any other manner, any business or any Person or
organization or division thereof;
(j) increased the compensation or benefits of any officer,
director, employee or independent contractor of the Company or any of its
Subsidiaries (except as required by any Employee Benefit Plan as in effect on
the date hereof) or amended any other terms of employment of such persons, in
each case, other than in the ordinary course of business;
(k) other than for payments that will constitute Management
Closing Costs hereunder entered into, terminated, amended or modified any
employment agreement, retention agreement, change in control agreement,
severance agreement, or other similar arrangement with or granted any severance
or termination pay to any current or former officer, director, employee or
independent contractor of the Company or any of its Subsidiaries;
(l) modified, amended or terminated any Material Contracts;
(m) engaged in any Related Party transactions; or
(n) entered into any other material transaction, except in the
ordinary course of business.
4.07 Title to Properties.
(a) The real property demised by the leases described on the
attached Leased Real Property Schedule (the "Leases") constitutes all of the
real property leased by the Company and its Subsidiaries (the "Leased Real
Property").
(b) The Leases are in full force and effect, and the Company or
the Subsidiary indicated opposite such Lease on such schedule holds a valid and
existing leasehold interest under such Lease, subject only to Permitted
Encumbrances (as hereinafter defined), for the term set forth on the Leased Real
Property Schedule. The Company has made available to the Buyer complete and
accurate copies of each of the Leases, and none of the Leases has been modified,
amended or assigned in any material respect, except to the extent that such
modifications,
13
amendments or assignments are listed on such schedule and copies thereof have
been made available to the Buyer. Neither the Company nor any Subsidiary nor, to
the Knowledge of the Company, any other party thereto, is in default (including
unmatured defaults) in any material respect under any of such Leases.
(c) Except as set forth on the attached Owned Real Property
Schedule, neither the Company nor any of its Subsidiaries owns any real
property. The real property described on the attached Owned Real Property
Schedule constitutes all of the real property owned by the Company or any of its
Subsidiaries (the "Owned Real Property"). The Owned Real Property Schedule and
the Leased Real Property Schedule are sometimes hereinafter referred to
collectively as the "Real Property Schedules", and the Owned Real Properties and
the Leased Real Properties are sometimes hereinafter referred to collectively as
the "Real Properties".
(d) Either the Company or the Subsidiary specified opposite each
Owned Real Property on the Owned Real Property Schedule owns good, marketable
and insurable title to such Owned Real Property, free and clear of all Liens and
other restrictions or matters affecting title ("Encumbrances"), other than (A)
real estate taxes and installments of special assessments not yet due and
payable, (B) easements, covenants and restrictions of record, (C) utility
easements, building restrictions, zoning restrictions and other easements and
restrictions which are not violated by existing usage of and improvements on
such property, (D) matters which would be disclosed by an accurate survey of
each parcel of real property, (E) public roads and highways, (F) mechanics and
similar statutory Liens arising or incurred in the ordinary course of business
and securing amounts which are not delinquent, or which are being contested in
good faith by appropriate proceedings described on such schedule and for which
adequate reserves are made in the Financial Statements in accordance with GAAP
have been made, and (G) other encumbrances and exceptions set forth on the Real
Property Schedule (the "Permitted Encumbrances").
(e) There are no leases, subleases, licenses, concessions or
other agreements granting to any third party or parties the right of use or
occupancy of any portion of any Real Property.
(f) There are no outstanding options or rights of first refusal
or first offer to purchase any Real Property, or any portion thereof or interest
therein.
(g) With respect to the Owned Real Property and, to the
Knowledge of the Company, with respect to the Leased Real Property, there is not
pending or threatened, any (i) zoning application or proceeding, (ii)
condemnation, eminent domain or taking proceeding, (iii) tax certiorari
proceeding or other tax contest or dispute, or (iv) other claim, action or
proceeding or other matter relating to the interest of the Company or any of its
Subsidiaries in any Real Property (or the interest of the landlord in any Leased
Real Property), or portion of either thereof or interest therein that would
materially adversely affect the ownership, use, occupancy or value thereof.
(h) The Company and its Subsidiaries have in full force and
effect all material consents, approvals, registrations, applications,
qualifications, authorizations, certificates (including certificates of
occupancy), filings, franchises, licenses, notices, permits (including
14
zoning permits) and rights necessary for the current use and occupancy by the
Company and the Company Subsidiaries of their respective Real Property and the
conduct by them of the Business thereat, all of which are identified on the Real
Property Schedule (collectively, "Permits") and there has occurred no material
default under any Permit. No representation is given under this clause with
respect to Permits required by Environmental Laws.
4.08 Tax Matters. Except as set forth on the attached Taxes
Schedule:
(a) The Company and each of its Subsidiaries and each affiliated
group (within the meaning of Section 1504 of the Code) or consolidated, combined
or unitary group (under state or local Tax law) of which the Company or any such
Subsidiary or any predecessor of the Company or any such Subsidiary is or has
been a member (each, an "Affiliated Group") have filed all Tax Returns which are
required to be filed by them, each such Tax Return is true, correct and complete
in all material respects and the Company and its Subsidiaries have paid all
Taxes shown as due on such Tax Returns. The Company, its Subsidiaries and each
Affiliated Group have paid all Taxes due from any of them and have withheld and
paid over to the appropriate taxing authority all Taxes that any of them is
required to withhold from amounts paid or owing to any employee, creditor or
other third party. Since the date of the Latest Balance Sheet, the Company has
not incurred any material liability for Taxes other than in the ordinary course
of business.
(b) Neither the Company, any Affiliated Group nor any Subsidiary
of the Company has waived any statute of limitations with respect to any Taxes
or agreed to any extension of time with respect to any Tax assessment or
deficiency.
(c) No audits or administrative or judicial proceedings are
pending or being conducted, or, to the Knowledge of the Company, are threatened
with respect to the Taxes of the Company, or any of its Subsidiaries or any
Affiliated Group.
(d) Neither the Company nor any of its Subsidiaries is liable
for the Taxes of another Person (i) under Section 1.1502-6 of the Treasury
Regulations (or any comparable provisions of state, local or foreign law), (ii)
as a transferee or successor, or (iii) by contract or indemnity. Neither the
Company nor any of its Subsidiaries is a party to any Tax sharing agreement.
(e) Neither the Company nor any of its Subsidiaries has made any
payments, and neither the Company nor any of its Subsidiaries is or will become
obligated to make any payments that will be nondeductible under Code Section
280G (or any corresponding provision of state or local income Tax law).
(f) No Tax Liens have been filed and no claims are being
asserted with respect to any Taxes of the Company, any Subsidiary or any
Affiliated Group.
(g) Neither the Company nor any of its Subsidiaries has been
included in any Affiliated Group other than the Affiliated Group for Federal
income tax purposes of which the Company is the common parent.
15
(h) Neither the Company nor any Subsidiary is required to
include in income any adjustment pursuant to Section 481(a) of the Code.
(i) Neither the Company, any Affiliated Group nor any Subsidiary
has filed with respect to any item a disclosure statement pursuant to Section
6662 of the Code or any comparable disclosure with respect to foreign, state
and/or local Tax statutes.
(j) No Federal income tax audits or other judicial or
administrative proceedings relating to Federal income taxes of the Company, any
Subsidiary of the Company or any Affiliated Group have concluded within the past
three years.
(k) In the past five years, neither the Company nor any
Subsidiary has been a party to a transaction that was reported as a
reorganization within the meaning of Code Section 368 or has distributed stock
of a corporation (or has had its own stock distributed) in a transaction that
was reported to qualify under Code Section 355.
4.09 Material Contracts.
(a) The Material Contracts Schedule lists or, if not in writing,
describes in reasonable detail, all Contracts not fully performed to which the
Company or any of its Subsidiaries is party or by which the assets or properties
of the Company or any of its Subsidiaries is bound (i) entered into in the
ordinary course of business and which may not be terminated by the Company or
any of its Subsidiaries with less than 90 days prior notice, (ii) for the
purchase by any of them of any materials, supplies, equipment or services for
more than $250,000 per year, (iii) for the sale of any product or service for
more than $250,000 per year, (iv) for the purchase or improvement of any fixed
or capital assets or any business for more than $250,000, (v) for the sale of
any fixed or capital assets or any business for more than $250,000 as to any
individual or series of related items; (vi) all agreements with current and
former employees, officers and directors for more than $75,000 per year, (vii)
all Contracts relating to any strategic alliance or similar arrangement, (viii)
all employment, management, consulting, independent contractor, subcontractor,
retainer or other similar type of Contract under which services are provided by
fees or fees are paid to any person and agreements or commitments to enter into
the same, (ix) all Contracts of which the benefits of which will be increased,
or the vesting of the benefits will be accelerated, by the occurrence of any
transactions contemplated by this Agreement other than those for which such
obligations will constitute Management Closing Costs hereunder, (x) any fidelity
or surety bond or completion bond, (xi) any Contract providing for
indemnification (other than ordinary course of business Contracts with
provisions for indemnification) or guaranty, (xii) any Contract containing any
covenant limiting the freedom of the Company or any Subsidiary (or any of their
current or future Affiliates) to solicit for employment or hire any Person for
employment by the Company or any of its Subsidiaries, (xiii) all mortgages,
indentures, loans or credit agreements, security agreements, guaranties or other
agreements or instruments relating to the borrowing of money or extension of
credit or to mortgaging, pledging or otherwise placing a Lien on any portion of
the Company's or any of its Subsidiaries' assets, and any other letters of
credit, financing, surety, bonding or similar arrangements pursuant to which the
Company or any of its Subsidiaries secures any of its obligations, including
insurance obligations, (xiv) all Contracts with Related Parties, (xv) all
Intellectual Property Contracts (other than for the use of computer software
which is generally
16
commercially available "off the shelf"), (xvi) all Hedging Agreements, (xvii)
all distribution, joint marketing or development Contracts, (xviii) all
collective bargaining agreements or Contracts with any labor union; (xix) all
leases or Contracts under which the Company or any of its Subsidiaries is lessee
of, or holds or operates any personal property owned by any other party, for
which the annual rental exceeds $100,000, (xx) all Contracts with Equityholders
other than those for which the obligations thereunder would constitute
Management Closing Costs, and (xxi) all joint venture, partnership agreement,
limited liability company agreement and any other similar Contract involving a
sharing of profits or losses, costs or liabilities by the Company or any of its
Subsidiaries with any other Person. The Contracts required to be included on the
Contracts Schedule pursuant to clauses (i)-(xxi) above are collectively referred
to herein as the "Material Contracts."
(b) The Buyer either has been supplied with, or has been given
access to, a true and correct copy of all written contracts which are referred
to on the Contracts Schedule, together with all material amendments, waivers or
other changes thereto.
(c) Neither the Company nor any Subsidiary is in material breach
or default under any Material Contract and to the Knowledge of the Company, no
other party thereto is in material breach or default under any such Material
Contract.
(d) Each Material Contract is in full force and effect and
constitutes a legal, valid and binding obligation of the Company (subject to the
effects of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws not or hereafter in effect relating to creditors'
rights generally and general principles of equity).
(e) No party to any Material Contract has given the Company or
any Subsidiary (and neither the Company nor any Subsidiary has given its
counter-party) written notice of its intention to cancel, terminate or fail to
renew any Material Contract.
4.10 Intellectual Property. Except as set forth on the
Intellectual Property Schedule:
(a) the attached Intellectual Property Schedule sets forth all
Intellectual Property (other than Trade Secrets) which is owned by the Company
or any of its Subsidiaries and which is Registered or material to the Business.
(b) the Company and its Subsidiaries, as the case may be, own
and possess all right, title and interest in and to, or possess the right to
use, pursuant to a license, sublicense, agreement or permission, the
Intellectual Property used in the operation of the Business as presently
conducted;
(c) the Company or its Subsidiaries has good title to each item
of Intellectual Property owned by it, free and clear of any Lien other than
Permitted Encumbrances;
(d) there are no actions, suits or proceedings (collectively,
"Suits") pending or, to the Knowledge of the Company, threatened by or against
the Company or any of its Subsidiaries that involve claims concerning the
infringement or other violation, validity, enforceability, ownership or right to
use any Intellectual Property, and, to the Knowledge of the
17
Company, neither the Company nor the Subsidiaries is currently infringing or
misappropriating the Intellectual Property of any other Person and no other
Person is currently infringing or misappropriating the Intellectual Property of
the Company or any of its Subsidiaries;
(e) the Company or a Subsidiary has timely made all filings,
payments and ownership recordations with the appropriate foreign and domestic
agencies required to maintain in subsistence all Registered Intellectual
Property owned by the Company or a Subsidiary, and, to the Knowledge of the
Company, all material Intellectual Property owned by the Company or any of its
Subsidiaries is valid and enforceable; and
(f) the Company and its Subsidiaries have taken reasonable
measures consistent with industry practice to protect the secrecy,
confidentiality and value of all Trade Secrets used in the Business
(collectively, "Business Trade Secrets"), and to the Knowledge of the Company,
no unauthorized disclosure of any Business Trade Secrets has been made.
4.11 Litigation. Except as set forth on the attached Litigation
Schedule, (i) there are no actions, suits or proceedings pending or, to the
Knowledge of the Company, threatened against the Company or any Subsidiary, (ii)
there are no pending or threatened actions, suits or proceedings brought by the
Company or any of its Subsidiaries, in each case, at law or in equity, or before
or by any Governmental Authority and (iii) neither the Company nor any
Subsidiary is subject to any outstanding judgment, order or decree of any court
or Governmental Authority.
4.12 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Company, any Subsidiary or the Equityholders, except for the
fees and expenses of Xxxxxx Xxxxxxxx & Co., which shall be paid by the Buyer (on
behalf of the Company and the Equityholders) as a Closing Cost pursuant to
Section 1.02(b)(ii).
4.13 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act and except as set forth on the Governmental Consents
Schedule, no material permit, consent, approval or authorization of, or
declaration to or filing with, any governmental or regulatory authority is
required in connection with any of the execution, delivery or performance of
this Agreement by the Company or the Sellers or the consummation by the Company
or the Sellers of any other transaction contemplated hereby.
4.14 Employee Benefit Plans. The attached Employee Benefits
Schedule contains a true and complete list of each employee benefit plan as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and each deferred compensation, stock option, restricted
stock, stock purchase, severance or termination pay, employment, consulting,
retention, change in control, bonus or incentive plan, program, agreement or
arrangement (other than those for which such obligations will constitute
Management Closing Costs hereunder) and each other material employee benefit
plan, program, agreement or arrangement, whether or not subject to ERISA and
whether or not written (including any funding mechanism therefor now in effect
or required in the future) that the Company or any of its Subsidiaries sponsors,
maintains, contributes to or is required to
18
contribute to, or has any liability with respect to any current or former
employee, leased employee, director, officer, shareholder or independent
contractor of the Company or any of its Subsidiaries (the "Employee Benefit
Plans"). The Company has made available to Buyer true and complete copies of
each Employee Benefit Plan or written summaries of any unwritten material
Employee Benefit Plan and, to the extent applicable, (i) the summary plan
description; (ii) the most recent determination letter received from the
Internal Revenue Service; (iii) the most recent Form 5500 (including all
schedules); (iv) the two most recent audited financial statements and actuarial
valuation reports; and (v) any related trust agreement or other funding
instrument. Each Employee Benefit Plan has been maintained in all material
respects in compliance with its terms and with the requirements prescribed by
any and all laws applicable to such Plan, including the Code and ERISA. No
notice has been issued by any governmental authority questioning or challenging
such compliance. Each Employee Benefit Plan which is intended to be qualified
within the meaning of Section 401(a) of the Code has received a favorable
determination or opinion letter as to its qualification, and to the Knowledge of
the Company, nothing has occurred since the date of such determination, whether
by action or failure to act, that could reasonably be expected to cause the loss
of such qualification. None of the Employee Benefit Plans are subject to Title
IV of ERISA, and neither the Company nor any of its Subsidiaries has any
liability or obligation with respect to any employee benefit plan subject to
Title IV of ERISA. No event has occurred and no. condition exists that would
subject the Company or any of its Subsidiaries, by reason of its affiliation
with any member of its "Controlled Group" (defined as any organization which is
a member of a controlled group of organizations within the meaning of Sections 4
14(b), (c), (m) or (o) of the Code), to any Tax, fine, Lien or penalty imposed
by ERISA or the Code. Except as set forth on the Employee Benefits Schedule,
neither the Company nor any of its Subsidiaries has incurred any current or
projected liability in respect of post-employment or post-retirement health or
welfare benefits for current, former or retired employees of the Company or any
of its Subsidiaries, except as required to avoid an excise tax under Section
4980B of the Code. With respect to any Employee Benefit Plan, no actions, suits
or claims (other than routine claims for benefits in the ordinary course) are
pending or, to the Knowledge of the Company, threatened and no facts or
circumstances exist that could reasonably be expected to give rise to any such
actions, suits or claims. Except as set forth on the Employee Benefits Schedule,
the consummation of the transactions contemplated by this Agreement, either
alone or in combination with another event, will not increase any benefits or
result in the acceleration or creation of any rights of any person to benefits
under any Employee Benefit Plan (including but not limited to, the acceleration
of the vesting or exercisability of any stock options, the acceleration of the
accrual or vesting of any benefits under any Employee Benefit Plan, or the
acceleration or creation of any rights under any severance or change in control
agreement).
4.15 Compliance with Laws. Since January 31, 2001, the Company
and each Subsidiary is and has been in compliance in all material respects with
all applicable laws, statutes, ordinances, codes, Permits, rules, regulations or
orders or decrees (collectively, "Laws") of any foreign, federal, state or local
government or governmental authority, agency, department, board, bureau,
commission or instrumentality or any political subdivision, domestic or foreign,
of any thereof, any entity exercising executive, legislative, judicial,
regulatory or administration functions of or pertaining to government, or any
court tribunal or arbitrator(s) of competent jurisdiction, and any governmental
or non-governmental self-regulatory organization, agency or authority,
(collectively, "Governmental Authorities"). This Section 4.15 does not relate to
19
environmental matters, it being the intent of the parties hereto that
environmental matters are the subject of Section 4.16.
4.16 Environmental Compliance. Except as set forth on the
Environmental Compliance Schedule:
(a) The operations of the Company and its Subsidiaries comply in
all material respects with all applicable Environmental Laws;
(b) The Company and its Subsidiaries have obtained and are in
compliance in all material respects with all necessary Permits that are required
under Environmental Laws to operate the Real Properties and business of the
Company and its Subsidiaries as operated on the Closing Date;
(c) There has been no Release of Hazardous Materials at any of
the Real Property owned or operated by the Company or any of its Subsidiaries
or, to the Knowledge of the Company, by a predecessor in interest, or to the
Knowledge of the Company, at any disposal or treatment facility which received
Hazardous Materials generated by the Company or its Subsidiaries or any
predecessor in interest, which, in each case, would reasonably be expected to
result in material Environmental Liabilities;
(d) No Environmental Claims are pending against the Company or
any of its Subsidiaries or, to the Knowledge of the Company, against any
predecessor in interest, nor to the Company's Knowledge, has any notice of any
threatened or pending Environmental Claim against the Company, any of its
Subsidiaries or any of their respective predecessors in interest been received
by the Company or any of its Subsidiaries;
(e) To the Knowledge of the Company, no Environmental Claims are
pending against any facilities that received Hazardous Materials generated by
the Company or any of its Subsidiaries or, to the Knowledge of the Company
facilities that received Hazardous Materials generated by any predecessor in
interest;
(f) The Company has made available to Buyer true and complete
copies of all environmental reports, studies, investigations or material
correspondence regarding any material Environmental Liabilities relating to the
Company or its Subsidiaries or "Recognized Environmental Conditions" as that
term is defined by ASTM E 1527-97, at any of the Real Properties, to the extent
the foregoing are in the possession, custody or reasonable control of the
Company or its Subsidiaries; and
(g) The representations and warranties contained in this Section
4.16 constitute the sole and exclusive representations and warranties of the
company in connection with environmental matters.
4,17 Undisclosed Liabilities. Neither the Company nor any
Subsidiary has any liability or obligation (whether accrued, absolute,
contingent, unasserted or otherwise) of any nature, of a type required by GAAP
to be reflected on a consolidated balance sheet, including indebtedness for
borrowed money or guarantees, except for (a) liabilities set forth on the Latest
Balance Sheet, (b) liabilities incurred in the ordinary course of business since
the date of the
20
Latest Balance Sheet that do not exceed $50,000 individually or $100,000 in the
aggregate, and (c) liabilities disclosed on the Developments Schedule.
4.18 Labor and Employment Matters. Neither the Company nor any of
its Subsidiaries is a party to or bound by any collective bargaining agreement
or any other agreement with a labor union. No employees of the Company or any of
its Subsidiaries, in their capacity as such, are represented by any labor
organization; no labor organization or group of employees of the Company or any
of its Subsidiaries has made a pending demand in writing for recognition or
certification to the Company or any of its Subsidiaries and there are no
representation or certification proceedings or petitions presently pending or
threatened, to be brought or filed with the National Labor Relations Board or
any other labor relations tribunal or authority relating to the Company or any
of its Subsidiaries. To the Knowledge of the Company, there are no organizing
activities involving the Company or any of its Subsidiaries pending with any
labor organization or group of employees of the Company or any of its
Subsidiaries. There is no pending or, to the Knowledge of the Company,
threatened, labor dispute, strike, slowdown, work stoppage or lockout at the
Company or any of its Subsidiaries. No event giving rise to the requirement that
notice be given to any employee of the Company or any of its Subsidiaries under
the Worker Adjustment and Retraining Notification Act or under any similar state
or local Law has occurred or been announced during the 90-day period ending on
the date of this Agreement or any longer period required by any local Law.
4.19 Suppliers and Customers. Set forth on the Suppliers and
Customers Schedule is a true and correct list of the ten suppliers and the ten
customers that accounted for the largest dollar volume of purchases and sales,
respectively, by the Company and its Subsidiaries during each of (i) the twelve
month period immediately preceding the date hereof and (ii) the fiscal year
ending January 31, 2005 (the "Material Suppliers and Customers"). To the
Knowledge of the Company, none of the Material Suppliers and Customers has
cancelled or otherwise terminated, or threatened in writing to cancel or
otherwise terminate, its relationship with the Company or any of its
Subsidiaries during the past twelve months. Neither the Company nor any of its
Subsidiaries has received any written notice during the past twelve months that
any of the Material Suppliers and Customers intends to cancel or otherwise
materially adversely modify its relationship with the Company or any of its
Subsidiaries.
4.20 Inventory. The aggregate value at which the inventory,
including the inventory reserves, is carried in the Financial Statements, and
will be carried in the Closing Balance Sheet and on the books of the Company as
of the Closing Date, reflects and will reflect the normal and consistent
inventory valuation method of the Company of valuing inventory at the lower of
cost or market, all in accordance with GAAP and includes appropriate allowances
for obsolescence.
4.21 Transactions with Related Persons. Except as set forth on
the Related Persons Schedule:
(a) Except for Contracts by and between the Company and its
Subsidiaries or Contracts for which the obligations thereunder will constitute
Management Closing Costs, no Contract or transaction between the Company or any
of its Subsidiaries and (i) any director, officer, holder of equity interests
(including Phantom Rights) in the Company, its Subsidiaries or
21
any of their respective Affiliates (such persons in (i) being referred to herein
as an "Insider"), or (ii) any relative or spouse (or relative of such spouse) of
any Insider (such persons in (ii) being referred to herein as a "Related Party")
has been entered into in the past three years;
(b) No Insider and, to the Knowledge of the Company, no Related
Party is a director or officer of, or has any direct or indirect interest in
(other than the ownership of not more than 5% of the publicly traded shares of),
any Person which is a supplier, vendor, landlord, sales agent or competitor of
the Company or any of its Subsidiaries;
(c) No Insider and, no Related Party owns or has any interest
in, directly or indirectly, in whole or in part, any tangible or intangible
property used in the conduct of the Business;
(d) Other than expense advance reimbursements not exceeding
$25,000 in the aggregate, no Insider and, to the Knowledge of the Company no
Related Party owes any money or other amounts to, nor is any Insider or, to the
Knowledge of the Company, any Related Party owed any money or other amounts
(other than obligations that would constitute Closing Costs) by, the Company or
any of its Subsidiaries;
(e) Neither the Company nor any of its Subsidiaries has,
directly or indirectly, guaranteed or assumed any Indebtedness for the benefit
of any Insider or, to the Knowledge of the Company, any Related Party; and
(f) Neither the Company nor any of its Subsidiaries has made any
loans, payments or transfers of the Company's or any of its Subsidiaries' assets
to any Insider or, to the Knowledge of the Company, to any Related Party.
4.22 Sales Practices; Accounts Receivable.
(a) Since the date of the Latest Audited Financial Statement,
the Company and each of its Subsidiaries have operated in the Ordinary course of
business and have not adversely modified payment terms for accounts receivable
in such a manner as would reasonably be expected to result in an accounts
receivable portfolio that, in amount or character, is materially and adversely
different than that maintained by the Company and each of its Subsidiaries in
the ordinary course of business. All accounts, notes and other receivables
reflected in the Financial Statements have arisen in the ordinary course of
business consistent with past practice, arise out of bona fide sales, represent
valid obligations to the Company or any of its Subsidiaries.
(b) The Company has made available to the Buyer a true, correct
and complete copy of the Company's standard written warranty or warranties for
sales of any and all products distributed or sold by the Company or any of its
Subsidiaries (the "Products") and true and complete copies of the warranty
provisions of the purchase orders of the Company's top 10 customers and, except
as stated therein, as imposed by applicable Law or as set forth on the Product
Warranty Schedule, there are no warranties, Contractual commitments or
Contractual obligations with respect to the return, repair or replacement of
Products sold to the top 10 customers. Except as set forth on the Product
Warranty Schedule, to the Knowledge of the Company, there are no defects in
design, construction or manufacture of Products that would
22
reasonably be expected to create an unusual risk of injury to persons or
property, and, to the Knowledge of the Company, no facts or conditions exist
that would reasonably be expected to result in a new Product recall requirement.
(c) Except as set forth on the Product Warranty Schedule, to the
Knowledge of the Company: (i) there is no action by or before any Governmental
Entity pending or, threatened against or involving the Company or any of its
Subsidiaries concerning any Product that is alleged to have been manufactured,
shipped, sold, marketed, distributed, processed or merchandised by the Company
or any of its Subsidiaries to have a material defect of any kind, in
manufacture, processing, design or otherwise, including without limitation any
failure to warn of the defect; and (ii) there has not been any Product recall or
post-sale warning by the Company or any of its Subsidiaries since January 31,
2001 concerning any Product that was manufactured, shipped, sold, marketed,
distributed, processed or merchandised by the Company or any of its
Subsidiaries.
4.23 Condition of Assets. The machinery, equipment, personal
property and other tangible assets that the Company and its Subsidiaries own and
lease (including building structures) are in reasonable operating condition and
repair for the purposes for which they are used (in each case subject to normal
wear and tear) and are owned, leased or licensed by the Company or one of its
Subsidiaries free and clear of all Liens, other than Permitted Encumbrances.
4.24 Insurance.
(a) The Insurance Schedule lists each insurance policy of the
Company or any of its Subsidiaries and each insurance policy acquired by or on
behalf of the Company or any of its Subsidiaries to which any of their
respective officers, directors or employees has been a party, a named insured,
or otherwise is the beneficiary of coverage at any time with respect to claims
that have occurred within the past two years (the "Insurance Policies"). All
such Insurance Policies are in full force and effect on the date hereof, and all
due premiums with respect thereto covering all periods up to and including the
date hereof have been timely paid in full and the Company and its Subsidiaries
are otherwise in material compliance with the terms and provisions thereof.
(b) As of the date hereof, neither the Company nor any of its
Subsidiaries has received either a written notice of cancellation or non-renewal
of any Insurance Policy, and, to the Knowledge of the Company, no basis exists
for early termination thereof on the part of the insurer. To the Knowledge of
the Company, neither the Company nor any of its Subsidiaries have failed to give
any notice or present any claim under any Insurance Policy in due and timely
fashion, and there are no outstanding unpaid claims under any Insurance Policy.
To the Knowledge of the Company, no facts or circumstances exist which would
relieve the insurer under any Insurance Policy of its obligation to satisfy in
full any valid claim of the Company or any of its Subsidiaries thereunder.
Neither the Company nor any of its Subsidiaries has received any notice of
cancellation or non-renewal of any Insurance Policy. To the Knowledge of the
Company, neither the Company nor any of its Subsidiaries has been refused any
insurance (including, without limitation, insurance against loss due to
terrorist acts) with respect to its assets, properties or businesses, nor has
any coverage been limited by an insurance carrier to
23
which any of the Company or any of its Subsidiaries has applied for any such
insurance or with which the Company or any of its Subsidiaries have carried
insurance during the last three years.
(c) No claim is outstanding under any of the Insurance Policies,
and to the Knowledge of the Company, no claim is pending under any of the
Insurance Policies relating to the Company and its Subsidiaries for which
coverage has been questioned, denied or disputed by the underwriters under such
Insurance Policies.
(d) True, correct and complete copies of each Insurance Policy
have previously been delivered to the Buyer (including without limitation copies
of all written amendments, supplements and other modifications thereto or
waivers of rights thereunder).
4.25 Foreign Corrupt Practices Act Compliance. Neither the
Company nor any of its Subsidiaries, nor any of their respective officers,
directors, employees, consultants or agents acting on their behalf has made,
directly or indirectly, any payment or promise to pay, or gift or promise to
give or authorized such a promise or gift, of any money or anything of value,
directly or indirectly, to: (i) any foreign official (as such term is defined in
the of 1977, as amended (the "FCPA")) for the purpose of influencing any
official act or decision of such official or inducing him or her to use his or
her influence to affect any act or decision of a foreign government, or any
agency or subdivision thereof; or (ii) any foreign political party or official
thereof or candidate for foreign political office for the purpose of influencing
any official act or decision of such party, official or candidate or inducing
such party, official or candidate to use his, her or its influence to affect any
act or decision of a foreign government or agency or subdivision thereof, in the
case of both (i) and (ii) above in order to assist the Company or any of its
Subsidiaries to obtain or retain business for or direct business to the Company
or any of its Subsidiaries and under circumstances which would subject the
Company or any of its Subsidiaries to liability under the FCPA.
4.26 Indebtedness. Except as set forth in the Indebtedness
Schedule, neither the Company nor any of its Subsidiaries has any Indebtedness.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Sellers and the Company
that:
5.01 Organization and Corporate Power. The Buyer is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware, with full power and authority to enter into this
Agreement and perform its obligations hereunder.
5.02 Authorization. The execution, delivery and performance of
this Agreement by the Buyer and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all requisite
action, and no other proceedings on its part are necessary to authorize the
execution, delivery or performance of this Agreement. Assuming that this
Agreement is a valid and binding obligation of the Sellers and the Company, this
Agreement constitutes a valid and binding obligation of the Buyer, enforceable
in accordance with its terms
24
(subject to the effects of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws not or hereafter in effect relating to
creditors' rights generally and general principles of equity).
5.03 No Violation. The Buyer is not subject to or obligated under
its certificate of formation, any applicable Law or any material Contract or
instrument, or any Permit, or subject to any order, writ, injunction or decree,
which would be breached or violated in any material respect by the Buyer's
execution, delivery or performance of this Agreement.
5.04 Governmental Authorities; Consents. Except for the
applicable requirements of the HSR Act, the Buyer is not required to submit any
notice, report or other filing with any Governmental Authority in connection
with the execution, delivery or performance by it of this Agreement or the
consummation of the transactions contemplated hereby. No consent, approval or
authorization of any Governmental Authority or any other party or Person is
required to be obtained by the Buyer in connection with its execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby.
5.05 Litigation. There are no actions, suits or proceedings
pending or, to the Buyer's knowledge, threatened against or affecting the Buyer
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would materially and adversely affect the Buyer's
performance under this Agreement or the consummation of the transactions
contemplated hereby.
5.06 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Buyer for which the Sellers (in their capacity as such) will be
responsible.
5.07 Investment Representation. The Buyer is purchasing the
Shares for its own account with the present intention of holding such securities
for investment purposes and not with a view to or for sale in connection with
any public distribution of such securities in violation of any federal or state
securities laws.
5.08 Financing. The Buyer or an Affiliate of the Buyer has
received (i) an executed commitment letters from each of (i) Bear, Xxxxxxx & Co.
Inc. and Bear Steams Corporate Lending, Inc. and (ii) GE Commercial Finance,
committing, subject to the terms and conditions therein, to provide an aggregate
of up to $250 million of debt financing to the Buyer (collectively, the "Debt
Commitment Letter") and (ii) an executed commitment letter from Xxxxxx Xxxxxx
Partners IV, L.P., committing, subject to the terms and conditions therein, to
provide equity financing of up to $67.5 million to the Buyer (the "Equity
Commitment Letter"). True and correct copies of the Debt Commitment Letter and
the Equity Commitment Letter are attached hereto as Exhibit E. Assuming the
financings contemplated by the Debt Commitment Letter and the Equity Commitment
Letter are consummated in accordance with their terms, the Buyer will have
sufficient funds to pay (i) the Initial Purchase Price, (ii) to repay the
Indebtedness and the Closing Costs of the Company on the Closing Date as
contemplated hereby, and (iii) to pay all of its related fees and expenses.
25
5.09 Solvency. Assuming the Company's representations and
warranties contained in Article IV are true and correct immediately after giving
effect to the transactions contemplated by this Agreement and the Company has
complied with its covenants hereunder, the Company and each of its Subsidiaries
shall be able to pay their respective debts as they become due and shall own
property which has a fair saleable value greater than the amounts required to
pay their respective debts (including a reasonable estimate of the amount of all
contingent liabilities). Assuming the Company's representations and warranties
contained in Article IV are true and correct immediately after giving effect to
the transactions contemplated by this Agreement and the Company has complied
with its covenants hereunder, the Company and each of its Subsidiaries shall
have adequate capital to carry on their respective businesses. No transfer of
property is being made and no obligation is being incurred in connection with
the transactions contemplated by this Agreement with the intent, to hinder,
delay or defraud either present or future creditors of the Company and its
Subsidiaries.
ARTICLE VI
COVENANTS OF THE COMPANY AND SELLERS
6.01 Conduct of the Business.
(a) From the date hereof until the Closing Date, the Company
shall carry on its and its Subsidiaries' respective businesses according to
their ordinary and usual course of business and substantially in the same manner
as heretofore conducted; provided that the Company may use all available cash to
repay any Indebtedness prior to the Closing.
(b) From the date hereof until the Closing Date, except as
otherwise provided for by this Agreement or consented to in writing by the
Buyer, the Company shall not and shall not permit any Subsidiary to (i) issue,
sell or deliver any of its capital stock or any of its Subsidiary's capital
stock or issue or sell any securities convertible into, or options with respect
to, or warrants to purchase or rights to subscribe for, any of its capital stock
or any of its Subsidiary's capital stock; (ii) effect any recapitalization,
reclassification, equity dividend, equity split or like change in its or any
Subsidiary's capitalization; (iii) amend its or any Subsidiary's governing
organizational documents; (iv) declare or pay any dividends or make any
distributions with respect to the Company's capital stock; (v) make any
redemption or purchase of any of the Company's capital stock; (vi) enter into
any Contract in excess of $250,000 or that has a term of, or requires the
performance of any obligations by the Company or its Subsidiaries over a period
in excess of, one year or that would otherwise constitute a Material Contract or
for which the obligations thereunder would constitute Management Closing Costs;
(vii) engage in any transactions with any Related Party that is not terminable
at will by the Company or its Subsidiaries, without notice, penalty or premium
or for which the obligations thereunder would constitute Management Closing
Costs; (viii) amend in any respect any Material Contract that would materially
and adversely affect the use and enjoyment of such Contract by the Buyer, or
terminate any of the Material Contracts (except with respect to purchase orders
or termination of Material Contracts caused by the termination or default of any
party to such Contracts other than the Company or its Subsidiaries), or waive,
settle, modify, compromise or cancel any debt or material right, claim or
privilege arising under any Material Contract; (ix) except in the ordinary
course of business consistent with past practice, or except as required by Law
or the terms of any
26
existing Contract, increase the salary, wage, rate of compensation or benefits
of, any current or former employee, consultant or director of the Company or its
Subsidiaries or enter into any Contract or other binding commitment in respect
of any such increase, or amend, adopt or terminate any Plan covering current or
former employees, consultants or directors of the Company or its Subsidiaries or
enter into any negotiation in respect of or enter into any collective bargaining
agreement covering employees of the Company or its Subsidiaries or grant any
equity or equity based awards; provided, that with respect to any individual,
such ordinary course increases shall not exceed seven percent (7%) of such
individual's annual base salary; (x) hire, fire promote or otherwise change the
employment status of any employees with an annual base salary in 2005 equal to
or greater than $75,000, any officers or directors; (xi) incur by or on behalf
of the Company or any of its Subsidiaries of any material obligations or
material liabilities (including Indebtedness), whether absolute, accrued,
contingent or otherwise (including liabilities as a guarantor or otherwise with
respect to obligations of others), other than liabilities and obligations
incurred in the ordinary course of business consistent with past practice; (xii)
change any of its accounting methods, principles or practices, except as may be
required by GAAP, (xiii) make or change any Tax election, change any annual Tax
accounting period, adopt or change any method of Tax accounting, file any
amended Return, enter into any closing agreement, settle any tax claim or
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitation period applicable to any Tax claim or assessment, if
any such action could reasonably be expected to have the effect of materially
increasing the Tax liability of the Company, any Subsidiary of the Company, the
Buyer or any Affiliate of the Buyer in any Post-Closing Tax Period, (xiv) sell,
lease, transfer, distribute or otherwise dispose of or abandon any of its
material property or assets; (xv) enter into, modify or terminate, or commit any
act or permit or suffer to occur any circumstance which would constitute a
default under any material Permits or Material Contracts; (xvi) cause, permit,
allow or suffer any of the assets of the Company or any Subsidiary to violate
any Law or to become subjected to any Lien, other than permitted Encumbrances,
or (xvii) agree to take any of the foregoing actions. For the avoidance of
doubt, nothing herein shall limit or restrict the Company's ability to use cash
to pay down the balance of any Indebtedness prior to the Closing; provided that
any such paydown of Indebtedness shall not reduce the actual cash on the
Company's books below $100,000.
6.02 Transaction Proposal. Until the Closing Date, the Company
and the Equityholders shall not, directly or indirectly, solicit or engage in
discussion with third parties, initiate, entertain or respond to offers,
inquiries, proposals or discussions, or enter into any agreement involving any
transaction that has as its purpose a business combination involving or
disposing of the whole or part of the Company or any of its Subsidiaries or any
other transaction that would make the transactions contemplated by this
Agreement infeasible or impractical (each a "Proposal") or provide any
information to any Person or any of such Person's advisors or prospective
lenders regarding the Company or its Subsidiaries in the context involving a
potential Proposal or the transactions contemplated thereby. For purposes of
this Agreement, non-solicitation shall include, but not be limited to, any
proposed or actual (a) sale, merger, consolidation or similar transaction
involving the Company or its Subsidiaries, (b) sale, lease or other disposition,
directly or indirectly, by merger, consolidation, share exchange or otherwise,
of any assets or properties of the Company or its Subsidiaries representing 10%
of the consolidated assets, revenues, earnings before interest, tax,
depreciation and amortization or profits of the Company or such Subsidiaries,
(c) issuance, sale or other disposition by the Company or any of its
Subsidiaries (including by way of merger, consolidation, share exchange
27
or any similar transaction) of any interest or securities (or options, rights or
warrants to purchase, or securities convertible into, such securities)
representing 10% or more of the votes associated with the Shares, (d)
recapitalization, restructuring, liquidation, dissolution or other similar type
of transaction with respect to the Company or any Subsidiary involving a third
party or (e) transactions which are similar in form, substance or purpose to any
of the foregoing transactions. In the event the Sellers, the Company or any of
its Subsidiaries or any of their respective representatives receive any such
Proposal, such recipient will immediately inform the Buyer and provide the Buyer
with the details thereof, including a copy of any Proposal that is in writing.
6.03 Non-Competition; Non-Solicitation. For a period of two (2)
years after the Closing Date, each of the Management Equityholders shall not
engage in any business that is competitive with the Business anywhere in the
world. For a period of two (2) years after the Closing Date, each of the Sellers
shall not, and shall cause his or its Affiliates not to, solicit for employment
or hire any of the employees of the Company or any of its Subsidiaries. Each of
the Sellers acknowledges that the Buyer will be irrevocably damaged if such
covenant is not specifically enforced. Accordingly, each Seller agrees that, in
addition to any other relief to which the Buyer may be entitled, the Buyer would
be entitled to seek and obtain injunctive relief (without the requirement of any
bond) from a court of competent jurisdiction for the purposes of restraining the
applicable Seller from any actual or threatened breach of such covenant.
6.04 Access to Books and Records.
From the date hereof until the Closing Date, the Company shall
provide the Buyer, the Buyer's lenders and their respective authorized
representatives. (the "Buyer's Representatives") with full access at all
reasonable times and upon reasonable notice to the offices, properties,
personnel, books and records of the Company and its Subsidiaries in order for
the Buyer to have the opportunity to make such investigation as it shall
reasonably desire to make of the affairs of the Company and its Subsidiaries,
including conducting Phase I environmental site assessments provided that any
such environmental site assessments shall be conducted under the supervision of
Company personnel and shall not unreasonably interfere with the operation of the
Company's business. The Buyer acknowledges that it shall be bound by the
Confidentiality Agreement, dated June 15, 2005, between the Company and Castle
Xxxxxx XX, L.P. (the "Confidentiality Agreement") in accordance with the terms
thereof. Notwithstanding the foregoing, the Buyer, Bear Steams and any other
Person arranging the financing contemplated by the Debt Commitment Letter may
disclose any and all matters customarily disclosed in documents relating to the
financing of such acquisition, including any offering memorandum or prospectus
relating to the issuance of debt securities and/or any "bank book" related to
credit facilities.
6.05 Financing.
(a) The Company shall take commercially reasonable action as
shall be reasonably requested by the Buyer or otherwise customary in order to
enable the Company, and, if applicable, one or more of its Affiliates as of the
Closing, to consummate, simultaneously with the Closing, an underwritten "high
yield" debt offering (the "Offering") to "qualified institutional buyers" within
the meaning of Rule 144A under the Securities Act. Without limiting the
foregoing, the Company shall (i) together with the Buyer, assist in the
preparation of an offering
28
memorandum, including, without limitation, any pro forma financial statements
and the "Management's Discussion and Analysis of Financial Condition and Results
of Operations" section to be included therein (in accordance with the
requirements of Item 303 of Regulation S-K of the Securities Act), (ii) respond
in a reasonably prompt fashion to any diligence inquiries of the underwriters of
the Offering, (iii) make its officers and employees reasonably available to
participate in diligence sessions, drafting sessions and the road show for the
Offering and (iv) cause its independent auditors to issue a customary comfort
letter to the underwriters of the Offering. In addition to the foregoing, the
Company shall use commercially reasonable efforts to furnish the following
consolidated financial statements of the Company and its Subsidiaries, each in a
form meeting the requirements of GAAP and Regulation S-X of the Securities Act
of 1933, as amended ("Regulation S-X"): (i) the audited consolidated balance
sheets as of January 31, 2004 and January 31, 2005, together with the related
audited consolidated statements of income, cash flow and shareholders' equity
for the twelve-month periods ended January 31, 2003, January 31, 2004 and
January 31, 2005, together with unqualified reports thereon issued by
PricewaterhouseCoopers LLP (the "Company's Independent Auditors") (collectively,
"Historical Audited S-X Financial Statements"), (ii) the unaudited consolidated
balance sheets as of October 31, 2005 and as of October 31, 2004 together with
the related unaudited consolidated statements of income, cash flow and
shareholders' equity for each of the quarterly periods then ended, (iii) the
unaudited consolidated balance sheets as of July 31, 2005 and as of July 31,
2004 together with the related unaudited consolidated statements of income, cash
flow and shareholders' equity for each of the quarterly periods then ended and
(iv) the unaudited consolidated balance sheets as of April 30, 2005 and as of
April 30, 2004 together with the related unaudited consolidated statements of
income, cash flow and shareholders' equity for each of the quarterly periods
then ended (clauses (ii) through (iv), collectively, the "Historical Stub Period
Unaudited S-X Financial Statements", and together with the Historical Audited
S-X Financial Statements, the "Historical S-X Financial Statements").
(b) The Company shall take action as shall be reasonably
requested by the Buyer or otherwise customary in order to enable the Company,
and, if applicable, one or more of its Affiliates as of the Closing, to
consummate the debt financings (other than the Offering) contemplated in the
Debt Commitment Letter, including, without limitation, providing all necessary
information reasonably requested by the Buyer's lenders pursuant to Section 6.05
hereof.
(c) Unless the Buyer terminates this Agreement in accordance
with Section 8.01(b) hereof, the Buyer shall be responsible and pay for any and
all costs and expenses incurred by the Company and its Affiliates and
specifically requested by the Buyer, subject to the Buyer's receipt of
reasonable documentation of such costs and expenses, in connection with any
services or cooperation provided by the Company pursuant to this Section 6.05
which costs and expenses shall not be considered Closing Costs hereunder.
6.06 Notification. From the date hereof until the Closing Date,
the Company and the Sellers shall disclose to the Buyer in writing any material
variances from the representations and warranties contained in Article III and
Article IV promptly upon discovery thereof, and, solely for purposes of Section
2.01(a), such disclosures shall amend and supplement the appropriate schedules
attached hereto in the form of the Updated Schedules delivered to the Buyer;
provided that such disclosures shall not amend and supplement the schedules
attached
29
hereto for purposes of the indemnification obligations of the Sellers set forth
in Section 10.02. The Company shall give prompt notice in writing to the Buyer
upon discovery of : (a) the material failure of the Company or the Sellers to
comply or satisfy any covenant or condition herein; (b) any written notice of,
or any written communication relating to, a default or event which, with notice
or lapse of time or both, would reasonably be expected to become a material
default, received by the Company or any Subsidiary prior to the Closing Date,
under any Material Contract; (c) any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement; and (d) any
notice or other communication from any Governmental Authority or any other
Person in connection with the transactions contemplated hereby.
6.07 Regulatory Filings. The Company and the Sellers shall make
or cause to be made all filings and submissions under the HSR Act and any other
laws or regulations applicable to the Sellers, the Company and its Subsidiaries
for the consummation of the transactions contemplated herein. The Company and
the Sellers shall coordinate and cooperate with the Buyer in exchanging such
information and assistance as the Buyer may reasonably request in connection
with all of the foregoing.
6.08 Conditions. The Company and the Sellers shall use reasonable
efforts to cause the conditions set forth in Section 2.01 to be satisfied and to
consummate the transactions contemplated herein as soon as reasonably possible
after the satisfaction of the conditions set forth in Article II (other than
those required to be satisfied at the Closing) but in any event no later than
the third Business Day occurring after such date; provided that neither the
Company nor any Seller shall be required to expend any amount of funds (other
than reasonable administrative expenses) to obtain any third-party or
governmental consents required under Section 2.01(d) or (e).
6.09 Release. Subject to the occurrence of the Closing and as of
the Closing Date, the Sellers release and forever discharge the Company and its
Subsidiaries from any and all actions, causes of action, suits, debts, claims
and demands (except for obligations arising under this Agreement and any other
document or instrument executed and delivered in connection with the
transactions contemplated by this Agreement) that arise out of acts, events,
conditions or omissions occurring or existing from the beginning of the world to
and including the Closing Date, including with respect to the Seller's ownership
of equity, equity-linked or debt securities of the Company or any of its
Subsidiaries, other than any such claims (i) related to directors and officers
insurance, (ii) arising under the Company's certificate of incorporation, bylaws
and amendment thereto and (iii) with respect to current employees of the
Company, related to their employment with the Company or any of its
Subsidiaries.
6.10 Interim Periodic Financial Statements. As soon as
practicable, but in no case later than fifteen (15) Business Days after the end
of each monthly and quarterly accounting period between the date hereof and the
Closing Date, the Company shall deliver to the Buyer unaudited consolidated
balance sheets for the Company at the end of each period, and unaudited
consolidated statements of income, cash flows or stockholders' equity for the
Company as of each such month and quarter then ended (collectively, the "Interim
Periodic Financial Statements"). Such Interim Periodic Financial Statements,
when delivered, will present fairly in
30
all material respects the financial condition of the Company as of their
respective dates, and the results of the operations and cash flow of the Company
for the periods indicated, in each case in accordance with GAAP subject to
normal year-end adjustments in accordance with past practices.
ARTICLE VII
COVENANTS OF THE BUYER
7.01 Access to Books and Records. From and after the Closing, the
Buyer shall, and shall cause the Company and its Subsidiaries, to provide the
Representative, the Sellers and their agents with reasonable access (for the
purpose of examining and copying), during normal business hours, to the books
and records of the Company and its Subsidiaries with respect to periods or
occurrences prior to the Closing Date in connection with any matter directly
relating to or arising out of this Agreement or the transactions contemplated
hereby. Unless otherwise consented to in writing by the Representative, neither
the Company nor its Subsidiaries shall, for a period of seven years following
the Closing Date, destroy, alter or otherwise dispose of any of the books and
records of the Company or its Subsidiaries for the period prior to the Closing
Date without first offering to surrender to the Representative such books and
records or any portion thereof which the Buyer, the Company or its Subsidiaries
may intend to destroy, alter or dispose of.
7.02 Notification. Prior to the Closing, upon discovery the Buyer
shall promptly inform the Company and the Representative in writing of any
material variances from the Buyer's representations and warranties contained in
Article V, and the Buyer shall promptly notify the Representative if the Buyer
obtains actual knowledge that the representations and warranties of the Sellers
or the Company in this Agreement and the Schedules hereto are not true and
correct in all material respects, or if the Buyer obtains actual knowledge of
any material errors in, or omissions from, the Schedules to this Agreement.
7.03 Director and Officer Liability and Indemnification.
(a) For a period of six years after the Closing, the Buyer shall
not, and shall not permit the Company or any of its Subsidiaries to amend,
repeal or modify any provision in the Company's or any of its Subsidiaries'
governing documents, including the Company's articles of incorporation and
bylaws, relating to the exculpation or indemnification of former officers and
directors (unless required by law), it being the intent of the parties that the
officers and directors of the Company and its Subsidiaries prior to the Closing
shall continue to be entitled to such exculpation and indemnification to the
fullest extent permitted under applicable law.
(b) For a period of six years after the Closing, the Buyer
shall, or shall cause the Company and its Subsidiaries to, maintain director and
officer liability insurance which insurance shall provide coverage for the
individuals who were officers and directors of the Company and its Subsidiaries
immediately prior to Closing comparable to the policy or policies maintained by
the Company or its Subsidiaries immediately prior to the Closing for the benefit
of such individuals; provided, however, that the Buyer's aggregate obligations
under this Section 7.03(b) shall be limited the payment of a single premium for
a "tail" policy in an amount not to
31
exceed 150% of the annual premium for such insurance as in effect on the date
hereof, in an aggregate amount not to exceed $50,000.
7.04 Regulatory Filings. The Buyer shall make or cause to be made
all filings and submissions under the HSR Act and any other laws or regulations
applicable to the Buyer as may be required of the Buyer for the consummation of
the transactions contemplated herein, and the Buyer shall be responsible for all
filing fees under the HSR Act. The Buyer shall coordinate and cooperate with the
Company in exchanging such information and assistance as the Company may
reasonably request in connection with all of the foregoing.
7.05 Conditions. The Buyer shall use all reasonable best efforts
to cause the conditions set forth in Section 2.02 to be satisfied and to
consummate the transactions contemplated herein as soon reasonably possible
after the satisfaction of the conditions set forth in Article II (other than
those to be satisfied at the Closing) but in any event no later than the third
Business Day occurring after such date. The Buyer shall use commercially
reasonable efforts to cause the conditions in the Debt Commitment Letter and the
Equity Commitment Letter to be satisfied.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual consent of the Buyer and the Representative;
(b) by the Buyer, if there has been a material violation or
breach by the Company or the Sellers of any covenant, representation or warranty
contained in this Agreement or any event, circumstance or condition has occurred
which has prevented the satisfaction of any condition to the obligations of the
Buyer at the Closing and such violation or breach has not been waived by the
Buyer or, in the case of a covenant breach, cured by the Company or the Sellers
within ten days after receipt by the Representative of written notice thereof
from the Buyer;
(c) by the Buyer, if there has occurred prior to the Closing
Date a Material Adverse Change;
(d) by the Representative, if there has been a material
violation or breach by the Buyer of any covenant, representation or warranty
contained in this Agreement which has prevented the satisfaction of any
condition to the obligations of the Sellers at the Closing and such violation or
breach has not been waived by the Representative or, with respect to a covenant
breach, cured by the Buyer within ten days after written notice thereof by the
Representative; or
(e) by either the Buyer or the Representative if the
transactions contemplated hereby have not been consummated by the Final Date,
provided that neither the Buyer nor the Representative shall be entitled to
terminate this Agreement pursuant to this Section 8.01(e) if such Person's (or
the Company's or any Seller's, in the case of Representative) knowing or willful
breach of this Agreement has prevented the consummation of the transactions
contemplated
32
hereby. The "Final Date" shall mean February 15, 2006, unless the Company
delivers to the Buyer the Company's Historical S-X Financial Statements on a
date that is after January 15, 2006, in which case the Final Date shall be the
date that is 30 days after the date on which the Company delivers to the Buyer
such Historical S-X Financial Statements; provided, however, that in no event
shall the Final Date be later than March 31, 2006. Notwithstanding the
foregoing, if the Company has not delivered the Historical S-X Financial
Statements to the Buyer on or before February 22, 2006, then the Buyer may
terminate this Agreement by providing written notice to the Representative on or
before the close of business on the third business day following February 22,
2006.
8.02 Effect of Termination. In the event of a termination of this
Agreement by either the Buyer or the Representative in accordance with Section
8.01, the provisions of this Agreement shall immediately become void and of no
further force or effect (other than this Section 8.02 and Article XII hereof and
the Confidentiality Agreement which shall survive the termination of this
Agreement), and there shall be no liability on the part of the Buyer, the
Company or the Sellers to one another, except for knowing and willful breaches
of this Agreement prior to the time of such termination.
ARTICLE IX
REPRESENTATIVE
9.01 Designation. Liberty Partners Holdings 10, L.L.C. (the
"Representative") is hereby designated by each of the Sellers to serve as the
representative of the Sellers with respect to the matters expressly set forth in
this Agreement to be performed by the Representative.
9.02 Authority. Each of the Sellers, by the execution of this
Agreement, hereby irrevocably appoints the Representative as the agent, proxy
and attorney-in-fact for such Seller for all purposes of this Agreement and the
agreements contemplated hereby (including the full power and authority on such
Seller's behalf (a) to consummate the transactions contemplated herein; (b) to
pay such Seller's expenses incurred in connection with the negotiation and
performance of this Agreement (whether incurred on or after the date hereof);
(c) to disburse any funds received hereunder to such Seller and each other
Seller; (d) to execute and deliver any certificates representing the Shares and
execution of such further instruments of assignment as the Buyer shall
reasonably request; (e) to execute and deliver on behalf of such Seller any
amendment or waiver hereto; (f) to take all other actions to be taken by or on
behalf of such Seller in connection herewith; (g) to negotiate, settle,
compromise and otherwise handle the Working Capital adjustment and all claims
for indemnification made by the Buyer pursuant to Section 10.02 hereof; and (h)
to give and receive after the Closing all notices required to be given and to do
each and every act and exercise any and all rights which such Seller or the
Sellers collectively are permitted or required to do or exercise under this
Agreement). Each of the Sellers agrees that such agency and proxy are coupled
with an interest, are therefore irrevocable without the consent of the
Representative and shall survive the death, incapacity, bankruptcy, dissolution
or liquidation of any Seller.
9.03 No Fiduciary Relationship; Exculpation; Reliance.
33
(a) The Representative shall not have by reason of this
Agreement a fiduciary relationship in respect of any Seller, except in respect
of amounts received, if any, by the Representative on behalf of an Seller. The
Representative shall not be liable to any Seller for any action taken or omitted
by it or any agent employed by it under this Agreement or any other agreement
executed in connection herewith, except that the Representative shall not be
relieved of any liability imposed by law for gross negligence or willful
misconduct. The Representative shall not be liable to any Seller for any
apportionment or distribution of payments made by it in good faith, and, if any
such apportionment or distribution is subsequently determined to have been made
in error, the sole recourse of any Seller to whom payment was due, but not made,
shall be to recover from other Sellers (including the Representative in its
capacity as a Seller), any payment in excess of the amount to which they are
determined to have been entitled pursuant to this Agreement.
(b) Neither the Representative nor any agent employed by it
shall incur any liability to any Seller by virtue of the failure or refusal of
the Representative for any reason to consummate the transactions contemplated
hereby or relating to the performance of its other duties hereunder, except for
actions or omissions constituting fraud or bad faith.
(c) The Buyer and the Company shall be able to rely conclusively
on the actions, instructions and decisions of the Representative on behalf of
the Sellers as to the defense or settlement of any claims for indemnification by
Buyer and the Company and any other actions required to be taken by the
Representative hereunder.
ARTICLE X
ADDITIONAL COVENANTS
10.01 Survival. The representations and warranties of the Company,
Sellers and the Buyer contained in this Agreement shall survive, the Closing for
the applicable periods set forth in this Section 10.01. Any and all claims and
causes of action for indemnification under this Article X arising out of the
inaccuracy or breach of any representation or warranty of the Company, the
Sellers or the Buyer must be made prior to the termination of the applicable
survival period and in accordance with Section 10.02(d) below. All of the
representations and warranties of the Company, the Sellers and the Buyer
contained in this Agreement and any and all claims and causes of action for
indemnification under this Article X with respect thereto shall terminate on May
31, 2007; provided, however, that (i) the representations and warranties of the
Company contained in Section 4.14 (Employee Benefits) shall survive until the
third anniversary of the Closing Date and the representations and warranties of
the Company contained in Section 4.17 (Environmental Matters) shall survive
until the sixth anniversary of the Closing Date; (ii) the representations and
warranties of the Sellers or the Company, as applicable, contained in Sections
3.01 (Execution; Validity), 3.02 (Authority), 3.03 (No Breach), 3.04
(Ownership), 3.06 (Brokerage), the first sentence of 4.01 (Organization and
Power), 4.02 (Subsidiaries), 4.03 (Authorization; No Breach), 4.04
(Capitalization), 4.08 (Tax Matters) (but only to the extent that the
representations contained in Section 4.08 relate to Taxes based on or measured
by income ("Income Taxes") and 4.12 (Brokerage) shall survive until the
expiration of the applicable statute of limitations, and (iii) the
representations and warranties of the Buyer contained in Sections 5.01
(Organization and Corporate Power), (Authorization), 5.06 (Brokerage),
(Investment
34
Representation) and 5.08 (Financing) shall survive until the expiration of the
applicable statute of limitations (the representations and warranties listed in
clauses (ii) and (iii) above, the "Fundamental Representations").
10.02 Indemnification.
(a) Subject to the provisions of Section 10.02(d), Section 10.03
and the next sentence, each of the Buyer, each Affiliate of the Buyer (including
after the Closing Date, the Company and its Subsidiaries), and their respective
stockholders, officers, directors, agents, employees, successors and assigns
(collectively, the "Buyer Indemnities") shall be indemnified and held harmless
by the Sellers (On a several, and not a joint and several, basis according to
each Seller's Indemnification Share) against any actual loss, liability, damage
or expense (including reasonable legal fees and expenses, but excluding damages
set forth in the last sentence of Section 10.03(a)) (collectively, "Losses" and
individually, a "Loss") which any such Buyer Indemnitee suffers, sustains or
becomes subject to as a result of any breach of any covenant, representation or
warranty of the Company (on or prior to the Closing) expressly set forth herein
and in any certificate delivered pursuant hereto (without regard to materiality
or Material Adverse Effect qualifiers set forth in any such representation or
warranty except for any such qualifier(s) contained in the first sentence of
Section 4.06), in each case without taking into account any disclosures made in
the Updated Schedules pursuant to Section 6.06 hereof. Notwithstanding anything
herein to the contrary:
(i) subject to Section 10.02(a)(iii), the Buyer
Indemnitees shall not be entitled to seek indemnification with respect to
any Loss unless and until the amount of such Loss suffered by Buyer as a
result of such breach or series of breaches associated with related events
or circumstances exceeds $25,000 (the "De Minimis Amount"), in which case
all of such amount shall be deemed to be a Loss hereunder;
(ii) subject to Section 10.02(a)(iii), the Buyer
Indemnitees shall not be entitled to seek indemnification with respect to
any Losses unless (A) each such Loss or series of related Losses is in
excess of the De Minimis Amount and (B) until and only to the extent that
the aggregate amount of all such Losses suffered by the Buyer as a result
of such breach(es) exceeds in the aggregate $2,600,000 (the "Deductible
Basket"), in which case the Buyer shall be entitled to indemnification
only for such Losses in excess of $1,300,000; and
(iii) the aggregate amount of all payments to which the
Buyer shall be entitled in satisfaction of claims for indemnification
pursuant to this Section 10.02(a) shall in no event exceed $15,000,000
(the "Cap"); provided, however, that none of the Deductible Basket, the De
Minimis Amount or the Cap shall apply with respect to any Losses resulting
from or relating to (A) breaches of representations and warranties
(without regard to materiality or Material Adverse Effect qualifiers set
forth in any such representation or warranty except for any such
qualifier(s) contained in the first sentence of Section 4.06) of the
Sellers and/or the Company contained in any of the Fundamental
Representations or (B) breaches of covenants by the Company or any of the
Sellers; provided further that no Seller shall be liable under this
Section 10.02(a) (together with any indemnification claim amounts owing by
such Seller under Section 10.02(b) and
35
Section 10.06) for more than the portion of the Final Purchase Price and
the portion of the Contingent Payment and Second Contingent Payment, if
any, received by such Seller.
(b) Subject to the provisions of Section 10.02(d) and Section
10.03, each Seller shall solely for himself, herself or itself severally (not
jointly and severally) indemnify the Buyer and hold it harmless against any Loss
which the Buyer suffers, sustains or becomes subject to as a result of the
breach by such Seller of his, her or its covenants, or the representations and
warranties contained in Article III hereof; provided that no Seller shall be
liable under this Section 10.02(b) (together with any indemnification claim
amounts owing by such Seller under Section 10.02(a) and Section 10.06) for more
than the portion of the Final Purchase Price and the portion of the Contingent
Payment and Second Contingent Payment, if any, received by such Seller.
(c) Subject to the provisions of Section 10.02(d), Section 10.03
and the next sentence, the Buyer shall indemnify each Seller and hold him, her
or it harmless against any Loss which any such Seller suffers, sustains or
becomes subject to as a result of any breach by the Buyer of its covenants,
representations and warranties set forth herein (without regard to materiality
or Material Adverse Effect qualifiers set forth in any such representation or
warranty). Notwithstanding anything herein to the contrary, (A) the Sellers
shall not be entitled to seek indemnification with respect to any Loss unless,
until and only to the extent that the aggregate amount of all Losses suffered by
the Sellers as a result of such breach(es) exceeds the De Minimis Amount and the
Deductible Basket, in which case the Sellers shall be entitled to
indemnification only for such excess; and (B) the aggregate amount of all
payments to which the Sellers shall be entitled in satisfaction of claims for
indemnification pursuant to Section 10.02(c) shall in no event exceed the Cap;
provided, however, that neither the De Minimis Amount, the Deductible Basket nor
the Cap shall apply with respect to any Losses resulting from or relating to
breaches of representations and warranties contained in any of the Fundamental
Representations.
(d) No Person shall be liable for any claim for indemnification
under subsections (a), (b) or (c) above (but with respect to covenants, only
those that provide for performance prior to Closing) unless written notice
specifying in reasonable detail the nature of the claim for indemnification is
delivered by the Person seeking indemnification to the Person from whom
indemnification is sought (i) prior to the expiration of the applicable statute
of limitations with respect to claims for indemnification relating to breaches
of the representations and warranties of the Buyer, the Sellers or the Company,
as applicable, contained in any of the Fundamental Representations; and (ii)
prior to May 31, 2007 with respect to all other claims for indemnification under
subsections (a), (b) and (c) above; provided that in each case each such claim
shall survive until the resolution of such claim. Covenants that provide for
performance following Closing shall survive in accordance with their respective
terms.
(e) Promptly after the assertion by any third party of any claim
(a "Third Party Claim") against any Person entitled to indemnification under
this Section 10.02 (the "Indemnitee") that results or may result in the
incurrence by such Indemnitee of any Loss for which such Indemnitee would be
entitled to indemnification pursuant to this Agreement, and promptly after
obtaining knowledge of any other claim, such Indemnitee shall promptly (and, in
any event, within fifteen (15) Business Days after receiving notice of such
Third Party Claim)
36
notify in writing the parties from whom such indemnification could be sought
(the "Indemnitors") and, if a Buyer Indemnitee is the Indemnitee, the
Representative of such Third Party Claim. The Representative shall act on behalf
of all Indemnitors in the case of all Third Party Claims with respect to which
any Buyer Indemnitee is seeking indemnification under subsection (a) above and
may, at its option, assume and conduct the defense of the Indemnitee against
such Third Party Claim (including the employment of counsel and the payment of
reasonable expenses) with counsel reasonably acceptable to the Buyer Indemnitee;
provided, however, in the event any Third Party Claim or series of related Third
Party Claims by or against a Material Customer or Material Supplier or the
Indemnified Party or its Subsidiaries or a Person with whom the Indemnified
Party otherwise has a material business relationship (in each case wherein an
adverse judgment would reasonably be expected to cause a Material Adverse
Effect), the Buyer Indemnitee shall have the right to control the defense of
such Third Party Claim (at the expense of the Indemnifying Party) and designate
counsel for such defense; provided, that the Indemnifying Party shall have the
right to consent to the choice of such counsel (such consent not to be
unreasonably withheld or delayed); provided further, that the Indemnitor shall
have the right to consult with the Indemnitee and such counsel in all material
decisions relating to such Third Party Claim or series of Third Party Claims. No
such Third Party Claim or series of related Third Party Claims may be settled or
compromised without the prior written consent of the Indemnitor (which consent
will not be unreasonably withheld or delayed). Any Indemnitee shall have the
right to employ separate counsel in any such Third Party Claim and to
participate in the defense thereof (to the extent such Indemnitee shall not
control the defense thereof), but the fees and expenses of such counsel shall
not be an expense of the Indemnitor unless (i) the Indemnitor shall have failed,
within a reasonable time after having been notified by the Indemnitee of the
existence of such Third Party Claim as provided in the preceding sentence, to
assume and conduct the defense of such Third Party Claim or (ii) the employment
of such counsel has been specifically authorized by the Indemnitor and/or the
Representative in the case of all Third Party Claims with respect to which any
Buyer Indemnitee is entitled to indemnification under subsection (a) above.
(f) The amount of any Loss subject to indemnification hereunder
or of any claim therefor shall be calculated net of (i) any refund of Taxes
received by Buyer or reduction in Taxes actually paid by the Buyer, the Company,
its Subsidiaries or any of their Affiliates on account of such Loss and (ii) any
insurance proceeds or other recoveries (net of collection expenses) actually
received by any Seller, the Buyer, the Company and its Subsidiaries on account
of such Loss (including, but not limited to, amounts actually received from any
third party for indemnification or contribution). If the Buyer, the Company, its
Subsidiaries or any of their Affiliates receives, a Tax benefit of the type
described in clause (i) above after an indemnification payment is made, the
Buyer shall promptly pay to the Representative (on behalf of the Sellers) the
value of such Tax benefit. The Buyer, the Company and its Subsidiaries shall
seek full recovery under all insurance policies covering any Loss to the same
extent as they would if such Loss were not subject to indemnification hereunder,
and the Buyer, the Company and its Subsidiaries shall not terminate or cancel
any insurance policies in effect for periods prior to the Closing. In the event
that an insurance recovery is made by the Buyer, the Company, its Subsidiaries
or any of their Affiliates with respect to any Loss for which any such Person
has been indemnified hereunder, then a refund equal to the aggregate amount of
the recovery (net of all direct collection expenses) shall be made promptly to
the Representative (on behalf of the Sellers). Each party hereby waives, to the
extent permitted under its applicable insurance
37
policies, any subrogation rights that its insurer may have with respect to any
indemnifiable Losses.
(g) All indemnification payments made hereunder shall be treated
by all parties as an adjustment to the Purchase Price.
(h) Notwithstanding anything to the contrary contained in this
Section 10.02, there shall be no recovery for any Loss by any Buyer Indemnitee
under this Section 10.02, and the Loss shall not be included in meeting the
stated thresholds hereunder, to the extent such item has been included in the
calculation of the Final Purchase Price (with respect to the determination of
Working Capital) under Section 1.01(b) and Section 1.01(g) hereof.
(i) The Buyer agrees that in the event of any breach giving
rise to an indemnification obligation under Section 10.02(a), the Buyer shall
take and cause its Affiliates (including the Company and its Subsidiaries) to
take, or cooperate with the Representative, if so requested by the
Representative, in order to take, all commercially reasonable measures to
mitigate the consequences of the related breach (including taking steps to
prevent any contingent liability from becoming an actual liability).
(j) Upon payment in full of any Losses pursuant to Section 10.02
or the payment of any judgment or settlement with respect to a Third Party
Claim, the Indemnitor shall be subrogated to the extent of such payment to the
rights of the Indemnitee against any Person with respect to the subject matter
of such Loss or Third Party Claim. The Indemnitee shall assign or otherwise
cooperate with the Indemnitor, at the cost and expense of the Indemnitor, to
pursue any claims against, or otherwise recover amounts from, any Person liable
or responsible for any Losses for which indemnification has been received
pursuant to this Agreement. Notwithstanding the foregoing, no Indemnitor shall
be required or obligated to take any action that is in conflict with any
insurance policy or other agreement pursuant to which subrogation or assignment
would occur.
10.03 Limitation of Recourse.
(a) Following the Closing, except with respect to claims based
upon fraud, the indemnification provided by Section 10.02(a) shall be the sole
and exclusive remedy for any Losses of any Person entitled to indemnification
hereunder with respect to any misrepresentation or inaccuracy in, or breach of,
any representations or warranties or any breach or failure in performance of any
covenants or agreements in this Agreement or in any exhibit or schedules hereto
or any certificate delivered hereunder. In no event shall any Person be entitled
to recover or make a claim for any amounts in respect of lost profits or
punitive damages and, in particular, no "multiple of profits" or "multiple of
cash flow" or similar valuation methodology shall be used in calculating the
amount of any Losses.
(b) Except as provided in Section l0.02(a) or Section 10.02(b),
no claim shall be brought or maintained by any Person entitled to
indemnification hereunder against any officer, director or employee (present or
former) of the Company or any of its Subsidiaries, the Representative or any
Seller, and no recourse shall be brought or granted against any of them, by
virtue of or based upon any alleged misrepresentation or inaccuracy in or breach
of any of the
38
representations, warranties or covenants set forth or contained in this
Agreement or any exhibit or schedule hereto or any certificate delivered
hereunder, except to the extent that the same shall have been the result of
fraud by any such Person. The obligations of the Sellers for all purposes under
this Agreement are several and not joint and several (based on the Sellers'
Indemnification Share), and in no event shall any Seller, the Representative or
any present or former officer, director or employee of the Company or its
Subsidiaries have any shared or vicarious liability for the actions or omissions
of any other Person.
(c) The Buyer, the Company, its Subsidiaries and their
respective successors and permitted assigns, hereby waive any right to seek
contribution or other recovery from any Seller (or any of their respective
officers, directors or employees (present or former)) that any of them may now
or in the future have under any Environmental Laws (including the
Comprehensive Environmental Response, Compensation, and Liability Act, any
analogous state law, and any common law providing for any remedy or right of
recovery with respect to environmental matters). The Buyer, the Company, its
Subsidiaries and their respective successors and permitted assigns hereby
release all Sellers (or any of their respective officers, directors or employees
(present or former)) from any and all such claims, demands and causes of action
that any of them may now or in the future have under such Environmental Laws.
Nothing in this Section 10.03(c) shall limit in any way any rights to
indemnification that any Buyer Indemnitee may have pursuant to Section 10.02
above.
(d) The Buyer shall have no right to assert any claims with
respect to any Loss, cause of action or other claim to the extent it is a Loss,
cause of action or claim with respect to which the Buyer or any of its
Affiliates has taken action (or caused action to be taken) to accelerate the
time period in which such matter is asserted or payable.
10.04 Disclosure Generally. If and to the extent any information
required to be furnished in any Schedule or Updated Schedule is contained in
this Agreement or in any Schedule or Updated Schedule attached hereto and such
information is reasonably apparent to be responsive to any other schedule or
Updated Schedule, such information shall be deemed to be included in all
Schedules in which the information is required to be included. The inclusion of
any information in any Schedule or Updated Schedule attached hereto shall not be
deemed to be an admission or acknowledgment by the Company, its Subsidiaries or
the Sellers, in and of itself, that such information is material to or outside
the ordinary course of the business of the Company or its Subsidiaries.
10.05 No Additional Representations; Disclaimer.
(a) The Buyer acknowledges that neither the Representative,
Sellers, the Company nor any of its Subsidiaries, nor any other Person acting on
behalf of the Company or any of its Affiliates has made any representation or
warranty, express or implied, as to the accuracy or completeness of any
information regarding the Company or any of its Subsidiaries or their respective
businesses or assets, except as expressly set forth in this Agreement or as and
to the extent required by this Agreement to be set forth in the Schedules
hereto. The Buyer further agrees that none of the Sellers nor any other Person
shall have or be subject to any liability to the Buyer or any other Person
resulting from the distribution to the Buyer, or the Buyer's use of, any such
information, including the Confidential Information Memorandum prepared by
Xxxxxx
39
Xxxxxxxx & Co. dated June 2005 and any information, document or material made
available to the Buyer or the Buyer's Representatives in certain "data rooms,"
management presentations or any other form in expectation of the transactions
contemplated by this Agreement.
(b) In connection with the Buyer's investigation of the Company
and its Subsidiaries, the Buyer or the Buyer's Representatives has received from
or on behalf of the Company certain projections, including projected statements
of operating revenues and income from operations of the Company and its
Subsidiaries for the fiscal year ending January 31, 2006 and for subsequent
fiscal years and certain business plan information for such fiscal year and
succeeding fiscal years. The Buyer acknowledges that there are uncertainties
inherent in attempting to make such estimates, projections and other forecasts
and plans, that the Buyer is familiar with such uncertainties, that the Buyer is
taking full responsibility for making its own evaluation of the adequacy and
accuracy of all estimates, projections and other forecasts and plans so
furnished to it (including the reasonableness of the assumptions underlying such
estimates, projections and forecasts), and that the Buyer shall have no claim
against the Sellers or any other Person with respect thereto. Accordingly,
neither the Company nor the Sellers make any representations or warranties
whatsoever with respect to such estimates, projections and other forecasts and
plans (including the reasonableness of the assumptions underlying such
estimates, projections and forecasts).
(c) The Buyer acknowledges that it has conducted to its
satisfaction, an independent investigation and verification of the financial
condition, results of operations, assets, liabilities, properties and projected
operations of the Company and its Subsidiaries and, in making its
determination to proceed with the transactions contemplated by this Agreement.
SUCH REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND THE SELLERS CONSTITUTE
THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SELLERS TO BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND
BUYER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND
WARRANTIES OF ANY KIND OR NATURE EXPRESSED OR IMPLIED (INCLUDING, BUT NOT
LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION,
RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY AND ITS
SUBSIDIARIES) ARE SPECIFICALLY DISCLAIMED BY THE COMPANY AND THE SHAREHOLDERS.
Notwithstanding the foregoing, the parties hereto acknowledge and agree,
however, that, notwithstanding the Buyer's conduct of its due diligence and
independent investigation and verification of the financial condition, results
of operations, assets, liabilities, properties and projected operations of the
Company and its Subsidiaries, (i) the Buyer is entitled to rely on all of the
representations and warranties of the Company and the Sellers set forth herein
and all of the Schedules and Exhibits hereto, and (ii) nothing contained herein
shall limit, condition or otherwise restrict the Buyer's rights and remedies
hereunder associated with its reliance on the representations and warranties of
the Company and the Sellers expressly and specifically set forth in this
Agreement, including the Schedules and Updated Schedules attached hereto.
10.06 Certain Tax Matters. The following provisions shall govern
the allocation of responsibility as between the Buyer and the Company on the one
hand and the Sellers and the Representative on the other hand for certain Tax
matters following the Closing:
40
(a) The Buyer, the Company, the Sellers and the Representative
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of any Tax Returns and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's reasonable request) making
available of records and information which 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. The Company shall retain all books and records
with respect to tax matters pertinent to the Company and its Subsidiaries
relating to any tax periods and shall abide by all record retention agreements
entered into with any taxing authority, and shall give the Representative
reasonable written notice prior to transferring, destroying or discarding any
such books and records prior to the expiration of the applicable statute of
limitations for that tax period, and if the Representative so requests, the
Company shall allow the Representative to take possession of such books and
records.
(b) All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be borne equally by the Buyer and the
Sellers when due, and the Buyer and the Sellers will, each at its own expense,
file all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and fees,
and, if required by applicable law, each of the Buyer and the Sellers will join
in the execution of any such Tax Returns and other documentation.
(c) Buyer shall be entitled to any and all Income Tax refunds or
credits (including, without limitation, any and all Transaction Tax Deduction
Benefits) of the Company with respect to any losses or credits incurred for
periods ending on or prior to the Closing Date regardless of whether such
refunds or credits are realized or received with respect to the periods
occurring before or after the Closing Date. Buyer will pay any such amounts
(without duplication) to the Representative within 10 days of receipt of such
refund or realization of such credit.
(d) Tax Indemnification. The Sellers shall severally (based on
each Seller's Indemnification Share), and not jointly, indemnify the Buyer
Indemnitees and hold them harmless from and against any Loss attributable to (i)
all Income Taxes (or the non-payment thereof) of the Company and its
Subsidiaries for all Taxable periods ending on or before the Closing Date and
the portion through the end of the Closing Date for any Taxable period that
includes (but does not end on) the Closing Date ("Pre-Closing Tax Period"), (ii)
all Income Taxes of any member of an Affiliated Group of which the Company or
any Subsidiary (or any predecessor of the foregoing) is or was a member on or
prior to the Closing Date, including pursuant to Treasury Regulation SS.1.1502-6
(or any analogous or similar state, local, or foreign law or regulation), and
(iii) any and all Income Taxes of any Person imposed on the Company or any
Subsidiary as a transferee or successor, by contract or pursuant to any law,
rule, or regulation, which Taxes relate to an event or transaction occurring
before the Closing; provided that any such claims for indemnity pursuant to this
Section 10.06(d) shall not be subject to the DeMinimis Amount or the Deductible
Basket; and provided further that no Seller shall be liable under this Section
10.06(d) (together with any indemnification claim amounts owing by such Seller
under Section 10.02(a) and Section 10.02(b)) for more than the portion of the
Actual
41
Purchase Price and the portion of the Contingent Payment and Second Contingent
Payment, if any, received by such Seller.
(e) Straddle Period. In the case of any Taxable period that
includes (but does not end on) the Closing Date (a "Straddle Period"), the
amount of any Income Taxes for the Pre-Closing Tax Period shall be determined
based on an interim closing of the books as of the close of business on the
Closing Date (and for such purpose, the Taxable period of any partnership or
other pass-through entity in which the Company or any Subsidiary holds a
beneficial interest shall be deemed to terminate at such time).
(f) Tax Return Filing. The Representative (on behalf of the
Sellers) shall prepare all of the Company's Tax Returns for the periods for
which the Sellers are liable under Section 10.06(d). All such Tax Returns shall
be prepared and filed in a manner consistent with prior practice, except as
required by a change in applicable law. Buyer shall have the right to review any
such Tax Returns prepared by the Representative (on behalf of the Sellers) at
least 15 days prior to when such tax Returns are due. Buyer shall cause the
Company and its Subsidiaries to file income Tax Returns or shall include the
Company and its Subsidiaries in its combined or consolidated income tax returns,
for all other periods.
(g) Wisconsin Tax Audit. If the Wisconsin Tax Audit has not
been settled prior to the Closing in a manner reasonably satisfactory to Buyer
(and only in such event), the Sellers shall severally (based on each Seller's
Indemnification Share), and not jointly, indemnify the Buyer Indemnitees and
hold them harmless from and against any Loss attributable to the Wisconsin Tax
Audit. Any indemnity payment in respect of the Wisconsin Tax Audit shall be made
first from the escrow account created pursuant to the Additional Escrow
Agreement and shall thereafter be made by the Sellers directly. In addition, the
Sellers shall severally (based on each Seller's Indemnification Share) and not
jointly indemnify the Buyer Indemnitees and hold them harmless from and against
any Loss attributable to the Wisconsin Later Years Tax Audit; provided that
notwithstanding anything else contained in this Agreement to the contrary, the
maximum amount of any such Losses for which the Buyer Indemnitees may assert
claims in respect of the Wisconsin Later Years Tax Audit hereunder shall be
$2,000,000.
10.07 Further Assurances. From time to time, as and when
reasonably requested by any party hereto and at such party's expense, any other
party shall execute and deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be taken, all such further
or other actions as such other party may reasonably deem necessary or desirable
to evidence and effectuate the transactions contemplated by this Agreement.
ARTICLE XI
DEFINITIONS
"2007 Adjusted Consolidated EBITDA Statement" has the meaning set
forth in Section 1.03(a).
"2007 Audited Financial Statements" has the meaning set forth in
Section 1.03(a).
"2007 Fiscal Year" has the meaning set forth in Section 1.03(a).
42
"Additional Escrow Amount" has the meaning set forth in Section
1.01(d).
"Adjusted Consolidated EBITDA" means (for the relevant period) (i)
the consolidated net income of Company and its Subsidiaries plus (ii) to the
extent deducted in determining consolidated net income: (A) interest expense
(including amortization of deferred loan costs); (B) federal, state and local
income taxes; (C) depreciation of tangible assets; and (D) amortization of
intangible assets, as adjusted for the following items (to the extent that they
are reflected in net income or net loss):
(i) elimination of: (A) all extraordinary gains and losses
determined in accordance with GAAP and (B) gains and losses from sales,
impairments or dispositions of property and equipment or other fixed assets;
(ii) add-back for all (i) management fees paid to the Equity
Sponsor or its Affiliates, (ii) director fees paid to any member of the Board of
Directors of the Company or any of its Subsidiaries, (iii) any stock option
compensation expenses, and (iv) any fees and expenses incurred by the Company in
connection with the consummation of the transactions contemplated hereby and the
financing thereof;
(iii) add-back for all consulting fees paid to consultants
providing strategic advice to the Company or its Subsidiaries; and
(iv) add-back of the amount of one-time costs associated with the
Company's compliance with Sarbanes/Oxley in excess of $250,000.
"Affiliated Group" has the meaning set forth in Section 4.08(a).
"Affiliates" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Aggregate Option/Phantom Right Amount" has the meaning set forth in
Section 1.01(h).
"Audited Financial Statements" has the meaning set forth in Section
4.05(ii).
"Business" means the manufacturing and sales of premium stainless
steel and specialty alloy welded tubular products for established and developing
end-markets, including oil & gas exploration and production, food & beverage
processing and dispensing, power generation, chemical/petrochemical processing,
biotechnology, the pharmaceutical and semiconductor industries, by the Company
and its Subsidiaries, and any business operations related thereto and in each
case as conducted as of the date hereof.
"Business Trade Secrets" has the meaning set forth in Section
4.16(f).
"Buyer" has the meaning set forth in the preamble.
43
"Buyer Indemnitees" has the meaning set forth in Section 10.02(a).
"Buyer's Representatives" has the meaning set forth in Section 6.03.
"Business Day" means any day other than a Saturday, a Sunday or a
day on which banks in New York City are authorized or obligated by Law or
executive order to close.
"Cash and Cash Equivalents" means those items of the Company and its
Subsidiaries as of the close of business on the Closing Date which are required
by GAAP to be included as "cash" or "cash equivalents" on the Closing Balance
Sheet, but excluding (x) outstanding checks (to the extent such outstanding
checks reduce accounts payable), (y) any restricted cash balances, and (z) in
each case, any effects of the consummation of the transactions contemplated by
this Agreement and the financing thereof.
"Closing" has the meaning set forth in Section 1.02(a).
"Closing Balance Sheet" has the meaning set forth in Section
1.0l(f)(ii).
"Closing Costs" means all of the fees, expenses and other payments
(including Management Closing Costs) incurred by the Company in connection with
the transactions contemplated by this Agreement (on its own behalf and on behalf
of the Equityholders, individually or as a group) that remain unpaid as of the
Closing and, subject to Closing, are to be paid by the Buyer at the Closing
pursuant to Section 1.02(b), including, without limitation, any fees and
expenses owing to Xxxxxxxx & Xxxxx LLP, Xxxxxx Xxxxxxxx & Co.,
PricewaterhouseCoopers LLP and such other parties as are set forth on the
Closing Costs Schedule attached hereto.
"Closing Date" has the meaning set forth in Section 1.02(a).
"Closing Transactions" has the meaning set forth in Section 1.02(b).
"Closing Working Capital" means the Working Capital as of the close
of business on the Closing Date without taking into account the effects of the
consummation of the transactions contemplated by this Agreement and the
Financing thereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preamble.
"Confidentiality Agreement" has the meaning set forth in Section
6.02.
"Contingent Amount" means the lesser of (i) $30,000,000, and (ii)
the product of (A) 3.0 times (B) the Adjusted Consolidated EBITDA for the 2007
Fiscal Year (as set forth in the 2007 Adjusted Consolidated EBITDA Statement)
minus $45,000,000.
"Contingent Payment" means the Contingent Amount, minus the
aggregate dollar value of any of the good faith indemnification claims by the
Buyer Indemnitees that have not
44
been fully resolved pursuant to Section 10.02 on the date the Contingent Payment
is to be made pursuant to Section 1.03.
"Contract" means, whether oral or written, any agreement, contract,
lease, license, franchise, note, bond, mortgage, indenture, guarantee, purchase
or sale order or other instrument or obligation, arrangement or commitment,
including all amendments thereto.
"Controlled Group" has the meaning set forth in Section 4.20.
"De Minimis Amount" has the meaning set forth in Section 10.02(a).
"Debt Commitment Letter" has the meaning set forth in Section 5.08.
"Deductible Basket" has the meaning set forth in Section 10.02(a).
"Draft Balance Sheet" has the meaning set forth in Section
1.01(f)(i).
"Employee Benefit Plan" has the meaning set forth in Section 4.20.
"Encumbrances" has the meaning set forth in Section 4.07(d).
"Environmental Claims" means any written complaint, summons,
citation, notice, directive, order, claim, litigation, investigation, notice of
violation, judicial or administrative proceeding, judgment, letter or other
communication from any governmental authority, or any third party alleging
violations of Environmental Laws or alleging Releases of Hazardous Materials
from (i) any assets, properties or businesses of the Company or its subsidiaries
or any predecessor in interest; (ii) from adjoining properties or businesses; or
(iii) from or onto any facilities that received Hazardous Materials generated by
the Company or its subsidiaries or any predecessor in interest.
"Environmental Laws" means all Federal, state and local laws,
statutes, ordinances, rules and regulations in each case, and all final court
orders, decrees and legally-binding arbitration awards which are in existence on
the Closing Date, imposing liability or establishing standards of conduct for
protection of the environment, including the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as
amended; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901 et
seq., as amended; and the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as
amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as amended.
"Environmental Liabilities" means all liabilities, monetary
obligations, remedial actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants and costs of
investigations and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any governmental
authority or any third party, and which relate to any environmental condition at
or a Release of Hazardous Materials from or onto (i) any property presently or
formerly owned by the Company or any of its Subsidiaries or (ii) any facility
that received Hazardous Materials generated by the Company or any of its
Subsidiaries.
45
"Environmental Permits" means licenses, permits, registrations,
governmental approvals, and consents that are required under or are issued
pursuant to Environmental Laws.
"Equityholder" has the meaning set forth in the preamble.
"Equity Commitment Letter" has the meaning set forth in Section
5.08.
"ERISA" has the meaning set forth in Section 4.14.
"Escrow Agent" means Xxxxx Fargo Bank, N.A.
"Escrow Agreement" has the meaning set forth in Section 1.01(c).
"Escrow Amount" has the meaning set forth in Section 1.01(c).
"Estimated Contingent Amount" has the meaning set forth in Section
1.03(a).
"Equity Commitment Letter" has the meaning set forth in Section
5.08.
"FCPA" has the meaning set forth in Section 4.25.
"Final Purchase Price" has the meaning set forth in Section
1.01(f)(ii).
"Financial Statements" has the meaning set forth in Section 4.05.
"Firm" has the meaning set forth in Section 1.01(f)(ii).
"GAAP" means the United States generally accepted accounting
principles, applied on a basis consistent with the Audited Financial Statements.
"Governmental Authorities" has the meaning set forth in Section
4.15.
"Hazardous Materials" shall mean, without regard to amount and/or
concentration but excluding naturally occurring concentrations (a) any element,
compound, or chemical that is defined, listed or otherwise classified as a
contaminant, pollutant, toxic pollutant, toxic or hazardous substances,
extremely hazardous substance or chemical, hazardous waste, medical waste,
biohazardous or infectious waste under Environmental Laws; (b) petroleum,
petroleum-based or petroleum-derived products; (c) polychlorinated biphenyls;
(d) any substance exhibiting a hazardous waste characteristic including but not
limited to corrosivity, ignitibility, toxicity or reactivity as well as any
radioactive or explosive materials; and (e) asbestos.
"Hedging Agreement" means any interest rate, foreign. currency,
commodity or equity swap, collar, cap, floor or forward rate agreement, or other
agreement or arrangement designed to protect against fluctuations in interest
rates or currency, commodity or equity values (including, without limitation,
any option with respect to any of the foregoing and any combination of the
foregoing agreements or arrangements), and any confirmation executed in
connection with any such agreement or arrangement, all as amended or otherwise
modified from time to time.
00
"XXX Xxx" has the meaning set forth in Section 2.01(e).
"Income Taxes" has the meaning set forth in Section 10.01(a).
"Indebtedness" means, as applied to the Company and its
Subsidiaries, all indebtedness of the Company or any of its Subsidiaries for
borrowed money as of the close of business on the Closing Date (determined
without giving effect to the consummation of the transactions contemplated by
this Agreement or the financing hereof), whether current or funded, or secured
or unsecured, including, without limitation, (a) all indebtedness of any such
Person for the deferred purchase price of property or services, excluding trade
accounts payable and excluding any installment obligations with respect to the
acquisition of capital equipment in the ordinary course of business, (b) all
indebtedness of any such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (c) all indebtedness of any such Person secured by a purchase money
mortgage or other Lien to secure all or part of the purchase price of the
property subject to such mortgage or Lien, (d) all obligations under leases
which shall have been or are required to be, in accordance with GAAP, recorded
as capital leases in respect of which such Person is liable as a lessee, (e) all
interest, fees, penalties (including prepayment penalties but only with respect
to indebtedness to be repaid at the Closing) and other expenses owed with
respect to the indebtedness referred to above, and (f) all indebtedness
referred to above which is directly or indirectly guaranteed by such Person or
which such Person has agreed (contingently or otherwise) to purchase or
otherwise acquire or in respect of which it has otherwise assured a creditor
against loss. Notwithstanding the foregoing, "Indebtedness" shall not include
indebtedness owing by the Company to any of its Subsidiaries, or by any
Subsidiary of the Company to the Company or any other Subsidiary of the Company.
"Indemnification Share" means the Indemnification Share of each
Equityholder as set forth on the Equityholders Schedule.
"Indemnitee" has the meaning set forth in Section 10.02(d).
"Indemnified Party" has the meaning set forth in Section 10.02(f).
"Indemnitors" has the meaning set forth in Section 10.02(d).
"Initial Purchase Price" has the meaning set forth in Section
1.01(b).
"Insider" has the meaning set forth in Section 4.21(a).
"Insurance Policies" has the meaning set forth in Section 4.24.
"Intellectual Property" means all foreign and domestic (i)
trademarks, service marks, brand names, certification marks, collective marks,
d/b/a's, Internet domain names, logos, symbols, trade dress, assumed names,
fictitious names, trade names, and other indicia of origin, all applications and
registrations for all of the foregoing, and all goodwill associated therewith
and symbolized thereby, including without limitation all extensions,
modifications and renewals of same (collectively, "Trademarks") (ii) inventions,
discoveries and ideas, whether patentable
47
or not, and all patents and patent applications (including without limitation
reissues, reexaminations, divisionals, renewals, extensions, provisionals,
continuations, continuations-in-part, patent disclosures, mask works and
integrated circuit topographies) and equivalents thereof (collectively,
"Patents"); (iii) confidential and proprietary information, trade secrets and
know-how, including without limitation processes, schematics, databases,
formulae, drawings, prototypes, models, designs and customer lists
(collectively, "Trade Secrets"); (iv) published and unpublished works of
authorship, whether copyrightable or not (including without limitation computer
software), copyrights therein and thereto, and registrations and applications
therefor, and all renewals, extensions, restorations and reversions thereof
(collectively, "Copyrights"); (v) electronic data processing, information,
recordkeeping, communications, telecommunications, account management, inventory
management and other computer systems (including all computer programs,
software, databases, firmware, hardware and related documentation) and Internet
websites and related content (collectively, "IT Systems"); and (vi) all other
intellectual property or proprietary rights and claims or causes of action
arising out of or related to any infringement, misappropriation or other
violation of any of the foregoing, including without limitation rights to
recover for past, present and future violations thereof (collectively, "Other
Proprietary Rights").
"Interim Periodic Financial Statements" has the meaning as set forth
in Section 6.10.
"IRS" as the meaning set forth in Section 4.14.
"Knowledge" means, with respect to the representations and
warranties of the Company set forth herein which are made subject to the
qualification "to the Knowledge of the Company," or other qualification of
similar import, as of the date hereof or the Closing Date, the knowledge, after
due inquiry, of Xxxxxx Xxxxxx, Xxxxxxx X. Xxxxxxx, C. Xxxxxx Xxxxxxxx, Xxxxx
Xxxxxxxx, Xxxx Xxxx, Xxxx Xxxxxxx, Xxxxx Xxxxx, Xxxxx X'Xxxxxxx, Xxxx Fan or
Xxxxx Xxxxxxxx of any matter, fact, or thing. For the purposes of this
definition, the term "knowledge, after due inquiry" shall mean knowledge that
such person could reasonably be expected to obtain upon a review of the books
and records of the Company.
"Laws" has the meaning set forth in Section 4.21.
"Leased Real Property" has the meaning set forth in Section 4.07(a).
"Leases" has the meaning set forth in Section 4.07(a).
"Law" or "Laws" means any Federal, provincial, state, local,
municipal, international or foreign law, statute, ordinance, code, rule,
regulation, judgment, order or decree.
"Liens" means all liens, claims, encumbrances, mortgages, pledges,
easements, charges, security interests, options, proxies, voting trusts or other
agreements and other restrictions and limitations (statutory or otherwise).
"Loss" has the meaning set forth in Section 10.02(a).
48
"Management Closing Costs" means any compensatory, bonus,
change-in-control, or similar payments (other than payments made in respect of
the Stock Options and Phantom Rights) in an amount not to exceed $5,000,000
incurred by the Company or any of its Subsidiaries in connection with the
transactions contemplated hereby and paid at Closing and for which no further
obligation of any kind shall continue following the Closing.
"Management Equityholder" means each of Xxxxxx Xxxxxx, Xxxxxxx X.
Xxxxxxx and C. Xxxxxx Xxxxxxxx.
"Material Adverse Change" means a change, event, circumstance or
series of changes, events or circumstances that, has had or gives rise to a
Material Adverse Effect.
"Material Adverse Effect" means any effect or change that would,
individually or in the aggregate, be materially adverse to (i) the financial
condition, assets, properties or operating results of the Company and its
Subsidiaries, taken as a whole or (ii) the ability of the Company or the Sellers
to timely consummate the transactions contemplated hereby, provided, however,
that the following shall in no event be deemed to be a Material Adverse Effect
hereunder: (i) any effect or change (including any change in the laws, rules,
regulations, orders, or other binding directives issued by any governmental or
regulatory authority) which affects generally the United States economy or the
Company's industry as a whole except for those effects or changes that
disproportionately affect the Company and its Subsidiaries, taken as a whole;
(ii) any national or international political or social conditions, including the
engagement by the United States 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 any of its territories, possessions,
or diplomatic or consular offices or upon any military installation, equipment
or personnel of the United States except for those effects or changes that
disproportionately affect the Company and its Subsidiaries, taken as a whole; or
(iii) any adverse change, effect, event, occurrence, state of facts or
development arising from or relating to financial, banking, or securities
markets (including any disruption thereof or any decline in the price of
securities generally or any market or index).
"Material Contracts" has the meaning set forth in Section 4.09(a).
"Material Suppliers and Customers" has the meaning set forth in
Section 4.19.
"Objection Notice" has the meaning set forth in Section 1.01(f)(ii).
"Offering" has the meaning set forth in Section 6.05.
"Owned Real Property" has the meaning set forth in Section 4.07(d).
"Per Share Initial Purchase Price" means an amount equal to (A) the
sum of the Initial Purchase Price plus the aggregate exercise price of all Stock
Options divided by (B) the sum of (i) the number of Shares outstanding
immediately prior to the Closing plus (ii) the number of Phantom Rights
outstanding immediately prior to the Closing, plus (iii) the aggregate number of
shares of Common Stock issuable upon exercise of the outstanding Stock Options.
"Permits" has the meaning set forth in Section 4.07(f).
49
"Permitted Encumbrances" has the meaning set forth in Section
4.07(d).
"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 and a governmental entity or any
department, agency or political subdivision thereof.
"Phantom Rights" has the meaning set forth in Section 1.01(h).
"Phantom Rights Agreements" means those certain Phantom Rights
Agreements, each dated as of September 26, 2005, by and between the Company and
each of Xxxxxxx X. Xxxxxxx, C. Xxxxxx Xxxxxxxx, Xxxxx X. Xxxxxx and Xxxxxx
Xxxxxxxxxx.
"Phantom Rights Plan" means the RathGibson, Inc. 2005 Phantom Rights
Plan.
"Plans" has the meaning set forth in Section 4.14.
"Pre-Closing Tax Period" means any Tax period ending on or before
the Closing Date or, in the case of any Straddle Period, the portion of such
Straddle Period up to and including the Closing Date.
"Pro Rata Share" means the Pro Rata Share of each Equityholder as
set forth on the Equityholders Schedule.
"Products" has the meaning set forth in Section 4.22(a).
"Proposal" has the meaning set forth in Section 6.02.
"Real Properties" has the meaning set forth in Section 4.07.
"Registered" means issued, registered, renewed or the subject of a
pending application.
"Related Party" has the meaning set forth in Section 4.21(a).
"Release" has the meaning set forth in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.
"Representative" has the meaning set forth in Section 9.01.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Second Contingent Payment" has the meaning set forth in Section
1.04(a).
"Shares" has the meaning set forth in the preamble.
"Stock Option Agreement" means that certain Stock Option Agreement,
dated as of September 26, 2005, by and between the Company and Xxxxx X. Xxxxxx.
50
"Stock Option Plan" means the RathGibson, Inc. 2005 Stock Option
Plan.
"Stock Options" has the meaning set forth in Section 1.01(h).
"Straddle Period" means any Tax period that includes but does not
end on the Closing Date.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, trust or other entity of
which more than 50% of the total voting power, whether by way of contract or
otherwise, of shares of capital stock or other interests (including partnership
interests) 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 (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Suits" has the meaning set forth in Section 4.10(d).
"Target Working Capital" means an amount equal to (i) the average of
the Company's Working Capital as of the last day of each of the twelve months
immediately preceding the month in which the Closing occurs as calculated in
accordance with the Working Capital Schedule attached hereto plus (ii)
$5,000,000.
"Tax" or "Taxes" means any federal, state, local or foreign gross or
net income, gross or net receipts, capital stock, franchise, profits,
withholding, social security, unemployment, disability, real property, ad
valorem/personal property, stamp, excise, occupation, sales, use, transfer,
value added, alternative minimum, estimated or other tax, duty, fee or other
governmental charge of any kind, including any interest, penalty or addition
thereto, whether disputed or not.
"Tax Returns" means any return, report, information return or other
document (including schedules or any related or supporting information) filed or
required to be filed with any governmental entity or other authority in
connection with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.
"Third Party Claim" has the meaning set forth in Section 10.02(d).
"Transaction Tax Deduction Benefits" means any Tax refunds and/or
reductions in Taxes payable by the Company or the Sellers attributable to
deductions arising from expenditures by or on behalf of the Company in respect
of the items set forth on the Transaction Tax Deduction Benefits Schedule.
"Unaudited Financial Statements" has the meaning set forth in
Section 4.05(i).
"Wisconsin Later Years Tax Audit" means any claim by the Wisconsin
Department of Revenue with respect to the interest deductions taken by the
Company with respect to any taxable years after the taxable year ended January
31, 2000, on any loans between the Company and the State Board of Florida.
51
"Wisconsin Tax Audit" means any claim by the Wisconsin Department of
Revenue with respect to the interest expense deductions taken by the Company for
taxable years 1995 through the year ended January 31, 2000, on any loans between
the Company and the State Board of Florida.
"Working Capital" means the excess of (i) the sum of the Company's
and its Subsidiaries' current assets on a consolidated basis (including accounts
receivable, other receivables, inventory, prepaid expenses and other current
assets, but excluding Cash and Cash Equivalents, Income Taxes recoverable and
deferred Income Tax balances) over (ii) the sum of the Company's and its
Subsidiaries' current liabilities on a consolidated basis (including accounts
payable, other accounts payable, and salaries and wages payable and other
current liabilities but excluding any Income Taxes payable, deferred Income Tax
Balances and any amounts that relate to Indebtedness of the Company). The
foregoing shall be determined on a consolidated basis for the Company and its
Subsidiaries and in accordance with GAAP (except as otherwise provided in the
immediately preceding sentence) as set forth on the Schedule of Working Capital
attached hereto.
ARTICLE XII
MISCELLANEOUS
12.01 Press Releases and Communications. No press release or
public announcement related to this Agreement or the transactions contemplated
herein shall be issued or made without the joint approval of the Buyer and the
Representative (which approval shall not be unreasonably withheld or delayed)
unless required by law (in the reasonable opinion of counsel) in which case the
Buyer and the Representative shall have the right to review such press release
or announcement prior to publication.
12.02 Expenses. Except as otherwise expressly provided herein, the
Sellers and the Buyer shall pay all of their own expenses (including attorneys'
and accountants' fees and expenses) in connection with the negotiation of this
Agreement, the performance of their respective obligations hereunder and the
consummation of the transactions contemplated by this Agreement (whether
consummated or not); provided that if the Closing occurs, the Buyer shall fund
the payment of all pre-Closing fees and expenses of the Sellers, the Company
and its Subsidiaries (including, without limitation, fees and expenses payable
to legal counsel and independent accountants) as part of the Closing Costs.
12.03 Notices. Any notice provided for in this Agreement shall be
in writing and shall be either personally delivered, or received by certified
mail, return receipt requested, or sent by reputable overnight courier service
(charges prepaid) or telecopy to the Company at the address set forth below and
to any other recipient at the address indicated in this Agreement and to any
subsequent holder of Shares at such address as indicated by the Company's
records or at such address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
Notices will be deemed to have been given hereunder (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) upon
machine-generated acknowledgment of receipt after transmittal by facsimile if so
acknowledged to have been
52
received before 5:00 p.m. on a Business Day at the location of receipt and
otherwise on the next following Business Day, provided that such notice, demand
or other communication is also deposited within 24 hours thereafter with a
reputable overnight courier service (charges prepaid) for delivery to the same
Person, or (iv) five days after being mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid.
Notices to the Buyer and to the Company after the Closing:
Xxxxxx Xxxxxx, Inc.
000 X. 00xx Xxxxxx--00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: 212.207.8042
Attn: Xxxxxxx X. Xxxxxxxxx
with a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: 212.593.5955
Attn: Xxxxxx Xxxxxxxxx
Notices to the Representative:
Liberty Partners Holdings 10, L.L.C.
1370 Avenue of the Americas
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: 212.649.6076
Attention: Xxxx X. Xxxxxx
with a copy to (which shall not constitute notice):
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxx, P.C.
53
Notices to the Company prior to Closing:
Liberty Partners Holdings 10, L.L.C.
1370 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx
Telecopy: 212.649.6076
And
RathGibson, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopy: 608.754.0605
With a copy to (which shall not constitute notice):
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxx, P.C.
12.04 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned or
delegated by the Buyer without the prior written consent of the Representative.
Notwithstanding anything to the contrary in this Section 12.05, the Buyer may
assign, without the prior written consent of any other parties hereto, (i) any
of its rights, benefits or obligations hereunder to an Affiliate, and (ii) any
rights under this Agreement to the Buyer's financing institutions and following
Closing subsequent purchasers of the Buyer, the Company or any of its
Subsidiaries, provided, that in each case, no such assignment shall relieve the
Buyer of obligations under this Agreement that have not been performed timely by
any such Affiliate assignee.
12.05 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable Law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
54
12.06 No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Person.
12.07 Amendment and Waiver. Any provision of this Agreement or the
Schedules or Exhibits hereto may be amended or waived only in writing signed by
the Buyer, the Company and the Representative. No waiver of any provision
hereunder or any breach or default thereof shall extend to or affect in any way
any other provision or prior or subsequent breach or default. In addition, the
Buyer and certain Management Equityholders may enter into agreements between the
date hereof and the Closing Date whereby all or a portion of such Management
Equityholders Shares (which would otherwise be sold to Buyer pursuant to this
Agreement) may be contributed by such Management Equityholders to the capital or
exchanged for capital stock or options to acquire equity interests of the Buyer
(or the parent of the Buyer). In such event, the Buyer, Company and the
Representative agree to amend this Agreement as reasonably necessary in order to
accommodate the execution of such agreements and the transactions contemplated
thereby; provided, however, that no such modification shall result in any
additional liability to the Representative, or any other non-participating
Seller.
12.08 Complete Agreement. This Agreement and the documents
referred to herein (including the Confidentiality Agreement and the Escrow
Agreement) contain the complete agreement between the parties hereto and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
12.09 Counterparts. This Agreement may be executed in multiple
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same instrument.
12.10 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns, and except for
Section 7.03 and Article X, nothing herein expressed or implied shall give or be
construed to give any Person (other than the parties hereto and such assigns)
any legal or equitable rights hereunder.
12.11 Governing Law. Jurisdiction. All matters relating to the
interpretation, construction, validity and enforcement of 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 Illinois or any other jurisdiction) that would
cause the application of laws of any jurisdiction other than the State of New
York. The parties hereto irrevocably and unconditionally submit to the exclusive
jurisdiction of any state or federal court sitting in New York, New York over
any suit, action or proceeding brought pursuant to the terms of this Agreement.
12.12 Waiver of Jury Trial. The parties to this Agreement each
hereby waives, to the fullest extent permitted by law, any right to trial of any
claim, demand, action, or cause of action (i) arising under, this Agreement or
(ii) in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the transactions related
hereto, in each case whether now existing or hereafter arising, and whether in
contract, tort,
55
equity, or otherwise. The parties to this Agreement each hereby agree and
consents that any such claim, demand, action, cause of action shall be decided
by court trial without a jury and that the parties to this Agreement may file an
original counterpart of a copy of this Agreement with any court as written
evidence of the consent of the parties hereto to the waiver of their right to
trial by jury.
12.13 Buyer Obligations. With respect to any post-Closing
obligations of the Buyer, the Buyer may cause the Company and/or any of its
Subsidiaries to satisfy any such obligations directly or on Buyer's behalf.
* * * * *
56
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
BUYER:
RGCH HOLDINGS LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
_________________________________
Its: President
_________________________________
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
BUYER:
RGCH HOLDINGS LLC
By: _________________________________
Its: _________________________________
COMPANY:
RATHGIBSON, INC.
By: /s/ Xxxxxx X. Xxxxxx
_________________________________
Its: President & CEO
_________________________________
REPRESENTATIVE:
LIBERTY PARTNERS HOLDINGS 10, L.L.C.
By: Liberty Partners, L.P.
Its: Manager
By: PEB Associates, Inc.
Its: General Partner
By: _________________________________
Its: _________________________________
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
BUYER:
RGCH HOLDINGS LLC
By: _________________________________
Its: _________________________________
COMPANY:
RATHGIBSON, INC.
By: _________________________________
Its: _________________________________
REPRESENTATIVE:
LIBERTY PARTNERS HOLDINGS 10, L.L.C.
By: Liberty Partners, L.P.
Its: Manager
By: PEB Associates, Inc.
Its: General Partner
By: /s/ Xxxx X. Xxxxxx
_________________________________
Its: Managing Director
SELLERS:
LIBERTY PARTNERS HOLDINGS 10, L.L.C.
By: Liberty Partners, L.P.
Its: Manager
By: PEB Associates, Inc.
Its: General Partner
By: /s/ Xxxx X. Xxxxxx
_________________________________
Its: Managing Director
______________________________________
Xxxxxx Xxxxxx
______________________________________
Xxxxxxx X. Xxxxxxx
______________________________________
C. Xxxxxx Xxxxxxxx
______________________________________
Xxxxx X. Xxxxxx
SELLERS:
LIBERTY PARTNERS HOLDINGS 10, L.L.C.
By: Liberty Partners, L.P.
Its: Manager
By: PEB Associates, Inc.
Its: General Partner
By: _________________________________
Its: _________________________________
/s/ Xxxxxx X. Xxxxxx
______________________________________
Xxxxxx Xxxxxx
______________________________________
Xxxxxxx X. Xxxxxxx
______________________________________
C. Xxxxxx Xxxxxxxx
______________________________________
Xxxxx X. Xxxxxx
SELLERS:
LIBERTY PARTNERS HOLDINGS 10, L.L.C.
By: Liberty Partners, L.P.
Its: Manager
By: PEB Associates, Inc.
Its: General Partner
By: _________________________________
Its: _________________________________
______________________________________
Xxxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxxx
______________________________________
Xxxxxxx X. Xxxxxxx
______________________________________
C. Xxxxxx Xxxxxxxx
______________________________________
Xxxxx X. Xxxxxx
SELLERS:
LIBERTY PARTNERS HOLDINGS 10, L.L.C.
By: Liberty Partners, L.P.
Its: Manager
By: PEB Associates, Inc.
Its: General Partner
By: _________________________________
Its: _________________________________
______________________________________
Xxxxxx Xxxxxx
______________________________________
Xxxxxxx X. Xxxxxxx
/s/ C. Xxxxxx Xxxxxxxx
______________________________________
C. Xxxxxx Xxxxxxxx
______________________________________
Xxxxx X. Xxxxxx
SELLERS:
LIBERTY PARTNERS HOLDINGS 10, L.L.C.
By: Liberty Partners, L.P.
Its: Manager
By: PEB Associates, Inc.
Its: General Partner
By: _________________________________
Its: _________________________________
______________________________________
Xxxxxx Xxxxxx
______________________________________
Xxxxxxx X. Xxxxxxx
______________________________________
C. Xxxxxx Xxxxxxxx
/s/ Xxxxx X Xxxxxx
______________________________________
Xxxxx X. Xxxxxx
EQUITYHOLDERS SCHEDULE
---------------------------------------------------------------------------------------------------------------------------
Equityholder
Name and Address Shares Stock Options Phantom Rights Pro Rata Share Indemnification Share
---------------------------------------------------------------------------------------------------------------------------
Liberty Partners Holdings 10, L.L.C. 197,883 N/A N/A 87.91% 90.52%
c/o Liberty Capital Partners, Inc.
1370 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx
---------------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxx 10,385 N/A N/A 4.61% 4.75%
0000 Xxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxx 00000
---------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxx 1,357.25 N/A 1,554 1.29% 1.33%
000 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
---------------------------------------------------------------------------------------------------------------------------
C. Xxxxxx Xxxxxxxx 4,143 N/A 1,036 2.30% 2.37%
00 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
---------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 1,694 256 311 1.00% 1.03%
0000 Xxxxxx Xxxx
Xxxxxxxxx, Xxxxx 00000
---------------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxxxxx N/A N/A 6,474 2.88% --
0 Xxxxxxxxxxx Xxxx Xxx
Xxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------------
TOTAL: 215,462.25 256 9,375 100% 100%
---------------------------------------------------------------------------------------------------------------------------
