EXHIBIT 10.48
AGREEMENT AND PLAN OF MERGER
by and among
HANOVER COMPRESSOR COMPANY,
APSI ACQUISITION CORPORATION
and
APPLIED PROCESS SOLUTIONS, INC.
Dated as of May 3, 2000
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS 1
1.1 DEFINED TERMS............................................... 1
1.2 INTERPRETATION PROVISIONS................................... 14
ARTICLE 2 THE MERGER 15
2.1 THE MERGER.................................................. 15
2.2 EFFECTIVE TIME.............................................. 15
2.3 EFFECT OF THE MERGER........................................ 15
2.4 CERTIFICATE OF INCORPORATION; BYLAWS........................ 15
2.5 DIRECTORS AND OFFICERS...................................... 16
2.6 CLOSING ADJUSTMENT.......................................... 16
2.7 CONVERSION OF SECURITIES.................................... 16
2.8 SURRENDER OF CERTIFICATES................................... 17
2.9 NO FURTHER OWNERSHIP RIGHTS IN SHARES OF COMPANY STOCK...... 18
2.10 LOST, STOLEN OR DESTROYED CERTIFICATES...................... 19
2.11 ESCROW FUND................................................. 19
2.12 FUNDED DEBT OF THE COMPANY.................................. 19
2.13 EQUITY ADJUSTMENT........................................... 19
2.14 TAX CONSEQUENCES............................................ 21
2.15 TAKING OF NECESSARY ACTION; FURTHER ACTION.................. 21
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 22
3.1 ORGANIZATION OF THE COMPANY................................. 22
3.2 CAPITALIZATION OF THE COMPANY............................... 22
3.3 STOCKHOLDERS' AGREEMENTS, ETC............................... 23
3.4 AUTHORIZATION............................................... 23
3.5 OFFICERS AND DIRECTORS...................................... 23
3.6 BANK ACCOUNTS............................................... 23
3.7 SUBSIDIARIES, ETC........................................... 23
3.8 REAL PROPERTY............................................... 24
3.9 PERSONAL PROPERTY........................................... 26
3.10 ENVIRONMENTAL MATTERS....................................... 27
3.11 CONTRACTS................................................... 28
3.12 NO CONFLICT OR VIOLATION; CONSENTS.......................... 30
3.13 PERMITS..................................................... 31
3.14 FINANCIAL STATEMENTS; BOOKS AND RECORDS..................... 31
3.15 ABSENCE OF CERTAIN CHANGES OR EVENTS........................ 32
3.16 LIABILITIES................................................. 34
3.17 LITIGATION.................................................. 34
3.18 LABOR MATTERS............................................... 34
3.19 EMPLOYEE BENEFIT PLANS...................................... 35
3.20 TRANSACTIONS WITH RELATED PARTIES........................... 39
3.21 COMPLIANCE WITH LAW......................................... 40
3.22 INTELLECTUAL PROPERTY....................................... 40
3.23 TAX MATTERS................................................. 41
3.24 INSURANCE................................................... 45
3.25 ACCOUNTS RECEIVABLE......................................... 45
3.26 INVENTORY................................................... 46
3.27 PURCHASE COMMITMENTS AND OUTSTANDING BIDS................... 46
3.28 SUPPLIERS................................................... 46
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TABLE OF CONTENTS
(Continued)
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3.29 YEAR 2000 PROBLEM........................................... 46
3.30 BROKERS; TRANSACTION COSTS.................................. 46
3.31 NO OTHER AGREEMENTS TO SELL THE COMPANY OR THE ASSETS....... 46
3.32 FOREIGN CORRUPT PRACTICES ACT............................... 47
3.33 FINANCIAL PROJECTIONS; OPERATING PLAN....................... 47
3.34 APPROVALS................................................... 47
3.35 TAKEOVER STATUTES........................................... 47
3.36 MATERIAL MISSTATEMENTS OR OMISSIONS......................... 47
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB 47
4.1 ORGANIZATION................................................ 48
4.2 CAPITALIZATION.............................................. 48
4.3 AUTHORIZATION............................................... 49
4.4 NO CONFLICT OR VIOLATION; CONSENTS.......................... 49
4.5 REPORTS AND FINANCIAL STATEMENTS............................ 49
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS........................ 50
4.7 MATERIAL MISSTATEMENTS OR OMISSIONS......................... 50
ARTICLE 5 ACTIONS BY THE COMPANY, PARENT AND SUB PRIOR TO THE CLOSING... 50
5.1 CONDUCT OF BUSINESS......................................... 50
5.2 ACCESS BY PARENT............................................ 52
5.3 NOTIFICATION OF CERTAIN MATTERS............................. 52
5.4 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC.............. 53
5.5 COMPANY STOCKHOLDER APPROVAL................................ 53
5.6 COMPLIANCE WITH SECURITIES LAWS; NEW YORK STOCK EXCHANGE
LISTING..................................................... 53
5.7 COMPANY'S AUDITORS.......................................... 53
5.8 CLOSING DATE................................................ 54
5.9 TAKEOVER STATUTES........................................... 54
5.10 COMPANY AUDITED FINANCIALS.................................. 54
5.11 FURTHER ASSURANCES.......................................... 54
5.12 EXCHANGEABLE STOCK.......................................... 55
5.13 CANADIAN TAX DOCUMENTATION.................................. 55
ARTICLE 6 POST-CLOSING COVENANTS 55
6.1 REGISTRATION RIGHTS......................................... 55
6.2 PREPARATION OF TAX RETURNS.................................. 59
ARTICLE 7 CONDITIONS TO THE COMPANY'S OBLIGATIONS 59
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS................... 59
7.2 CONSENTS.................................................... 59
7.3 NO COURT ORDERS............................................. 59
7.4 CLOSING DOCUMENTS........................................... 59
7.5 MATERIAL ADVERSE CHANGE..................................... 59
ARTICLE 8 CONDITIONS TO PARENT'S AND SUB'S OBLIGATIONS 59
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS................... 60
8.2 CONSENTS.................................................... 60
8.3 NO ACTIONS OR COURT ORDERS.................................. 60
8.4 CLOSING DOCUMENTS........................................... 60
8.5 EXEMPTION UNDER FEDERAL AND STATE SECURITIES LAWS........... 60
8.6 STOCKHOLDER CONSENT......................................... 60
8.7 TAX MATTERS................................................. 60
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TABLE OF CONTENTS
(Continued)
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8.8 XXXXXXXX XXXXXXXX AGREEMENT................................. 61
8.9 STOCKHOLDER LOCK-UP AGREEMENTS; CLOSING DOCUMENTS........... 61
8.10 MATERIAL ADVERSE CHANGE..................................... 61
8.11 EXCHANGE RATIO.............................................. 61
8.12 EXCHANGEABLE STOCK.......................................... 61
8.13 FUNDED DEBT OF THE COMPANY.................................. 61
8.14 APPRAISAL RIGHTS............................................ 61
8.15 APS GROWTH LIMITED PARTNERSHIP AGREEMENT.................... 61
8.16 OTHER AGREEMENTS............................................ 61
8.17 SATISFACTORY CANADIAN TAX DOCUMENTATION..................... 62
ARTICLE 9 CLOSING 62
9.1 DELIVERIES BY THE COMPANY AND THE STOCKHOLDERS TO PARENT.... 62
9.2 DELIVERIES BY PARENT TO THE STOCKHOLDERS.................... 62
ARTICLE 10 INDEMNIFICATION 62
10.1 SURVIVAL OF REPRESENTATIONS, ETC............................ 62
10.2 INDEMNIFICATION............................................. 63
10.3 NO RIGHT OF CONTRIBUTION.................................... 65
10.4 ESCROW OF MERGER SHARES..................................... 65
10.5 LIMITATIONS ON INDEMNITY.................................... 68
10.6 STOCKHOLDER AGENT; POWER OF ATTORNEY........................ 68
ARTICLE 11 MISCELLANEOUS 69
11.1 TERMINATION................................................. 69
11.2 ASSIGNMENT.................................................. 70
11.3 NOTICES..................................................... 70
11.4 CHOICE OF LAW............................................... 71
11.5 REPRESENTATION BY COUNSEL................................... 71
11.6 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS.................... 72
11.7 COUNTERPARTS................................................ 72
11.8 INVALIDITY.................................................. 72
11.9 EXPENSES.................................................... 72
11.10 PUBLICITY................................................... 72
11.11 NO THIRD PARTY BENEFICIARIES................................ 72
11.12 DISPUTE RESOLUTION.......................................... 72
11.13 WAIVER OF JURY TRIAL........................................ 73
11.14 SERVICE OF PROCESS.......................................... 74
11.15 ATTORNEY FEES............................................... 74
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TABLE OF EXHIBITS
Exhibit A Distributees
Exhibit B Form of Escrow Agreement
Exhibit C Form of Stockholder Consent
Exhibit D Stockholders and Distributees to Sign Lock-up Agreements
Exhibit E Form of Stockholder Lock-up Agreement
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER is dated as of May 3, 2000 (the
"Agreement"), by and among Hanover Compressor Company, a Delaware corporation
("Parent"), APSI Acquisition Corporation, a Delaware corporation and a direct,
wholly owned subsidiary of Parent ("Sub"), and Applied Process Solutions, Inc.,
a Delaware corporation (the "Company").
RECITALS:
---------
A. The Boards of Directors of Parent, Sub and the Company have determined
that it is advisable and in the best interests of their respective stockholders
for Parent, Sub and the Company to enter into a business combination upon the
terms and subject to the conditions set forth herein.
B. In furtherance of such combination, the Boards of Directors of Parent,
Sub and the Company have each approved the merger of Sub with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
herein, in accordance with the applicable provisions of the Delaware General
Corporation Law (the "DGCL").
C. Parent, Sub and the Company intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
and that the Merger qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder.
D. Pursuant to the Merger, each outstanding share of common stock, par
value $0.01 per share, of the Company (the "Company Stock") shall be converted
solely into Parent Stock (as defined herein), upon the terms and subject to the
conditions set forth herein.
AGREEMENT:
----------
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Sub, the Company and the Stockholders hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the following
meanings:
"Action" means any action, claim, suit, litigation, proceeding, labor
dispute, arbitral action, government audit, inquiry, criminal prosecution,
investigation, unfair labor practice charge, complaint or dispute.
"Affiliate" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Ancillary Agreements" means the Escrow Agreement, the Lock-up
Agreements and all other agreements required hereunder to consummate the Merger.
"Assets" means the right, title and interest of the Company and its
Subsidiaries in their properties, assets and rights of any kind, whether
tangible or intangible, real or personal, including, without limitation, the
right, title and interest in the following:
(a) all Contracts and Contract Rights;
(b) all Fixtures and Equipment;
(c) all Inventory;
(d) all Books and Records;
(e) all Proprietary Rights;
(f) all Permits;
(g) all return and other rights under or pursuant to all warranties,
representations and guarantees made by suppliers and other third parties in
connection with the Assets or services furnished to such Person;
(h) all cash, accounts receivable, deposits and prepaid expenses;
(i) all goodwill; and
(j) all shares of capital stock or other securities or ownership
interests in any Person.
"Average Share Price" means the average of the closing prices of
Parent Stock on the New York Stock Exchange as reported in the Wall Street
Journal for the twenty (20) Trading Days ending on the Trading Day immediately
prior to the Closing Date.
"Balance Sheet" means the consolidated balance sheet of the Company as
of the Balance Sheet Date.
"Balance Sheet Date" means December 31, 1999.
2
"Benefit Arrangement" means any employment, consulting, severance or
other similar contract, arrangement or policy (written or oral) and each plan,
arrangement, program, agreement or commitment (written or oral) providing for
insurance coverage (including, without limitation, any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health or
accident benefits (including, without limitation, any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Code providing
for the same or other benefits) or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights, stock purchases or other
forms of incentive compensation or post-retirement insurance, compensation or
benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(b) is entered into, maintained, contributed to or required to be contributed
to, as the case may be, by the Company or any ERISA Affiliate or under which the
Company or any ERISA Affiliate may incur any liability, and (c) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such any entity).
"Books and Records" means (a) all product, business and marketing
plans, sales and promotional literature and artwork relating to the Assets or
the Business, (b) all books, records, lists, correspondence, ledgers, financial
and other data, files, reports, surveys, product and design manuals, plans,
drawings, formulae, technical manuals and operating records of every kind
relating to the Assets or the Business (including records and lists of
customers, distributors, suppliers and personnel) and (c) all telephone and fax
numbers used in the Business, in each case whether maintained as hard copy or
stored in computer memory and whether owned by the Company or its Subsidiaries
or Affiliates.
"Business" means the business and operations of the Company and its
Subsidiaries, consisting of its design, manufacture and installation of oil and
gas production and processing systems worldwide.
"Canadian Subsidiaries" has the meaning set forth in Section 3.23(q).
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" means the date of the Closing.
"Code" has the meaning set forth in the Recitals hereto.
"Company Confidentiality Agreement" means that certain Confidentiality
Agreement dated as of October 25, 1999 between Parent and the Company relating
to the delivery by the Company of confidential information to Parent and its
Representatives.
"Company Material Adverse Effect" or "Company Material Adverse Change"
means a Material Adverse Effect with respect to the Company and its
Subsidiaries, taken as a whole, the Business or the Assets.
3
"Company Options" means options to purchase shares of Company Stock
issued by the Company pursuant to the Company Stock Option Plan or otherwise to
Company employees.
"Company Stock" has the meaning set forth in the Recitals hereto.
"Company Stock Option Plan" means the Company Amended 1998 Stock
Option Plan.
"Consents" means any and all Permits and any and all consents,
approvals or waivers from third parties that are required for the consummation
of the transactions contemplated by this Agreement.
"Contract Rights" means all rights and obligations under the
Contracts.
"Contracts" means all agreements, contracts, leases (whether for real
or personal property), purchase orders, open tenders, warranties or guarantees
(express or implied) undertakings, covenants not to compete, employment
agreements, confidentiality agreements, licenses, entitlements, instruments,
obligations and commitments to which the Company or its Subsidiaries are parties
or by which the Company or its Subsidiaries or any of their respective Assets
are bound or affected, whether written or oral.
"Court Order" means any judgment, decision, consent decree,
injunction, ruling or order of any foreign, federal, state or local court or
governmental agency, department or authority that is binding on any Person or
its property under applicable law.
"Default" means (a) a breach of or default under any Contract, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of or default under any Contract or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both would give rise to a right of termination, renegotiation or
acceleration under any Contract.
"Depositary Agent" means ChaseMellon Shareholder Services, as
depositary agent under the Escrow Agreement, or any alternative or successor
agent which (a) shall be designated by Parent and the Company if designated
prior to Closing and (b) shall be designated in accordance with the terms of the
Escrow Agreement if designated after Closing.
"Distributees" means those partners in APS Growth, L.P. or Xxxxxxx
Holding, L.P. listed on Exhibit A hereto.
"Effective Time" has the meaning set forth in Section 2.2.
"Employee Plans" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans, Welfare Plans and Foreign Plans.
"Employees" means all officers and directors of the Company and its
Subsidiaries and all other Persons employed by the Company or its Subsidiaries
on a full or part-time basis
4
(including those employees on long-term disability leave or other absence)
together with all persons retained as "independent contractors" as of the
relevant date.
"Encumbrance" means any claim, lien, pledge, option, lease, license,
occupancy agreement, charge, easement, tax assessment, security interest, deed
of trust, mortgage, right-of-way, encroachment, building or use restriction,
title defect, work order, conditional sales agreement, encumbrance or other
right of third parties or other restriction on use, whether voluntarily incurred
or arising by operation of law, and includes any agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
"Environmental Claims" means all notices of violation, liens, claims,
demands, suits, or causes of action for any damage, including, without
limitation, personal injury, property damage (including, without limitation, any
depreciation or diminution of property values), or lost use of property, arising
directly or indirectly out of Environmental Conditions or Environmental Laws.
By way of example only (and not by way of limitation), Environmental Claims
include (i) violations of or obligations under any contract related to
Environmental Laws or Environmental Conditions between the Company or any of its
Subsidiaries and any other person, (ii) actual or threatened damages to natural
resources, (iii) claims for nuisance or its statutory equivalent, (iv) claims
for the recovery of response costs, or administrative or judicial orders
directing the performance of investigations, responses or remedial actions under
any Environmental Laws, (v) requirements to implement "corrective action"
pursuant to any order or permit issued pursuant to the Resource Conservation and
Recovery Act, as amended, or similar provisions of applicable state law, (vi)
claims related to Environmental Laws or Environmental Conditions for
restitution, contribution, or indemnity, (vii) fines, penalties or liens of any
kind against property related to Environmental Laws or Environmental Conditions,
(viii) claims related to Environmental Laws or Environmental Conditions for
injunctive relief or other orders or notices of violation from federal, state or
local agencies or courts, and (ix) with regard to any present or former
employees, claims relating to exposure to or injury from Environmental
Conditions.
"Environmental Conditions" means the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposal, dumping or threatened release of Hazardous Substances by the Company
or any of its Subsidiaries or any of their respective predecessors or successors
in interest, or by its respective agents, representatives, employees or
independent contractors when acting in such capacity on behalf of the Company or
any of its Subsidiaries. With respect to Environmental Claims by third parties,
Environmental Conditions also include the exposure of persons to Hazardous
Substances at the work place or the exposure of persons or property to Hazardous
Substances migrating from or otherwise emanating from or located on the
Facilities.
5
"Environmental Laws" means all applicable foreign, U.S. federal,
state, district and local laws, all rules or regulations promulgated thereunder,
and all orders, consent orders, judgments, notices, permits or demand letters
issued, promulgated or entered pursuant thereto, relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, ground water, land surface, or subsurface strata), including,
without limitation, (i) laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, industrial
materials, wastes or other substances into the environment and (ii) laws
relating to the identification, generation, manufacture, processing,
distribution, use, treatment, storage, disposal, recovery, transport or other
handling of pollutants, contaminants, chemicals, industrial materials, wastes or
other substances. Environmental Laws shall include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Toxic Substances Control Act, as amended, the Hazardous Materials
Transportation Act, as amended, the Resource Conservation and Recovery Act, as
amended, Environmental Protection and Enforcement Act (Alberta), the Clean Water
Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as
amended, the Occupational Safety and Health Act, as amended, and all analogous
laws promulgated or issued by any Governmental Authority.
"Environmental Reports" means any and all written analyses, summaries
or explanations, in the possession or control of the Company and its
Subsidiaries, prepared for the purpose of analyzing or assessing (a) any
Environmental Conditions in, on or about the Facilities or (b) compliance by the
Company or any of its Subsidiaries with Environmental Laws.
"Equity Amount Deficit" has the meaning set forth in Section 2.13(a).
"Equity Amount Excess" has the meaning set forth in Section 2.13(a).
"Equity Shares" has the meaning set forth in Section 2.8(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, or otherwise
required to be aggregated with, the Company as set forth in Section 414(b), (c),
(m) or (o) of the Code.
"Escrow Agreement" means the Escrow Agreement to be entered into among
Parent, the Company, the Depositary Agent, the Stockholder Agent, and the other
parties named therein, substantially in the form of Exhibit B hereto.
"Escrow Fund" has the meaning set forth in Section 2.11.
"Estimated Closing Balance Sheet" has the meaning set forth in Section
2.6.
6
"Estimated Closing Date Stockholders' Equity" has the meaning set
forth in Section 2.6.
"Estimated Equity Amount Deficit" has the meaning set forth in
Section 2.6.
"Estimated Equity Amount Excess" has the meaning set forth in
Section 2.6.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" means the result of dividing (i) the Number of Parent
Shares by (ii) the Number of the Company Shares.
"Exchangeable Stock" has the meaning set forth in Section 3.2(c).
"Facilities" means all plants, offices, manufacturing facilities,
stores, warehouses, administration buildings and all real property and related
facilities owned, leased or operated by the Company and its Subsidiaries.
"Financial Statements" means (a) the consolidated balance sheets of
the Company and its Subsidiaries as of December 31, 1999 and 1998 and the
related statements of income, changes in stockholders' equity and cash flows, of
the Company and its Subsidiaries for the years ended December 31, 1999 and 1998,
together with the report of Xxxxxx Xxxxxxxx LLP thereon and (b) the consolidated
balance sheets of Xxxxxxx as of December 31, 1997 and the related consolidated
statements of operations and changes in equity and cash flows of Xxxxxxx for the
year ended December 31, 1997, together with the report of Xxxxxx Xxxxxxxx LLP
thereon.
"Fixtures and Equipment" means all of the furniture, fixtures,
furnishings, machinery, computer hardware, equipment, parts, tools, discs and
other tangible personal property owned by the Company and its Subsidiaries,
wherever located.
"Foreign Plan" means each employee pension and welfare plan which is
maintained by or to which the Company or any of its Subsidiaries is obligated to
contribute or otherwise has any liability which is exempt from ERISA pursuant to
Section 4(b)(4) thereof.
"Former Properties" means all plants, offices, manufacturing
facilities, stores, warehouses, administration buildings and all real property
and related facilities owned, leased or operated by the Company or its
Subsidiaries or any of their respective predecessors prior to the date hereof,
but excluding the Facilities.
"Funded Debt of the Company" means, without duplication, (a) all
obligations of the Company and its Subsidiaries for borrowed money including,
without limitation, all obligations for accrued and unpaid interest thereon and
any pre-payment premiums or penalties (and associated expenses) with respect
thereto, (b) any reimbursement obligations of the Company and its Subsidiaries
in respect of any letters of credit, (c) any capitalized lease obligations of
the Company and its Subsidiaries (as determined in accordance with GAAP), (d)
all obligations of the Company and its Subsidiaries for the payment of
brokerage, investment
7
banking, legal, accounting and similar fees and expenses arising in connection
with the transactions contemplated by this Agreement, whether or not set forth
on Schedule 3.30, and (e) all guarantees issued by the Company and its
Subsidiaries in respect of any obligations of any other Person (other than the
Company and its Subsidiaries) of the type described in clauses (a) through (d),
above, all of which shall constitute obligations of the Company at Closing.
"Funded Debt Notice" has the meaning set forth in Section 2.12.
"GAAP" means generally accepted accounting principles of the United
States applied on a consistent basis.
"Governmental Authority" means any nation or government, any state or
provincial or other political subdivision thereof, any province, city or
municipality, any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government, including, without
limitation, any governmental authority, agency, department, board, commission or
instrumentality of the United States or Canada, any State of the United States
or Province of Canada, or any political subdivision thereof, any government
authority, agency, department, board, commission or instrumentality of the
United States or Canada or any political subdivision thereof and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.
"Xxxxxxxx Xxxxxxxx Agreement" has the meaning set forth in
Section 5.1(h).
"Hazardous Substances" means all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation, control or remediation under Environmental Laws. By way
of example only, the term Hazardous Substances includes petroleum, urea
formaldehyde, flammable, explosive and radioactive materials, PCBs, pesticides,
herbicides, asbestos or asbestos-containing materials, sludge, slag, acids,
metals, solvents and waste waters.
"HSR Act" means the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indemnity Shares" has the meaning set forth in Section 2.11.
"Inventory" means all merchandise owned and intended for resale.
"Laws" means all laws, statutes, by-laws, ordinances, rules,
regulations, orders, Judgments or decrees of any Governmental Authority.
"Leases" has the meaning set forth in Section 3.8(c).
"Liability" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
8
"Lock-up Agreements" has the meaning set forth in Section 8.9.
"Xxxxxxx" means Xxxxxxx Industries, Inc., an Alberta, Canada
corporation and a direct, majority-owned Subsidiary of the Company.
"Material Adverse Effect" or "Material Adverse Change" or a similar
phrase means, with respect to any Person, any material adverse effect on or
change with respect to (i) the business, operations, assets (taken as a whole),
liabilities (taken as a whole), financial condition or results of operations of
such Person and its Subsidiaries, taken as a whole, or (ii) the right or ability
of such Person to consummate any of the transactions contemplated hereby.
"Merger Shares" has the meaning set forth in Section 2.7(a).
"Multiemployer Plan" means any "multiemployer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or, after September 25, 1980, maintained, administered, contributed to or
was required to contribute to, or under which the Company or any ERISA Affiliate
may incur any liability and (b) covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with any such
entity).
"Number of the Company Shares" means the number of shares of Company
Stock issued and outstanding at the Effective Time.
"Number of Parent Shares" means 1,300,000 shares of Parent Stock
multiplied by a fraction, the numerator of which is $42.3077 and the denominator
of which is the Average Share Price; provided that if application of the
foregoing formula would result in the issuance of fewer than 1,150,000 shares of
Parent Stock at Closing, the Number of Parent Shares shall be 1,150,000.
Notwithstanding the foregoing, the Number of Parent Shares shall be subject to
adjustment pursuant to Section 2.13.
"Parent Stock" means the common stock, par value $.001 per share, of
Parent.
"Parent Stock Option Plans" means the Parent's 1992 Stock Compensation
Plan, Incentive Option Plan, 1993 Management Stock Option Plan, 1995 Management
Stock Option Plan, 1995 Employee Stock Option Plan, Senior Executive Stock
Option Plan, 1996 Employee Stock Option Plan, 1997 Employee Stock Option and
Purchase Plan, the 1997 Stock Purchase Plan, 1997 Stock Option Plan, December 9,
1998 Stock Option Plan, 1998 Stock Option Plan, 1999 Stock Option Plan and
option agreements entered into with certain management employees of Parent.
"Pension Plan" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company or
any ERISA Affiliate
9
maintains, administers, contributes to or is required to contribute to, or,
within the five (5) years prior to the Closing Date, maintained, administered,
contributed to or was required to contribute to, or under which the Company or
any ERISA Affiliate may incur any liability (including, without limitation, any
contingent liability) and (b) covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with any such
entity).
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the Business or
ownership of the Assets of such Person.
"Permitted Encumbrances" means (a) statutory liens of landlords, liens
of carriers, warehousepersons, mechanics and materialpersons incurred in the
ordinary course of business for sums (i) not yet due and payable, or (ii) being
contested in good faith, if, in either such case, an adequate reserve, shall
have been made therefor in such Person's financial statements, (b) liens
incurred or deposits made in connection with workers' compensation, unemployment
insurance and other similar types of social security programs or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return of money bonds and similar
obligations, in each case in the ordinary course of business, consistent with
past practice, (c) easements, rights-of-way, restrictions and other similar non-
monetary charges or encumbrances, in each case, which do not interfere with the
ordinary conduct of business of the Company and its Subsidiaries and do not
materially detract from the value of the property upon which such encumbrance
exists, and (d) liens securing taxes, assessments and governmental charges not
yet delinquent or the amount or validity of which are being contested in good
faith by appropriate proceedings by the Company or its Subsidiaries, as
applicable.
"Permitted Transferee" means (i) any Affiliate or immediate family
member of a holder, or any trust or entity for the benefit of any such Persons,
to whom Registrable Shares are transferred for no consideration, (ii) any
Distributee or (iii) any arms-length bona fide donee or pledgee of Registrable
Shares of any of the foregoing Persons.
"Person" means any person or entity, whether an individual, whether in
their capacity as a trustee, executor, administrator or other legal
representative, sole proprietorship, corporation, limited liability company,
general partnership, limited partnership, trust, unincorporated organization,
syndicate, business association, firm, joint venture, governmental agency or
authority or any similar entity.
"Proprietary Rights" means all intellectual property rights of every
nature and kind, including without limitation, (a) U.S., Canadian and foreign
patents, patent applications, patent disclosures and improvements thereto,
including xxxxx patents and utility models and applications therefor, (b) U.S.,
Canadian and foreign trademarks, service marks, trade dress, logos, commercial
symbols, trade names and corporate names and the goodwill associated therewith
and registrations and applications for registration thereof, (c) U.S., Canadian
and foreign copyrights and registrations and applications for registration
thereof, (d) U.S., Canadian
10
and foreign mask work rights and registrations and applications for registration
thereof, (e) Trade Secrets, (f) URL registrations, (g) other proprietary rights,
including industrial designs, (h) copies and tangible embodiments thereof (in
whatever form or medium), (i) licenses granting any rights with respect to any
of the foregoing and (j) any renewal applications, divisions, extensions and
reissues, where applicable with respect to any of the foregoing.
"Recaptured Shares" has the meaning set forth in Section 2.13.
"Registrable Shares" means (i) any shares of Parent Stock issued to
any Stockholder in accordance with the provisions of this Agreement and (ii) any
other shares of capital stock or other securities of Parent into which such
shares of Parent Stock shall be reclassified, converted, exchanged or changed.
If the Parent Stock has been so reclassified or changed, or if Parent pays a
dividend or makes a distribution on the Parent Stock in shares of capital stock
or splits or subdivides (or combines) its outstanding shares of Parent Stock
into a greater (or smaller) number of shares of Parent Stock, a share of Parent
Stock shall be deemed to be such number of shares of stock and amount of other
securities to which a holder of a share of Parent Stock outstanding immediately
prior to such change, conversion, reclassification, exchange, dividend,
distribution, subdivision, split or combination would be entitled. As to any
particular Registrable Shares, once issued such shares shall cease to be
Registrable Shares when (i) the Shelf Registration Statement with respect to
such shares shall have become effective under the Securities Act and such shares
shall have been disposed of in accordance with the Shelf Registration Statement,
(ii) they shall have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act, (iii) they shall have been
otherwise transferred and new certificates for them not bearing any legend
restricting further transfer shall have been delivered by the Company, (iv) they
shall have ceased to be outstanding, or (v) prior to January 3, 2001, when sold,
or otherwise transferred to, any Person who is not a Permitted Transferee.
"Regulations" means any laws, statutes, ordinances, regulations,
rules, notice requirements, court decisions, agency guidelines, and orders of
any foreign, federal, state or local government and any other governmental
department or agency, including without limitation energy, motor vehicle safety,
public utility, zoning, building and health codes, Environmental Laws, Canadian
or provincial human rights code, and occupational safety and health and laws
respecting employment practices, employee documentation, human rights code,
terms and conditions of employment and wages and hours.
"Related Party" means (i) any of the Company's officers, directors and
stockholders, and any officers, directors, partners, associates or relatives of
such officers, directors and stockholders, (ii) any Person in which the Company
or any Stockholder or any Affiliate, associate or relative of any such Person
has any direct or indirect interest, and (iii) any direct or indirect trustee or
beneficiary of any Stockholder.
"Representative" of any Person means any officer, director, principal,
attorney, accountant, agent, employee or other representative of such Person.
"Returned Shares" has the meaning set forth in Section 2.13.
11
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Shelf Registration Statement" has the meaning set forth in
Section 6.1.
"Stockholder" means each stockholder of the Company and "Stockholders"
means all stockholders of the Company, in each case as determined immediately
prior to the Effective Time.
"Stockholder Agent" has the meaning set forth in Section 10.6.
"Stockholder Consent" has the meaning set forth in Section 5.5.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which at least 50% of the securities or interests having, by their terms,
ordinary voting power to elect members to the board of directors, or other
persons performing similar functions with respect to such corporation, is held,
directly or indirectly, by such Person, (b) any partnership or limited liability
company of which (i) such Person is a general partner or managing member or (ii)
such person possesses a 50% or greater interest in the total capital or total
income of such partnership or limited liability company.
"Survival Period" has the meaning set forth in Section 10.1.
"Takeover Statute" means a "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted under
state or federal laws in the United States, Canada, the United Kingdom or the
European Union.
"Tax Act" has the meaning set forth in Section 3.23(q).
"Tax Returns" means any report, return (including information return),
election, document, estimated tax filing, declaration or other information or
filing required to be supplied to any taxing authority or jurisdiction (foreign
or domestic) with respect to Taxes including any schedule or attachment thereto,
and amendments thereto and any document with respect to or accompanying requests
for the extension of time in which to file any such item.
"Taxes" means any and all taxes, assessments, charges, duties, fees,
levies, imposts or other governmental charges, including, without limitation,
all federal, state, provincial, local, municipal, county, foreign and other
income, franchise, profits, capital gains, capital stock, capital structure,
transfer, gross receipt, sales, use, service, occupation, ad valorem, property,
excise, severance, windfall profits, withholding, premium, stamp, license,
payroll, employment, social security, unemployment, health insurance, employment
insurance, workers compensation, disability, environmental (including taxes
under Code Section 59A), alternative minimum, add-on, value-added, goods and
services, harmonized sales, customs, import, export, registration, excise,
production, frankings, fringe benefits, occupancy, real property, personal
12
property, business and occupation, education, mercantile, withholding and other
taxes, assessments, charges, duties, fees, levies, imposts or other governmental
charges of any kind whatsoever imposed by any taxing authority or jurisdiction
(whether payable directly or by withholding and whether or not requiring the
filing of a Tax Return), and all estimated taxes, deficiency assessments,
additions to tax, additional amounts imposed by any governmental authority
(domestic or foreign), penalties, fines and interest, and shall include any
liability for such amounts of any other Person as a result either of being (or
having been) a member of a combined, consolidated, unitary or affiliated group
or of a contractual obligation to indemnify any Person, and shall include any
liability for such amounts relating to any other Person if such liability is
imposed by reason of law (including transferee or successor liability). Any
such amount shall also include any interest whether paid or received, fines,
penalties, surtaxes, or additional amounts attributable to, or imposed upon, or
with respect to, any such taxes, assessments, charges, duties, fees, levies,
imposts or other governmental charges.
"to the knowledge" or "knowledge" of a party (or similar phrases)
means to the extent of matters which are actually known by such party and when
used in respect of the Company, the term "to the knowledge" or "knowledge" shall
mean the matters actually known by each of the directors and officers of the
Company and with respect to the Parent, shall mean the matters actually known by
each of Xxxxxxx XxXxxx, Xxxxxx Xxxxxxx and Xxxxxxx Xxxxxxxx.
"Trade Secrets" means all trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
research and development information, software, drawings, specifications,
circuit, topographies, designs, plans, proposals, technical data, copyrightable
works, concepts, methods, procedures, financial, marketing and business data,
pricing and cost information, business and marketing plans marketing mailing and
e-mail lists, and customer and supplier mailing and e-mail lists and
information).
"Trading Day" means any day on which the New York Stock Exchange is
open and available for at least five (5) hours for the trading of securities.
"Transaction Costs" means all costs and expenses incurred by the
Company in connection with the preparation and execution of this Agreement and
the Ancillary Agreements and in anticipation of the Merger and the transactions
contemplated hereby for reasonable legal, accounting and transaction costs.
"Transmittal Letter" has the meaning set forth in Section 2.8.
"Welfare Plan" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which the
Company or any ERISA Affiliate may incur any liability and (b) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with any such entity).
"Xxxxx Hall Mortgage" shall mean that certain Promissory Note signed
by Xxxxxxx Industries Inc. in the amount of Canadian $1,980,000 which is secured
by a mortgage
13
of the real property held by Xxxxxxx Industries Inc.'s wholly-owned subsidiary,
Xxxxx-Xxxx Manufacturing Ltd.
"Working Capital Credit Lines" shall mean the operating loan
facilities provided by the Toronto Dominion Bank, Calgary, Alberta and the
overdraft facility provided by Barclays Bank PLC, Birmingham, England.
1.2 Interpretation Provisions
(a) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, and article, section, schedule and
exhibit references are to this Agreement unless otherwise specified. The meaning
of defined terms shall be equally applicable to the singular and plural forms of
the defined terms. The terms "include" and "including" are not limiting and mean
"including without limitation."
(b) References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(d) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
(e) The parties participated jointly in the negotiation and drafting of
this Agreement and the language used in this Agreement shall be deemed to be the
language chosen by the parties to express their mutual intent. If an ambiguity
or question of intent or interpretation arises, then this Agreement will
accordingly be construed as drafted jointly by the parties to this Agreement,
and no presumption or burden of proof will arise favoring or disfavoring any
party to this Agreement by virtue of the authorship of any of the provisions of
this Agreement.
(f) The annexes, schedules and exhibits to this Agreement are a
material part hereof and shall be treated as if fully incorporated into the body
of the Agreement.
14
ARTICLE 2
THE MERGER
2.1 The Merger.
(a) Effective Time. At the Effective Time (as defined in Section 2.2
hereof), and upon the terms and subject to the conditions of this Agreement and
the DGCL, Sub shall be merged with and into the Company, the separate corporate
existence of Sub shall cease, and the Company shall continue as the surviving
corporation. The Company, as the surviving corporation after the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated pursuant
to Section 11.1, and subject to the satisfaction (or the extent permitted, the
waiver) of the conditions set forth in Articles 7 and 8, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place (i)
at the offices of Xxxxxx & Xxxxxxx, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX
00000, as promptly as practicable (and in any event within five (5) business
days) after satisfaction (or the extent permitted, the waiver) of the conditions
set forth in Articles 7 and 8 or (ii) at such other time, date or place as
Parent and the Company may mutually agree.
2.2 Effective Time. As promptly as practicable after the satisfaction
(or the extent permitted, the waiver) of the conditions set forth in Articles 7
and 8, and provided that this Agreement has not been terminated pursuant to
Section 11.1, the parties hereto shall cause the Merger to be consummated by
executing and filing a certificate of merger as contemplated by the DGCL (the
"Certificate of Merger"), with the Secretary of State of Delaware as provided in
Section 251 of the DGCL. The Merger shall be effective at the time indicated in
such Certificate of Merger (the "Effective Time").
2.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL.
2.4 Certificate of Incorporation; Bylaws.
(a) Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation (except that Surviving Corporation shall be named and operate as
"Hanover Applied Process Solutions, Inc."), until duly amended in accordance
with applicable law.
(b) Bylaws. At the Effective Time, the Bylaws of Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter duly amended in accordance with applicable law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
15
2.5 Directors and Officers. The directors of Sub immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation, and the officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation and in accordance with
applicable law. Upon request of Parent, the Company shall cause each or any
director and officer of the Company to tender his or her resignation prior to
the Effective Time, with each such resignation to be effective as of the
Effective Time.
2.6 Closing Adjustment. The Company shall prepare and deliver to Parent
on the day that is on or about five (5) business days prior to the Effective
Time an estimated closing balance sheet for the Company (the "Estimated Closing
Balance Sheet"), together with the Company's preliminary calculation of the
estimated total stockholders equity of the Company determined from the Estimated
Closing Balance Sheet (the "Estimated Closing Date Stockholders' Equity") and
the Estimated Equity Amount Deficit or the Estimated Equity Amount Excess, as
the case may be. Parent and its representatives shall have the right to review
all work papers and procedures of the Company and its outside accountants used
to prepare the Estimated Closing Balance Sheet and the Estimated Equity Amount
Deficit or the Estimated Equity Amount Excess, as the case may be, and shall
have the right to ask questions of the Company or its representatives or perform
any other reasonable procedures necessary to verify the accuracy thereof.
"Estimated Equity Amount Deficit" means the amount, if any, by which the
Estimated Closing Date Stockholders' Equity is less than $30,529,000. "Estimated
Equity Amount Excess" means the amount, if any, by which the Estimated Closing
Date Stockholders' Equity is more than $30,529,000.
2.7 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any further action on the part of Parent, Sub, the Company or
any Stockholder:
(a) Company Stock. Subject to Section 2.7(f), each share of Company
Stock issued and outstanding immediately prior to the Effective Time will by
virtue of the Merger be converted into such number of validly issued, fully paid
and nonassessable shares of Parent Stock as equals the Exchange Ratio. The
shares of Parent Stock issued in connection with the Merger as a result of the
conversions provided for in this Section 2.7(a) are sometimes referred to herein
as the "Merger Shares."
(b) Options. Each Company Option, whether vested or unvested, to
purchase shares of Company Stock which is outstanding and unexercised
immediately prior to the Effective Time shall cease to represent a right to
acquire shares of Company Stock and shall automatically become the right to
purchase the number of shares of Parent Stock into which the shares of Company
Stock subject to such Company Option would have been converted into at the
Effective Time by operation of Section 2.7(a) (rounded down to the nearest full
number of shares of Parent Stock) for an exercise price equal to the result of
dividing the per share exercise price of such Company Option by the Exchange
Ratio (rounded down to the nearest full cent). Notwithstanding the foregoing,
the number of and the per share exercise price of each Company
16
Option which is an "incentive stock option" (as defined in Section 422 of the
Code) shall be adjusted in accordance with the requirements of Section 424 of
the Code, as necessary in order for such Company Option to be an "incentive
stock option." Except for the adjustments provided for in this Section 2.7(b),
the Company Options shall continue to be governed by, and be subject to, the
terms of the Company Stock Option Plan and agreements pursuant to which such
Company Options were granted.
(c) Number of Shares of Parent Stock Issuable. The number of shares of
Parent Stock to be issued in the Merger in exchange for the acquisition by
Parent of all outstanding shares of Company Stock, all other capital stock of
any class or series, and all outstanding options, warrants, or other securities
to acquire capital stock of the Company (other than the Company Options) shall
not exceed the Number of Parent Shares.
(d) Sub Stock. Each share of common stock, par value $.01 per share, of
Sub issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
automatically be converted into and thereafter represent one (1) validly issued,
fully paid and nonassessable common share, par value $.01 per share, of the
Surviving Corporation, so that thereafter Parent will be the sole and exclusive
owner of the capital stock of the Surviving Corporation.
(e) Cancellation. Each share of Company Stock held in the treasury of
the Company immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, automatically
cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(f) Fractional Shares. No certificates or scrip representing fractional
shares of Parent Stock shall be issued in connection with the Merger, but in
lieu thereof each Stockholder who would otherwise be entitled to receive a
fraction of a Merger Share shall receive from Parent an amount of cash equal to
the product of (i) the fraction of a share of a Merger Share to which such
holder would otherwise be entitled multiplied by (ii) the Average Share Price.
The fractional share determination shall be made individually for each
Stockholder after giving effect to the delivery of the Escrow Fund (as defined
below) to the Depositary Agent, it being recognized that, as provided in Section
2.11, only whole shares may be delivered to the Depositary Agent.
(g) Adjustments to Exchange Ratio. The Exchange Ratio shall be
equitably adjusted to reflect fully the effect of any stock split, reverse
split, stock combination, stock dividend, reorganization, reclassification,
recapitalization or other like change with respect to Parent Stock or Company
Stock after the date hereof and prior the Effective Time.
2.8 Surrender of Certificates.
(a) Distribution of Transmittal Letter. As soon as practicable after
the Effective Time, Parent shall make available to each holder of Company Stock
a letter of transmittal in customary form (the "Transmittal Letter") and
instructions for such holder's use in
17
effecting the surrender of the certificate or certificates evidencing Company
Stock (the "Certificates") and the exercise of the rights of such holder to
obtain its Merger Shares.
(b) Delivery of Certificates. At the Effective Time, Parent shall make
available, and each holder of Company Stock shall be entitled to receive, upon
surrender to Parent or its designated representative of any Certificates for
cancellation, together with a duly-executed and completed Transmittal Letter,
such number of shares of Parent Stock as equals such holder's pro rata portion
of the aggregate Merger Shares into which such Company Stock shall have been
converted in the Merger minus (i) in the event that there is an Estimated Equity
Amount Deficit, a number of Merger Shares (which shall be rounded to the nearest
full number of shares) determined by dividing the Estimated Equity Amount
Deficit by the Average Share Price (the "Equity Shares") and (ii) the Indemnity
Shares (as defined in Section 2.11); the Equity Shares, if any, and the
Indemnity Shares shall be delivered to the Depositary Agent pursuant to Section
2.11.
(c) Cancellation of Company Stock. Upon surrender of each Certificate
and delivery by Parent of the Merger Shares to be delivered in exchange
therefor, such Certificate shall forthwith be canceled. Until so surrendered,
each Certificate shall be deemed for all corporate purposes to evidence only the
right to receive upon such surrender the aggregate number of Merger Shares into
which the Company Stock represented thereby shall have been converted in
accordance with the terms and upon the conditions of this Agreement (including,
without limitation, the requirement that a portion of such Merger Shares be
deposited with the Depositary Agent).
(d) Distributions With Respect to Unexchanged Shares of Company Stock.
No dividends or other distributions with respect to Parent Stock declared or
made after the Effective Time and with a record date after the Effective Time
will be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable law,
promptly following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time, if any, theretofore payable with respect to such whole shares of
Parent Stock.
2.9 No Further Ownership Rights in Shares of Company Stock. The shares
of Parent Stock delivered upon the surrender for exchange of Company Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Stock, and there
shall be no further registration of transfers of Company Stock which were
outstanding immediately prior to the Effective Time on the records of the
Surviving Corporation. If, after the Effective Time, the Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 2.
18
2.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, Parent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Stock as may
be required pursuant to Section 2.8; provided, however, that Parent may, in its
sole discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Parent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
2.11 Escrow Fund. Notwithstanding the other provisions of this Article
2, Parent shall deliver to the Depositary Agent that number of shares of Parent
Stock as equals (a) the Number of Parent Shares multiplied by (b) 0.20, and
rounded to a whole number of shares on a holder-by-holder basis (the "Indemnity
Shares"). The Indemnity Shares and the Equity Shares, if any, shall be withheld
from the Parent Stock otherwise deliverable to the Stockholders and shall
constitute the "Escrow Fund". The Escrow Fund shall be deposited with the
Depositary Agent and disbursed in accordance with Section 10.4.
2.12 Funded Debt of the Company. On or before the date that is three (3)
business days prior to the date scheduled for the Closing, the Company will
provide the Parent with a written certificate executed by its Chief Executive
Officer and President (the "Funded Debt Notice"), which certificate shall set
forth (i) the identity of each lender or obligee, (ii) the amount outstanding
under each item of Funded Debt, the applicable interest rate and repayment
terms, (iii) the payments necessary to be made in order for each item of Funded
Debt of the Company to be repaid in full and retired as of the Effective Time of
the Merger, and (iv) wire transfer instructions and such other information
necessary to effect such payments. Upon request, the Company will provide
reasonable documentary support for its calculations and obtain pay-off letters
from the lenders and vendors involved.
2.13 Equity Adjustment.
(a) Calculation of Closing Date Stockholders Equity. As soon as
reasonably practicable following the Closing Date, and in any event within
ninety (90) calendar days thereof, Parent shall cause to be prepared and
delivered to the Stockholder Agent (i) a balance sheet of the Company as of the
Closing Date which shall be audited by Xxxxxx Xxxxxxxx LLP ("AA"), together with
the related audit report of such firm (the "Closing Balance Sheet"), (ii) a
calculation of the total stockholders equity of the Company determined from the
Closing Balance Sheet (the "Closing Date Stockholders Equity") and (iii) a
calculation of the Equity Amount Deficit or the Equity Amount Excess, as the
case may be). The Closing Balance Sheet shall (i) be prepared in accordance with
GAAP (as applied in the Company's audited financial statements for the year
ended December 31, 1999), (ii) fairly present the financial position of the
Company as of the Closing and (iii) reflect all liabilities of the Company which
remain unpaid as of the Closing and are required to be included on the balance
sheet under GAAP. For the purpose hereof, the "Equity Amount Deficit" shall mean
the amount, if any, by which the Closing Date Stockholders Equity is less than
$30,529,000, and the "Equity Amount Excess" shall mean the amount, if any, by
which the Closing Date Stockholders Equity is more than $30,529,000.
19
(b) Resolution of Disputes as to the Equity Amount. Upon delivery of
the Closing Balance Sheet, Parent will provide the Stockholder Agent and its
accountants and other representatives full access to the Company's records, and
will use all commercially reasonable efforts to provide the Stockholder Agent
and its accountants and other representatives access to AA and the work papers
of AA, to the extent reasonably related to the Stockholder Agent's evaluation of
the Closing Balance Sheet and the calculation of the Equity Amount Deficit or
the Equity Amount Excess, as the case may be. If the Stockholder Agent shall
disagree with the calculation of the Equity Amount Deficit or the Equity Amount
Excess, as the case may be or any element of the Closing Balance Sheet relevant
thereto, the Stockholder Agent shall notify Parent of such disagreement in
writing, setting forth in detail the particulars of such disagreement, within
thirty (30) days after its receipt of the Closing Balance Sheet. In the event
that the Stockholder Agent does not provide such a notice of disagreement within
such thirty (30) day period, the Stockholder Agent shall be deemed to have
accepted the Closing Balance Sheet and the calculation of the Equity Amount
Deficit or the Equity Amount Excess, as the case may be, delivered by Parent,
which shall be final, binding and conclusive for all purposes hereunder. In the
event any such notice of disagreement is timely provided, Parent and the
Stockholder Agent shall use commercially reasonable efforts for a period of
thirty (30) days (or such longer period as they may mutually agree) to resolve
any disagreements with respect to the calculation of the Equity Amount Deficit
or the Equity Amount Excess, as the case may be. If, at the end of such period,
they are unable to resolve such disagreements, then an independent accounting
firm of recognized national standing mutually selected by Parent and the
Stockholder Agent (the "Auditor") shall resolve any remaining disagreements. The
Auditor shall determine as promptly as practicable whether the Closing Balance
Sheet was prepared in accordance with the standards set forth in Section 2.13(a)
and (only with respect to the remaining disagreements submitted to the Auditor)
whether and to what extent (if any) the Equity Amount Deficit or the Equity
Amount Excess, as the case may be requires adjustment. The Auditor shall
promptly deliver to Parent and the Stockholder Agent its determination in
writing, which determination shall be made subject to the definitions and
principles set forth in this Agreement and shall be (i) consistent with either
the position of the Stockholder Agent or Parent or (ii) between the positions of
the Stockholder Agent and Parent. The fees and expenses of the Auditor shall be
paid one-half by Parent and one-half by the Stockholders. The determination of
the Auditor shall be final, conclusive and binding on the parties. The date on
which the Equity Amount Deficit or the Equity Amount Excess, as the case may be
is finally determined in accordance with this Section 2.13(b) is hereinafter
referred as to the "Determination Date."
(c) Upon final determination of the Equity Amount Deficit or the Equity
Amount Excess, as the case may be in accordance with Section 2.13(b) hereof:
(i) In the event that there is an Equity Amount Deficit,
(A) If the Equity Amount Deficit is greater than or equal to
the Estimated Equity Amount Deficit, each of Parent and the Stockholder Agent
shall, within five (5) business days of the Determination Date, execute joint
written instructions to the Depositary Agent instructing the Depositary Agent to
disburse to Parent from the Escrow Fund that number of shares of Parent Stock
comprising the Equity Shares plus that number of shares of Parent
20
Stock (rounded to the nearest full number of shares) determined by dividing (A)
the Equity Amount Deficit less the Estimated Equity Amount Deficit by (B) the
Average Share Price (together, the "Recaptured Shares"). The number of
Recaptured Shares shall not exceed the number of shares of Parent Stock
originally comprising the Escrow Fund.
(B) If the Equity Amount Deficit is less than the Estimated
Equity Amount Deficit, each of Parent and the Stockholder Agent shall, within
five (5) business days of the Determination Date, execute joint written
instructions to the Depositary Agent instructing the Depositary Agent to
disburse from the Escrow Fund (I) to each Stockholder that number of shares of
Parent Stock as equals such holder's pro rata portion of that number of shares
of Parent Stock (rounded to the nearest full number of shares) determined by
dividing (w) the Estimated Equity Amount Deficit, less the Equity Amount Deficit
by (x) the Average Share Price (the "Returned Shares"), and (II) to Parent that
number of shares of Parent Stock (rounded to the nearest full number of shares)
determined by dividing (y) the Equity Amount Deficit by (z) the Average Share
Price. The number of Returned Shares shall not exceed the number of shares of
Parent Stock originally comprising the Equity Shares.
(ii) In the event that there is an Equity Amount Excess, within five
(5) business days of the Determination Date (A) Parent and the Stockholder Agent
shall execute joint written instructions to the Depository Agent to disburse to
each Stockholder from the Escrow Fund that number of shares of Parent Stock as
equals such holder's pro rata portion of that number of shares of Parent Stock
(rounded to the nearest full number of shares) comprising the Equity Shares and
(B) Parent shall issue to each Stockholder that number of shares of Parent Stock
as equals such holder's pro rata portion of that number of shares of Parent
Stock (rounded to the nearest full number of shares) determined by dividing (x)
the Equity Amount Excess by (y) the Average Share Price.
2.14 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
U.S. Treasury Regulations.
2.15 Taking of Necessary Action; Further Action. Each of Parent, Sub,
the Company and each Stockholder will take all such reasonable lawful action as
may be necessary or appropriate in order to effect the Merger in accordance with
this Agreement as promptly as practicable. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest Parent with full right, title and
possession to all the property, rights, privileges, power and franchises of the
Company, the officers and directors of Sub, Parent and the Company immediately
prior to the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
21
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement of Parent to enter into this Agreement, the Company hereby
makes, as of the date hereof and as of the Closing Date, the following
representations and warranties to Parent, except as otherwise set forth in
written disclosure schedules (the "Schedules") delivered to Parent in accordance
with Section 3.37 hereof. The Schedules are numbered to correspond to the
various sections of this Article 3 setting forth certain exceptions to the
representations and warranties contained in this Article 3 and certain other
information called for by this Agreement. Unless otherwise specified, no
disclosure made in any particular Schedule shall be deemed made in any other
Schedule unless expressly made therein (by cross-reference or otherwise) or the
Schedules otherwise expressly and completely disclose the specific exception.
3.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to conduct the
Business as it is presently being conducted and to own or lease, as applicable,
the Assets owned or leased by it. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
such qualification is necessary under applicable law as a result of the conduct
of the Business or the ownership of its properties and where the failure to be
so qualified could reasonably be expected to have a Company Material Adverse
Effect. Each jurisdiction in which the Company is qualified to do business as a
foreign corporation is set forth in Schedule 3.1.
3.2 Capitalization of the Company.
(a) Authorized Capitalization. As of the date of this Agreement,
the authorized capitalization of the Company consists of 25,000 shares of
Company Stock of which 18,656 shares are issued and outstanding and no
additional shares of capital stock of the Company will be issued after the date
hereof except for (i) shares issued in respect of Company Options outstanding on
the date hereof and (ii) 1,431 shares of Company Stock issued upon exchange of
the Exchangeable Stock. The Company has no other capital stock authorized,
issued or outstanding. Annex I sets forth the name of each holder of shares of
Company Stock, as well as the number of shares of Company Stock held by each
such holder.
(b) Options. As of the date of this Agreement, 1,000 shares of
Company Stock are reserved for issuance upon the exercise of outstanding Company
Options and options to purchase 620 shares of Company Stock remain outstanding
pursuant to the Company Options. Schedule 3.2(b) sets forth the name of each
holder of Company Options, as well as the number of the Company Options held by
each such holder, the number of Company Shares for which each such Company
Option is exercisable, the date upon which each such Company Option becomes
exercisable and the price per share of Company Stock for which each such Company
Option is exercisable (without taking into account whether or not such Company
Option is in fact exercisable on the date hereof). Attached as Schedule 3.2(b)
is a true and correct copy of the Company Stock Plan and the forms of option
agreement used in all cases.
22
(c) Exchangeable Stock. As of the date of this Agreement, 1,431
shares of Company Stock are reserved for issuance upon the exchange of
outstanding shares of Xxxxxxx'x Exchangeable Shares (the "Exchangeable Stock").
Each share of Exchangeable Stock is exchangeable for one share of Company Stock.
Schedule 3.2(c) sets forth the name of each holder of Exchangeable Stock, as
well as the number of shares of Exchangeable Stock held by each such holder.
(d) No Other Capital Stock, Options, Warrants. Except for the
Company Options referred to above, there are no outstanding options, warrants,
convertible securities or rights of any kind to purchase or otherwise acquire
any shares of capital stock or other securities of the Company. Except for the
aggregate of 1,000 shares of Company Stock reserved for issuance upon exercise
of the Company Options, no shares of capital stock of the Company are reserved
for issuance.
(e) Valid Issuances. All outstanding shares of Company Stock are,
and any shares of Company Stock issued upon exercise of any Company Option will
be, validly issued, fully paid and non-assessable and not subject to any
preemptive rights created by statute, the Company's Certificate of Incorporation
or Bylaws, or any Contract. The Company Options have been, and the shares of
Company Stock have been or will be, issued in compliance with all federal and
state corporate and securities laws.
3.3 Stockholders' Agreements, etc. Except as disclosed on Schedule 3.3,
to the knowledge of the Company, there are no stockholder agreements, voting
trusts, proxies or other agreements or understandings with respect to or
concerning the purchase, sale or voting of the capital stock of the Company or
any of its Subsidiaries.
3.4 Authorization. The Company has all necessary corporate or other
power and authority to enter into this Agreement and the Ancillary Agreements to
which the Company is a party and, has taken all corporate or other action
necessary to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. This Agreement has been duly
executed and delivered by the Company, and this Agreement is, and upon execution
and delivery each of the Ancillary Agreements to which the Company is a party
will be, a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except that enforceability may be limited
by the effect of (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors or (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
3.5 Officers and Directors. Schedule 3.5 contains a true, correct and
complete list of all the officers and directors of the Company.
3.6 Bank Accounts. Schedule 3.6 contains a list of all of the Company's
bank accounts, safe deposit boxes and persons authorized to draw thereon or have
access thereto.
3.7 Subsidiaries, Etc. Each Subsidiary of the Company is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, with all requisite
23
power and authority to conduct its business as presently conducted and to own or
lease, as applicable, the Assets owned or leased by it. Each Subsidiary of the
Company is duly qualified to do business and is registered and in good standing
in each jurisdiction in which such qualification is necessary under applicable
law as a result of the conduct of such Subsidiary's business or the ownership of
its properties and where the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect on such Subsidiary. Except as
disclosed on Schedule 3.7, the Company is, directly or indirectly, the record
and beneficial owner of all the outstanding shares of capital stock of each of
its Subsidiaries, free and clear of any lien, mortgage, pledge, charge, security
interest or encumbrance of any kind, except for Permitted Encumbrances, and
there are no irrevocable proxies with respect to any such shares. Except as
disclosed on Schedule 3.7, there are no outstanding (i) securities of the
Company or any of its Subsidiaries convertible into or exchangeable for shares
of capital stock or other voting securities or ownership interests in the
Company or any Subsidiary of the Company, as the case may be, or (ii) options or
other rights to acquire from the Company or any of its Subsidiaries, and no
other obligation of the Company or any of its Subsidiaries to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities or
ownership interests in, any Subsidiary of the Company, or any other obligation
of the Company or any of its Subsidiaries to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other
similar agreement or commitment (the items in clauses (i) and (ii) being
referred to collectively as the "Subsidiary Securities"). There are no
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any outstanding Subsidiary Securities.
3.8 Real Property.
(a) General. The real property set forth on Schedule 3.8(b) and
Schedule 3.8(c) constitutes all real property necessary for the conduct of the
business of the Company and its Subsidiaries as presently conducted and, except
as set forth on Schedule 3.8(a), all of such real property, and the improvements
thereon, are (i) in good condition, repair and proper working order having
regard for their use and age, have been properly maintained, and are fit for the
current uses thereof by the Company and its Subsidiaries; (ii) serviced by
adequate electric, gas, water, sewer, telephone and other utilities; (iii)
legally entitled to the benefit of all easements and rights of way and other
uses of property of third persons or governmental entities; (iv) legally
entitled to access, both vehicular and pedestrian, to a public street; and (v)
not in violation of any material zoning requirement, permit or other
governmental or private restriction or entitlement relating to the real property
or the conduct of the business thereon as currently conducted.
(b) Owned Real Property. Schedule 3.8(b) hereto sets forth all
Facilities owned by the Company and its Subsidiaries or to be acquired by the
Company or its Subsidiaries prior to the Effective Time. With respect to each
parcel of owned real property, except as set forth on Schedule 3.8(b), (i) the
Company or any Subsidiary of the Company, as the case may be, has insurable fee
simple title to such parcel of real property, free and clear of any and all
Encumbrances other than Permitted Encumbrances, (ii) there are no leases,
subleases, licenses, options, rights, concessions or other agreements, written
or oral, granting to any party or parties the right of use or occupancy of any
portion of such parcel of real property, (iii) there are no
24
outstanding options or rights of first refusal in favor of any other party to
purchase any such parcel of real property or any portion thereof or interest
therein, (iv) there are no parties (other than the Company or its Subsidiary, as
the case may be) who are in possession of or who are using any such parcel of
real property, except in connection with a Permitted Encumbrance, and (v) there
is no (A) pending or, to the knowledge of the Company, threatened condemnation
or expropriation proceeding relating to such parcel of real property, (B)
pending or, to the knowledge of the Company, threatened Action relating to such
parcel of real property, (C) to the knowledge of the Company, other matter
adversely affecting the current use or occupancy of such parcel of real property
in any material respect, (D) to the knowledge of the Company, pending or
threatened special assessment relating to such real property or (E) to the
Company's knowledge, proposed or pending zoning charge to any zoning affecting
the property.
(c) Leased Real Property. Schedule 3.8(c) sets forth all leases,
subleases or other occupancy agreements pursuant to which Facilities are leased
by the Company or its Subsidiaries (as lessee) (the "Leases"), true and complete
copies of which (including all amendments, extensions, renewals, guarantees and
other related agreements) have been delivered to Parent. Such Leases constitute
all leases, subleases or other occupancy agreements pursuant to which the
Company or its Subsidiary, as the case may be, occupies or uses Facilities.
Except as set forth on Schedule 3.8(c), Company and its Subsidiaries have good
and valid leasehold title to, and enjoy peaceful and undisturbed possession of,
all leased property described in such Leases (the "Leased Property"), free and
clear of any and all Encumbrances other than any Permitted Encumbrances which
would not permit the termination of the Lease therefor by the lessor. With
respect to each such parcel of Leased Property, (i) to the knowledge of the
Company, there are no pending or threatened condemnation proceedings relating
to, or any pending or threatened Actions relating to, the Company's leasehold
interests in such Leased Property or any portion thereof, (ii) neither the
Company and its Subsidiaries nor, to the knowledge of the Company, any third
party has entered into any sublease, license, option, right, concession or other
agreement or arrangement, written or oral, granting to any person the right to
use or occupy such Leased Property or any portion thereof or interest therein,
and (iii) there is no (A) other matter adversely affecting the current use or
occupancy of such parcel of Leased Property in any material respect, (B) to the
knowledge of the Company, pending or threatened special assessment relating to
such Leased Property or (C) payment which is required to be made which is past
due or other default by the Company of any material obligations under such
Lease.
With respect to each Lease listed on Schedule 3.8(c) and subject to
Schedule 3.35, (i) there is no material default under any such Lease by the
Company or its Subsidiaries or, to the knowledge of the Company, by any other
party, (ii) the execution, delivery and performance of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby will not cause a material default under any such Lease, (iii)
such Lease is a valid and binding obligation of the lessor, is in full force and
effect with respect to and is enforceable against the lessor in accordance with
its terms, except as the enforceability thereof may be limited by (1) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
similar laws in effect which affect the enforcement of creditors' rights
generally or (2) general principles of equity, whether considered in a
proceeding at law or in equity, (iv) no action has been taken by the Company or
its Subsidiaries, and to the
25
knowledge of the Company, no event has occurred and is continuing which, with
notice or lapse of time or both, would permit termination, modification or
acceleration by a party thereto other than the Company or its Subsidiaries
without the consent of the Company or its Subsidiaries under any such Lease that
is material to the Company or its Subsidiaries, (v) no party has repudiated in
writing to the Company or its Subsidiaries any material term thereof or
threatened in writing to the Company or its Subsidiaries to terminate, cancel or
not renew any such Lease that is material to the Company or its Subsidiaries and
(vi) the Company and its Subsidiaries have not assigned, transferred, conveyed,
mortgaged or encumbered any interest in any such Lease or in any Leased Property
subject thereto (or any portion thereof), except in connection with a Permitted
Encumbrance. Except for those leasehold improvements leased pursuant to the
Leases, the Company has marketable fee simple title to all leasehold
improvements located on properties leased pursuant to the Leases.
(d) The Company has delivered to Parent true and complete copies
of all policies of title insurance, commitments for title insurance and real
property surveys in its possession with respect to all real property owned or
leased by the Company.
3.9 Personal Property.
(a) General. The Company and each Subsidiary of the Company owns
or leases all personal property Assets necessary for the conduct of its business
as presently conducted, and the personal property Assets (taken as a whole) are
in such operating condition and repair (subject to normal wear and tear) as is
necessary for the conduct of its business as presently conducted.
(b) Owned Personal Property. Except as set forth on Schedule
3.9(b), the Company and each Subsidiary of the Company has good title to all
such personal property owned by it, free and clear of any and all Encumbrances
other than Permitted Encumbrances. With respect to each such item of personal
property (i) there are no leases, subleases, licenses, options, rights,
concessions or other agreements, written or oral, granting to any party or
parties the right of use of any portion of such item of personal property, (ii)
there are no outstanding options or rights of first refusal in favor of any
other party to purchase any such item of personal property or any portion
thereof or interest therein and (iii) there are no parties (other than the
Company or its Subsidiaries) who are in possession of or who are using any such
item of personal property.
(c) Leased Personal Property. Except as set forth on Schedule
3.9(c), the Company and each Subsidiary of the Company has good and valid
leasehold title to all of such Fixtures and Equipment, vehicles and other
tangible personal property Assets leased by it from third parties, free and
clear of any and all Encumbrances other than Permitted Encumbrances which would
not permit the termination of the lease therefor by the lessor. Schedule 3.9(c)
sets forth all Leases for personal property involving annual payments in excess
of $40,000, true and complete copies of which have been delivered or made
available to Parent.
With respect to each lease listed on Schedule 3.9(c), (i) there is no
material default under such lease by the Company or its Subsidiaries or, to the
knowledge of the Company, by any other
26
party, (ii) the execution, delivery and performance of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby will not cause (with or without notice and with or without
the passage of time) a default under any such lease, (iii) such lease is a valid
and binding obligation of the applicable lessor, is in full force and effect and
is enforceable by the Company or its Subsidiaries in accordance with its terms,
except as the enforceability thereof may be limited by (1) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
similar laws in effect which affect the enforcement of creditors' rights
generally or (2) general principles of equity, whether considered in a
proceeding at law or in equity, (iv) no action has been taken by the Company or
its Subsidiaries and no event has occurred and is continuing which, with notice
or lapse of time or both, would permit termination, modification or acceleration
by a party thereto other than by the Company or its Subsidiaries without the
consent of the Company or its Subsidiaries under any such Lease that is material
to the Company or any Subsidiary of the Company, (v) no party has repudiated in
writing any term thereof or threatened in writing to terminate, cancel or not
renew any such Lease that is material to the Company or any Subsidiary of the
Company, (vi) neither the Company nor any Subsidiary of the Company has
assigned, transferred, conveyed, mortgaged or encumbered any interest in any
such Lease or in any leased property subject thereto (or any portion thereof)
except in connection with a Permitted Encumbrance and (vii) all payments
required to be made by the Company or any of its Subsidiaries have been paid and
neither the Company nor any Subsidiary is otherwise in default of any material
obligations under any of such Leases.
3.10 Environmental Matters.
(a) Compliance. Except as disclosed on Schedule 3.10(a), the
Company and its Subsidiaries are in compliance with all Environmental Laws,
including, without limitation, all Permits required thereunder to conduct their
business as currently being conducted, except for such non-compliance as could
not reasonably be expected to result in a Company Material Adverse Effect. All
such Permits are listed on Schedule 3.10(a). Except as disclosed on Schedule
3.10(a), neither the Company nor any of its Subsidiaries has received any notice
to the effect that, or otherwise has knowledge that, (i) it is not in compliance
in any material respect with, or is in violation of, any such Environmental Laws
or Permits required thereunder or (ii) any currently existing circumstances are
reasonably likely to result in a failure of the Company or any of its
Subsidiaries to comply with, or a violation by the Company or any of its
Subsidiaries of, any such Environmental Laws or Permits required thereunder.
Except as disclosed on Schedule 3.10(a), to the knowledge of the Company, the
Company and its Subsidiaries at all times during the previous five (5) years
have been in compliance with all Environmental Laws, except for such non-
compliance as could not reasonably be expected to result in a Company Material
Adverse Effect.
(b) Environmental Claims. There are no existing or, to the
knowledge of the Company, potential Environmental Claims against the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has
received any written notification or otherwise has any knowledge, of any
allegation of any actual, or potential responsibility for, or
27
any inquiry or investigation regarding, any disposal, release or threatened
release at any Facility of any Hazardous Substance generated or transported by
the Company or any of its Subsidiaries.
(c) Hazardous Substances. Except as disclosed on Schedule
3.10(c), (i) no underground tank or other underground storage receptacle for
Hazardous Substances is currently or, to the knowledge of the Company, has in
the past been located on the Facilities listed in Schedule 3.8(b), or to the
knowledge of the Company, the Former Properties, and there have been no releases
of any Hazardous Substances from any such underground tank or related piping;
(ii) there have been no current or, to the knowledge of the Company, past
releases (i.e., any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, or dumping) of Hazardous Substances in quantities exceeding those
authorized by Environmental Laws including, without limitation, the Permits
required thereunder, upon or into the Facilities, or to the knowledge of the
Company, the Former Properties; (iii) there are no polychlorinated biphenyls
(PCBs) or asbestos located at or on the Facilities, except when used in
compliance with Environmental Laws and (iv) no part of the Facilities has been
used as a landfill or for the disposal of hazardous waste and to the knowledge
of the Company and its Subsidiaries, no part of the Facilities has been used by
any other persons as a landfill or for the disposal of hazardous waste.
(d) Environmental Indemnities. Neither the Company nor any
Subsidiary of the Company is a party, whether as a direct signatory or as
successor, assign or third-party beneficiary, or otherwise bound, to any Lease
or other Contract (excluding insurance policies disclosed on the Schedules)
under which the Company or any of its Subsidiaries is obligated by or entitled
to the benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions.
(e) No Releases. Neither the Company nor any of its Subsidiaries
has released any other person from any claim under any Environmental Law or
waived any rights concerning any Environmental Condition.
(f) Environmental Reports. Complete and accurate copies of the
Environmental Reports, as well as all other written environmental reports,
audits or assessments which have been conducted, either by the Company, its
Subsidiaries, or any person engaged by the Company or any of its Subsidiaries
for such purpose, at any Facility or Former Property have been made available to
Parent and a list of all such reports, audits and assessments is set forth on
Schedule 3.10(f).
3.11 Contracts.
(a) Disclosure. Schedule 3.11 sets forth a complete and accurate
list of all of the Contracts of the following categories:
(i) Contracts not made in the ordinary course of business
which are material to the Business or the Assets;
28
(ii) License agreements or royalty agreements, whether the
Company is the licensor or licensee thereunder (excluding licenses that are
commonly available on standard commercial terms, such as software "shrink-wrap"
licenses);
(iii) Confidentiality and non-disclosure agreements (whether
the Company is the beneficiary or the obligated party thereunder);
(iv) Contracts or commitments involving future expenditures
or Liabilities, actual or potential, in excess of $100,000 after the date hereof
or otherwise material to the Business or the Assets;
(v) Contracts or commitments relating to commission
arrangements with others that are material to the Business;
(vi) Employment contracts, consulting contracts, severance
agreements, "stay-bonus" agreements and similar arrangements, including
Contracts (A) to employ or terminate executive officers or other personnel and
other contracts with present or former officers or directors of the Company or
(B) that will result in the payment by, or the creation of any Liability of the
Company, the Stockholders or Parent to pay any severance, termination, "golden
parachute," or other similar payments to any present or former personnel
following termination of employment or otherwise as a result of the consummation
of the transactions contemplated by this Agreement;
(vii) Indemnification agreements;
(viii) Promissory notes, loans, agreements, indentures,
mortgages, deeds of trust, evidences of indebtedness, letters of credit,
guarantees, or other instruments relating to an obligation to pay money, whether
the Company shall be the borrower, lender or guarantor thereunder (excluding
credit provided by the Company in the ordinary course of business to purchasers
of its products and obligations to pay vendors in the ordinary course of
business and consistent with past practice);
(ix) Contracts containing covenants limiting the freedom of
the Company or any Subsidiary of the Company, or any officer, director, Employee
or Affiliate of the Company or any Subsidiary of the Company, to engage in any
line of business or compete with any Person that relates directly or indirectly
to the Business;
(x) Any Contract with the federal, state or local government
or any agency or department thereof;
(xi) Any Contract or other arrangement with a Related Party;
(xii) Leases of real property or personal property involving
annual payments of more than $100,000; and
29
(xiii) Any other Contract under which the consequences of a
default or termination could reasonably be expected to have a Material Adverse
Effect on the Company, individually or in the aggregate.
Complete and accurate copies of all of the Contracts listed on Schedule
3.11, including all amendments and supplements thereto, have been made available
to Parent. The Company has included as part of Schedule 3.11 a brief summary of
the material terms of each oral Contract.
(b) Absence of Defaults. Except as set forth on Schedule
3.11(b), all of the Contracts set forth on Schedule 3.11(b) are valid, binding
and enforceable in accordance with their terms, except as such enforceability
may be limited by (1) applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability or (2) general principles
of equity, and there is no existing material Default by the Company or the
relevant Subsidiary of the Company, as the case may be, under the Contracts. The
Company or the relevant Subsidiary of the Company, as the case may be, has
fulfilled all of its material obligations under each of such Contracts accrued
to the date of such determination. To the knowledge of the Company, all parties
to such Contracts have complied in all material respects with the provisions
thereof, no party is in material Default thereunder and no notice of any claim
of Default has been given to the Company or any Subsidiary of the Company.
(c) Product Warranty. Neither the Company, nor any Subsidiary of
the Company, has committed any act, and there has been no omission which may
result in, and there has been no occurrence which may give rise to, product
liability or Liability for breach of warranty (whether covered by insurance or
not) on the part of the Company or any Subsidiary of the Company, with respect
to products designed, manufactured, assembled, sold, repaired, maintained,
delivered or installed or services rendered prior to or on the Closing Date
which could reasonably be expected to result in Liability to the Company or any
Subsidiary of the Company exceeding the greater of $100,000 in the aggregate and
the amount of any warranty reserve specifically established with respect thereto
and included in the Financial Statements.
3.12 No Conflict or Violation; Consents. Except as set forth on Schedule
3.12, none of the execution, delivery or performance of this Agreement or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by the Company with any of the provisions hereof or
thereof, will (a) violate or conflict with any provision of the governing
documents of the Company, (b) violate, conflict with, or result in a breach of
or constitute a default (with or without notice or the passage of time) under,
or result in the termination of, or accelerate the performance required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice under, or result in the creation of any Encumbrance upon any of its
respective assets under, any material Contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, security interest or other arrangement to
which the Company is a party or by which the Company is bound or to which any of
its respective assets are subject, (c) violate any applicable Regulation or
Court Order, except to the extent such violation could not reasonably be
expected to have a Company Material Adverse Effect or (d) impose any Encumbrance
on any Assets or the Business, except to the extent such Encumbrance could not
30
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth on Schedule 3.12, no notices to, declaration, filing or registration with,
approvals or Consents of, or assignments by, any Persons (including any federal,
state or local governmental or administrative authorities) are necessary to be
made or obtained by the Company in connection with the execution, delivery or
performance of this Agreement or any Ancillary Agreement to which it is a party
or the consummation of the transactions contemplated hereby or thereby.
3.13 Permits. Schedule 3.13 sets forth a complete list of all material
Permits of the Company, all of which are as of the date hereof, and will be as
of the Closing Date, in full force and effect. The Company and its Subsidiaries
have, and at all times have had, all material Permits required under any
applicable Regulation in their operation of the Business or in their ownership
of the Assets, and own or possess such Permits free and clear of all
Encumbrances, except for Permitted Encumbrances. Neither the Company nor any
Subsidiary of the Company is in default, nor, to the knowledge of the Company,
has the Company nor any subsidiary of the Company received any notice of any
claim of default, with respect to any such Permit. Except as otherwise governed
by law or as otherwise set forth on Schedule 3.13, all such Permits are
renewable by their terms or in the ordinary course of business without the need
to comply with any special qualification procedures or to pay any amounts other
than routine filing fees and, except as set forth on Schedule 3.13, will not be
adversely affected by the completion of the transactions contemplated by this
Agreement or the Ancillary Agreements.
3.14 Financial Statements; Books and Records.
(a) General. Except as contemplated by Schedule 3.14(a), the
Financial Statements are complete, are in accordance with the Company's Books
and Records and fairly present in all material respects the financial condition,
results of operations and cash flows of the Company and its Subsidiaries as of
the dates and for the periods indicated thereby, in accordance with GAAP
consistently applied throughout the periods covered thereby (except as otherwise
expressly indicated in the notes to the Financial Statements and, in the case of
interim financial statements, for (i) the lack of footnotes and (ii) year-end
audit adjustments that are not material).
(b) Books and Records. The Books and Records accurately and
fairly reflect in all material respects the activities of the Company and its
Subsidiaries and the Business and have been provided to Parent for its
inspection.
(c) All Accounts Recorded. Neither the Company nor any
Subsidiary of the Company has engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank accounts or
funds which have been and are reflected in the normally maintained Books and
Records.
(d) Corporate Records. The stock records and minute books of the
Company and each Subsidiary of the Company that have been made available to
Parent fully reflect all minutes of meetings, resolutions and other material
actions and proceedings of its stockholders, trustees and board of directors and
all committees thereof, all issuances, transfers and redemptions of capital
stock of which the Company or such Subsidiary are aware and contain
31
true, correct and complete copies of their respective organizational documents
and bylaws and all amendments thereto through the date hereof.
3.15 Absence of Certain Changes or Events. Except as set forth on
Schedule 3.15, since the Balance Sheet Date there has not been any:
(a) Company Material Adverse Change;
(b) failure to operate the Business in the ordinary course so as
to use all commercially reasonable efforts to preserve the Business and to
preserve the continued services of the employees of the Company and its
Subsidiaries and the goodwill of suppliers, customers and others having business
relations with the Company or its Subsidiaries or their Representatives;
(c) resignation or termination of any officer, director or
manager listed on Schedule 3.15(c), or any increase in the rate of compensation
payable or to become payable to any officer, director or manager or
Representative of the Company (other than increases in the rate of compensation
as a result of general, regularly-scheduled reviews), including the making of
any loan to any such Person (other than normal advances or expense allowances),
or the payment, grant or accrual of any bonus, incentive compensation, service
award or other similar benefit to any such Person (other than pursuant to
existing arrangements heretofore disclosed to Parent), or material modification,
addition or contribution (other than regularly scheduled contributions) to any
Employee Plan;
(d) any payment, loan or advance of any amount to or in respect
of, or the sale, transfer or lease of any properties or the Assets to, or
entering into of any Contract with, any Related Party except for regular
compensation and normal advances or expense allowances to Employees;
(e) sale, assignment, license, transfer or Encumbrance of any of
the Assets, tangible or intangible, singly or in the aggregate, other than in
the ordinary course of business and consistent with past practice;
(f) new Contracts, or extensions, modifications, terminations or
renewals thereof, except for Contracts entered into, modified or terminated in
the ordinary course of business and consistent with past practice;
(g) actual or, to the knowledge of the Company, threatened,
termination of any material customer account or group of accounts or actual or,
to the knowledge of the Company, threatened material reduction in purchases or
royalties payable by any such customer or, to the knowledge of the Company,
occurrence of any event that is likely to result in any such termination or
reduction;
(h) disposition or lapsing of any material Proprietary Rights of
the Company or any Subsidiary of the Company, in whole or in part, or any
disclosure of any trade secret, process or know-how to any Person not an
Employee or adviser to the Company;
32
(i) change in accounting methods or practices by the Company or
any Subsidiary of the Company;
(j) revaluation by the Company or any Subsidiary of the Company
of any of the Assets, including writing off or establishing reserves with
respect to inventory, notes or accounts receivable (other than for which
adequate reserves have been previously established);
(k) damage, destruction or loss (whether or not covered by
insurance) of any property of the Company or its Subsidiaries materially
adversely affecting the Assets or the Business;
(l) declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any Subsidiary of
the Company or any redemption, purchase or other acquisition of any equity
securities of the Company or any Subsidiary of the Company;
(m) issuance or reservation for issuance by the Company or any
Subsidiary of the Company of, or commitment of it to issue or reserve for
issuance, any shares of capital stock or other equity securities or obligations
or securities convertible into or exchangeable for shares of capital stock or
other equity securities;
(n) increase, decrease or reclassification of the capital stock
of the Company or any Subsidiary of the Company;
(o) amendment of the organizational documents or bylaws of the
Company or any Subsidiary of the Company;
(p) capital expenditure or execution of any lease or any
incurring of liability therefor by the Company or any Subsidiary of the Company,
involving payments or obligations in excess of $50,000 in the aggregate;
(q) failure to pay any material obligation of the Company or any
Subsidiary of the Company when due;
(r) cancellation of any indebtedness or waiver of any rights of
substantial value to the Company or any Subsidiary of the Company, except in the
ordinary course of business and consistent with past practice;
(s) indebtedness incurred by the Company or any Subsidiary of
the Company for borrowed money or any commitment to borrow money entered into by
the Company or any Subsidiary of the Company except indebtedness under the
Working Capital Credit Lines, or any loans made or agreed to be made by the
Company or any Subsidiary of the Company;
(t) liability incurred by the Company or any Subsidiary of the
Company except in the ordinary course of business and consistent with past
practice, or any increase or
33
change in any assumptions underlying or methods of calculating any bad debt,
contingency or other reserves;
(u) payment, discharge or satisfaction of any Liabilities of the
Company or any Subsidiary of the Company, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of Liabilities reflected or reserved against in the Financial
Statements or incurred in the ordinary course of business and consistent with
past practice since the Balance Sheet Date;
(v) acquisition of any equity interest in any other Person; or
(w) agreement by the Company or any Subsidiary of the Company,
directly or indirectly, to do any of the foregoing.
3.16 Liabilities. The Company and its Subsidiaries have no Liabilities
or obligations (absolute, accrued, contingent inchoate or otherwise) except (i)
Liabilities which are reflected and properly reserved against in the Financial
Statements, (ii) Liabilities incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet Date and (iii) Liabilities
arising under the Contracts (other than obligations which are required to be
reflected on a balance sheet prepared in accordance with GAAP) set forth on
Schedule 3.11 or Liabilities which are not required to be disclosed on such
Schedule and which have arisen or been incurred in the ordinary course of
business. None of the Liabilities described in this Section 3.16 relates to any
Actions.
3.17 Litigation. Except as set forth on Schedule 3.17, there is no
Action, pending or, to the knowledge of the Company, threatened or reasonably
anticipated (i) against, relating to or affecting the Company or its
Subsidiaries, any of the Assets or any of their respective officers and
directors as such, (ii) which seeks to enjoin or obtain damages in respect of
the transactions contemplated hereby or by the Ancillary Agreements or (iii)
with respect to which there is a reasonable likelihood of a determination which
would prevent the Company from consummating the transactions contemplated
hereby. None of the Actions disclosed in Schedule 3.17, if adversely determined
against the Company or its Subsidiaries, their respective directors or officers,
or any other Person could reasonably be expected to result in a loss to the
Company, individually or in the aggregate, in excess of $100,000. There are
presently no outstanding judgments, decrees or orders of any court or any
governmental or administrative agency against or affecting the Company any of
its Subsidiaries, the Business or any of the Assets. Schedule 3.17 contains a
complete and accurate description of all Actions since December 31, 1995 to
which the Company or any Subsidiary of the Company has been a party or which
relate to any of the Assets or the officers or directors of the Company or any
Subsidiary of the Company as such, or any such Actions which were settled prior
to the institution of formal proceedings, other than Actions brought by the
Company or its Subsidiaries for collection of monies owed in the ordinary course
of business.
3.18 Labor Matters.
34
(a) General. Except as disclosed on Schedule 3.18(a), the Company
is not a party to any labor agreement with respect to its Employees with any
labor organization, group or association and has not experienced any attempt by
organized labor or its representatives to make the Company conform to demands of
organized labor relating to its Employees or to enter into a binding agreement
with organized labor that would cover the Employees of the Company. There is no
unfair labor practice charge or complaint against the Company pending before the
National Labor Relations Board or any other governmental agency arising out of
the Company's activities, and the Company does not have any knowledge of any
facts or information which would give rise thereto; there is no labor strike or
labor disturbance pending or, to the knowledge of the Company, threatened
against the Company nor is any grievance currently being asserted against it;
and the Company has not experienced a work stoppage or other labor difficulty
within the past five (5) years. There are no material controversies pending or,
to the knowledge of the Company, threatened between the Company and its
Employees, and the Company is not aware of any facts which could reasonably
result in any such controversy.
(b) Compliance. The Company is in material compliance with all
applicable Regulations respecting employment practices, terms and conditions of
employment, wages and hours, equal employment opportunity, and the payment of
social security and similar taxes and is not engaged in any unfair labor
practice. Except as disclosed on Schedule 3.18(b), the Company is not liable for
any claims for past due wages or any penalties for failure to comply with any of
the foregoing.
(c) Severance Obligations. The Company has not entered into any
severance, "stay-bonus" or similar arrangement in respect of any present or
former Employee that will result in any obligation (absolute or contingent) of
Parent or the Company to make any payment to any present or former Employee
following termination of employment or upon consummation of the transactions
contemplated by this Agreement (whether or not employment is continued for any
specified period after the Effective Time). Neither the execution and delivery
of this Agreement or any Ancillary Agreement nor the consummation of the
transactions contemplated hereby or thereby will result in the acceleration or
vesting of any other rights of any Person to benefits under any Employee Plans.
(d) Highly Compensated Employees. Attached hereto as Schedule
3.18(d) is a list of the names of all present Employees with total compensation
expected to exceed $100,000 in 1999 and their current compensation payable by
the Company. Notwithstanding any provision of this Agreement or any Schedule to
the contrary, the Company represents that from and after the Effective Time no
benefit or other compensation is payable to any Person identified on Schedule
3.18(d) upon the voluntary resignation of such Person from employment with
Parent or the Company as a result of the occurrence of the Effective Time.
3.19 Employee Benefit Plans. Schedule 3.19 contains a complete list of
Employee Plans. True and complete copies of each of the following documents have
been delivered by the Company to Parent: (i) each Employee Plan (and, if
applicable, related trust agreements, annuity contracts or other funding
instruments) and all amendments thereto, all summary plan descriptions, summary
of material modifications (as defined in ERISA) and all written
35
interpretations and descriptions thereof which the Company generally has
distributed to participants therein, the number of and a general description of
the level of employees covered by each Benefit Arrangement and a complete
description of any Employee Plan which is not in writing, (ii) the most recent
determination letter issued by the Internal Revenue Service with respect to each
Pension Plan and each voluntary employees' beneficiary association as defined
under Section 501(c)(9) of the Code (other than a Multiemployer Plan), (iii) for
the three (3) most recent plan years, Annual Reports on Form 5500 Series
required to be filed with any governmental agency for each Pension Plan or
Welfare Plan, (iv) all actuarial reports prepared for the last three (3) plan
years for each Pension Plan and each Foreign Plan for which an actuarial report
is required by an applicable Law, Regulation or Governmental Authority, (v) a
description of complete age, salary, service and related data as of the last day
of the last plan year for employees and former employees of the Company and each
of its Subsidiaries, (vi) a description setting forth the amount of any
liability of the Company and each of its Subsidiaries as of the Closing Date for
payments more than thirty (30) calendar days past due with respect to any
Welfare Plan (vii) the most recent summary plan description for each Employee
Plan for which a summary plan description is required by ERISA or other Law or
applicable Governmental Authority, (viii) the most recent financial statement or
accounting statements for each Employee Plan, where applicable, (ix) annual
information returns and other returns, filings and notices to or from the
Company or any Subsidiary to or from any Governmental Authority in the last
three (3) years relating to any Employee Plan, (x) all current booklets,
summaries, manuals and written communications of a general nature distributed to
or made available to any current or former employees concerning any of the
Employee Plans, (xi) copies of the most recent letters of confirmation of
registration of a Foreign Plan or determination regarding tax qualified status,
where applicable, and (xii) copies of any current statements of investment
policies and goals prepared in respect of the Employee Plans (whether or not
such statements have been filed with the applicable Governmental Authorities).
(i) Pension Plans.
(A) No Pension Plan is subject to Title VI of ERISA or Section
412 of the Code.
(B) Each Pension Plan which has been operated as a qualified
plan (1) has received a favorable determination letter from the Internal
Revenue Service stating that such Pension Plan and each related trust is
qualified and tax-exempt under the provisions of Code Sections 401(a) and
501(a), (2) has been so qualified during the period from its adoption to
date and (3) no fact or circumstance exists which could adversely affect
the qualified status of such Pension Plan.
(C) Each Pension Plan currently complies in all material
respects and has been maintained in compliance in all material respects
with its terms and, both as to form and in operation, with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such plans, including, without limitation, ERISA and the
Code.
36
(ii) Multiemployer Plans. Neither the Company nor any ERISA
Affiliate has any liability with respect to a Multiemployer Plan, and no
liability will arise or be imposed on the Company or any ERISA Affiliate under,
or with respect to, any Multiemployer Plan.
(iii) Welfare Plans.
(A) Each Welfare Plan currently complies in all material
respects and has been maintained in compliance in all material respects
with its terms and, both as to form and operation, with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Welfare Plan, including, without limitation, ERISA and
the Code.
(B) Except as required by Section 4980B of the Code or Part 6 of
Title 1, Subtitle B of ERISA, none of the Company, any ERISA Affiliate or
any Welfare Plan has any present or future obligation to make any payment
to, or with respect to any present or former employee of the Company or any
ERISA Affiliate pursuant to, any retiree medical benefit plan, or other
retiree Welfare Plan, and no condition exists which would prevent the
Company or an ERISA Affiliate from amending or terminating any such benefit
plan or such Welfare Plan.
(C) Each Welfare Plan which is a "group health plan," as defined
in Section 607(1) of ERISA, presently complies in all material respects
with and has been operated in compliance in all material respects with
provisions of Part 6 of Title I, Subtitle B of ERISA and Sections 162(k)
and 4980B of the Code at all times.
(D) Neither the Company nor any ERISA Affiliate has, at any
time, maintained, contributed to or had any obligation to maintain or
contribute to any Welfare Plan that is a "multiemployer plan," as defined
in Section 3(37) of ERISA.
(E) The insurance policies or other funding instruments, if any,
for each Welfare Plan provide coverage for each employee, consultant,
independent contractor or retiree of the Company or any of its Subsidiaries
(and, if applicable, their respective dependents) who has been advised by
the Company, whether through an Employee Plan or otherwise, that he or she
is covered by such Welfare Plan.
(iv) Benefit Arrangements. Each Benefit Arrangement which
presently complies and has been maintained in compliance in all material
respects with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Benefit
Arrangement, including, without limitation, the Code. Except as provided by law
or in any employment agreement set forth on Schedule 3.19, the employment of all
persons presently employed or retained by the Company is terminable at will.
37
(v) Unrelated Business Taxable Income; Unpaid Contributions. No
Employee Plan (or trust or other funding vehicle pursuant thereto) has incurred
any liability under Code Section 511. Neither the Company nor any ERISA
Affiliate has any liability for unpaid contributions under Section 515 of ERISA
with respect to any Employee Plan.
(vi) Deductibility of Payments. There is no contract, agreement,
plan or arrangement covering any employee or former employee of the Company
(with respect to such employee's relationship with the Company) that,
individually or collectively, requires the payment by the Company of any amount
(i) that is not deductible under Section 162 or 404 of the Code or (ii) that is
an "excess parachute payment" pursuant to Section 280G of the Code.
(vii) Fiduciary Duties and Prohibited Transactions. Neither the
Company nor any plan fiduciary of any Welfare Plan or Pension Plan has engaged
in, or has any liability in respect of, any transaction in violation of Sections
404 or 406 of ERISA or any "prohibited transaction," as defined in Section
4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA
or Section 4975(c)(2) or (d) of the Code, or has otherwise violated the
provisions of Part 4 of Title I, Subtitle B of ERISA so as to create any
liability of the Company or any of its Subsidiaries or any Employee Plan. The
Company has not participated in a violation of Part 4 of Title I, Subtitle B of
ERISA by any plan fiduciary of any Welfare Plan or Pension Plan, and the Company
and its Subsidiaries have not been assessed any civil penalty under Section
502(l) of ERISA.
(viii) Litigation. There is no action, order, writ, injunction,
judgment or decree outstanding or claim (other than routine claims for
benefits), suit, litigation, proceeding, arbitration proceeding, governmental
audit or investigation relating to or seeking benefits under any Employee Plan
that is pending or, to the knowledge of the Company, anticipated or threatened
against the Company, any ERISA Affiliate or any Employee Plan or pursuant to any
workers compensation laws or Canadian or provincial human rights laws.
(ix) No Amendments. Neither the Company nor any ERISA Affiliate
has announced to employees, former employees, consultants or directors an
intention to create, or otherwise created, a legally binding commitment to adopt
any additional Employee Plan or to amend or modify any existing Employee Plan.
(x) Insurance Contracts. No Employee Plan (other than a
"multiemployer plan," as defined in Section 3(37) of ERISA) holds as an asset of
any Employee Plan any interest in any annuity contract, guaranteed investment
contract or any other investment or insurance contract issued by an insurance
company that is the subject of bankruptcy, conservatorship or rehabilitation
proceedings.
(xi) No Acceleration or Creation of Rights. Except as set forth
on Schedule 3.18(c), neither the execution and delivery of this Agreement or the
Ancillary Agreements by the Company nor the consummation of the transactions
contemplated hereby or the related transactions will result in the acceleration
or creation of any rights of any person to benefits under any Employee Plan
(including, without limitation, the acceleration of the vesting or
exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the
38
acceleration of the accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any severance, parachute or
change in control agreement).
(xii) No Other Material Liability. No event has occurred in
connection with which the Company, any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (A) under any
statute, regulation or governmental order relating to any Employee Plan or (B)
pursuant to any obligation of the Company to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Plans.
(xiii) Foreign Plans. Each Foreign Plan is, and has been,
established, registered (where required), qualified, administered, funded (where
required) and invested in compliance in all material respects with the terms
thereof and all applicable Laws. With respect to each Foreign Plan, all required
filings and reports have been made in a timely and complete manner with all
Governmental Authorities. All obligations of the Company and its Subsidiaries to
or under the Foreign Plans (whether pursuant to the terms thereof or any
applicable Laws) have been satisfied, and there are no outstanding defaults or
violations thereunder nor does the Company or any of its Subsidiaries have any
knowledge of any default or violation by any other party to any Foreign Plan.
Full payment has been made in a timely manner of all amounts which are required
to be made as contributions, payments or premiums to or in respect of any
Foreign Plan under applicable Law or under any Foreign Plan or any agreement
relating to a Foreign Plan and no Taxes, penalties or fees are owing or
assessable under any such Foreign Plan. The Company and its Subsidiaries have
made adequate provision for reserves to meet contributions that have not been
made because they are not yet due under the terms of any Foreign Plan or related
agreements. To the knowledge of the Company and each Subsidiary, no event has
occurred with respect to any registered Foreign Plan which would result in the
revocation of the registration of such Foreign Plan or which would entitle any
Person (without the consent of the sponsor of such Foreign Plan) to wind up or
terminate any such Foreign Plan, in whole or in part, or could otherwise
reasonably be expected to have an adverse effect on the tax status of any such
Foreign Plan. There are no going-concern unfunded actuarial liabilities, past
service unfunded liabilities or solvency deficiencies with respect to any of the
Foreign Plans. No contribution holidays have been taken under any of the Foreign
Plans, and there have been no withdrawals of assets or transfers of assets from
any Foreign Plan, except in accordance with applicable Laws. Neither the Company
nor any of its Subsidiaries has received or applied for any payment of surplus
assets out of any Foreign Plan. No Foreign Plan provides benefits beyond
retirement or termination of service to Employees or former employees or to
beneficiaries or dependents of such employees. No Foreign Plan requires or
permits a retroactive increase in premiums or payments and the level of
insurance reserves, if any, under any insured Foreign Plan is reasonable and
sufficient to provide for all incurred but unreported claims.
3.20 Transactions with Related Parties. Except for employment agreements
and other compensation arrangements and loans disclosed on Schedule 3.20, no
Related Party has (a) borrowed or loaned money or other property to the Company
or any Subsidiary of the Company which has not been repaid or returned, (b) any
contractual relationship with or other claims, express or implied, of any kind
whatsoever against the Company or any Subsidiary of the
39
Company or (c) any interest in any property used by the Company or any
Subsidiary of the Company.
3.21 Compliance with Law. The Company and its Subsidiaries have
conducted the Business in compliance with all applicable Regulations and Court
Orders, except as could not reasonably be expected to cause a Company Material
Adverse Effect. Neither the Company nor any Subsidiary of the Company has
received any notice to the effect that, or has otherwise been advised that, the
Company or any Subsidiary is not in compliance with any such Regulations or
Court Orders, and neither the Company nor any Subsidiary of the Company has any
reason to anticipate that any existing circumstances are likely to result in any
material violation of any of the foregoing.
3.22 Intellectual Property.
(a) General. Schedule 3.22(a) sets forth with respect to
Proprietary Rights of the Company and its Subsidiaries: (i) for each trademark,
tradename or service xxxx, whether or not registered, the date first used, the
application serial number or registration number, as appropriate, the class of
goods covered, the nature of the goods or services on or in connection with
which such name or xxxx has been used, the countries in which the name or xxxx
is used and the expiration date for each country in which a trademark has been
registered, (ii) for each copyright for which registration has been sought
whether or not registered, the date of creation and first publication of the
work, the registration number and date of registration for each country in which
a copyright application has been registered, (iii) for each mask work (if any),
whether or not registered, the date of first commercial exploitation and, if
registered, the registration number and date of registration, (iv) a description
of all Trade Secrets that are material to the Business and (v) all such
Proprietary Rights in the form of licenses. True and correct copies of all
Proprietary Rights (including all pending applications, application related
documents and materials and descriptions of Trade Secrets) owned, controlled or
used by or on behalf of the Company of any Subsidiary of the Company or in which
the Company or any Subsidiary of the Company has any interest whatsoever have
been provided or made available to Parent.
(b) Adequacy. The Proprietary Rights owned, controlled or used by
the Company and its Subsidiaries are all those necessary for the normal conduct
of the Business as presently conducted and as presently contemplated, including
the design, manufacture and sale of all products currently under development,
planned for development or in production.
(c) Ownership. The Company and its Subsidiaries own or have a valid
right to use their Proprietary Rights, and such Proprietary Rights will not
cease to be valid rights of the Company and its Subsidiaries by reason of the
execution, delivery and performance of this Agreement or the Ancillary
Agreements or the consummation of the transactions contemplated hereby or
thereby.
(d) Royalties and Licenses. Except as set forth on Schedule
3.22(d), neither the Company nor any Subsidiary of the Company has any
obligation to compensate any Person for the use of any Proprietary Rights nor
has the Company or any Subsidiary of the Company
40
granted to any Person any license, option or other rights to use in any manner
any of its respective Proprietary Rights, whether requiring the payment of
royalties or not.
(e) Absence of Claims. Except as set forth in Schedule 3.17,
neither the Company nor any Subsidiary of the Company (A) has received any
notice alleging, or otherwise has knowledge of facts that could reasonably be
expected to give rise to, invalidity with respect to any of the Proprietary
Rights of the Company or any Subsidiary of the Company or (B) has received any
notice of alleged infringement of any rights of others due to any activity by
the Company or any Subsidiary of the Company. The use by the Company and its
Subsidiaries of their Proprietary Rights in their past, current and planned
products do not and would not infringe upon or otherwise violate the valid
rights of any third party in the current or planned markets for such products,
including, without limitation, the United States, Canada and the United Kingdom.
No other Person (i) has notified the Company or any Subsidiary of the Company
that it is claiming any ownership of or right to use any of the Proprietary
Rights of the Company and its Subsidiaries or (ii) to the knowledge of the
Company, is infringing upon any such Proprietary Rights in any way.
(f) Protection of Proprietary Rights. All of the pending
applications for Proprietary Rights of the Company and its Subsidiaries have
been properly filed and all other actions to protect such Proprietary Rights
have been taken. The Company and its subsidiaries have taken reasonable steps
necessary or appropriate (including, entering into appropriate confidentiality
and nondisclosure agreements with officers, directors, subcontractors,
Employees, licensees and customers in connection with the Assets or the
Business) to safeguard and maintain the secrecy and confidentiality of, and the
proprietary rights in, the Proprietary Rights that are material to the Business.
The Company has no knowledge of any breach of any such confidentiality or
nondisclosure agreement by any party thereto.
3.23 Tax Matters.
(a) Filing of Tax Returns. The Company and its Subsidiaries have
timely filed with the appropriate taxing authorities all Tax Returns required to
be filed. The Tax Returns filed are complete, correct and accurate in all
respects. Except as set forth on Schedule 3.23(a), neither the Company nor any
of its Subsidiaries have requested any extension of time within which to file
any Tax Return. The Company and its Subsidiaries have delivered to Parent
complete and accurate copies of all federal, state, local and foreign Tax
Returns of the Company, its Subsidiaries and their respective predecessors for
the years ended December 31, 1998, 1997 and 1996.
(b) Payment of Taxes. All Taxes for which the Company and its
Subsidiaries are or may be liable, in respect of periods (or portions thereof)
ending on or before the Closing Date have been timely paid or an adequate
reserve (in conformity with GAAP or, with respect to the Canadian Subsidiaries,
Canadian GAAP) has been established therefor, as set forth in the Financial
Statements, and the Company and its Subsidiaries have no Liability for Taxes in
excess of the amounts so paid or reserves so established. All Taxes that the
Company, its Subsidiaries or their respective predecessors have been required by
law to withhold or collect have been duly
41
withheld or collected and have been timely paid over to the appropriate
governmental authorities to the extent due and payable.
(c) Audits, Investigations or Claims. No deficiencies for Taxes of
the Company or its Subsidiaries have been claimed, proposed or assessed by any
taxing or other governmental authority. Except as set forth on Schedule 3.23(c),
there are no pending or, to the knowledge of the Company, threatened audits,
assessments or other Actions for or relating to any Taxes of the Company or its
Subsidiaries, and there are no matters under discussion with any governmental
authorities with respect to Taxes of the Company or its Subsidiaries. Audits of
federal, state, local and foreign Tax Returns by the relevant taxing authorities
have been completed for the periods set forth on Schedule 3.23(c) and, except as
set forth in such Schedule, none of the Company, any Subsidiary of the Company
or any of their respective predecessors has been notified that any taxing
authority intends to audit a Tax Return for any other period. Except as set
forth on Schedule 3.23(c), no extension of a statute of limitations relating to
Taxes is in effect with respect to the Company, its Subsidiaries or any of their
respective predecessors.
(d) Lien. There are no Encumbrances for Taxes (other than for
current Taxes not yet due and payable) on any of the Assets or any shares of
Company Stock or on the stock of any of the Company's Subsidiaries.
(e) Tax Elections. All elections with respect to Taxes affecting
the Company, or the Assets, as of the date hereof are set forth on Schedule
3.23(e). Neither the Company nor any of its Subsidiaries has (i) consented at
any time under Section 341(f)(1) of the Code to have the provisions of Section
341(f)(2) of the Code apply to any disposition of any Assets; (ii) agreed, or is
required, to make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise; (iii) made an election, or is
required, to treat any Asset as owned by another Person pursuant to the
provisions of Section 168(f) of the Code or as tax-exempt bond financed property
or tax-exempt use property within the meaning of Section 168 of the Code; (iv)
acquired and does not own any assets that directly or indirectly secure any debt
the interest on which is tax exempt under Section 103(a) of the Code; or (v)
made any of the foregoing elections or is required to apply any of the foregoing
rules under any comparable state, local or foreign Tax provision.
(f) Tax Sharing Agreements. There are no Tax-sharing agreements or
similar arrangements (including indemnity arrangements) with respect to or
involving the Company or any of its Subsidiaries, the Assets or the Business
and, after the Closing Date, none of the Company, its Subsidiaries, the Assets
or the Business shall be bound by any such Tax-sharing agreements or similar
arrangements or have any Liability thereunder for amounts due in respect of
periods prior to the Closing Date.
(g) Partnerships. Neither the Company nor any of its Subsidiaries
has an interest in or is subject to any joint venture, partnership, trust, co-
tenancy or other arrangement or contract which is treated as a partnership for
federal income tax purposes.
42
(h) No Withholding. The transactions contemplated herein are not
subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
(i) USRPC. Neither the Company nor any of its Subsidiaries is or
has been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in section
897(c)(1)(A)(ii) of the Code.
(j) Other Entity Liability. None of the Company, any Subsidiary of
the Company, any of their respective predecessors or affiliates of any of them
has any Liability for the Taxes of any other Person (other than Taxes of the
Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise.
(k) Compliance with Withholding Taxes. The Company and its
Subsidiaries have properly requested, received and retained all necessary
exemption certificates and other documentation supporting any claimed exemption
or waiver of Taxes on sales or other transactions for which the Company or any
of its Subsidiaries would have been obligated to collect or withhold Taxes.
(l) Overall Foreign Loss. There is no overall foreign loss of the
Company or any of its Subsidiaries under Treasury Regulation Section 1.1502-9
which is subject to recapture.
(m) Subpart F Income. None of the Company, its Subsidiaries or
Parent would be required to include any amount in gross income with respect to
any foreign Subsidiary of the Company pursuant to Section 951 of the Code if the
taxable year of each of the foreign Subsidiaries of the Company was deemed to
end on the Closing Date. None of the foreign Subsidiaries of the Company has an
investment in "United States property" for purposes of Section 956 of the Code.
(n) Foreign Operations. None of the foreign Subsidiaries of the
Company (i) has been engaged in a United States trade or business for federal
income tax purposes; (ii) has been a passive foreign investment company within
the meaning of the Code; or (iii) has participated in or cooperated with an
international boycott nor has been requested to do so in connection with any
transaction or proposed transaction.
(o) Foreign Tax Laws. To the best of the knowledge of the Company
and its foreign Subsidiaries, there are no proposed or planned changes in the
Tax laws of any foreign jurisdiction that could, if enacted, materially increase
the Taxes payable by any of the Company or its foreign Subsidiaries after the
Closing Date.
(p) No Failure to File. No claim has been made within the last
three years by any taxing authority in a jurisdiction where the Company or any
of its Subsidiaries do not file Tax Returns that the Company or a Subsidiary, as
the case may be, may be subject to taxation in that jurisdiction.
43
(q) Canadian Taxes.
(i) Except pursuant to this Agreement or as set forth in
Schedule 3.23(q) hereto, for purposes of the Income Tax Act (Canada) and
all regulations promulgated thereunder, as amended ("Tax Act"), or any
applicable provincial or municipal taxing statute, no Person or group of
Persons has ever acquired or had the right to acquire control of Xxxxxxx,
Xxxxxxx Industries International Ltd. or Xxxxx-Xxxx Manufacturing Ltd.
(collectively, the "Canadian Subsidiaries").
(ii) None of Sections 78, 80, 80.01, 80.02, 80.03 or 80.04 of
the Tax Act, or any equivalent provision of the taxation legislation of any
province or any other jurisdiction, have applied or will apply to any
Canadian Subsidiary any time up to and including the Closing Date.
(iii) Each Canadian Subsidiary has not acquired property from a
non-arm's length person, within the meaning of the Tax Act, for
consideration, the value of which is less than the fair market value of the
property acquired, in circumstances which could subject it to a liability
under Section 160 of the Tax Act.
(iv) Except as disclosed on Schedule 3.23(q), for all
transactions between a Canadian Subsidiary and any non-resident Person with
whom such Canadian Subsidiary was not dealing at arm's length, such
Canadian Subsidiary has made or obtained records or documents that meet the
requirements of paragraphs 247(4)(a) to (c) of the Tax Act.
(v) Xxxxxxx, Xxxxxxx Industries International Ltd. and Xxxxx-
Xxxx Manufacturing Ltd. are duly registered under Subdivision (d) of
Division V of Part IX of the Excise Tax Act (Canada) with respect to goods
and services tax and harmonized sales tax and their respective registration
numbers are 89840-2763, 89057-3058 and 89159-9128;
(vi) The only reserves under the Tax Act or any equivalent
provincial statute to be claimed by a Canadian Subsidiary for the taxation
year ended immediately prior to the closing of the transactions
contemplated hereby are set out in Schedule 3.23(q);
(vii) Each Canadian Subsidiary has provided complete and
accurate information relating to the matters referred to below, which
information is attached as Schedule 3.23(q):
(a) cost and adjusted cost base of capital properties;
(b) capital cost allowance deducted in each class of
depreciable assets;
(c) undepreciated capital cost of each class of depreciable
assets;
(d) paid-up capital of each class of shares;
44
(e) capital dividend account balance;
(f) refundable dividend tax on hand;
(g) non-capital losses available for carry over;
(h) net capital losses;
(i) cumulative eligible capital;
(j) investment tax credits; and
(k) unclaimed GST input tax credit.
(r) Tax Basis of Company Stock. Set forth on Schedule 3.23(r)
hereto, are the aggregate tax bases of the Company's shareholders, as
provided by such shareholders to the Company, as of the date hereof in
their Company Stock as of the date hereof and, if different, their expected
aggregate bases as of the Effective Time.
3.24 Insurance. Schedule 3.24 contains a complete and accurate list of
all policies or binders of insurance (showing as to each policy or binder the
carrier, policy number, coverage limits, expiration dates, annual premiums, a
general description of the type of coverage provided and any pending claims
thereunder) of which the Company or any Subsidiary of the Company is the owner,
insured or beneficiary. All of such policies are sufficient for (i) compliance
with all Regulations applicable to the Company and its Subsidiaries, the
Business or the Assets and all of the Contracts, and (ii) providing replacement
cost insurance coverage for all of the Assets, Fixtures and Equipment and all
leasehold improvements. Neither the Company nor any Subsidiary of the Company is
in material default under any such policies or binders, or has failed to give
any notice or to present any material claim under any such policy or binder in a
due and timely fashion. There are no facts known to the Company upon which an
insurer might be justified in reducing or denying coverage or increasing
premiums on existing policies or binders. There are no outstanding unpaid claims
under any such policies or binders. Such policies and binders are in full force
and effect on the date hereof and shall be kept in full force and effect by the
Company and its Subsidiaries through the Closing Date.
3.25 Accounts Receivable. Except as contemplated by Schedule 2.12(a),
the accounts and notes receivable reflected in the Balance Sheet, and all
accounts or notes receivable arising since the Balance Sheet Date, represent
bona fide claims against debtors for sales, services performed or other charges
arising on or before the date of recording thereof, and, to the Company's
knowledge, all the goods delivered and services performed which gave rise to
said accounts were delivered or performed in accordance with the applicable
orders, Contracts or customer requirements in all material respects. Except to
the extent of any reserves provided for in the Books and Records, the Company
does not know of any reason why all accounts and notes receivable would not be
collectible at the aggregated recorded amounts or that any such accounts or
notes would be subject to any defense, counterclaim or set-off.
45
3.26 Inventory. Except as contemplated by Schedule 2.12(a), the value at
which the Inventory is shown on December 31, 1999 has been determined in
accordance with the normal valuation policy of the Company, consistently applied
and in accordance with GAAP. The Inventory and the specific items acquired or
manufactured subsequent to December 31, 1999, consists only of items of quality
and quantity commercially usable and salable in the ordinary course of business,
except for any items of obsolete material or material below standard quality,
all of which have been written down to net realizable market value, or for which
adequate reserves have been provided, and the present quantity of all Inventory
is reasonable in the present circumstances of the Business. Schedule 3.26
contains a complete and accurate list of all Inventory as of December 31, 1999
and the addresses at which the Inventory is located.
3.27 Purchase Commitments and Outstanding Bids. As of the date of this
Agreement, the aggregate of all Contracts for the purchase of Inventory by the
Company and its Subsidiaries, other than in the ordinary course of business,
does not exceed $100,000. No outstanding purchase or outstanding lease
commitment of the Company or any Subsidiary of the Company presently is in
excess of the normal, ordinary and usual requirements of the Business or was
made at any price in excess of the now current market price or contains terms
and conditions more onerous than those usual and customary in the Company's
business. There are outstanding no pending obligations to lease real property in
addition to those identified on Schedule 3.8(c).
3.28 Suppliers. Schedule 3.28 sets forth a complete and accurate list of
the names and addresses of the ten (10) suppliers with the greatest dollar
volume of sales to the Company and its Subsidiaries during the last fiscal year,
showing the approximate total purchases in dollars (Canadian dollars where
applicable) by the Company and its Subsidiaries from each such supplier during
such fiscal year. Since the Balance Sheet Date, there has been no Company
Material Adverse Change in the business relationship of the Company with any
supplier named on Schedule 3.28. Neither the Company nor any Subsidiary of the
Company has received any written communication from any supplier named on
Schedule 3.28 of any intention to return, terminate or materially reduce
purchases from or supplies to the Company or any Subsidiary of the Company.
3.29 Year 2000 Problem. The "Year 2000 Problem" (that is, the risk that
computer applications used by any person may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999) could not reasonably be expected to have a Company
Material Adverse Effect.
3.30 Brokers; Transaction Costs. Except as set forth on Schedule 3.30,
the Company nor any Subsidiary of the Company has entered into or will enter
into any contract, agreement, arrangement or understanding with any Person which
will result in the obligation of Parent, the Company or any Subsidiary of the
Company to pay any finder's fee, brokerage commission, legal, accounting, or
similar payment in connection with the transactions contemplated hereby.
3.31 No Other Agreements to Sell the Company or the Assets. Neither the
Company nor any Subsidiary of the Company has any legal obligation, absolute or
contingent, to any other Person to sell the Assets (other than Inventory in the
ordinary course of business) or to sell any capital
46
stock of the Company or any Subsidiary of the Company or to effect any merger,
consolidation or other reorganization of the Company or any Subsidiary of the
Company or to enter into any agreement with respect thereto, except pursuant to
this Agreement.
3.32 Foreign Corrupt Practices Act. None of the Company, any Subsidiary
of the Company or any agent, employee or other Person associated with or acting
on behalf of the Company or any Subsidiary of the Company has, directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds,
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended,
or made any bribe, rebate, payoff, influence payment, kickback or other similar
unlawful payment.
3.33 Financial Projections; Operating Plan. The Company has made
available to Parent certain financial projections with respect to the Business
which projections were prepared for internal use only. The Company makes no
representation or warranty regarding the accuracy of such projections or as to
whether such projections will be achieved, except that the Company represents
and warrants that such projections were prepared in good faith and are based on
assumptions believed by it to be reasonable as of the date of this Agreement.
3.34 Approvals. Schedule 3.34 contains a list of all material approvals
or consents relating to the business conducted by the Company and its
Subsidiaries which are required to be given to or obtained by the Company or its
Subsidiaries from any Person in connection with the consummation of the
transactions contemplated by this Agreement.
3.35 Takeover Statutes. No Takeover Statute applicable to the Company or
its Subsidiaries is applicable to the Merger or the transactions contemplated
hereby.
3.36 Material Misstatements Or Omissions. No representations or
warranties by the Company in this Agreement or any Ancillary Agreement to which
it is a party or in any document, written information, exhibit, statement,
certificate or schedule heretofore or hereinafter furnished by the Company or
any of its Representatives to Parent or Sub pursuant hereto, or in connection
with the transactions contemplated by this Agreement or by such Ancillary
Agreements contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary to make the statements
or facts contained therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
As an inducement of the Company and each of the Stockholders to enter into
this Agreement, except as set forth on the Parent Schedule of Exceptions
attached to this Agreement, Parent represents and warrants to the Company as
follows, which representations and warranties are, as of the date hereof, and
will be, as of the Closing Date, true and correct:
47
4.1 Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Parent
has full corporate power and authority to conduct its business as it is
presently being conducted. Parent is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is necessary under applicable law as a result of the conduct of
its business or the ownership of its properties and where the failure to be so
qualified could reasonably be expected to have a Material Adverse Effect on
Parent. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware. Sub has not engaged in any
business (other than in connection with this Agreement and the transactions
contemplated hereby) since the date of its incorporation.
4.2 Capitalization.
(a) Parent has authorized under its Certificate of Incorporation
100,000,000 shares of Parent Stock and 3,000,000 shares of preferred stock, par
value $.01 per share of which, as of March 24, 2000, 28,830,826 shares of Parent
Stock and no shares of preferred stock were issued and outstanding. Parent has
no other stock authorized, issued or outstanding.
(b) As of December 31, 1999, there were 4,398,502 options granted
under Parent's Stock Option Plans (including any options granted under Parent's
Stock Option Plans since December 31, 1999, the "Parent Options").
(c) Except for (i) the Parent Options, (ii) 2,412,585 shares of
Parent Stock issuable upon conversion of the 7 1/4% Convertible Preferred
Securities issued by Hanover Compressor Capital Trust and (iii) approximately
344,000 shares (as of December 31, 1999) of Parent Stock issuable upon exercise
of outstanding warrants, there are no outstanding options, warrants, convertible
securities or rights of any kind to purchase or otherwise acquire any shares of
capital stock or other securities of Parent. Except as set forth above, no
shares of capital stock of Parent are reserved for issuance.
(d) All outstanding shares of Parent Stock issued or to be issued
upon exercise of any of the Parent Options or conversion of the Convertible
Preferred Securities are or will be validly issued, fully paid and non-
assessable and not subject to any preemptive rights created by statute, Parent's
Certificate of Incorporation or Bylaws or any Contract.
(e) Other than the transactions contemplated by this Agreement,
there is no outstanding vote, plan or pending proposal for any redemption of
stock of Parent or any merger or consolidation of Parent with or into any other
entity.
(f) The Merger Shares to be issued pursuant to the terms of this
Agreement have been duly authorized and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable.
(g) The authorized capital stock of Sub consists of 1,000 shares of
common stock, par value $.01 per share, of which 100 shares are issued and
outstanding. All of such
48
outstanding shares are owned by Parent, and all such shares are validly issued,
fully paid and non-assessable.
4.3 Authorization. Each of Parent and Sub has all necessary corporate
power and authority to enter into this Agreement and the Ancillary Agreements to
which it is a party and has taken all action necessary to consummate the
transactions contemplated hereby and thereby and to perform its respective
obligations hereunder and thereunder. This Agreement has been duly executed and
delivered by each Parent and Sub, and this Agreement is, and upon execution and
delivery each of the Ancillary Agreements to which each of Parent and Sub is a
party will be, a valid and binding obligation of each of Parent and Sub
enforceable against each of Parent and Sub in accordance with its terms, except
that enforceability may be limited by the effect of (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
4.4 No Conflict or Violation; Consents. Except as set forth on Schedule
4.4 and except as could not result in a Material Adverse Effect on Parent, none
of the execution, delivery or performance of this Agreement or any Ancillary
Agreement, the consummation of the transactions contemplated hereby or thereby,
nor compliance by Parent or Sub with any of the provisions hereof or thereof,
will (a) violate or conflict with any provision of Parent's or Sub's governing
documents to the extent applicable, (b) violate, conflict with, or result in a
breach of or constitute a default (with or without notice of passage of time)
under, or result in the termination of, or accelerate the performance required
by, or result in a right to terminate, accelerate, modify or cancel under, or
require a notice under, or result in the creation of any Encumbrance upon any of
its assets under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Parent or Sub is a
party or by which Parent or Sub is bound or to which any of their respective
assets are subject, (c) violate any Regulation or Court Order applicable to
Parent or Sub or (d) impose any Encumbrance on any assets of Parent or Sub.
Except as set forth on Schedule 4.4, no notices to, declaration, filing or
registration with, approvals or Consents of, or assignments by, any Persons
(including any federal, state or local governmental or administrative
authorities) are necessary to be made or obtained by Parent or Sub in connection
with the execution, delivery or performance of this Agreement or any Ancillary
Agreement or the consummation of the transactions contemplated hereby or
thereby.
4.5 Reports and Financial Statements. Parent has timely filed all
reports required to be filed with the SEC pursuant to the Exchange Act or the
Securities Act, and has previously provided or made available to the Company
true and complete copies of all reports filed by Parent with the SEC since
January 1, 1999 (the "SEC Reports"). Such SEC Reports, as of their respective
dates, complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and none of such SEC
Reports, as of its date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Parent, including the notes
thereto, included in the SEC Reports have been prepared in accordance with GAAP
consistently applied (except as
49
otherwise stated in the footnotes to the financial statements) and fairly
present in all material respects the consolidated financial condition of Parent
as at the dates thereof and consolidated results of operations and cash flows
for the periods then ended.
4.6 Absence of Certain Changes or Events. Except as otherwise set forth
in the SEC Reports or in Parent's press release dated March 8, 2000 relating to
its financial results for the quarter ended December 31, 1999, since December
31, 1999, there has not been any fact, event, circumstance or change affecting
or relating to Parent which has had or is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Parent, or
(B) the likelihood of Parent to consummate the Merger and the other transactions
contemplated by this Agreement (a "Parent Material Adverse Effect").
4.7 Material Misstatements or Omissions. No representations or
warranties by Parent in this Agreement or any Ancillary Agreement to which it is
a party or in any document, written information, exhibit, statement, certificate
or schedule heretofore or hereinafter furnished by Parent or any of its
Representatives to the Company pursuant hereto, or in connection with the
transactions contemplated by this Agreement or by such Ancillary Agreements
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements or facts
contained therein not misleading.
ARTICLE 5
ACTIONS BY THE COMPANY, PARENT
AND SUB PRIOR TO THE CLOSING
The Company, Parent and Sub, each as indicated below, covenant as
follows for the period from the date hereof through the Closing Date:
5.1 Conduct of Business. From the date hereof through the Closing, the
Company shall, except as otherwise expressly contemplated by this Agreement, or
as consented to by Parent in writing which consent shall not be unreasonably
withheld or delayed, operate the Business solely in the ordinary course of
business and in accordance with past practice and will not, in any event, take
any action inconsistent with this Agreement, the Ancillary Agreements or the
consummation of the Closing. Without limiting the generality of the foregoing,
the Company shall not, except as specifically contemplated by this Agreement or
as consented to by Parent in writing:
(a) incur any indebtedness for borrowed money, or assume,
guarantee, endorse (other than endorsements for deposit or collection in the
ordinary course of business), or otherwise become responsible for obligations of
any other Person in excess of $100,000 (not including indebtedness under the
Working Capital Credit Lines or the refinancing of the Xxxxx Xxxx Mortgage);
provided, however, that the Company may incur indebtedness to fund asset
purchases in the ordinary course of business up to $2.5 million for any
individual incurrence and $5 million for all such incurrences in the aggregate.
(b) issue (except pursuant to Company Options or Exchangeable Stock
outstanding on the date of this Agreement and disclosed on Schedule 3.2(b) or
Schedule 3.2(c),
50
respectively) or commit to issue any shares of its capital stock or any other
securities or any securities convertible into shares of its capital stock or any
other securities, including, without limitation, any options to acquire capital
stock;
(c) declare, pay or incur any obligation to pay any dividend on its
capital stock or declare, make or incur any obligation to make any distribution
or redemption with respect to capital stock;
(d) make any change to the Company's Certificate of Incorporation
or Bylaws;
(e) mortgage, pledge or otherwise encumber any Assets or sell,
transfer, license or otherwise dispose of any Assets except for the sale of
inventory to customers in the ordinary course of business and consistent with
past practice and except for the refinancing of the Xxxxx Hall Mortgage;
(f) cancel, release or assign any indebtedness owed to it or any
claims or rights held by it except in the ordinary course of business and
consistent with past practice;
(g) make any investment or commitment of a capital nature either by
purchase of stock or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person in
excess of $50,000;
(h) terminate any material Contract or make any change in any
material Contract, except that the Company shall terminate the Financial and
Business Consultancy Agreement between the Company and Xxxxxxxx Xxxxxxxx &
Company Incorporated (the "Xxxxxxxx Xxxxxxxx Agreement"), including the payment
to Xxxxxxxx Xxxxxxxx of a termination fee of up to $760,000, and the Company
shall terminate the agreements described in Section 8.16 hereof; provided that
such terminations shall provide that none of the Company, Parent or Purchaser
shall have any further liability or obligation whatsoever under the Xxxxxxxx
Xxxxxxxx Agreement or such other agreements following the termination thereof;
(i) enter into or modify any employment Contract, (ii) pay any
compensation to or for any Employee, officer or director other than in the
ordinary course of business and pursuant to existing employment arrangements,
(iii) pay or agree to pay any bonus, incentive compensation, service award,
severance, "stay bonus" or other like benefit or not in the ordinary course of
business consistent with past practice, (iv) establish, enter into or modify any
Employee Plan, (v) modify the Company Stock Option Plan, or (vi) accelerate the
vesting of any Company Plan;
(j) enter into or modify any Contract or other arrangement with a
Related Party;
(k) make any change in any method of accounting or accounting
practice;
51
(l) fail to comply with all Regulations applicable to the Assets
(except as could not reasonably be expected to result in a Company Material
Adverse Effect) and the Business consistent with past practices;
(m) fail to use its commercially reasonable efforts to (i) maintain
the Business except for ordinary wear and tear, (ii) retain the Employees so
that such Employees will remain available to the Surviving Corporation on and
after the Closing Date, (iii) maintain existing relationships with material
suppliers and customers and others having business dealings with Parent and (iv)
otherwise to preserve the goodwill of the Business so that such relationships
and goodwill will be preserved on and after the Closing Date;
(n) make or change any election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any tax allocation
agreement, tax sharing agreement, tax indemnity agreement or closing agreement,
settle or compromise any claim, notice, audit report or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period applicable
to any claim or assessment in respect of Taxes;
(o) commence any Action or other legal proceeding;
(p) do any other act which would cause any representation or
warranty of the Company or Stockholders in this Agreement to be or become untrue
in any material respect or that is not in the ordinary course of business
consistent with past practice; or
(q) directly or indirectly take, agree to take or otherwise permit
to occur any of the actions described in Sections 5.1(a) through 5.1(p).
Notwithstanding the foregoing, nothing in this Section 5.1 shall prohibit the
Company from taking any action or omitting to take any action as required or as
contemplated by this Agreement.
5.2 Access by Parent. Subject to the Confidentiality Agreement, from the
date hereof through the Closing Date, the Company shall, and shall cause the
Company's officers, Employees and Representatives to, afford the Representatives
of the Parent and those of its lenders access upon reasonable notice and at all
reasonable times to its Business for the purpose of inspecting the same, and to
its officers, Employees and Representatives, properties, Books and Records,
Contracts and other Assets, and shall furnish Parent and its Representatives and
those of its lenders, upon reasonable notice and in a timely manner, all
financial, operating and other data and information as Parent or its affiliates,
through their respective Representatives, may reasonably request.
5.3 Notification of Certain Matters. The Company and the Stockholders
shall give prompt notice to Parent of (i) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause any
representation or warranty of the Company contained in this Agreement to be
untrue or inaccurate in any material respect and (ii) any material failure of
the Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that such
disclosure shall not be deemed to cure any
52
breach of a representation, warranty, covenant or agreement or to satisfy any
condition. The Company shall promptly notify Parent of any Default, the threat
or commencement of any Action, or any development that occurs before the Closing
that could reasonably be expected to result in a Company Material Adverse
Effect.
5.4 No Mergers, Consolidations, Sale of Stock, etc. The Company shall
not, directly or indirectly, through any Representative or otherwise, (a)
solicit or encourage any inquiries or proposals or enter into or continue any
discussions, negotiations or agreements relating to (i) the sale or exchange of
the Company's capital stock, (ii) the merger of the Company with, or the direct
or indirect disposition of a significant amount of the Assets or the Business
to, any Person other than Parent or (iii) the licensing of the Company's
Proprietary Rights to any Person or (b) provide any assistance or any
information to or otherwise cooperate with any Person in connection with any
such inquiry, proposal or transaction. The Company hereby represents that the
Company is not now engaged in discussions or negotiations with any party other
than Parent with respect to any transaction of the kind described in clauses (a)
(i) through (a) (iii) of the preceding sentence (a "Proposed Acquisition
Transaction"). The Company agrees not to release any third party from, or waive
any provision of, any confidentiality or standstill agreement to which it is a
party. The Company shall (w) immediately notify Parent (orally and in writing)
if any offer is made, any discussions or negotiations are sought to be
initiated, any inquiry, proposal or contact is made or any information is
requested with respect to any Proposed Acquisition Transaction, (x) promptly
notify Parent of the terms of any proposal which it may receive in respect of
any such Proposed Acquisition Transaction, including, without limitation, the
identity of the prospective purchaser or soliciting party, (y) promptly provide
Parent with a copy of any such offer, if written, or a written summary (in
reasonable detail) of such offer, if not in writing, and (z) keep Parent
informed of the status of such offer and the offeror's efforts and activities
with respect thereto.
5.5 Company Stockholder Approval. The Company agrees that it will submit
to the Stockholders a written consent in lieu of a meeting of such Stockholders
(the "Stockholder Consent") in substantially the form attached hereto as Exhibit
C, (a) approving the execution, delivery and performance by the Company of this
Agreement and each of the Ancillary Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby and (b)
expressly waiving any dissenters' appraisal or similar remedy available under
the DGCL or other applicable law.
5.6 Compliance with Securities Laws; New York Stock Exchange Listing.
(a) Parent shall take such actions as are necessary or appropriate
to ensure that the issuance of the Merger Shares as contemplated by this
Agreement complies with all applicable federal, state and Canadian securities
laws and regulations.
(b) Parent shall use its best efforts to cause the Merger Shares to
be authorized for listing on the New York Stock Exchange, subject to official
notice of issuance.
5.7 Company's Auditors. The Company will use commercially reasonable
efforts to cause its management and the Company's independent accountants,
Xxxxxx Xxxxxxxx LLP, to facilitate
53
on a timely basis (i) the preparation of financial statements (including pro
forma financial statements if required) as required by Parent to comply with
applicable SEC regulations and (ii) the review of any Company or predecessor
audit work papers, including, as applicable, the review of selected interim
financial statements and data.
5.8 Closing Date. Each party to this Agreement shall use all reasonable
commercial efforts to cause the Closing to occur on or before May 31, 2000.
5.9 Takeover Statutes. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, the Board of Directors of
the Company will grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate the
effects of any Takeover Statute on any of the transactions contemplated hereby.
5.10 Company Audited Financials. The Company will use its commercially
reasonable efforts to prepare and deliver to Parent within twenty (20) days of
the Closing Date (i) the Company financial statements for the year ended
December 31, 1999 along with the opinion of Xxxxxx Xxxxxxxx LLP (the "Company
Audited Financials") and (ii) a schedule summarizing the adjustments made to the
Financial Statements for the period ended December 31, 1999 as previously
provided to Parent (which will be prepared on a basis consistent in all material
respects with the Financial Statements in order to arrive at the Company Audited
Financials. The Company Audited Financials will be provided to Parent in draft
form and Parent shall have an opportunity to ask questions and receive responses
from senior management of the Company regarding such financial statements before
they are finalized.
5.11 Further Assurances. Upon the terms and subject to the conditions
contained herein, the parties agree, in each case both before and after the
Closing, (i) to use all commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement and the Ancillary Agreements, including fulfillment of the
conditions set forth in Article VII hereof, (ii) to use their respective
commercially reasonable efforts to cause the Merger to qualify, and will not
take any actions which to their knowledge could reasonably be expected to
prevent the Merger from qualifying, as a reorganization under the provisions of
Section 368(a) of the Code, (iii) to execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the transactions contemplated hereunder and thereunder and (iv) to
cooperate with each other in connection with the foregoing. Without limiting the
foregoing, the parties agree to use their respective reasonable commercial
efforts (A) to obtain any necessary Consents (including, without limitation, all
filings required to be made under the HSR Act with respect to this Agreement and
the transactions contemplated hereby) (B) to give all notices to, and make all
registrations and filings with third parties, including submissions of
information requested by governmental authorities and (C) to fulfill all other
conditions to this Agreement. Notwithstanding the foregoing, (x) no amendment or
modification shall be made to any Contract to obtain any required Consent
without the prior written consent of Parent and (y) no party hereto
54
or any of their respective Affiliates shall be required to sell, transfer,
divest or otherwise dispose of any of its respective business, assets or
properties in connection with this Agreement or any of the transactions
contemplated hereby. Each party shall deliver customary closing certificates and
representations for the purpose of facilitating delivery of the opinions of
counsel and the outside independent accountants contemplated by this Agreement.
5.12 Exchangeable Stock. Prior to the Effective Time, the Company will
use its best efforts to acquire from each holder of Exchangeable Stock all of
such holder's shares for Company Stock in accordance with Retraction Call Right
(as defined in the Articles of Xxxxxxx). Prior to the Effective Time, the
Company will provide Parent with the aggregate tax bases, as of the Effective
Time, of the holders of Exchangeable Stock in their Company Stock issued upon
exchange of such Exchangeable Shares.
5.13 Canadian Tax Documentation. Xxxxxxx and Xxxxxxx Industries
International Ltd. ("MIII") each covenants to provide, and it is a condition to
the Parent's obligations under this Agreement that Xxxxxxx and MIII each
provide, in advance of closing, documentation as Parent may reasonably request
for the purpose of establishing to the satisfaction of Parent in its sole
discretion the following:
(a) the zero-rating under the Excise Tax Act (Canada) of all zero-
rated supplies completed by Xxxxxxx and MIII as of the Closing;
(b) that Xxxxxxx and MIII each have satisfied the arm's length
transfer pricing and allocation requirements of Section 247 of the Tax Act in
all material respects for all transactions to which such provision applies; and
(c) that Xxxxxxx and MIII each have satisfied the arm's length
transfer pricing requirements of Subsections 69(2) and 69(3) of the Tax Act in
all material respects for all transactions to which such provisions apply.
ARTICLE 6
POST-CLOSING COVENANTS
6.1 Registration Rights.
(a) Not later than one hundred twenty (120) days after the
Effective Time, Parent, at its sole expense, shall prepare and file with the
United States Securities and Exchange Commission (the "SEC") a shelf
registration statement on an appropriate form pursuant to Section 415 under the
Securities Act, or any similar rule that may be adopted by the SEC (the "Shelf
Registration Statement"), relating to the offer and sale of all Registrable
Shares the holders of which have provided the information and other documents
required pursuant to Section 6.1(b) and are otherwise entitled to the benefit of
this Section 6.1(a) (the "Holders"). Parent shall use its best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act no later than January 3, 2001. Parent shall subject to Section 6.1(c):
55
(i) for a period of two years from the date the Shelf
Registration Statement is declared effective by the SEC, or for such shorter
period that will terminate when all Registrable Shares covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement or cease to be outstanding or otherwise to be Registrable Shares (the
"Effectiveness Period"): use its best efforts to keep the Shelf Registration
Statement continuously effective, and to prepare and file with the SEC such
amendments and post-effective amendments to the Shelf Registration Statement as
may be necessary under applicable law to keep the Shelf Registration Statement
effective for the Effectiveness Period; and to cause the prospectus forming part
of the Shelf Registration Statement to be supplemented by any required
prospectus supplement, and as so supplemented to be filed (if required) pursuant
to Rule 424 (or any similar provision then in force) under the Securities Act
and comply with the provisions of the Securities Act, the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder applicable to
it with respect to the disposition of all shares covered by the Shelf
Registration Statement during the Effectiveness Period so that the Shelf
Registration Statement is available and usable for sales of Registrable Shares
from time to time by the Holders;
(ii) take such action as may be necessary so that the Shelf
Registration Statement complies with the requirements of the Securities Act and
the policies, rules and regulations of the SEC as announced from time to time;
(iii) take such action as may be necessary so that the Shelf
Registration Statement and any amendment thereto and the prospectus forming part
of the Shelf Registration Statement and any amendment or supplement thereto do
not contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statement therein,
in light of the circumstances under which they were made, not misleading and,
upon becoming aware of the occurrence of any event or the discovery of any facts
during the period the Shelf Registration Statement is effective which makes any
statement of a material fact made in the Shelf Registration Statement or the
related prospectus untrue in any material respect or which material fact is
omitted from the Shelf Registration Statement or related prospectus which
requires the making of any changes in the Shelf Registration Statement or
related prospectus so that it will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, promptly notify the Holders, and as soon as reasonably practicable
prepare and file with the SEC a supplement or post-effective amendment to the
Shelf Registration Statement or the related prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Registrable Shares, such prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(iv) a reasonable time prior to the filing of the Shelf
Registration Statement, the prospectus, any amendment to the Shelf Registration
Statement or amendment or supplement to the prospectus or any document which is
to be incorporated by reference into the Shelf Registration Statement or
prospectus after the filing of the Shelf Registration Statement,
56
provide copies of all such documents proposed to be filed to one counsel
selected by the Holders (the fees of such counsel to be paid by the Holders)
(the "Holders' Counsel"), which documents shall be subject to the review and
comment of such counsel, promptly notify each Holder when any such document has
been filed and furnish to the Holders' Counsel copies of such documents once
filed, and promptly notify each Holder when the Shelf Registration Statement or
any post-effective amendment thereto becomes effective;
(v) promptly notify the Holders:
(A) of any request by the SEC for amendments or supplements
to the Shelf Registration Statement or the prospectus or for additional
information;
(B) of the issuance by the SEC of any stop order suspending
the effectiveness of the Shelf Registration Statement or the initiation or
threat of any proceedings by any Person for that purpose, and use its best
efforts to obtain the withdrawal of any order suspending the effectiveness of
the Shelf Registration Statement as soon as possible; and
(C) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Securities for
sale under the securities or blue sky laws of any jurisdiction;
(vi) use its best efforts to list all Registrable Shares covered
by the Shelf Registration Statement on any securities exchange on which any of
the securities of the same class as the Registrable Shares are then listed;
(vii) use its best efforts to provide a CUSIP number for the
Registrable Shares, not later than the effective date of the Shelf Registration
Statement; and
(viii) furnish to each Holder, without charge, such number of
copies of the prospectus forming part of the Shelf Registration Statement
(including any preliminary prospectus), and any amendment or supplement thereto,
and such other documents as such holders may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Holders
that are included in the registration. The Parent shall also take any action
required to be taken under any applicable state securities or "blue sky" laws in
connection with the issuance of Registrable Shares and the sale thereof by
Stockholders; provided, however, that Parent will not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such state or jurisdiction.
(b) Each holder of Registrable Shares shall be entitled to be named in
the Shelf Registration Statement as a selling shareholder with respect to such
shares and to use the prospectus forming part of the Shelf Registration
Statement for the resale thereof, beginning on the date of effectiveness of the
Shelf Registration Statement, provided that no holder of Registrable Shares may
include any of its Registrable Shares in the Shelf Registration Statement unless
and until such holder furnishes to Parent in writing, within 20 days after
receipt of a request therefor, such information with respect to such holder
required by the Securities Act or the Securities and Exchange Commission for use
in connection with the Shelf Registration
57
Statement, and an indemnity, reasonably satisfactory to Parent, to the effect
that such information does not contain any untrue statement of a material fact
and does not omit to state any material fact necessary to make such information
not misleading.
(c) At any time when the Shelf Registration Statement is effective and
Parent becomes aware and promptly notifies each holder of Registrable Shares
that (i) the prospectus included in the Shelf Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or (ii) the
Securities Act would otherwise require the amendment or supplement of such
prospectus, and Parent determines in good faith that the filing by Parent of
such amendment or supplement would violate applicable law, including without
limitation, the rules of the Securities and Exchange Commission, the Holders of
Registrable Securities, at the written request of Parent, will promptly suspend
sales of Registrable Securities pursuant to the Shelf Registration Statement
until the earlier of (A) the date on which Parent notifies such holders that any
necessary amendment or supplement has been filed or is not required to be filed
or (B) 60 days after such holders' receipt of such written notice, provided that
Parent shall not suspend sales of Registrable Shares pursuant clause (ii) above
more than once during any 12-month period, and provided further that Parent
shall extend the Effectiveness Period by the number of days during which sales
of Registrable Shares pursuant to the Shelf Registration Statement are suspended
pursuant to clause (ii) above.
(d) Parent agrees to indemnify and hold harmless each Holder of
Registrable Shares participating in the Shelf Registration Statement against any
and all loss, liability, claim, damage, and expense (i) arising out of any
untrue statement of alleged untrue statement of a material fact contained in the
Shelf Registration Statement (or any amendment or supplement thereto) pursuant
to which Registrable Shares were registered under the Securities Act, including
all documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
prospectus forming part of the Shelf Registration Statement (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a material
fact necessary in order to make the statement therein, in the light of the
circumstances under which they were made, not misleading; and (ii) any violation
or alleged violation by Parent of the Securities Act, the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder in
connection with the offering covered by the Shelf Registration Statement; Parent
will reimburse each such holder for any legal or other expenses reasonably
incurred by them in connection with investigating or defending or in settlement
of any such loss, claim, damage, liability or action; provided however, that the
indemnity agreement contained in this subsection 6.1(d) will not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Parent, nor will Parent be
liable in any such case for any such loss, claim, damage, liability or action to
the extent that it arises directly out of or is based directly upon a violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such Shelf Registration Statement
by such Holder.
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6.2 Preparation of Tax Returns. Parent shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns of the Company and its
Subsidiaries for all Tax periods ending on or prior to the Closing Date which
are filed after the Closing Date. Parent shall permit the Stockholder Agent to,
upon request, review and comment on each such Tax Return prior to filing. Parent
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns of the Company and its Subsidiaries for all Tax periods which begin
before the Closing Date and end after the Closing Date.
ARTICLE 7
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company to effect the Merger and complete the
related transactions contemplated by this Agreement are subject, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Parent and Sub contained in this Agreement shall be true and
correct in all material respects (without regard to any materiality qualifier
contained therein) at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Parent and Sub shall
have performed in all material respects all agreements and covenants required
hereby to be performed by it prior to or at the Closing Date (without regard to
any materiality qualifier contained therein). There shall be delivered to the
Company a certificate of Parent and Sub signed by their President and Chief
Financial Officer to the foregoing effect ("Parent Closing Certificate").
7.2 Consents. All Consents, approvals and waivers from governmental
authorities necessary to permit consummation of the Merger as contemplated
hereby shall have been obtained and all approvals required under any Regulations
to permit Parent and Sub to carry out the transactions contemplated by this
Agreement and the Ancillary Agreements (including, without limitation, the
expiration or termination of the waiting period under the HSR Act) shall have
been obtained. All required approvals, if any, under Canadian, United States
federal and state securities laws and regulations shall have been obtained.
7.3 No Court Orders. There shall not be any Regulation or Court Order
that makes the transactions contemplated hereby and by the Ancillary Agreements
illegal or otherwise prohibited.
7.4 Closing Documents. Parent shall have delivered to the Company the
documents and other items described in Section 9.2 and such other documents and
items as the Company may reasonably require.
7.5 Material Adverse Change. There shall not have been any Parent
Material Adverse Change.
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ARTICLE 8
CONDITIONS TO PARENT'S AND SUB'S OBLIGATIONS
The obligations of Parent and Sub to effect the Merger and complete the
related transactions contemplated by this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
8.1 Representations, Warranties and Covenants. All representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects (without regard to any materiality qualifier contained
therein) at and as of the Closing Date as if such representations and warranties
were made at and as of the Closing Date, and the Company shall have performed in
all material respects all agreements and covenants required hereby to be
performed prior to or at the Closing Date (without regard to any materiality
qualifier contained therein). There shall be delivered to Parent a certificate
of the Company signed by its Chief Executive Officer and its President (the
"Company Closing Certificate") to the foregoing effect.
8.2 Consents. All Consents, approvals and waivers from governmental
authorities and other parties (but excluding required Consents of Company any
vendors) necessary to permit consummation of the Merger as contemplated hereby
and by the Ancillary Agreements and for the operation of the Business after the
Closing (including all required third party consents under the Contracts) shall
have been obtained. Parent shall be satisfied that all approvals required under
any Regulations to permit the Company to carry out the transactions contemplated
by this Agreement and the Ancillary Agreements (including, without limitation,
the expiration or termination of the waiting period under the HSR Act) shall
have been obtained. All required approvals, if any, under Canadian, United
States federal and state securities laws and regulations shall have been
obtained.
8.3 No Actions or Court Orders. No Action by any court, governmental
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
by the Ancillary Agreements. There shall not be any Regulation or Court Order
that makes the acquisition of the Company stock contemplated hereby illegal or
otherwise prohibited or that otherwise may have a Company Material Adverse
Effect.
8.4 Closing Documents. The Company and/or the Stockholders, as the case
may be, shall have delivered to Parent the documents and other items described
in Section 9.1 and such other documents and items as Parent may reasonably
require.
8.5 Exemption under Federal and State Securities Laws. Parent shall be
satisfied in its sole discretion that the issuance of shares of Parent Stock in
the Merger will not violate any federal, state or Canadian securities laws.
8.6 Stockholder Consent. Ninety percent (90%) or more of the
Stockholders shall have executed the Stockholder Consent and the Company shall
have taken all further actions related to the due authorization of the Merger as
may be required under the DGCL.
8.7 Tax Matters. The Company shall have provided Parent with (i) all
forms, certificates and/or other instruments required to pay the transfer and
recording taxes and charges arising from the transactions contemplated by this
Agreement, together with evidence satisfactory to Parent that such transfer
taxes and charges have been paid by the Company or the Stockholders,
60
(ii) a clearance certificate or any other document (including, without
limitation, a properly executed statement in a form reasonably acceptable to
Parent that satisfies Parent's obligations under Treasury Regulation Section
1.1445-2(c)(3)) which may be required by any taxing authority to relieve Parent
of any obligation to withhold any portion of the payments to the Stockholders
pursuant to this Agreement, and (iii) the aggregate tax basis of the
Stockholders in their Company Stock as of the Effective Time.
8.8 Xxxxxxxx Xxxxxxxx Agreement. The Xxxxxxxx Xxxxxxxx Agreement shall
have been terminated in accordance with Section 5.1(h) hereof.
8.9 Stockholder Lock-up Agreements; Closing Documents. The Stockholders
and the Distributees listed on Exhibit D hereto shall have duly executed and
delivered a Lock-up Agreement in the form attached as Exhibit E (each, a "Lock-
up Agreement"). The Company, the Stockholders and the Distributees shall have
delivered to Parent or Sub the documents and other items described in Section
9.2.
8.10 Material Adverse Change. There shall not have been any Company
Material Adverse Change.
8.11 Exchange Ratio. At the Closing, the Number of Parent Shares,
determined in accordance with the provisions of this Agreement, shall be
1,450,000 or less.
8.12 Exchangeable Stock. All shares of Exchangeable Stock shall have
been exchanged for shares of Company Stock in accordance with the terms of such
Exchangeable Stock.
8.13 Funded Debt of the Company. The Company shall have delivered the
Funded Debt Notice in accordance with Section 2.12 and Parent shall be satisfied
with the Funded Debt of the Company in its sole discretion.
8.14 Appraisal Rights. The number of shares of Company Stock with
respect to which appraisal rights have been asserted under the DGCL shall not
exceed 10% of the number of outstanding shares of Company Stock.
8.15 APS Growth Limited Partnership Agreement. The Limited Partnership
Agreement for APS Growth, L.P. ("APS Growth") shall have been amended to
eliminate, and the Company shall be released from, any and all provisions
thereof under which the Company may have any liability or obligations to APS
Growth or its partners thereunder, including without limitation, Section 14
thereof.
8.16 Other Agreements. The Amended and Restated Stockholder's and
Registration Rights Agreement dated September 28, 1998 referred to in Schedule
3.3 and the Support Agreement dated October 9, 1998 between APSI and Xxxxxxx
Industries, Inc. shall have been terminated with no further liability to the
Company or its Subsidiaries.
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8.17 Satisfactory Canadian Tax Documentation. Xxxxxxx and MIII as the
case may be, shall have provided Parent the documentation described in Section
5.13 and such documentation shall be satisfactory to Parent in its sole
discretion.
ARTICLE 9
CLOSING
On the Closing Date at the Closing Place:
9.1 Deliveries by the Company and the Stockholders to Parent. The
Company and each Stockholder, as applicable, shall deliver (or cause to be
delivered) to Parent:
(a) the Ancillary Agreements, duly executed by each party thereto
other than Parent and Sub;
(b) any Consents required to be obtained by the Company;
(c) the Company Closing Certificate;
(d) the certificates and documents described in Section 8.7;
(e) the Stockholder Consent, duly executed by at least ninety
percent (90%) of the Stockholders; and
(f) all share certificates representing the shares of Company Stock
to be canceled in connection with the Merger.
9.2 Deliveries by Parent to the Stockholders. Parent shall deliver to
the Stockholders:
(a) the Ancillary Agreements to which Parent or Sub is a party,
duly executed by them;
(b) any Consents required to be obtained by Parent;
(c) the Parent Closing Certificate; and
(d) the Merger Shares to be issued to the Stockholders and the
Depositary Agent as provided for herein.
ARTICLE 10
INDEMNIFICATION
10.1 Survival of Representations, etc. All statements contained in this
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of the parties pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be
62
deemed to be representations and warranties by such party hereunder. The
representations and warranties contained herein shall survive the Closing Date
until (and claims based upon or arising out of such representations and
warranties, as well as any claims based upon or arising out of any covenants and
agreements herein or made hereunder, may be asserted at any time before) the
earlier of (i) the date which shall be the first anniversary of the Effective
Time and (ii) the date which is fifteen days after the date of the audit report
of Parent's independent public accountants with respect to Parent's audited
financial statements for the year ending December 31, 2000 (the "Survival
Period"). No investigation made by any of the parties hereto (whether prior to,
on or after the Closing Date) shall in any way limit the representations and
warranties of the parties. On the Closing Date all representations and
warranties contained in this Agreement and made by the Company shall expire as
to the Company and thereafter will be deemed to have been made exclusively by
the Stockholders. The termination of the representations and warranties provided
herein shall not affect the rights of a party in respect of any claim made by
such party in a writing received by the other party prior to the expiration of
the applicable survival period provided herein.
10.2 Indemnification.
(a) General.
(i) Subsequent to the Closing, the holders immediately prior to
the Effective Time of shares of Company Stock and the Distributees shall,
subject to Section 10.5, jointly and severally, indemnify Parent, its
Affiliates, and each of their respective, officers, directors, employees,
stockholders and agents ("Parent Indemnified Parties") against, and hold each of
the Parent Indemnified Parties harmless from, any damage, claim, loss, cost,
Tax, Liability or expense, including without limitation, interest, penalties,
reasonable attorneys' fees and expenses of investigation, response action,
removal action or remedial action (collectively "Damages") incurred by any such
Parent Indemnified Party, that are incident to, arise out of, in connection
with, or related to, (A) the breach of any warranty, representation, covenant or
agreement of the Company contained in this Agreement or any schedule hereto or
in any certificate or instrument of conveyance delivered by or on behalf of the
Company pursuant to this Agreement or in connection with the transactions
contemplated hereby and (B) except to the extent provided in (A), Taxes of: (I)
the Company or any of its Subsidiaries (to the extent liability for Taxes of the
Company or any of its Subsidiaries is imposed on Parent or any Subsidiary of
Parent) with respect to the transactions contemplated by this Agreement; and
(II) the Company or any of its Subsidiaries with respect to Tax years or
portions thereof ending on or before the Closing Date (and for any Tax year
beginning before and ending after the Closing Date, for the portion of such year
ending on the Closing Date) to the extent such Taxes are not reflected in the
reserve for Tax liability (other than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) on the Balance Sheet.
For purposes of this Section 10.2(a)(i), in the case of any Taxes that are
imposed on a periodic basis and are payable for a Taxable period that includes
(but does not end on) the Closing Date, the portion of such Tax which relates to
the portion of such Taxable period ending on the Closing Date shall (i) in the
case of any Taxes other than Taxes based upon or related to income or receipts,
be deemed to be the amount of such Tax for the entire Taxable period multiplied
by a
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fraction the numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire Taxable period, and (ii) in the case of any Tax based upon or related
to income or receipts be deemed equal to the amount which would be payable if
the relevant Taxable period ended on the Closing Date. Any credits relating to a
Taxable period that begins before and ends after the Closing Date shall be taken
into account as though the relevant Taxable period ended on the Closing Date.
All determinations necessary to give effect to the foregoing allocations shall
be made in a manner consistent with the prior practice of the Company and its
Subsidiaries.
(ii) Subsequent to the Closing, Parent shall indemnify the
holders immediately prior to the Effective Time of Company Stock and the
Distributees, their Affiliates, and each of their respective partners, officers,
directors, employees, stockholders and agents, as the case may be ("Stockholder
Indemnified Parties"), against, and hold each of the Stockholder Indemnified
Parties harmless from, any Damages incurred by such Stockholder Indemnified
Party, that are incident to, arise out of, in connection with, or related to,
whether directly or indirectly, the breach of any warranty, representation,
covenant or agreement of Parent or Sub contained in this Agreement (including,
without limitation, Section 5.6 and Article VI hereof), any schedule or in any
certificate or instrument of conveyance delivered by or on behalf of Parent or
Sub pursuant to this Agreement or in connection with the transactions
contemplated hereby.
The term "Damages" as used in this Section 10.2 is not limited to
matters asserted by third parties against Stockholder Indemnified Parties or
Parent Indemnified Parties, but includes Damages incurred or sustained by such
persons in the absence of third party claims. The right to obtain
indemnification provided in this Section 10.2(a) is in addition to any other
remedy at contract or in the law (but without duplication of recovery).
(b) Procedure for Claims.
If a claim for Damages (a "Claim") is to be made by a person
entitled to indemnification hereunder, the person claiming such indemnification
(the "Indemnified Party") shall give written notice (a "Claim Notice") to the
indemnifying person (the "Indemnifying Party") promptly after the Indemnified
Party becomes aware of any fact, condition or event which may give rise to
Damages for which indemnification may be sought under this Section 10.2;
provided, that if the Indemnified Party is a Stockholder Indemnified Party, such
Claim Notice shall only be valid if it is delivered by the Stockholder Agent;
and provided further, that if the Indemnified Party is a Parent Indemnified
Party, such Claim Notice shall be valid if it is delivered to the Stockholder
Agent. The failure of any Indemnified Party to give timely notice hereunder
shall not affect rights to indemnification hereunder, except and only to the
extent that, the Indemnifying Party demonstrates actual material damage caused
by such failure, and then only to the extent thereof. In the case of a Claim
involving the assertion of a claim by a third party (whether pursuant to a
lawsuit, other legal action or otherwise, a "Third-Party Claim"), if the
Indemnifying Party shall acknowledge in writing to the Indemnified Party that
the Indemnifying Party shall be obligated to indemnify the Indemnified Party
under the terms of its indemnity hereunder in connection with such Third-Party
Claim, then (A) the Indemnifying
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Party shall be entitled and, if it so elects, shall be obligated at its own
cost, risk and expense, (1) to take control of the defense and investigation of
such Third-Party Claim and (2) to pursue the defense thereof in good faith by
appropriate actions or proceedings promptly taken or instituted and diligently
pursued, including, without limitation, to employ and engage attorneys of its
own choice reasonably acceptable to the Indemnified Party to handle and defend
the same, and (B) the Indemnifying Party shall be entitled (but not obligated),
if it so elects, to compromise or settle such claim, which compromise or
settlement shall be made only with the written consent of the Indemnified Party,
such consent not to be unreasonably withheld. In the event the Indemnifying
Party elects to assume control of the defense and investigation of such lawsuit
or other legal action in accordance with this Section 10.2(b), the Indemnified
Party may, at its own cost and expense, participate in the investigation, trial
and defense of such Third-Party Claim; provided that, if the named persons to a
lawsuit or other legal action include both the Indemnifying Party and the
Indemnified Party and the Indemnified Party has been advised in writing by
counsel that there may be one or more legal defenses available to such
Indemnified Party that are different from or additional to those available to
the Indemnifying Party, the Indemnified Party shall be entitled, at the
Indemnifying Party's cost, risk and expense, to retain one firm of separate
counsel of its own choosing. If the Indemnifying Party fails to assume the
defense of such Third-Party Claim in accordance with this Section 10.2 within
ten (10) calendar days after receipt of the Claim Notice, the Indemnified Party
against which such Third-Party Claim has been asserted shall (upon delivering
notice to such effect to the Indemnifying Party) have the right to undertake, at
the Indemnifying Party's cost, risk and expense, the defense, compromise and
settlement of such Third-Party Claim on behalf of and for the account of the
Indemnifying Party; provided that such Third-Party Claim shall not be
compromised or settled without the written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. In the event the Indemnifying
Party assumes the defense of the claim, the Indemnifying Party shall keep the
Indemnified Party reasonably informed of the progress of any such defense,
compromise or settlement, and in the event the Indemnified Party assumes the
defense of the claim, the Indemnified Party shall keep the Indemnifying Party
reasonably informed of the progress of any such defense, compromise or
settlement. The Indemnifying Party shall be liable for any settlement of any
Third-Party Claim effected pursuant to and in accordance with this Section 10.2
and for any final judgment (subject to any right of appeal), and the
Indemnifying Party agrees to indemnify and hold harmless each Indemnified Party
from and against any and all Damages by reason of such settlement or judgment.
10.3 No Right of Contribution. After the Closing, no Stockholder shall
have any right of contribution against the Surviving Corporation for any breach
of any representation, warranty, covenant or agreement of the Company. The
Stockholders and Parent shall be entitled to specific performance and injunctive
relief, without posting bond or other security, for the purpose of asserting
their respective rights under this Article 10. The remedies described in this
Section 9 shall be in addition to, and not in lieu of, any other remedies at law
or in equity that the parties may elect to pursue, but without duplication of
recovery.
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10.4 Escrow of Merger Shares.
(a) Establishment of the Escrow Funds. As soon as practicable after
the Effective Time, the Escrow Fund, without any act of any Stockholder, will be
deposited by Parent with the Depositary Agent, such deposit to be governed by
the terms set forth herein and at Parent's sole cost and expense. The portion of
the Escrow Fund contributed on behalf of each Stockholder shall be in proportion
to the aggregate number of shares of Parent Stock which such holder would
otherwise be entitled under Section 2.7. Notwithstanding the references in this
Agreement to the "escrow" and the Escrow Fund, the parties acknowledge and agree
that the Depositary Agent is acting as a depository and not as an escrow agent
pursuant to this Article 10.
(b) Recourse to the Escrow Shares. The Escrow Fund shall be
available to compensate each Parent Indemnified Party for (i) all Damages
(whether or not involving a Third Party Claim), incurred or sustained by such
Parent Indemnified Party with respect to which such Parent Indemnified Party is
entitled to indemnification as provided by Section 10.2(a)(i); provided,
however, that any such claim against the Escrow Fund shall be subject to the
limitations set forth in Section 10.5 and (ii) for any Equity Amount Deficit.
Parent, Sub and the Company each acknowledge that any such Damages or Equity
Amount Deficit, if any, would relate to unresolved contingencies existing at the
Effective Time, which if resolved at the Effective Time would have led to a
reduction in the aggregate Merger consideration to be paid to the Stockholders.
(c) Escrow Periods; Distribution of Escrow Fund upon Termination of
Escrow Period. Subject to the following requirements, the Escrow Fund shall be
in existence immediately following the Effective Time and shall terminate at
5:00 p.m., Central Time, on the last day of the Survival Period (the period of
time from the Effective Time through and including such termination date is
referred to herein as the "Escrow Period"); and upon such termination all shares
of Parent Stock remaining in the Escrow Fund shall be distributed as set forth
in the next succeeding sentence of this Section 10.4(c); provided, however, that
the Escrow Period shall not terminate with respect to such amount (or some
portion thereof) that is necessary in the reasonable judgment of Parent, subject
to the objection of the Stockholder Agent and the subsequent arbitration of the
matter in the manner as provided in this Agreement, to satisfy any unsatisfied
written claims under this Article 10 concerning facts and circumstances existing
prior to the termination of such Escrow Period which claims are specified in any
Officer's Certificate delivered to the Depositary Agent prior to termination of
such Escrow Period ("Unresolved Claims"). As soon as all such claims, if any,
have been resolved, the Depositary Agent shall deliver to the Stockholder Agent
for distribution to the Stockholders the remaining portion of the Escrow Fund
not required to satisfy such claims. Parent shall use its commercially
reasonable efforts to have such shares delivered within five (5) business days.
Notwithstanding Section 10.4(c)(i), the Escrow Period shall terminate on January
3, 2001 with respect to a number of shares of Parent Stock equal to 50% of the
Indemnity Shares; provided, however, that the Escrow Period shall not terminate
with respect to such amount (or some portion thereof) that is necessary in the
reasonable judgment of Parent, subject to the objection of the Stockholder Agent
and the subsequent arbitration of the matter in the manner as provided in this
Agreement, to satisfy any Unresolved Claims. As soon as all such claims, if any
have been resolved, the Depositary Agent shall deliver to the Stockholder Agent
for distribution to the Stockholders the remaining portion
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of such Indemnity Shares not required to satisfy such claims. Parent shall use
its commercially reasonable efforts to have such shares delivered within five
(5) business days.
(d) Protection of Escrow Funds. The Depositary Agent shall hold and
safeguard the Escrow Fund (and any cash proceeds) during the Escrow Period,
shall treat each such fund as a trust fund in accordance with the terms of this
Agreement and not as the property of Parent and shall hold and dispose of the
Escrow Fund (and any cash proceeds) only in accordance with the terms hereof.
Any shares of Parent Stock or other equity equivalent securities issued
or distributed by Parent ("New Shares") in respect of Parent Stock in the Escrow
Fund which have not been released from the Escrow Fund shall be added to the
Escrow Fund. New Shares issued in respect of shares of Parent Stock which have
been released from the Escrow Fund shall not be added to the Escrow Fund but
shall be distributed to the record holders thereof. Cash dividends on Parent
Stock shall not be added to the Escrow Fund but shall be distributed to the
record holders of the Parent Stock on the record date set for any such dividend.
Each Stockholder immediately prior to the Effective Time shall have voting
rights with respect to the shares of Parent Stock contributed to the Escrow Fund
by such Stockholder (and on the voting securities added to the Escrow Fund in
respect of such shares of Parent Stock).
(e) Claims Upon Escrow Funds. Upon receipt by the Depositary Agent
at any time on or before the last day of the Escrow Period of a certificate
signed by any officer of Parent (an "Officer's Certificate"): (A) stating that a
Parent Indemnified Party has paid or properly accrued or reasonably anticipates
that it will have to pay or accrue (1) Damages with respect to which such Parent
Indemnified Party is entitled to indemnification as provided by Section
10.2(a)(i) or (2) any Equity Amount Deficit, and (B) in the case of Damages,
specifying in reasonable detail the individual items of Damages included in the
amount so stated, the date each such item was paid or properly accrued, or the
basis for such anticipated liability, the Depositary Agent shall, subject to the
provisions of Section 10.4(f) hereof, deliver to Parent out of the Escrow Fund,
as promptly as practicable, shares of Parent Stock and/or cash held in the
Escrow Fund in an amount equal to such Damages or Equity Amount Deficit, as the
case may be.
For the purposes of determining the number of shares of Parent Stock to
be delivered to a Parent Indemnified Party out of the Escrow Fund pursuant to
Section 10.4(e), the shares of Parent Stock shall be valued at the Average Share
Price. In the event that the Escrow Fund also contains cash, the election to
receive cash or Parent Stock shall be made by the Parent Indemnified Party
entitled to receive Damages or Equity Amount Deficit, as the case may be.
(f) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Depositary Agent, a duplicate copy of such certificate shall
be delivered to the Stockholder Agent and for a period of thirty (30) days after
such delivery, the Depositary Agent shall make no delivery to Parent of any
shares of Parent Stock held in the Escrow Fund pursuant to Section 10.4(e)
hereof unless the Depositary Agent shall have received written authorization
from the Stockholder Agent to make such delivery. After the expiration of such
thirty (30) day period, the Depositary Agent shall make delivery of shares of
Parent Stock from the Escrow
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Fund in accordance with Section 10.4(e) hereof, provided that no such payment or
delivery may be made if the Stockholder Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Depositary Agent prior to the expiration of
such thirty (30) day period; provided, further, that no such right to object
shall be available to the Stockholder Agent in the case of any Equity Amount
Deficit determined in accordance with the procedures established in Section
2.13.
(g) Resolution of Conflicts; Arbitration. In case the Stockholder
Agent shall object in writing to any claim or claims made in any Officer's
Certificate, the Stockholder Agent and Parent shall attempt in good faith to
agree upon the rights of the respective parties with respect to each of such
claims. If the Stockholder Agent and Parent should so agree, joint written
instructions setting forth such agreement shall be prepared and signed by both
parties and shall be furnished to the Depositary Agent. The Depositary Agent
shall be entitled to rely on any such instructions and distribute shares of
Parent Stock from the Escrow Fund in accordance with the terms thereof. If no
such agreement can be reached after good faith negotiation, either Parent or the
Stockholder Agent may demand arbitration of the dispute pursuant to Section
11.12, unless the amount of the damage or loss is at issue in a pending Action
or Proceeding involving a Third Party Claim, in which event arbitration shall
not be commenced until such amount is ascertained or both parties agree to
arbitration. Thereafter, the Depositary Agent shall deliver to Parent out of the
Escrow Fund, shares of Parent Stock and/or cash held in the Escrow Fund in an
amount equal to such Damages as shall be the subject of an Officer's Certificate
of the Parent certifying that a final arbitrated judgment with respect to the
disputed Escrow Shares is attached to such Officer's Certificate.
10.5 Limitations on Indemnity. Notwithstanding any provision of this
Agreement to the contrary, the Parent Indemnified Parties may not, in the
aggregate, recover any Damages in excess of the amount contained in the Escrow
Fund at the time such recovery is sought.
10.6 Stockholder Agent; Power of Attorney.
(a) Stockholder Agent. In the event that the Merger is approved by
the Stockholders, effective upon such vote, and without further act of any
Stockholder, Xxxxxxxx shall be appointed as agent and attorney-in-fact (the
"Stockholder Agent") for each Stockholder, to give and receive notices and
communications (including, without limitation, all notices, copies of the Shelf
Registration Statement, prospectus forming a part thereof and any other document
and all other communications in respect of the Holders under Section 6.1 hereof
other than in respect of the Holders who are employees of Parent), to authorize
delivery to Parent of shares of Parent Stock from the Escrow Fund in
satisfaction of claims by Parent, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, take all actions required or permitted to be taken by the Holders under
Section 6.1 hereof other than in respect of the Holders who are employees of
Parent, and to take all actions necessary or appropriate in the judgment of the
Stockholder Agent for the accomplishment of the foregoing. Such agency may be
changed by the Stockholders from time to time upon not less than thirty (30)
days prior written notice to Parent; provided, however, that the Stockholder
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Agent may not be removed unless holders of a two-thirds interest in all shares
held in the Escrow Fund agree to such removal and to the identity of the
substituted Stockholder Agent. Any vacancy in the position of Stockholder Agent
may be filled by approval of the holders of a majority in interest of all shares
held in the Escrow Fund. No bond shall be required of the Stockholder Agent, and
the Stockholder Agent shall not receive compensation for his services. Notices
or communications to or from the Stockholder Agent shall constitute notice to or
from each of the Stockholders.
(b) Exculpation. The Stockholder Agent shall not be liable for any
act done or omitted hereunder as Stockholder Agent while acting in good faith
and in the exercise of reasonable judgment.
(c) Actions of the Stockholder Agent. A decision, act, consent or
instruction of the Stockholder Agent shall constitute a decision for all of the
Stockholders for whom a portion of the shares of Parent Stock otherwise issuable
to them are deposited in the Escrow Fund, and shall be final, binding and
conclusive upon each of such Stockholders, and the Depositary Agent and Parent
may rely exclusively upon any such decision, act, consent or instruction of the
Stockholder Agent as being the decision, act, consent or instruction of every
such Stockholder. The Depositary Agent and Parent are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Stockholder Agent.
ARTICLE 11
MISCELLANEOUS
11.1 Termination.
(a) This Agreement may be terminated at any time prior to Closing:
(i) By the written agreement of Parent and the Company;
(ii) By Parent or the Company if the Closing shall not have
occurred on or before June 30, 2000, other than due to a breach of this
Agreement by the party seeking to terminate;
(iii) By Parent if there is a material breach of any
representation or warranty set forth in Article 3 or any covenant or agreement
to be complied with or performed by the Company or any Stockholder pursuant to
the terms of this Agreement and such breach persists for fourteen (14) days or
more after notice is given, so long as any such breach is not caused by the
action or inaction of Parent or Sub;
(iv) By the Company if there is a material breach of any
representation or warranty set forth in Article 4 hereof or of any covenant or
agreement to be complied with or performed by Parent or Sub pursuant to the
terms of this Agreement and such breach persists for
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fourteen (14) days or more after notice is given, so long as any such breach is
not caused by the action or inaction of the Company or any of the Stockholders;
or
(v) By Parent if application of the formula contained in the
definition of "Number of Parent Shares" would result in the issuance of more
than 1,450,000 shares of Parent Stock at Closing.
(b) In the event of termination of this Agreement:
(i) The provisions of the Company Confidentiality Agreement
shall continue in full force and effect; and
(ii) No party hereto shall have any liability to any other
party to this Agreement, except for any willful breach of, or knowing
misrepresentation made in, this Agreement occurring prior to the formal
termination of this Agreement.
11.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by the Company without the prior written
consent of Parent, or by Parent or Sub without the prior written consent of the
Company.
11.3 Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the other
shall be in writing and delivered in person or by courier, telegraphed, telexed,
sent by facsimile transmission, sent via overnight delivery service or mailed by
registered or certified mail (such notice to be effective upon receipt), as
follows:
If prior to the Closing, to the Company:
Applied Process Solutions, Inc.
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx,
Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxx-Xxxxxxx, Colt & Mosle, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx xxx Xxxxxx
Fax: (000) 000-0000
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If to the Stockholder Agent:
Xxxxxxxx Xxxxxxxx LLC
000 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxxx or Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxx-Xxxxxxx, Colt & Mosle, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx xxx Xxxxxx
Fax: (000) 000-0000
If to Parent or Sub or, if after the Closing, to the Surviving Corporation:
Hanover Compressor Company
00000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. XxXxxx
Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Fax: (000) 000-0000
or to such other place and with such other copies as any party may designate as
to itself by written notice to the others.
11.4 Choice of Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
New York, except with respect to matters of law concerning the internal
corporate affairs or capital stock of the Company, which shall be governed by
the laws of the State of Delaware.
11.5 Representation By Counsel. Each party hereto represents and agrees
with each other that it has been represented by or had the opportunity to be
represented by, independent counsel of its own choosing, and that it has had the
full right and opportunity to consult with its respective attorney(s), that to
the extent, if any, that it desired, it availed itself of this right and
opportunity, that it or its authorized officers (as the case may be) have
carefully read and fully understand this Agreement in its entirety and have had
it fully explained to them by such party's respective counsel, that each is
fully aware of the contents thereof and its meaning, intent and legal effect,
and that it or its authorized officer (as the case may be) is competent to
execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence.
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11.6 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto, and the Confidentiality Agreement,
constitute the entire agreement among the parties pertaining to the subject
matter hereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
11.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
11.9 Expenses. All fees and expenses (including all accounting, legal
and investment banking fees and expenses and all other expenses) incurred by the
Parent and Sub in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Parent and Sub, as the case may be,
whether or not the Merger is consummated. All Transaction Costs incurred by the
Company shall be paid by the Company and shall be included in calculating the
Closing Date Stockholders Equity pursuant to Section 2.13 hereof.
11.10 Publicity. Except as required by law or on advice of counsel,
neither party shall issue any press release or make any public statement
regarding the transactions contemplated hereby without the prior approval of the
other parties, and the parties hereto shall issue a mutually acceptable press
release as soon as practicable after the date hereof and after the Closing Date.
Notwithstanding the foregoing, Parent shall be permitted to make any public
statement without obtaining the consent of any other party hereto if (i) the
disclosure is required by law or the requirements of the New York Stock Exchange
and (ii) Parent has first used its reasonable efforts to consult with (but not
to obtain the consent of) the other parties about the form and substance of such
disclosure.
11.11 No Third Party Beneficiaries. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, except
as specifically set forth in Section 6.1 and Article 10 hereof.
11.12 Dispute Resolution. The parties hereby agree that, in order to
obtain prompt and expeditious resolution of any disputes under this Agreement,
each claim, dispute or controversy of whatever nature, arising out of, in
connection with, or in relation to the interpretation, performance or breach of
this Agreement or the transactions contemplated hereby, including
72
without limitation any claim based on contract, tort or statute, or the
arbitrability of any claim hereunder (an "Arbitrable Claim"), shall be settled
by final and binding arbitration conducted in Houston, Texas. All such
Arbitrable Claims shall be settled by three (3) arbitrators in accordance with
the Commercial Arbitration Rules then in effect of the American Arbitration
Association. Such arbitrators shall be provided through the JAMS Endispute
("JAMS") by mutual agreement of the parties; provided, that, absent such
agreement, the arbitrators shall be appointed by JAMS. In either event, such
arbitrators may not have any preexisting, direct or indirect relationship with
any party to the dispute. EACH PARTY HERETO EXPRESSLY CONSENTS TO, AND WAIVES
ANY FUTURE OBJECTION TO, SUCH FORUM AND ARBITRATION RULES. Judgment upon any
award may be entered by any state or federal court having jurisdiction thereof.
Except as required by law (including, without limitation, the rules and
regulations of the SEC and the New York Stock Exchange if applicable), neither
party nor the arbitrators shall disclose the existence, content, or results of
any arbitration hereunder without the prior written consent of all parties.
Except as provided herein, the Federal Arbitration Act shall govern the
interpretation, enforcement and all proceeding pursuant to this section.
Adherence to this dispute resolution process shall not limit the right
of the parties hereto to obtain any provisional remedy, including without
limitation, injunctive or similar relief, from any court of competent
jurisdiction as may be necessary to protect their respective rights and
interests pending arbitration. NOTWITHSTANDING THE FOREGOING SENTENCE, THIS
DISPUTE RESOLUTION PROCEDURE IS INTENDED TO BE THE EXCLUSIVE METHOD OF RESOLVING
ANY ARBITRABLE CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT. The
arbitration procedures shall follow the substantive law of the State of New
York, including the provisions of statutory law dealing with arbitration, as it
may exist at the time of the demand for arbitration, insofar as said provisions
are not in conflict with this Agreement and specifically excepting therefrom
sections of any such statute dealing with discovery and sections requiring
notice of the hearing date by registered or certified mail. The arbitrators
shall determine the prevailing party and shall include in their award that
party's reasonable attorneys' fees and costs.
11.13 Waiver of Jury Trial.
(a) Consistent with the intention of Section 11.12, each signatory
to this Agreement hereby waives its respective right to a jury trial of any
permitted claim or cause of action arising out of this agreement, any of the
transactions contemplated hereby, or any dealings between any of the signatories
hereto relating to the subject matter of this agreement or any of the
transactions contemplated hereby. The scope of this waiver is intended to be all
encompassing of any and all disputes that may be filed in any court and that
relate the subject matter of this agreement or any of the transactions
contemplated hereby, including, without limitation, contract claims, tort
claims, and all other common law and statutory claims. This waiver is
irrevocable, meaning that it may not be modified either orally or in writing,
and this waiver shall apply to any subsequent amendments, supplements or other
modifications to this agreement, any of the transactions contemplated hereby or
to any other document or agreement relating to the transactions contemplated
hereby.
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11.14 Service of Process. EACH OF THE PARTIES HERETO IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY PROCESS, PLEADING, NOTICES OR OTHER PAPERS BY THE
MAILING OF COPIES THEREOF BY REGISTERED, CERTIFIED OR FIRST CLASS MAIL, POSTAGE
PREPAID, TO SUCH PARTY AT SUCH PARTY'S ADDRESS SET FORTH HEREIN, OR BY ANY OTHER
METHOD PROVIDED OR PERMITTED UNDER TEXAS LAW.
11.15 Attorney Fees. If any party to this Agreement brings an action to
enforce its rights under this Agreement in accordance with the provisions
hereof, the prevailing party shall be entitled to recover its actual out-of-
pocket costs and expenses, including without limitation reasonable attorneys'
fees reasonably incurred in connection with such action, including any appeal of
such action.
* * * * * *
74
IN WITNESS WHEREOF, each party hereto has executed this Agreement and Plan
of Merger or caused this Agreement and Plan of Merger to be duly executed on its
behalf by its officer thereunto duly authorized, as of the day and year first
above written.
HANOVER COMPRESSOR COMPANY
a Delaware corporation
By:
--------------------------------------------
Name: Xxxxxxx X. XxXxxx
Title: Chief Executive Officer
APSI ACQUISITION CORPORATION
a Delaware corporation
By:
--------------------------------------------
Name: Xxxxxxx X. XxXxxx
Title: Chief Executive Officer
APPLIED PROCESS SOLUTIONS, INC.
a Delaware corporation
By:
--------------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
IN ITS CAPACITY AS THE
STOCKHOLDER AGENT:
XXXXXXXX XXXXXXXX LLC
By:
----------------------------
ANNEX I
Name and Address of Stockholder SHARES OWNED
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