EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
TELEFLEX INCORPORATED,
TFX ACQUISITION CORPORATION,
XXXXXXX XXXXXX & CO. LLC,
FS EQUITY PARTNERS IV, L.P.,
RIVER HOLDING CORP. AND
XXXXXX RESPIRATORY CARE INC.
MAY 17, 2004
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made and entered
into to be effective as of May 17, 2004, by and among Teleflex Incorporated, a
Delaware corporation (the "Buyer"), TFX Acquisition Corporation, a California
corporation and wholly-owned subsidiary of the Buyer (the "Merger Sub"), Xxxxxxx
Xxxxxx & Co. LLC (the "FS Management Company"), FS Equity Partners IV, L.P., a
Delaware limited partnership (the "Shareholders' Representative"), and River
Holding Corp., a Delaware corporation ("Holding") (the Shareholders'
Representative and Holding are collectively referred to as the "Significant
Shareholders"), and Xxxxxx Respiratory Care Inc., a California corporation (the
"Company"). The Buyer, the Merger Sub, the Company, FS Management Company and
the Significant Shareholders are referred to collectively herein as the
"Parties."
Background
The Significant Shareholders in the aggregate, and on an as-converted
basis, own more than 78% of the Company Common Shares and hold more than 78% of
the voting power of the Company Common Shares. This Agreement contemplates a
transaction in which the Buyer will acquire the Company by merging Merger Sub
with and into the Company, with the Company as the Surviving Corporation in the
Merger and the shareholders of the Company to receive the Purchase Price, and
potentially, the Contingent Purchase Price, for such acquisition of the Company
by the Buyer. The respective Boards of Directors of the Buyer, the Merger Sub,
and the Company each have approved this Agreement and the Merger on the terms
and conditions set forth herein. Each Significant Shareholder has approved and
bound itself to the terms of this Agreement as provided herein.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
covenants and agreements herein contained, the Parties agree as follows:
Terms
1. Definitions.
"Adjustment Dispute Notice" has the meaning set forth in Section 2.5(c)
below.
"Adverse Consequences" means all damages, liabilities, awards,
judgments, assessments, fines, sanctions, penalties, charges, costs, liens,
losses, payments, expenses and fees, including all court costs and reasonable
attorneys' and accountants' fees and expenses sustained or incurred in
connection with the defense or investigation of any claim.
"Affiliate" shall mean a Person or entity that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with a specified person or entity.
"Agreed Upon Retention Amount" shall mean the amount of any retention
payments that may be payable by the Company pursuant to agreements that the
Company enters into after the date hereof and on or before the Closing with
certain of its officers and employees and that provide for such payments (in an
aggregate amount not to exceed $750,000), as specified in Section 4.8(p) and
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Section 5.3 of this Agreement, but only to the extent that such agreements,
amounts and individuals are agreed to mutually by the Company and Buyer.
"Agreement of Merger" has the meaning set forth in Section 2.1 below.
"Antitrust Laws" means and includes the Xxxxxxx Act, as amended, the
Xxxxxxx Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other Federal, state and foreign statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines, and other laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade, including without
limitation those of the European Union, Germany, Brazil and any other foreign
jurisdiction.
"Applicable Rate" means the Prime Rate in effect from time to time as
published by The Wall Street Journal.
"Buyer" has the meaning set forth in the preface above.
"Buyer Disclosure Letter" has the meaning set forth in Section 3.2
below.
"CGCL" means the California General Corporation Law, as amended through
the date of this Agreement.
"Certificate" has the meaning set forth in Section 2.6(b)(i) below.
"Citigroup" means Citigroup Global Markets Inc.
"Closing" has the meaning set forth in Section 2.2 below.
"Closing Date" has the meaning set forth in Section 2.2 below.
"Closing Date Cash" has the meaning set forth in Section 2.5(b) below.
"Closing Date Net Working Capital Amount" has the meaning set forth in
Section 2.5(b) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Share Price" means the quotient determined by dividing the
Preliminary Purchase Price by the sum of (i) the number of Company Common Shares
outstanding immediately prior to the Closing plus (ii) the number of Company
Common Shares and Company Warrant Shares issuable upon the exercise of the
Company Options and the Warrants outstanding immediately prior to the Closing.
"Company" has the meaning set forth in the preface above.
"Company and Shareholder Transaction Expenses" means the costs and
expenses (including, without limitation, legal, accounting and other fees and
expenses and the fees and expenses of Citigroup) of the Company and the
Significant Shareholders incurred in connection with this Agreement and the
transactions contemplated hereby, including as required by Section 5.13, but not
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including the fees and expenses payable by Buyer pursuant to Section 5.14(a) and
Section 10.13 below.
"Company Common Share" means any share of the Common Stock, no par
value, of the Company.
"Company Convertible Notes" means those certain 10% Senior Subordinated
Convertible Notes of the Company having a face value of $15.0 million and due
March 31, 2008.
"Company Disclosure Letter" has the meaning set forth in Section 4
below.
"Company Junior Preferred Shares" means the shares of the 12% Junior
Convertible Cumulative Preferred Stock of the Company.
"Company Options" means all outstanding or authorized options, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock, other than the
Warrants.
"Company Preferred Shares" means, collectively, the Company Senior
Preferred Shares and the Company Junior Preferred Shares.
"Company Retention Payment Obligation" means an amount of cash equal to
the difference between (a) the amount of retention payments that may be payable
by the Company pursuant to agreements the Company enters into after the date
hereof and on or before the Closing with certain of its officers and employees
up to a maximum of seven hundred fifty thousand dollars ($750,000), and (b) an
amount equal to one half of the Agreed Upon Retention Amount.
"Company Second Lien Loan" means that certain Loan and Security
Agreement dated October 7, 2003 by and among the Company, Lenders, and MW Post
Advisory Group, LLC as Administrative Agent.
"Company Senior Credit Facility" means that certain Loan and Security
Agreement dated October 7, 2003 by and among the Company, Lenders, and Xxxxx
Fargo Foothill, Inc. as Administrative Agent, as amended.
"Company Senior Notes" means those certain 12% Senior Notes of the
Company having a face value of $12.0 million and due March 31, 2008.
"Company Senior Preferred Shares" means the shares of the 11-1/2%
Senior PIK Preferred Stock of the Company.
"Company Senior Subordinated Notes" means those certain 9-1/8% Senior
Subordinated Notes of the Company having a face value of $115 million and due
April 7, 2008.
"Company Shares" means the Company Common Shares and the Company
Preferred Shares.
"Company Warrant Shares" means the Company Common Shares into which the
Warrants are convertible upon their exercise.
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"Contingent Purchase Price" means an amount of cash equal to the Escrow
Deposit.
"Contribution Agreement" means the Contribution Agreement dated as of
the date hereof among the Significant Shareholders and each of the other holders
of the Company Common Shares, Warrants and Company Options that are parties
thereto.
"Current Assets" means the sum of the amount of all assets of the
Company calculated and determined in accordance with Schedule 1.1(a) and GAAP as
specified and described on Schedule 1.1(b).
"Current Liabilities" means the sum of the amount of all liabilities of
the Company calculated and determined in accordance with Schedule 1.1(a) and
GAAP as specified and described on Schedule 1.1(b).
"December 31, 2003 Balance Sheet" means the balance sheet included
within the Fiscal Year End Financials.
"December 31, 2003 Net Working Capital Amount" means $27,562,000.
"Dissenting Shareholders" has the meaning set forth in Section 2.4(e)
below.
"D&O Indemnified Parties" has the meaning set forth in Section 8.8(d)
below.
"Employee Benefit Plan" means any pension, profit-sharing, deferred
compensation, bonus, stock option, share appreciation right, severance, group or
individual health, dental, medical, life insurance, survivor benefit, or similar
plan, policy or arrangement, for the benefit of any director, officer,
consultant or employee, whether active or terminated, of the Company.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Insurance" has the meaning set forth in Section 5.13
below.
"Environmental Laws" means the Clean Water Act, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Emergency
Planning and Community Right-to-Know Act of 1986, and the Resource Conservation
and Recovery Act of 1976, each as amended, together with all other applicable
laws of federal, state, and local governments (and all agencies thereof)
concerning pollution or protection of the environment, including laws relating
to emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, toxic materials or wastes,
asbestos and petroleum-based products into ambient air, surface water, ground
water or lands.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" has the meaning set forth in the Escrow Agreement.
"Escrow Agreement" has the meaning set forth in Section 7.1(q) below.
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"Escrow Deposit" means an amount of cash equal to forty three million
dollars ($43,000,000).
"Estimated Closing Date Balance Sheet" has the meaning set forth in
Section 2.5(a) below.
"Estimated Closing Date Cash" has the meaning set forth in Section
2.5(a) below.
"Estimated Closing Date Net Working Capital Amount" has the meaning set
forth in Section 2.5(a) below.
"FDA" has the meaning set forth in Section 4.9(b) below.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Closing Date Balance Sheet" has the meaning set forth in Section
2.5(b) below.
"Final Closing Date Cash" has the meaning set forth in Section 2.5(c)
below.
"Final Closing Date Net Working Capital Amount" has the meaning set
forth in Section 2.5(c) below.
"Financial Statements" has the meaning set forth in Section 4.7 below.
"Fiscal Year End Financials" has the meaning set forth in Section 4.7
below.
"French" means Xx. Xxxxxxx X. French, an individual.
"French Additional Bonus" means an amount of cash equal to one million
two hundred ninety thousand dollars ($1,290,000), and which will become payable
to French pursuant to the terms of Section I.3.(b)(ii) of the French Employment
Agreement in the event that the Contingent Purchase Price is released to the
designee or designees of the Shareholders' Representative pursuant to the terms
of the Escrow Agreement or this Agreement.
"French Bonus" means an amount of cash equal to one million five
hundred ten thousand dollars ($1,510,000), and which will become payable to
French at the Closing pursuant to the terms of Section I.3.(b)(ii) of the French
Employment Agreement.
"French Employment Agreement" means that certain Employment Agreement
entered into as of May 23, 2002 by and between the Company and French, as
amended by that certain Amendment No. 1 to Employment Agreement dated as of May
29, 2003 by and between the Company and French.
"French Make Whole Amount" means an amount of cash equal to the
difference between (a) three million five hundred thousand dollars ($3,500,000)
and (b) (i) the amount paid to French at the Closing pursuant to the terms of
Section 2.4(d) of this Agreement (based on the Preliminary Purchase Price), plus
(ii) any amount withheld for Taxes pursuant to the terms of Section 2.4(d),
which is the Realization Bonus defined in and which will become payable to
French at the Closing pursuant to Section I.3.(b)(i) of the French Employment
Agreement, as such amount may be adjusted pursuant to
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the terms of Section 2.5(f) of this Agreement, and recaptured pursuant to the
terms of Section 2.8 of this Agreement.
"GAAP" means United States generally accepted accounting principles,
consistently applied, as in effect from time to time; provided, that for
purposes of Section 2.5 only, GAAP shall be as in effect as of the December 31,
2003 Balance Sheet, including the accounting principles, practices and
methodologies specified and described on Schedule 1.1(b) attached hereto.
"Holding" has the meaning set forth in the preface above.
"HRC Holding" means HRC Holding, Inc., a corporation organized under
the laws of the State of Delaware and a wholly-owned subsidiary of the Company.
"HRC Holding Senior 12% Notes" means those certain 12% Senior Notes of
HRC Holding having a face value of $10.1 million and due March 31, 2008.
"HRC Holding 12% Notes" means those certain 12% Notes of HRC Holding
having a face value of $2.2 million and due March 31,
2008.
"Xxxxxx RCI AB" means Xxxxxx RCI AB, a corporation organized under the
laws of Sweden and an indirect subsidiary of the Company.
"Xxxxxx RCI AB Credit Facility" means that certain Loan Agreement dated
March 21, 0000 xxxxxxx Xxxxxxx Xxxxxxx XX as Borrower, Xxxxxx Euro Co. as
Guarantor, and Handelsbanken as Lender.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indebtedness" means all amounts of principal, accrued interest,
premiums, penalties and other obligations relating to indebtedness or its
extinguishment (excluding capitalized leases reflected on the Financial
Statements) of the Company and its Subsidiaries, including the Company Senior
Credit Facility, the Company Second Lien Loan, the Company Senior Notes, the
Company Senior Subordinated Notes, the Company Convertible Notes, the HRC
Holding Senior 12% Notes, the HRC Holding 12% Notes and the Xxxxxx RCI AB Credit
Facility.
"Indemnified Party" has the meaning set forth in Section 8.4(a) below.
"Indemnifying Party" has the meaning set forth in Section 8.4(a) below.
"Indemnity Cap" has the meaning set forth in Section 8.5(b) below.
"Indemnity Deductible" has the meaning set forth in Section 8.5(a)
below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications,
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registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), Internet
web sites and domain names, (g) all other proprietary rights and (h) all copies
and tangible embodiments thereof (in whatever form or medium).
"Junior Preferred Share Amount" means the product of (i) the number of
Company Junior Preferred Shares outstanding at the Closing Date multiplied by
(ii) the Junior Preferred Share Price.
"Junior Preferred Share Price" means (i) $1,333.3333 (which is the
redemption price, including the call premium in effect on the Closing Date, and
all dividends accrued thereon through December 31, 2003 (as set forth in the
Company's certificate of designation for the Company Junior Preferred Shares))
plus (ii) all accumulated and unpaid dividends thereon from December 31, 2003 to
the Closing Date, for each Junior Preferred Share.
"Knowledge" means, with respect to the Company, the knowledge of
Xxxxxxx X. Xxxxx, Xxxxxxx X. French, Xxxxxx Xxxxxxxxx, Xxxxxx Xxxxxxxx, Xxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx and Xxxxxxx X. Xxxxx, in each case after reasonable
inquiry under the circumstances.
"Letter of Transmittal" has the meaning set forth in Section 2.6(b)
below.
"Material Adverse Effect" means, with respect to a Person, a material
adverse effect on the (i) business, assets, financial condition or results of
operations of the applicable Person or entity, or (ii) ability of such Person to
perform its obligations under this Agreement or any agreement entered into in
connection herewith or to consummate the transactions contemplated hereby or
thereby in all material respects.
"Merger" has the meaning set forth in Section 2.1 below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Net Working Capital Amount" means, as of a particular balance sheet
date, Current Assets minus Current Liabilities calculated as set forth in
Schedule 1.1(a) attached hereto (which schedule will exclude the Company and
Shareholder Transaction Expenses).
"Net Working Capital Holdback" has the meaning set forth in Section
2.5(f) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" has the meaning set forth in Section 4.9 below.
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"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or other entity, or a governmental
entity (or any department, agency or political subdivision thereof).
"Potential Environmental Conditions" has the meaning set forth in
Section 8.2(e) below.
"Preliminary Purchase Price" means $417,000,000 plus (i) the amount of
the Estimated Closing Date Cash plus (ii) the aggregate exercise price of the
Company Options and the Warrants that are outstanding and unexercised as of the
Closing, plus or minus (iii) the amount determined pursuant to the fifth or
sixth sentences of Section 2.5(a) below, as applicable, minus (iv) the amount of
any Indebtedness existing immediately prior to the Closing, minus (v) the Junior
Preferred Share Amount, minus (vi) the Senior Preferred Share Amount, minus
(vii) the Company and Shareholder Transaction Expenses, minus (viii) the amount
of the Company Retention Payment Obligation, minus (ix) the amount of the French
Bonus and the French Make Whole Amount, as well as any other amounts that may
become payable to French pursuant to the terms of the French Employment
Agreement as the result of his resignation from employment with the Company on
or before the Closing Date, which shall include (A) the payments described in
Section I.5.(b) of the French Employment Agreement and (B) a reasonable estimate
of the cost the Company will incur until French is eligible for coverage under
Medicare under the last sentence of Section I.4.(a) of the French Employment
Agreement if French cannot be enrolled in the Company's medical and dental plans
after termination of his employment with the Company. If the amount of the
payment to which the holders of Junior Preferred Stock or Senior Preferred Stock
is more than the amount specified in the respective definitions of Junior
Preferred Share Amount and Senior Preferred Share Amount, such difference shall
be treated as reduction in the Preliminary Purchase Price.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406
and Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 2.5(d) below.
"Required Shareholder Vote" has the meaning set forth in Section 4.22
below.
"Reviewing Accountant" has the meaning set forth in Section 2.5(c)
below.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lease, lien,
encumbrance, charge, restriction, conditional sales agreement, option,
reversionary interest, right of first refusal, voting trust agreement,
preemptive right, claim under bailment or storage contract, easement, security
interest or any other adverse claim or right whatsoever, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for Taxes not yet
delinquent, (c) those shown on the face of or the footnotes to the Fiscal Year
End Financials, (d) those created by zoning laws and other land use
restrictions, (e) with respect to real property, easements, rights of way,
reservations, licenses, charges, liens and other matters of record that do not
materially impair the use of the real property as currently conducted, and (e)
liens and encumbrances affecting the fee interest of any leased real property.
"Senior Preferred Share Amount" means the product of (i) the number of
Company Senior Preferred Shares outstanding at the Closing Date multiplied by
(ii) the Senior Preferred Share Price.
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"Senior Preferred Share Price" means (i) $104.60 (which is the
redemption price, including the call premium in effect on the Closing Date) plus
(ii) all accumulated and unpaid dividends thereon (as set forth in the Company's
certificate of designation for the Company Senior Preferred Shares) to the
Closing Date, for each Senior Preferred Share.
"Shareholder Holdback" means an amount in cash equal to the product of
(i) the Shareholder Holdback Price Per Share multiplied by (ii) the number of
Company Common Shares held at the Closing in the aggregate by those Persons that
have not executed the Contribution Agreement and are listed on Schedule 2.6.
"Shareholder Holdback Price Per Share" means the product of (i) the
Common Share Price multiplied by (ii) 33.33% (expressed as a decimal).
"Shareholders' Representative" has the meaning set forth in the preface
above.
"Significant Shareholder Disclosure Letter" has the meaning set forth
in Section 3.1 below.
"Significant Shareholders" has the meaning set forth in the preface
above.
"Subsidiary" means any corporation, partnership, limited liability
company or other entity with respect to which a specified Person (or a
Subsidiary thereof) owns at least 20% of the common stock or capital stock or
has the power to vote or direct the voting of sufficient securities to elect a
majority of the directors or otherwise direct the management of the entity.
"Surviving Corporation" has the meaning set forth in Section 2.1(b)
below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, ad valorem, transfer, registration, value added, alternative or add-on
minimum, estimated, claimed, unclaimed or abandoned property tax or other tax of
any kind whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not, and shall include any liability in respect of Taxes as
a transferee or as an indemnitor, guarantor, surety or in a similar capacity
under any contract, Tax sharing agreement, Tax indemnity agreement, Tax
reimbursement agreement, arrangement, agreement, understanding or commitment
(whether oral or written) and any liability in respect of Taxes which is payable
by reason of contract, assumption, operation of law, Treasury Regulation Section
1.1502-6 (or any predecessor or successor thereof or any analogous or similar
provision under state, local or foreign law) or otherwise.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.4 below.
"Transfer" has the meaning set forth in Section 5.8(c) below.
"Voting Agreement" has the meaning set forth in Section 7.1(q) below.
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"WARN" has the meaning set forth in Section 6.5(a) below.
"WARN obligations" has the meaning set forth in Section 6.5(a) below.
"Warrants" means those certain warrants to purchase Company Common
Shares listed in Section 4.2 of the Company Disclosure Letter.
"Warrant Purchase Agreement" has the meaning set forth in Section
7.2(g) below.
"Warrant Share Amount" means the product of (a) the Common Share Price,
less $1.00 (which is the exercise price of the Warrants), multiplied by (b) the
number of Company Warrant Shares issuable upon the exercise of the Warrants
outstanding immediately prior to or as of the Closing.
2. The Merger and Conversion of Securities.
2.1 The Merger.
(a) On and subject to the terms and conditions
of this Agreement, at the Effective Time, the Merger Sub shall be merged with
and into the Company (the "Merger") in accordance with the CGCL. At the Closing,
an agreement of merger, in the form attached hereto as Exhibit K, with such
changes, if any, as may be required by the California Secretary of State (the
"Agreement of Merger"), shall be duly executed and acknowledged by the Merger
Sub and the Company in accordance with the CGCL and shall be filed with the
Secretary of State of the State of California. The Merger shall become effective
upon the filing of the Agreement of Merger. The date and time when the Merger
shall become effective is hereinafter referred to as the "Effective Time."
(b) At the Effective Time, the Merger Sub shall
be merged with and into the Company, and the separate corporate existence of the
Merger Sub shall cease, and the Company shall continue as the "Surviving
Corporation" under the laws of the State of California.
(c) From and after the Effective Time, the
Merger shall have the effects set forth in this Agreement and in Section 1107 of
the CGCL.
(d) At the Effective Time, the articles of
incorporation of the Company shall be amended and restated to incorporate the
terms and provisions set forth in the Agreement of Merger, until such articles
of incorporation thereafter shall be duly amended in accordance with applicable
law. Notwithstanding the foregoing, the terms of the articles of incorporation
of the Surviving Corporation concerning directors' and officers' indemnification
shall comply with the provisions of Section 8.8 below.
(e) The bylaws of the Company as in effect
immediately prior to the Effective Time shall be the bylaws of the Surviving
Corporation unless and until such bylaws thereafter shall be changed in
accordance with the provisions thereof, the provisions of the articles of
incorporation of the Surviving Corporation and applicable law. Notwithstanding
the foregoing, the terms of the bylaws of the Surviving Corporation concerning
directors' and officers' indemnification shall comply with the provisions of
Section 8.8 below.
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(f) At the Effective Time, the directors of the
Merger Sub shall be the directors of the Surviving Corporation, with each of
such directors to hold office, subject to the applicable provisions of the CGCL
and the articles of incorporation and bylaws of the Surviving Corporation, until
the next annual shareholders' meeting of the Surviving Corporation and until
their respective successors shall be duly elected or appointed and qualified. At
the Effective Time, the officers of the Merger Sub shall, subject to the
applicable provisions of the articles of incorporation and bylaws of the
Surviving Corporation, be the officers of the Surviving Corporation until their
respective successors shall be duly elected or appointed and qualified.
2.2 The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxxx XxXxxxxxx LLP in Los Angeles, California, commencing at 8:00 a.m.
local time on the second business day following the satisfaction or waiver of
all conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date, time and
place as the Buyer and the Shareholders' Representative may mutually determine
(the "Closing Date").
2.3 Deliveries at the Closing. At the Closing, (a) the
Shareholders' Representative and the Company will deliver to the Buyer the
various certificates, instruments, and documents referred to in Section 7.1
below, (b) the Buyer will deliver to the Company and the Shareholders'
Representative the various certificates, instruments, and documents referred to
in Section 7.2 below, (c) the Buyer will deliver to the FS Management Company,
by wire transfer of immediately available funds, to the account or accounts
designated by the Shareholders' Representative, the Net Working Capital Holdback
and the Shareholder Holdback, (d) the Buyer will deliver the Escrow Deposit, by
wire transfer of immediately available funds, to the account designated in the
Escrow Agreement, or if, pursuant to the terms of the form of Escrow Agreement,
the Escrow Deposit would be delivered as directed by the Shareholders'
Representative, to the account or accounts designated by the Shareholders'
Representative, (e) the Company will deliver to French, by wire transfer of
immediately available funds, to the account or accounts designated by French,
the French Bonus and French Make Whole Amount (in each case as reduced by
applicable withholdings for Taxes), and (f) the Buyer will pay, to the
appropriate parties, any Company and Shareholder Transaction Expenses to the
extent not previously paid, as directed by the Shareholders' Representative. The
FS Management Company will hold the Net Working Capital Holdback in accordance
with Section 2.5(f) below, and will hold the Shareholder Holdback in order to
secure the obligation of those individuals, who have not executed and delivered
to the Shareholders' Representative the Contribution Agreement and are listed on
Schedule 2.6, to pay to the Significant Shareholders their proportionate share
of any payment that may be made by the Significant Shareholders to the Buyer
pursuant to the terms and provisions of Section 8 of this Agreement, so that
such individuals pay their share of such liabilities as if such parties had
executed and delivered to the Shareholders' Representative the Contribution
Agreement, and in the manner provided for therein.
2.4 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the Merger Sub, the
Buyer, the Company or any holder of Company Shares, Company Options or Warrants:
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(a) Each issued and outstanding share of common
stock of the Merger Sub shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Each Company Preferred Share shall be
converted into a right to receive, upon surrender of the certificate
representing such Company Preferred Share, cash equal to the Junior Preferred
Share Price (in the case of Company Junior Preferred Shares) or the Senior
Preferred Share Price (in the case of Company Senior Preferred Shares), as
applicable.
(c) Each Company Common Share shall be converted
into a right to receive, upon surrender of the certificate representing such
Company Common Share, cash equal to the Common Share Price, less (i) such
holder's proportionate share of the Net Working Capital Holdback (based on the
sum of the number of Company Common Shares outstanding immediately prior to the
Closing, plus the number of Company Common Shares issuable upon the exercise of
the Company Options and the Warrants outstanding immediately prior to the
Closing), and (ii) for those holders of Company Common Shares that have not
executed and delivered to the Shareholders' Representative the Contribution
Agreement and are listed on Schedule 2.6, an additional amount equal to the
Shareholder Holdback Price Per Share.
(d) Each Company Option that is outstanding
immediately prior to or as of the Effective Time, and is held by a Person that
has executed and delivered to the Shareholders' Representative the Contribution
Agreement, shall be cancelled in exchange for a lump sum cash payment, to be
paid by the Surviving Corporation at the Closing upon its receipt of a release
in the form of Exhibit A attached hereto, equal to the product of (i) the number
of Company Common Shares subject to such Company Option and (ii) the excess of
the Common Share Price over the exercise price per share of such Company Option,
subject to any required withholding of Taxes, and less such holder's
proportionate share of the Net Working Capital Holdback (based on the sum of the
number of Company Common Shares outstanding immediately prior to the Closing
plus the number of Company Common Shares issuable upon the exercise of the
Company Options and the Warrants outstanding immediately prior to the Closing).
(e) Notwithstanding anything in this Agreement
to the contrary, but only to the extent required by the CGCL, and subject to
Section 5.8 below, Company Common Shares that are issued and outstanding
immediately prior to the Effective Time and are held by Persons who comply with
all the provisions of the CGCL concerning appraisal rights for the fair value of
their Company Common Shares in connection with the merger (the "Dissenting
Shareholders") shall not be converted into the right to receive the Common Share
Price, but shall become the right to receive such consideration as may be
determined to be due such Dissenting Shareholder pursuant to Section 1300 of the
CGCL.
(f) The Buyer agrees to transmit any payment
required to be made pursuant to the terms and provisions of this Section 2.4, to
a holder of Company Preferred Shares, Company Common Shares or Company Options,
and that would equal or exceed $100,000, to such holder by wire transfer at the
Closing of immediately available funds, upon valid delivery to the Buyer by such
holder of duly completed wire transfer information that is adequate to enable
Buyer to effect such payment in such manner.
2.5 Purchase Price Adjustment. The Preliminary Purchase
Price shall be subject to adjustment according to this Section 2.5.
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(a) At least three (3) business days prior to
the Closing Date, the Company shall deliver to the Buyer an estimated balance
sheet as of the opening of business on the Closing Date (the "Estimated Closing
Date Balance Sheet") and a good faith written estimate of the Net Working
Capital Amount and the cash of the Company as of the opening of business on the
Closing Date (respectively, the "Estimated Closing Date Net Working Capital
Amount" and the "Estimated Closing Date Cash"). For purposes of the estimate of
the amount of cash, such estimate shall reflect (i) a deduction from any cash
balance in an amount equal to the aggregate amount of all drafts, checks and
wire transfers issued on accounts of the Company and its Subsidiaries that
remain outstanding and uncleared as of such time and date, and (ii) an addition
to any cash balance in an amount equal to the aggregate amount of all drafts,
checks and wire transfers that have been received by the Company and its
Subsidiaries as of such time and date but that have either not been cashed or
not been cleared. The Estimated Closing Date Balance Sheet, the Estimated
Closing Date Net Working Capital Amount and the Estimated Closing Date Cash
shall be prepared in accordance with Schedule 1.1(a) (which will exclude
transaction related items) and GAAP, including the accounting principles,
practices and methodologies specified and described on Schedule 1.1(b), and
using the same accounting principles, practices and methodologies, consistently
applied, that were used to prepare the December 31, 2003 Balance Sheet, and, at
the Company's election, may be based on the Company's most recent regularly
prepared balance sheet for the end of the month immediately preceding the month
in which the Closing actually occurs; provided, that, whether or not required by
GAAP, any "Swedish Social Tax" or other Tax payable by the Company or to be paid
by the Company on behalf of holders of Company Options who reside outside the
United States (other than any Taxes for withholding), as a result of the
transactions contemplated by this Agreement, will be included as an accrual on
the Estimated Closing Date Balance Sheet. Solely for purposes of the Estimated
Closing Date Balance Sheet and the Final Closing Date Balance Sheet, the Buyer
hereby approves and agrees to the application of GAAP as set forth on Schedule
1.1(b). If the Estimated Closing Date Net Working Capital Amount is greater than
the December 31, 2003 Net Working Capital Amount, the Preliminary Purchase Price
shall be increased by such amount. If the Estimated Closing Date Net Working
Capital Amount is less than the December 31, 2003 Net Working Capital Amount,
the Preliminary Purchase Price shall be reduced by such amount. The Company will
also deliver to the Buyer, at least five (5) business days prior to the Closing
Date, a certificate setting forth an estimate of the Company and Shareholder
Transaction Expenses as of the Closing Date.
(b) Within sixty (60) days after the Closing
Date, the Buyer will prepare and deliver to the Shareholders' Representative a
balance sheet of the Company as of the opening of business on the Closing Date
(the "Final Closing Date Balance Sheet"), including a calculation of the Net
Working Capital Amount and the cash of the Company as of the Closing Date
(respectively, the "Closing Date Net Working Capital Amount" and the "Closing
Date Cash"). The Final Closing Date Balance Sheet shall be prepared in
accordance with Schedule 1.1(a) and GAAP as set forth on Schedule 1.1(b) and
using the same accounting principles, practices and methodologies, consistently
applied, that were used to prepare the December 31, 2003 Balance Sheet;
provided, that, whether or not required by GAAP, any "Swedish Social Tax" or
other Tax payable by the Company or to be paid by the Company on behalf of
holders of Company Options who reside outside the United States (other than any
Taxes for withholding), as a result of the transactions contemplated by this
Agreement, will be included as an accrual on the Final Closing Date Balance
Sheet. If the Buyer fails to deliver the Final Closing Date Balance Sheet to the
Shareholders' Representative within sixty (60) days after the Closing Date, then
the Buyer and the holders of the Company Common Shares, the Company Options and
the Warrants shall be bound by the calculation of the Estimated Closing Date Net
Working Capital Amount and the Estimated Closing Date Cash that was delivered by
the
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Company to the Buyer pursuant to Section 2.5(a) of this Agreement, and the
Estimated Closing Date Net Working Capital Amount shall be deemed to be the
Final Closing Date Net Working Capital Amount, the Estimated Closing Date Cash
shall be deemed to be the Final Closing Date Cash, and any required payments
shall be made pursuant to Section 2.5(d) below based on such Final Closing Date
Net Working Capital Amount and Final Closing Date Cash. If any reserve in the
Final Closing Date Balance Sheet is adjusted, for any reason other than changes
in circumstances occurring since the date of December 31, 2003 Balance Sheet, a
corresponding adjustment will be made to the comparable reserves contained in
the December 31, 2003 Balance Sheet. If any changes are made in the Final
Closing Date Balance Sheet to reflect GAAP, such changes shall also be made to
the December 31, 2003 Balance Sheet and the Estimated Closing Date Balance
Sheet. For purposes of determining the Closing Date Cash, the cash of the
Company shall reflect (i) a deduction from any cash balance in an amount equal
to the aggregate amount of all drafts, checks and wire transfers issued on
Company accounts that remain outstanding and uncleared as of such time and date,
and (ii) an addition to any cash balance in an amount equal to the aggregate
amount of all drafts, checks and wire transfers that had been received by the
Company as of such time and dated but that have either not been cashed or not
been cleared.
(c) The Shareholders' Representative shall have
a period commencing upon delivery of the Final Closing Date Balance Sheet by the
Buyer and expiring twenty (20) days after such delivery date to review the Final
Closing Date Balance Sheet. During this period, the Shareholders' Representative
and its representatives and accountants shall have full access during regular
business hours and upon reasonable notice to all relevant books and records and
employees of the Surviving Corporation to the extent necessary to review matters
and information related to the preparation of the Final Closing Date Balance
Sheet (and including without limitation any financial and other information
relating to periods after the Closing Date that may be relevant to or helpful in
the review of the Final Closing Date Balance Sheet and the calculation of the
Closing Date Net Working Capital Amount and the Closing Date Cash) in a manner
not unreasonably interfering with the business of the Surviving Corporation. In
the event the Shareholders' Representative disputes the determination of the
Closing Date Net Working Capital Amount and/or the Closing Date Cash, the
Shareholders' Representative shall, within twenty (20) days after delivery of
the Final Closing Date Balance Sheet, deliver a notice to the Buyer (the
"Adjustment Dispute Notice"), setting forth in reasonable detail the component
or components which are in dispute and the basis of such dispute. If the
Shareholders' Representative fails to deliver an Adjustment Dispute Notice to
the Buyer within twenty (20) days after the Buyer's delivery of the Final
Closing Date Balance Sheet, then the Shareholders' Representative shall be bound
by the calculation of the Closing Date Net Working Capital Amount and the
Closing Date Cash that accompanied the Final Closing Date Balance Sheet prepared
by the Buyer, and the Closing Date Net Working Capital Amount and the Closing
Date Cash shall be deemed to be the Final Closing Date Net Working Capital
Amount and the Final Closing Date Cash, respectively, and any required payments
shall be made pursuant to Section 2.5(d) below based on such Final Closing Date
Net Working Capital Amount and such Final Closing Date Cash. If the
Shareholders' Representative delivers the Adjustment Dispute Notice within such
twenty (20) day period, then the Buyer and the Shareholders' Representative will
use reasonable efforts to resolve any such dispute within ten (10) days after
receipt by the Buyer of the Adjustment Dispute Notice. If the Buyer and the
Shareholders' Representative fail to resolve any such dispute within ten (10)
days after receipt by the Buyer of the Adjustment Dispute Notice, they shall
submit the dispute to KPMG LLP (the "Reviewing Accountant") to review the
Closing Date Net Working Capital Amount and/or the Closing Date Cash, as
applicable, set forth on the Final Closing Date Balance Sheet. The Buyer and the
Shareholders' Representative shall make available to the
14
Reviewing Accountant all work papers and all other information and material in
their possession relating to the matters in the Adjustment Dispute Notice. The
Reviewing Accountant shall be instructed to use its commercially reasonable
efforts to deliver its determination as promptly as practicable after such
submission of the dispute to the Reviewing Accountant. The Parties hereby
expressly agree that the determination of the Reviewing Accountant shall be
final and binding on the parties (absent fraud or manifest bad faith by the
Reviewing Accountant). The Closing Date Net Working Capital Amount and the
Closing Date Cash on the Final Closing Date Balance Sheet as determined by the
Buyer (if not disputed), or as modified (if at all) by agreement of the Buyer
and the Shareholders' Representative or by decision of the Reviewing Accountant,
shall be the "Final Closing Date Net Working Capital Amount" and the "Final
Closing Date Cash", respectively. Each Party shall bear its own expenses and the
fees and expenses of its own representatives and experts, including its
independent accountants, in connection with the preparation, review, dispute (if
any) and final determination of the Final Closing Date Net Working Capital
Amount and the Final Closing Date Cash, and such fees and expenses of the
holders of the Company Common Shares, the Company Options and the Warrants shall
be paid, if necessary, from the Net Working Capital Holdback. The costs,
expenses and fees of the Reviewing Accountant shall be borne by the holders of
the Company Common Shares, the Company Options and the Warrants, on the one
hand, and the Buyer, on the other hand, based on the percentage which the
portion of the contested amount not awarded to such Party bears to the amount
actually contested by such Party (and which, in the case of the holders of the
Company Common Shares, the Company Options and the Warrants, shall be paid, if
necessary, from the Net Working Capital Holdback). Such costs to be borne by the
holders of the Company Common Shares, the Company Options and the Warrants, if
not so otherwise paid, shall ultimately be paid by the Shareholders'
Representative.
(d) Within ten (10) days after the Final Closing
Date Net Working Capital Amount and the Final Closing Date Cash have become
final and binding on the parties pursuant to Section 2.5(c), the Preliminary
Purchase Price will be adjusted as follows (the Preliminary Purchase Price as so
adjusted is referred to as the "Purchase Price"):
(i) If the sum of the Final Closing
Date Net Working Capital Amount and the Final Closing Date Cash is greater than
the sum of (A) the Estimated Closing Date Net Working Capital Amount plus (B)
the Estimated Closing Date Cash plus (C) $50,000, the Buyer shall pay to the FS
Management Company (for the benefit of the holders of the Company Common Shares,
the Company Options and the Warrants), by wire transfer in immediately available
funds to the account designated by the Shareholders' Representative, an amount
equal to such excess, which amount will be added to the Net Working Capital
Holdback and allocated and distributed as provided in Section 2.5.
(ii) If the sum of the Final Closing
Date Net Working Capital Amount and the Final Closing Date Cash is less than the
difference between (A) the sum of the Estimated Closing Date Net Working Capital
Amount and the Estimated Closing Date Cash minus (B) $50,000, the Shareholders'
Representative shall pay to the Buyer, by wire transfer in immediately available
funds to the account designated by the Buyer, an amount equal to such deficit.
(e) Any amounts payable pursuant to this Section
2.5 will bear interest from and including the Closing Date to but excluding the
date of payment at the Applicable Rate.
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(f) The FS Management Company agrees that it
shall retain, and not distribute to the general or limited partners of the
Shareholders' Representative, or to the holders of the Company Common Shares,
the Company Options or the Warrants, $3,000,000 of the Preliminary Purchase
Price (the "Net Working Capital Holdback"), until the Final Closing Date Net
Working Capital Amount and the Final Closing Date Cash have become final and
binding on the Parties pursuant to Section 2.5(c), and all amounts required to
be paid by the Shareholders' Representative or the Buyer pursuant to Section
2.5(d) have been paid in full. The Shareholders' Representative will direct the
FS Management Company to pay any Company and Shareholder Transaction Expenses
exceeding the estimate thereof (including any increase in the estimate thereof
as a result of fees and expenses that may be payable to the Escrow Agent
pursuant to the terms of the Escrow Agreement), from the Net Working Capital
Holdback. After the Final Closing Date Net Working Capital Amount and Final
Closing Date Cash have become final and binding on the Parties pursuant to
Section 2.5(c), all amounts required to be paid by the Shareholders'
Representative or Buyer pursuant to Section 2.5(d) have been paid in full, and
any additional Company and Shareholder Transaction Expenses have been paid or
otherwise provided for (in each case by the Shareholders' Representative), the
Shareholders' Representative shall recalculate the French Make Whole Amount
based on the adjusted Purchase Price and (i) in the event that the Shareholders'
Representative makes a payment to Buyer pursuant to Section 2.5(d), the Company
shall pay to French, concurrent with the Company's receipt from the
Shareholders' Representative of an amount in cash equal to the FMWA Underpayment
(as defined below), an amount equal to the difference between the recalculated
French Make Whole Amount and the French Make Whole Amount paid to French at the
Closing pursuant to Section 2.3(e) (such difference, the "FMWA Underpayment"),
less applicable withholding for Taxes on the FMWA Underpayment or (ii) in the
event that Buyer makes a payment to the Shareholders' Representative pursuant to
Section 2.5(d), an amount equal to the difference between the French Make Whole
Amount paid to French at the Closing pursuant to Section 2.3(e) and the
recalculated French Make Whole Amount (such difference, the "FMWA Overpayment")
shall be deducted from the amount French would otherwise receive from the Net
Working Capital Holdback. Any amount remaining in the Net Working Capital
Holdback after the payment of such expenses, and after deducting the FMWA
Underpayment or adjusting for the FMWA Overpayment pursuant to the immediately
preceding sentence, shall be distributed by the FS Management Company pro rata
to the holders of the Company Common Shares, the Company Options and the
Warrants (based on the sum of the number of Company Common Shares outstanding
immediately prior to the Closing, plus the number of Company Common Shares
issuable upon the exercise of the Company Options and the Warrants outstanding
immediately prior to the Closing).
2.6 Method of Payment.
(a) The Buyer shall act as its own paying agent
under this Agreement for purposes of distributing the Preliminary Purchase
Price, the Junior Preferred Share Amount and the Senior Preferred Share Amount
as contemplated hereby. On the Closing Date, the Buyer shall segregate (and, in
the case of the Company Options, cause the Surviving Corporation to segregate)
into a separate account monies in an amount equal to the Preliminary Purchase
Price (less the amount of the Net Working Capital Holdback and the Shareholder
Holdback), the Junior Preferred Share Amount and the Senior Preferred Share
Amount and shall hold the same for the holders of the Company Shares and the
Company Options under this Agreement.
(b) Promptly after the date of this Agreement,
and from time to time following the exercise of any Company Options or Warrants
prior to the Effective Time, the
16
Company shall send to each holder of Company Common Shares and to each holder of
Company Preferred Shares a letter of transmittal from such holder to the Buyer
in substantially the forms of Exhibit B and Exhibit C attached hereto (as
applicable, the "Letter of Transmittal") stating:
(i) that payment of the Common Share
Price (less such holder's proportionate share of the Net Working Capital
Holdback), Junior Preferred Share Price or Senior Preferred Share Price, as
applicable, payable to such holder shall be made against and only upon delivery
to the Buyer by such holder of the certificates which immediately prior to the
Effective Time represented outstanding Company Shares (the "Certificates") owned
by such Person; and
(ii) that risk of loss and title to the
Certificates and other items required to be delivered by the holder shall pass
only upon delivery of such items to the Buyer, and that all such items the form
of which is not attached hereto shall be in customary form, including such
customary provisions as the Surviving Corporation or the Buyer reasonably may
specify in its written instructions for use by the holders of the Company Shares
in effecting the surrender to the Buyer of such items.
(c) Following the execution and delivery to the
Buyer of a Letter of Transmittal by a holder of Company Shares accompanied by
the Certificates, at the Closing the Buyer shall pay (or, if such execution and
delivery occurs after the Closing, the Buyer shall pay within three (3) business
days) by wire transfer of immediately available funds to the account designated
by the holder of Company Shares in its Letter of Transmittal, the Common Share
Price, Junior Preferred Share Price or Senior Preferred Share Price, as
applicable, deliverable in respect thereof, less, in the case of holders of
Company Common Shares only, (i) such holder's proportionate share of the Net
Working Capital Holdback (based in each case on the sum of the number of Company
Common Shares outstanding immediately prior to the Closing plus the number of
Company Common Shares issuable upon the exercise of the Company Options and the
Warrants outstanding immediately prior to the Closing) as provided in Section
2.5(f), and (ii) for those holders of Company Common Shares that have not
executed and delivered to the Shareholders' Representative the Contribution
Agreement and are listed on Schedule 2.6, an additional amount equal to the
Shareholder Holdback Price Per Share. The Shareholders' Representative will
provide to Buyer an update to Schedule 2.6 immediately prior to the Closing.
Until so surrendered, each Certificate shall be deemed, for all corporate
purposes, to evidence only the right to receive upon such surrender the amount
to which such Person is entitled pursuant to this Section 2. No interest shall
be paid or accrued in respect of any cash payments made hereunder.
(d) If the Common Share Price, Junior Preferred
Share Price or Senior Preferred Share Price (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefore are registered, it shall be a condition to the
payment of such amount that the Certificates so surrendered shall be properly
endorsed or accompanied by appropriate stock powers and otherwise in proper form
for transfer, that such transfer otherwise be proper and that the Person
requesting such transfer pay to the Buyer any transfer or other Taxes payable by
reason of the foregoing or establish to the satisfaction of the Buyer that such
Taxes have been paid or are not required to be paid.
(e) At and after the Effective Time, each holder
of a Certificate representing Company Shares shall cease to have any rights as a
shareholder of the Company, except for the right to surrender its Certificate in
exchange for payment of the Common Share Price (less
17
such holder's proportionate share of the Net Working Capital Holdback), Junior
Preferred Share Price or Senior Preferred Share Price, as applicable. No
transfer of Company Shares shall be made on the stock transfer books of the
Surviving Corporation. Certificates presented to the Surviving Corporation after
the Effective Time shall be canceled and exchanged for the Common Share Price
(less such holder's proportionate share of the Net Working Capital Holdback),
Junior Preferred Share Price or Senior Preferred Share Price, as applicable, as
provided in this Section 2. At the close of business on the day of the Effective
Time the stock ledger of the Company with respect to Company Shares shall be
closed.
(f) In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed, the Buyer
shall issue in exchange for such lost, stolen or destroyed Certificate the
amount deliverable in respect thereof as determined in accordance with this
Section 2; provided, that the Person to whom such amount is paid shall, as a
condition precedent to the payment thereof, indemnify the Surviving Corporation
in a manner satisfactory to it against any claim that may be made against the
Surviving Corporation with respect to the Certificate claimed to have been lost,
stolen or destroyed.
(g) The Buyer shall make no distribution of a
Dissenting Shareholder's Common Share Price unless and until the validity of
such claim as a Dissenting Shareholder (subject to Section 5.8 below) has been
determined and the fair value of a Dissenting Shareholder's Company Common
Shares has been determined for any Dissenting Shareholder in the manner
contemplated by Section 1300 of the CGCL. At that time, the Buyer shall pay to
the Buyer or the Surviving Corporation from the segregated fund established
under Section 2.6(a) above the Common Share Price for the Dissenting
Shareholder's Company Common Shares, and the Buyer or the Surviving Corporation
shall pay from its own funds the fair value of such Dissenting Shareholder's
Company Common Shares.
(h) Any portion of the segregated Preliminary
Purchase Price, Junior Preferred Share Amount or Senior Preferred Share Amount
on deposit with the Buyer that remains undistributed for one (1) year after the
Effective Time shall be delivered to or as directed by Buyer, upon demand, and
any holders of Certificates who have not theretofore complied with this Section
2 shall thereafter look only to Buyer (subject to abandoned property, escheat
and other similar legal requirements) as a general creditor for payment of their
claim for the same, with such sums to be paid only upon compliance by such
holder of Company Shares with all conditions to payment of the same specified in
this Section 2.
(i) Each of Buyer and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any Person hereunder such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code and the rules and regulations promulgated thereunder, or any provision
of state, local or foreign tax law. To the extent that amounts are so withheld
by the Surviving Corporation or the Buyer, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the Person entitled hereunder to receive the amounts in respect of which such
deduction and withholding was made by the Surviving Corporation or the Buyer, as
the case may be.
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2.7 Repayment of Indebtedness. Concurrent with the
Closing, Buyer, subject to its receipt of payoff letters as contemplated by
Section 7.1(i), shall, or shall cause the Surviving Corporation to repay, or
cause to be repaid, on behalf of the Company, any Indebtedness (other than the
Company Senior Subordinated Notes) that at that time remains outstanding, by
wire transfer of immediately available funds as set forth in instructions
delivered to Buyer by the Company.
2.8 Contingent Purchase Price. In addition to any amounts
payable to the holders of Company Common Shares and Company Options pursuant to
the terms and conditions of this Agreement, if the Escrow Deposit is released,
either by the Escrow Agent or the Buyer, to the designee or designees of the
Shareholders' Representative pursuant to the terms and conditions of the Escrow
Agreement and the satisfaction of the conditions contained therein, or of this
Agreement, then such amount shall be applied (a) first, to reimburse the Company
for the payment of the French Additional Bonus (reduced by applicable
withholding for Taxes), which amount the Company shall pay to French
concurrently with the reimbursement of such amount to the Company by the
Shareholders' Representative, and (b) second, to the payment of any increase in
the Company and Shareholder Transaction Expenses over the amount thereof
previously paid, and (c) the remaining amount shall be increased (by virtue of a
reduction in the amount payable to French pursuant to this Section 2.8(c)) by an
amount equal to the French Make Whole Amount, as determined and giving effect to
any adjustment made pursuant to Section 2.5(f) of this Agreement, and then be
distributed pro rata to the holders of the Company Common Shares, the Company
Options and the Warrants, in each case as if such amounts constituted part of
the Purchase Price to be distributed to such holders pursuant to this Agreement,
and based on the sum of the number of Company Common Shares outstanding
immediately prior to the Closing, plus the number of Company Common Shares
issuable upon the exercise of the Company Options and the Warrants outstanding
immediately prior to or as of the Closing, but less, in the case of French only,
an amount equal to the French Make Whole Payment as determined and giving effect
to any adjustment thereto pursuant to the terms of Section 2.5(f) of this
Agreement; provided, however, that the increase pursuant to clause (c) shall
not, in any event, exceed the reduction in the amount to be paid to French
(unless such excess amount is first paid to the Company by French or the
Shareholders' Representative).
2.9 Company Retention Payment Obligation. In addition to
any amounts payable to the holders of Company Common Shares and Company Options
pursuant to the terms and conditions of this Agreement, if the full amount of
the Company Retention Payment Obligation or the Agreed Upon Retention Amount has
not, as of January 15, 2005 been paid by the Company to the persons entitled
thereto, then the unpaid portion(s) of the Company Retention Payment Obligation
and fifty percent (50%) of the unpaid portions of the Agreed Upon Retention
Amount shall be paid to the FS Management Company by Buyer, and such amount
shall be distributed by the FS Management Company as directed by the
Shareholders' Representative pro rata to the holders of the Company Common
Shares, the Company Options and the Warrants, in each case as if such amount
constituted part of the Purchase Price to be distributed to such holders
pursuant to this Agreement, and based on the sum of the number of Company Common
Shares outstanding immediately prior to the Closing, plus the number of Company
Common Shares issuable upon the exercise of the Company Options and the Warrants
outstanding immediately prior to the Closing.
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3. Representations and Warranties Concerning the Transaction.
3.1 Representations and Warranties of the Significant
Shareholders. As of the date of this Agreement and except as set forth in the
disclosure letter delivered by the Significant Shareholders to the Buyer
concurrently with the execution and delivery of this Agreement (the "Significant
Shareholder Disclosure Letter"), each of the Significant Shareholders represents
and warrants to the Buyer, severally and not jointly, with respect to himself,
as follows:
(a) Organization of Certain Significant
Shareholder. If the Significant Shareholder is an entity, the Significant
Shareholder is duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its organization.
(b) Authorization of Transaction. The
Significant Shareholder has full power and authority (including, if the
Significant Shareholder is a corporation, full corporate power and authority) to
execute and deliver this Agreement and to perform his or its obligations
hereunder. The Significant Shareholders have acted consistent with their
fiduciary duties, and this Agreement has been duly authorized, executed and
delivered by the Significant Shareholder, and constitutes the valid and legally
binding obligation of the Significant Shareholder, enforceable against the
Significant Shareholder in accordance with its terms and conditions, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to creditors' rights generally and general equitable principles.
The Significant Shareholder need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement, other than the filings required to be made by the Shareholders'
Representative, Holding or the Company under the HSR Act and any other
applicable Antitrust Laws.
(c) Noncontravention. Neither the execution and
delivery by the Significant Shareholder of this Agreement, nor the consummation
by the Significant Shareholder of the transactions contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Significant Shareholder is subject
or, if the Significant Shareholder is a corporation, any provision of its
charter or bylaws, or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or consent under
any material agreement, contract, lease, license, instrument, or other
arrangement to which the Significant Shareholder is a party or by which he or it
is bound or to which any of his or its assets is subject, other than termination
of the waiting period under the HSR Act and any other applicable Antitrust Laws.
(d) Brokers' Fees. Except for fees and
commissions payable to Citigroup, the Significant Shareholder has no liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which the
Buyer could become liable or obligated.
(e) Company Shares. The Significant Shareholder
holds of record and owns beneficially the number of Company Shares or Warrants
set forth next to his or its name in Section 4.2 of the Company Disclosure
Letter, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. The
20
Significant Shareholder is not a party to any option, warrant, purchase right,
or other contract or commitment that could require the Significant Shareholder
to sell, transfer, or otherwise dispose of any capital stock of the Company
(other than this Agreement). The Significant Shareholder is not a party to any
voting trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company.
3.2 Representations and Warranties of the Buyer and the
Merger Sub. As of the date of this Agreement and except as set forth in the
disclosure letter delivered by the Buyer to the Shareholders' Representative
concurrently with the execution and delivery of this Agreement (the "Buyer
Disclosure Letter"), the Buyer and Merger Sub represent and warrant to the
Company and the Significant Shareholders, jointly and severally, as follows:
(a) Organization. The Buyer 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 own,
operate and lease its properties and to carry on its business as it is now being
conducted. The Merger Sub is a corporation duly organized, validly existing, and
in good standing under the laws of the State of California with all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted.
(b) Authorization of Transaction. Each of the
Buyer and the Merger Sub has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement, the Escrow Agreement
and the Warrant Purchase Agreement, as applicable, and to perform its
obligations hereunder. This Agreement, the Escrow Agreement and the Warrant
Purchase Agreement have been duly authorized, executed and delivered by Buyer
and Merger Sub, as applicable, and each constitute the valid and legally binding
obligation of each of the Buyer and the Merger Sub, as applicable, enforceable
in accordance with its terms and conditions, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
creditors' rights generally and general equitable principles. Neither the Buyer
nor the Merger Sub need give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement, the Escrow
Agreement and the Warrant Purchase Agreement, other than the filings required to
be made by the Buyer under the HSR Act and any other applicable Antitrust Laws.
(c) Noncontravention. Neither the execution and
delivery of this Agreement, the Escrow Agreement and the Warrant Purchase
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either the Buyer or the Merger Sub is
subject or any provision of its charter or bylaws, or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice or consent under any material agreement, contract, lease,
license, instrument, or other arrangement to which any of the Buyer or the
Merger Sub is a party or by which it is bound or to which any of its assets is
subject, other than termination of the waiting period under the HSR Act and any
other applicable Antitrust Laws.
(d) Brokers' Fees. Neither the Buyer nor the
Merger Sub has any liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to
21
the transactions contemplated by this Agreement, the Escrow Agreement and the
Warrant Purchase Agreement for which any Significant Shareholder could become
liable or obligated.
(e) Investment. The Buyer is not acquiring the
Company Shares with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
(f) Financing. The Buyer has available,
including borrowing capacity under credit facilities or like arrangements, the
funds necessary to pay the Purchase Price, the Junior Preferred Share Amount,
the Senior Preferred Share Amount and the Warrant Share Amount as contemplated
by this Agreement, the Escrow Agreement and the Warrant Purchase Agreement.
4. Representations and Warranties Concerning the Company and Its
Subsidiaries. As of the date of this Agreement and except as set forth in the
disclosure letter delivered by the Company to the Buyer concurrently with the
execution and delivery of this Agreement (the "Company Disclosure Letter"), the
Company represents and warrants to the Buyer as follows:
4.1 Organization, Qualification, and Corporate Power.
Each of the Company and its Subsidiaries is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of the Company and its Subsidiaries is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to be in good
standing or qualified would not reasonably be expected to have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole. Each of
the Company and its Subsidiaries has full corporate power and authority, and has
all material licenses, permits, and authorizations, in each case necessary to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it, except where the failure to have such licenses, permits
and authorizations would not reasonably be expected to have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole. The Company has
full corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The Board of Directors of the Company has
acted consistent with its fiduciary duties, and this Agreement has been duly
authorized, executed and delivered by the Company, and constitutes the valid and
legally binding obligation of the Company, enforceable against the Company in
accordance with its terms and conditions, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to creditors'
rights generally and general equitable principles. Section 4.1 of the Company
Disclosure Letter lists all of the directors and officers of the Company and its
Subsidiaries. The Company has delivered or made available to the Buyer correct
and complete copies of the charter and bylaws of each of the Company and its
Subsidiaries (as amended to date). The minute books (containing the records of
meetings of the Shareholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
each of the Company and its Subsidiaries are correct and complete in all
material respects. None of the Company and its Subsidiaries is in default under
or in violation in any respect of any provision of its charter, bylaws or other
organizational documents.
4.2 Capitalization. As of the date of this Agreement, the
entire authorized capital stock of the Company consists of (a) 42,000,000
Company Common Shares, of which 10,654,293 Company Common Shares are issued and
outstanding and (b) 3,000,000 shares of preferred stock, of which 588,156
Company Senior Preferred Shares are issued and outstanding and 3,000 Company
22
Junior Preferred Shares are issued and outstanding. All of the issued and
outstanding Company Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record as set forth in Section 4.2 of
the Company Disclosure Letter. Except as set forth in Section 4.2 of the Company
Disclosure Letter, there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments (whether oral or written) that could require the
Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock or any other equity security of the Company, including any right
of conversion or exchange under any outstanding security or other instrument.
There are no outstanding obligations of the Company to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock of the Company. None
of the capital stock of the Company was issued in material violation of any
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder). There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Company. Except for the rights as
shareholders of the shareholders identified as holders of Company Shares in
Section 4.2 of the Company Disclosure Letter, Employee Benefit Plans disclosed
pursuant to Section 4.18 below and as set forth in Section 4.2 of the Company
Disclosure Letter, no Person has any right to participate in, or receive any
payment based on any amount relating to, the revenue, income, value or net worth
of the Company or any of its Subsidiaries or any component or portion thereof,
or any increase or decrease in any of the foregoing. Each Company Option that is
outstanding immediately prior to the Effective Time, and is held by a person
that has not executed and delivered to the Shareholders' Representative the
Contribution Agreement, shall terminate pursuant to its terms in the event that
it remains unexercised immediately as of the Effective Time.
4.3 Noncontravention. Except as set forth in Section 4.3
of the Company Disclosure Letter, neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate in any material respect any statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Company and its Subsidiaries
is subject or any provision of the charter or bylaws of any of the Company and
its Subsidiaries or (b) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or consent under
any material agreement, contract, lease, license, instrument, or other
arrangement to which any of the Company and its Subsidiaries is a party or by
which it is bound or to which any of its material assets is subject (or result
in the imposition of any Security Interest upon any of its assets), other than
termination of the waiting period under the HSR Act and any other applicable
Antitrust Laws. None of the Company and its Subsidiaries needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, other than the
filings required to be made by the Shareholders' Representative, Holding or the
Company under the HSR Act and any other applicable Antitrust Laws.
4.4 Brokers' Fees. Except for fees and commissions
payable to Citigroup, none of the Company and its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
23
4.5 Title to Assets. Except as set forth in Section 4.5
of the Company Disclosure Letter, the Company and its Subsidiaries have good and
marketable title to the material properties and assets used by them, located on
their premises, or shown on the December 31, 2003 Balance Sheet or acquired
after the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the December 31, 2003 Balance Sheet. All Indebtedness of the Company and
its Subsidiaries that was previously secured by the Security Interests listed
under the headings "Trademarks" and "Patents" on Section 4.5 of the Company
Disclosure Letter has been paid and satisfied in full.
4.6 Subsidiaries. Section 4.6 of the Company Disclosure
Letter sets forth for each Subsidiary of the Company (a) its name and
jurisdiction of incorporation, (b) the number of shares of authorized capital
stock of each class of its capital stock, (c) the number of issued and
outstanding shares of each class of its capital stock, the names of the holders
thereof, and the number of shares held by each such holder, and (d) the number
of shares of its capital stock held in treasury. All of the issued and
outstanding shares of capital stock of each Subsidiary of the Company have been
duly authorized and are validly issued, fully paid, and nonassessable. One of
the Company and its Subsidiaries holds of record and owns beneficially all of
the outstanding shares of each Subsidiary of the Company, free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. There are no
outstanding or authorized options, warrants, purchase rights, conversion rights,
exchange rights, or other contracts or commitments that could require any of the
Company and its Subsidiaries to sell, transfer, or otherwise dispose of any
capital stock of any of its Subsidiaries or that could require any Subsidiary of
the Company to issue, sell, or otherwise cause to become outstanding any of its
own capital stock. There are no outstanding stock appreciation, phantom stock,
profit participation, or similar rights with respect to any Subsidiary of the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any Subsidiary
of the Company. None of the Company and its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary of the Company.
4.7 Financial Statements; No Undisclosed Liabilities.
(a) Attached hereto as Exhibit D are (i) audited
consolidated balance sheets and statements of income, changes in shareholders'
equity, and cash flow as of and for the fiscal years ended December 31, 2001,
December 31, 2002 and December 31, 2003 (the "Fiscal Year End Financials") and
(ii) the unaudited consolidated balance sheet and statement of income, changes
in shareholders' equity, and cash flow as of and for the three-month period
ended March 31, 2004, in each case for the Company and its Subsidiaries (the
"Interim Financial Statements" and, together with the financial statements
specified in clause (i) above, the "Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, except as set forth in Schedule
1.1(b) attached hereto and subject, in the case of the Interim Financial
Statements, to the absence of any notes thereto and to normal and recurring
year-end adjustments thereto that will not, individually or in the aggregate, be
material in amount. The Financial Statements present fairly in all material
respects the financial condition of the Company and its Subsidiaries as of the
dates thereof, and the results of operations of the Company and its Subsidiaries
for the periods covered thereby, and are consistent with the books
24
and records of the Company and its Subsidiaries (which books and records are
correct and complete in all material respects).
(b) Except (i) as and to the extent reflected
and adequately reserved against in the Financial Statements, (ii) for
liabilities and obligations of a type not required under GAAP to be disclosed in
the Financial Statements or (iii) as set forth in Section 4.7(b) of the Company
Disclosure Letter, as of December 31, 2003, neither the Company nor any of its
Subsidiaries had any liabilities or obligations, whether accrued, absolute,
contingent or otherwise. Since December 31, 2003, neither the Company nor any of
its Subsidiaries has incurred any liability or obligation, except for (i)
liabilities and obligations incurred in the Ordinary Course of Business or (ii)
as set forth in Section 4.7(b) of the Company Disclosure Letter.
(c) Neither the Company nor any of its
Subsidiaries has any indebtedness or mandatorily redeemable capital stock except
for the Indebtedness, and there are no prepayment penalties or premiums with
respect to such indebtedness except as set forth in Section 4.7(c) of the
Company Disclosure Letter.
4.8 Events Subsequent to the Most Recent Fiscal Year End.
Since December 31, 2003, there has not been any Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole (other than, since the date of
this Agreement, any effect arising from changes in general industry conditions,
changes in the US economy, including as a result of acts of war or terrorism,
changes in GAAP, changes in law or regulations, or changes resulting from the
fact that the transactions contemplated by this Agreement have been publicly
disclosed). Except as set forth in Section 4.8 of the Company Disclosure Letter,
since December 31, 2003, the Company and its Subsidiaries have conducted their
respective businesses only in the Ordinary Course of Business, and:
(a) none of the Company and its Subsidiaries has
sold, leased, transferred, or assigned any of its material assets, tangible or
intangible, other than in the Ordinary Course of Business;
(b) none of the Company and its Subsidiaries has
entered into any (i) agreement that is not terminable on 90 days' notice or
less, or (ii) agreement, contract, lease or license (or series of related
agreements, contracts, leases, and licenses) either involving (x) more than
$250,000 or (y) (other than those relating to purchases of supplies, purchases
or sales of inventory) a commitment of one year or more, or otherwise outside
the Ordinary Course of Business;
(c) no party (including any of the Company and
its Subsidiaries) has accelerated, terminated, modified, or cancelled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) to which any of the Company and its
Subsidiaries is a party or by which any of them is bound and that involves more
than $250,000 or is otherwise material to the Company and its Subsidiaries,
taken as a whole, and no party has threatened to do so;
(d) none of the assets, tangible or intangible,
of the Company or the Subsidiaries has become subject to any Security Interest
or had any Security Interest to which it is or was subject modified in any
material respect;
25
(e) none of the Company and its Subsidiaries has
made any capital investment in, any loan to, or any acquisition of the
securities or assets of (including by merger or consolidation), any other Person
(or series of related capital investments, loans, and acquisitions);
(f) none of the Company and its Subsidiaries has
issued any note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease obligation
either involving more than $250,000 or outside the Ordinary Course of Business,
other than intercompany guarantees;
(g) none of the Company and its Subsidiaries has
delayed or postponed the payment of any accounts payable and other material
liabilities outside the Ordinary Course of Business or accelerated or accepted
the prepayment of any notes or accounts receivable outside the Ordinary Course
of Business;
(h) none of the Company and its Subsidiaries has
granted any license or sublicense of any rights under or with respect to any
Intellectual Property;
(i) there has been no change made or authorized
in the charter, bylaws or other organizational documents of any of the Company
and its Subsidiaries;
(j) none of the Company and its Subsidiaries has
issued, sold, or otherwise disposed of any of its capital stock (except upon the
exercise of outstanding options), or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock, other than payment-in-kind dividends payable on the
Company Senior Preferred Shares;
(k) none of the Company and its Subsidiaries has
declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock, other than payment-in-kind
dividends payable on the Company Senior Preferred Shares;
(l) none of the Company and its Subsidiaries has
experienced any damage, destruction, or loss (whether or not covered by
insurance) to any of its material assets or property;
(m) none of the Company and its Subsidiaries has
made any loan to, or entered into any other transaction with, any of its
directors, officers or employees, other than travel and expense advances in the
Ordinary Course of Business;
(n) none of the Company and its Subsidiaries has
entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any such existing contract or agreement;
(o) none of the Company and its Subsidiaries has
granted or paid any increase in the compensation of any of its directors,
officers or employees outside the Ordinary Course of Business, other than
agreements that the Company has entered into with certain of its officers and
employees that provide for retention payments to such individuals in an
aggregate amount not to exceed $750,000;
26
(p) none of the Company and its Subsidiaries has
adopted, amended, modified, or terminated any bonus, profit sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan), other than (i) agreements that the Company has
entered into with certain of its officers and employees that provide for
retention payments to such individuals in an aggregate amount not to exceed
$750,000, (ii) the adoption of the Company's (x) 2004 Senior Management
Incentive Program and (y) 2004 EMEA Incentive Program and (iii) the approval or
payment of the Company's contributions for 2003 to the Xxxxxx Respiratory Care
Inc. 2003 Profit Sharing Plan and the Company's 2003 Senior Management Incentive
Program and 2003 EMEA Incentive Program;
(q) there has not been any change in accounting
methods or tax principles, practices or policies followed by the Company and its
Subsidiaries, any increase in reserves or any revaluation of any of their assets
from those in effect during or with respect to the past fiscal year;
(r) neither the Company nor any of its
Subsidiaries has made or rescinded any material express or deemed election
relating to Taxes, settled or compromised any material claim, audit or
controversy relating to Taxes, entered into any Tax ruling, agreement, contract,
or plan, filed any amended Tax Return, or except as may be required by
applicable law, made any change to any of its material methods of reporting
income or deductions for federal income Tax purposes from those employed in the
preparation of its most recently filed federal income tax return; and
(s) none of the Company or its Subsidiaries has
committed to any of the foregoing.
4.9 Legal Compliance; Permits and Licenses. Except as set
forth in Section 4.9 of the Company Disclosure Letter:
(a) Each of the Company and its Subsidiaries has
complied in all material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state and local governments (and all agencies
thereof), and to the Knowledge of the Company, no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against, and no notice, correspondence, inquiry or other
communication (including any notice from the FDA or other regulatory authority
of any state, country or other jurisdiction) has been received by, any of the
Company and its Subsidiaries alleging any failure to so comply; and
(b) Other than those permits listed in Section
5.14(b) and Section 5.14(d) of this Agreement, the Company and its Subsidiaries
have all material permits, licenses, orders, franchises and approvals of all
federal, state and local governments (and all agencies thereof) ("Permits")
necessary for the operation of the businesses of the Company and its
Subsidiaries as currently conducted, and to own, lease or otherwise hold their
respective assets and properties. Since January 1, 2000, no notice has been
received by the Company and/or its Subsidiaries with respect to any failure by
the Company and/or its Subsidiaries to have any material Permit required to
operate the businesses of the Company and its Subsidiaries as currently
conducted. All such Permits are in full force and effect, and no suspension,
revocation, cancellation or adverse modification of any of such items are
pending or, to the Knowledge of the Company, threatened. Neither the Company nor
27
its Subsidiaries is in material default or material non-compliance under any
Permit. The products currently sold or distributed by the Company and/or its
Subsidiaries in the United States that are required to be registered or listed
with the U.S. Food and Drug Administration (the "FDA") under Section 360 of the
Federal Food, Drug and Cosmetic Act (21 U.S.C. 30 et seq.) and the applicable
rules and regulations thereunder, are so listed or registered. The businesses of
the Company and its Subsidiaries are in material compliance with the current
Good Manufacturing Practices for Medical Devices regulations set forth in C.F.R.
Part 820 as well as the applicable record-keeping and reporting requirements for
Medical Devices Reporting set forth in 21 C.F.R. Part 803.
4.10 Tax Matters. Except as set forth in Section 4.10 of
the Company Disclosure Letter:
(a) Each of the Company and its Subsidiaries has
filed all material Tax Returns that it was required to file. All such Tax
Returns were correct and complete in all material respects. All Taxes owed by
any of the Company and its Subsidiaries have been or will be paid prior to the
Closing or accrued as a Tax liability or payable or as part of the Tax reserve
on the Final Closing Date Balance Sheet. None of the Company and its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return. Since December 31, 2000, the Company and its
Subsidiaries have not received notice of any claim by an authority in a
jurisdiction where any of the Company and its Subsidiaries do not currently file
Tax Returns stating that the Company and its Subsidiaries are or may be subject
to taxation by that jurisdiction. There are no Security Interests on any of the
assets of any of the Company and its Subsidiaries that arose in connection with
any failure (or alleged failure) to pay any Tax, except for any Tax, the payment
of which is not delinquent and not subject to penalties or which is being
contested in good faith.
(b) Each of the Company and its Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder, or other third party and has maintained all records with
respect thereto as required by law.
(c) There is no dispute or claim concerning any
Tax liability of any of the Company and its Subsidiaries either (i) claimed or
raised by any authority in writing delivered to any of the Company and its
Subsidiaries or (ii) as to which the Company has Knowledge based upon personal
contact with any agent of such authority. There is no audit, examination, or
similar proceeding pending or, to the Knowledge of the Company, proposed or
threatened, with respect to Taxes of the Company or any Subsidiary. The Company
has delivered or made available to the Buyer correct and complete copies of all
federal income Tax Returns and all examination reports, and statements of
deficiencies assessed against or agreed to by any of the Company and its
Subsidiaries for all periods beginning after December 31, 2000.
(d) None of the Company and its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
(e) None of the Company and its Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Sec. 280G. None of the Company
and its Subsidiaries has been a United States real property holding corporation
within the meaning of Code Sec. 897(c)(2) during the applicable period specified
in Code Sec.
28
897(c)(1)(A)(ii). None of the Company and its Subsidiaries is a party to any Tax
allocation or sharing agreement other than any agreement solely among the
Company and any of its Subsidiaries.
(f) The unpaid Taxes of the Company and its
Subsidiaries as of the Closing Date will not exceed the payable or liability for
Taxes plus the reserve for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) as
set forth on the Final Closing Date Balance Sheet and taken into account in
determining the Final Closing Date Net Working Capital Amount.
(g) Neither the Company, any of its Subsidiaries
nor any other Person on their behalf (i) has filed a consent pursuant to Section
341(f) of the Code; (ii) has executed or entered into a closing agreement
pursuant to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of state, local or foreign law or any other agreement relating
to Taxes that could reasonably be expected to have an effect on the Company's or
any Subsidiary's liability for, or reporting of, Taxes in any period after the
Closing Date; or (iii) has agreed to or is required to make any adjustments
pursuant to Section 481(a) or Section 482 of the Code, nor, to the Company's
Knowledge, has any taxing authority proposed or is considering any such
adjustment. Neither the Company nor any Subsidiary has been a party to a
transaction that was intended to be governed by Section 355 of the Code.
(h) Section 4.10 of the Company Disclosure
Letter sets forth the amount of the federal net operating losses of the Company
and its Subsidiaries through December 31, 2003 that will carry over and be
available to the Company and its Subsidiaries for taxable periods beginning on
or after the Closing Date and any existing limitation on the use of such net
operating losses under Section 382 of the Code (other than any limitation
resulting from the Merger).
4.11 Real Property.
(a) Section 4.11(a) of the Company Disclosure
Letter lists and describes briefly all real property owned by the Company and
its Subsidiaries (the "Owned Real Property"). The Company has good and
marketable title in fee simple in the Owned Real Property, free and clear of all
Security Interests. There are no pending or, to the Knowledge of the Company,
threatened condemnation proceedings, lawsuits, or administrative actions
relating to the Owned Real Property which would have a material adverse effect
on the current use, occupancy or value thereof.
(b) Section 4.11(b) of the Company Disclosure
Letter lists and describes briefly all real property leased or subleased to any
of the Company and its Subsidiaries (the "Leased Real Property"). The Company
and its Subsidiaries have valid legal right to use all of the Leased Real
Property, free of Security Interests (other than any Security Interests arising
out of the lease or similar agreement under which the Company and/or the
Subsidiaries uses or occupies the Leased Real Property). The Company has
delivered to, or made available for review by, the Buyer correct and complete
copies of the leases and subleases listed in Section 4.11(b) of the Company
Disclosure Letter (together with all amendments, extensions, renewals,
guaranties and other agreements with respect thereto).
With respect to each lease and sublease listed in Section 4.11(b) of
the Company Disclosure Letter:
29
(i) the lease or sublease is legal,
valid, binding, enforceable, and in full force and effect against the Company
and/or its Subsidiaries, as applicable, and, to the knowledge of the Company,
the other parties thereto;
(ii) none of the Company or any of its
Subsidiaries is in material default, nor has the Company or any of its
Subsidiaries, in its capacity as a tenant or subtenant under a lease or
sublease, received notice of any event which, with the giving of time or passing
of notice would constitute a default;
(iii) there are no pending or, to the
Knowledge of the Company, threatened proceedings, lawsuits, or administrative
actions relating to the Leased Real Property that would materially and adversely
affect the Company's or its Subsidiaries' possession, use, quiet enjoyment, or
occupancy of such property or the value thereof;
(iv) no security deposit or portion
thereof deposited with respect to such leases or subleases has been applied in
respect of a breach or default under such leases that has not been redeposited
in full;
(v) neither the Company nor any
Subsidiary owes any brokerage commissions or finder's fees with respect to such
leases or subleases;
(vi) the other party or parties to such
leases is not an Affiliate of, and otherwise does not have any economic interest
in, the Company or any Subsidiary; and
(vii) neither the Company nor any
Subsidiary has subleased, licensed or otherwise granted any Person the right to
use or occupy the Leased Real Property.
(c) With respect to the Temecula facility, the
original roofing membranes remain on the buildings and generally consist of
asbestos containing felt plies with inter-mopped asphalt. The original roofing
membrane on each building at the Temecula facility is now covered with
polyurethane foam, with the exception of the original roofing membrane on the
manufacturing plant building, which is not friable, in its present undisturbed
condition, and is covered by a raised metal roof. Each of the polyurethane foam
covers has an additional elastomeric coating, with the exception of the
polyurethane cover on office building A, which has a raised metal roof over the
polyurethane foam.
4.12 Intellectual Property.
(a) The Company and its Subsidiaries own or have
the right to use, pursuant to license, sublicense, agreement, or permission, all
material Intellectual Property used in the operation of the businesses of the
Company and its Subsidiaries as currently conducted, and each such item of
Intellectual Property owned or used by the Company and its Subsidiaries
immediately prior to the Closing hereunder will be owned or available for use by
the Company or the Subsidiary on identical terms and conditions immediately
subsequent to the Closing hereunder.
(b) To the Knowledge of the Company, except as
set forth in Section 4.12(b) of the Company Disclosure Letter, none of the
Company and its Subsidiaries has infringed upon or misappropriated any
Intellectual Property rights of third parties, and none of the Company and its
Subsidiaries has received, in the five (5) years preceding the date of this
30
Agreement, any written charge, complaint, claim, demand, or notice alleging any
such, infringement or misappropriation (including any claim that any of the
Company and its Subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the Company, in the
five (5) years preceding the date of this Agreement, no third party has
infringed upon or misappropriated any Intellectual Property rights of any of the
Company and its Subsidiaries.
(c) Section 4.12(c) of the Company Disclosure
Letter identifies each issued or pending patent, issued or pending copyright
registration, pending trademark application or trademark registration, or domain
name registration, if any, which has been made by or issued to any of the
Company and its Subsidiaries, as well as each unregistered copyright owned by
the Company in any material software, and identifies each license, agreement, or
other permission which any of the Company and its Subsidiaries has granted to
any third party with respect to any of its material Intellectual Property
(together with any exceptions). The Company has delivered or made available to
the Buyer correct and complete copies of all such applications and
registrations, licenses, agreements, and permissions (as amended to date) and
has made available to the Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each such
item. Section 4.12(c) of the Company Disclosure Letter also identifies each
trade name or unregistered trademark owned and currently being used by any of
the Company and its Subsidiaries in connection with any of its businesses. With
respect to each item of Intellectual Property required to be identified in
Section 4.12(c) of the Company Disclosure Letter:
(i) the Company's and its Subsidiaries'
right, title, and interest in and to the items are free and clear of any
Security Interest or undisclosed license;
(ii) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge of
infringement or misappropriation; and
(iii) no action, suit, proceeding,
hearing, investigation, charge of infringement or misappropriation, complaint,
claim, or demand is currently pending and, to the Knowledge of the Company, no
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand has been threatened in the preceding eighteen (18) months which
challenges the legality, validity, enforceability, use, or ownership of the
item.
(d) Section 4.12(d) of the Company Disclosure
Letter identifies each item of material Intellectual Property that any third
party owns and that any of the Company and its Subsidiaries uses pursuant to
license, sublicense, agreement, or permission. The Company has delivered or made
available to the Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to
each item of Intellectual Property required to be identified in Section 4.12(d)
of the Company Disclosure Letter:
(i) the license, sublicense, agreement,
or permission covering the item is legal, valid, binding, enforceable, and in
full force and effect against the Company and/or its Subsidiaries, as
applicable, and, to the Knowledge of the Company, the other parties thereto;
(ii) to the Knowledge of the Company, no
party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration thereunder; and
31
(iii) none of the Company and its
Subsidiaries has granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
4.13 Tangible Assets; Sufficiency of Assets. Except as set
forth in Section 4.13(b) of the Company Disclosure Letter:
(a) The tangible assets owned or leased by the
Company and/or its Subsidiaries have been maintained in the Ordinary Course of
Business, are in a good operating condition and repair in the aggregate (subject
to normal wear and tear), and are suitable for the purposes for which they
currently are used; and
(b) The rights, properties and other assets
presently owned, leased or licensed by the Company and its Subsidiaries include
all material rights, properties and other assets necessary to permit the Company
and its Subsidiaries to conduct their business in the same manner as such
business is currently conducted.
4.14 Contracts. Section 4.14 of the Company Disclosure
Letter lists the following contracts and other agreements to which any of the
Company and its Subsidiaries is a party:
(a) any agreement (or group of related
agreements) for the lease or use of personal property to or from any Person
providing for lease payments in excess of $200,000 per annum;
(b) any agreement (or group of related
agreements), including agreements with group purchasing organizations or like
parties, for the purchase or sale of raw materials, goods, commodities,
services, utilities, equipment, supplies, products, or other personal property,
or for the furnishing or receipt of services, the performance of which (i) will
extend over a period of one (1) year or more and involve consideration in excess
of $200,000 per annum or (ii) involve consideration in excess of $500,000 per
annum (in each case other than purchase orders or sales orders in the Ordinary
Course of Business);
(c) any agreement concerning a partnership,
joint venture or like arrangement or providing for payments to or by any Person
based on or determined by reference to sales, purchases or profits, other than
direct payments for products, involving obligations in excess of $250,000;
(d) any agreement that is an indenture,
mortgage, promissory note, loan agreement, guarantee of amounts owed by others,
letter of credit or other agreement or instrument of the Company or its
Subsidiaries for the borrowing or lending of funds by the Company and/or its
Subsidiaries or provides for the creation of any Security Interest upon any of
the property or assets of the Company and/or its Subsidiaries;
(e) any agreement concerning confidentiality
(other than (i) those entered into in the Ordinary Course of Business, and (ii)
those entered into with potential buyers of the Company within six (6) months
prior to the date of this Agreement), or any other agreement concerning
noncompetition or which contains any covenant that purports to restrict the
business activity of any of the Company and its Subsidiaries or limits their
ability to engage in any line of business;
32
(f) any agreement with any of the holders of the
Company Shares and their Affiliates (other than the Company and its
Subsidiaries) or with any employee or director (other than employment or stock
option agreements);
(g) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation or other equity-based or
profit sharing plan or arrangement for the benefit of its current or former
directors, officers, and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis providing
annual compensation in excess of $85,000 (including commissions and bonus
payments) or providing severance benefits;
(j) any agreement that is a sales, marketing or
distribution agreement that is material to the Company and/or its Subsidiaries;
(k) any agreement that involves consideration in
excess of $200,000 per annum and that requires the Company and/or its
Subsidiaries to deal exclusively with or grant exclusive rights to any customer,
vendor, supplier, distributor, contractor or other party;
(l) any agreement that includes minimum purchase
conditions or requirements or other terms that restrict or limit the purchasing
relationships of the Company and/or its Subsidiaries or any customer, licensee
or lessee thereof;
(m) any agreement that provides for "earn-outs"
or other contingent payments;
(n) any agreement with any of the Significant
Shareholders or any Affiliate of the Company or its Subsidiaries (other than
employment and stock option agreements and other than the Company Preferred
Shares);
(o) any agreement for the acquisition of the
debt or equity securities or all or substantially all of the assets of any other
Person (including, without limitation, by merger or consolidation).
The Company has delivered or made available to the Buyer a correct and
complete copy of each written agreement listed in Section 4.14 of the Company
Disclosure Letter, and Section 4.14 of the Company Disclosure Letter describes
in reasonable detail the material terms and conditions of any oral agreement
identified therein. With respect to each such agreement: (i) the agreement is
legal, valid, binding, enforceable, and in full force and effect against the
Company and/or its Subsidiaries, as applicable, and, to the Knowledge of the
Company, the other parties thereto, and (ii) each of the Company and its
Subsidiaries is not in material breach or default in any material respect under
the terms of such agreements. To the Knowledge of the Company, no other party to
any of such agreements is in breach or default in respect thereunder.
4.15 Insurance.
33
(a) Section 4.15 of the Company Disclosure
Letter sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which any of the
Company and its Subsidiaries is a party, a named insured, or otherwise the
beneficiary of coverage: (i) the name of the insurer, the name of the
policyholder, and the name of each covered insured; and (ii) the policy number
and the period of coverage.
(b) With respect to each such insurance policy:
(i) the policy is in full force and effect; and (ii) none of the Company or any
of it Subsidiaries is in breach or default (including with respect to the
payment of premiums or the giving of notices) in any material respect under the
terms of such policy. There are no outstanding unpaid amounts relating to
material claims under any such insurance policy or binder therefore. None of the
Company nor its Subsidiaries has received a notice of cancellation or
non-renewal of any such insurance policy or binder therefor. All premiums for
each such insurance policy or binder have been paid in full. Section 4.15 of the
Company Disclosure Letter sets forth a true and complete description of all
outstanding bonds and other surety arrangements issued or entered into in
connection with the Company's and/or its Subsidiaries' business, assets and
liabilities.
4.16 Litigation. Section 4.16 of the Company Disclosure
Letter sets forth each instance in which any of the Company and its Subsidiaries
(i) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (ii) is a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or administrative agency of any
federal, state or local jurisdiction or before any arbitrator or (iii) is, to
the Knowledge of the Company, threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
administrative agency of any federal, state or local jurisdiction or before any
arbitrator that are material to the Company or that involves a claim or series
of related claims involving more than $250,000 in the aggregate (exclusive of
workers' compensation claims in the Ordinary Course of Business). None of the
Company and its Subsidiaries, nor any of their assets or properties, is subject
to any order, judgment, injunction, writ, indictment or information, grand jury
subpoena or civil investigative demand, plea agreement, stipulation, decree or
award (whether rendered by a court, commission, arbitration tribunal, or
judicial, governmental or administrative department, body, agency, administrator
or official, grand jury or any other forum for the resolution of grievances).
4.17 Employees. Section 4.17 of the Company Disclosure
Letter contains a list of the names and current salary rates and bonus
commitments for all employees of the Company and its Subsidiaries whose annual
salaries exceed $100,000. Except as set forth in Section 4.17 of the Company
Disclosure Letter, none of the Company and its Subsidiaries is a party to or
bound by any collective bargaining agreement, nor, as of the date of this
Agreement, has the Company and its Subsidiaries experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. No unfair labor practice proceedings are currently pending against the
Company and its Subsidiaries, and each of the Company and its Subsidiaries has
complied in all material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) relating to employment practices, terms and conditions of
employment, equal employment opportunity, nondiscrimination, employee privacy,
immigration, wages, hours, benefits, collective bargaining, plant closing, the
payment of social security and similar taxes, and income tax withholding. As of
the date of this Agreement, the Company has no Knowledge of any organizational
effort currently being made or threatened by or on
34
behalf of any labor union with respect to employees of any of the Company and
its Subsidiaries. Except as set forth in Section 4.14(i) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
any contract, agreement, or arrangement with any employee of the Company or any
of its Subsidiaries that (i) restricts the Company's or any of its Subsidiaries'
right to terminate the employment of any employee without cause or without a
specified notice period or (ii) obligates the Company or any of its Subsidiaries
to pay severance or other compensation to any employee of the Company or any of
its Subsidiaries upon termination of such employee's employment with the Company
or any of its Subsidiaries (including as a result of such employee's termination
without cause or without a specified notice).
4.18 Employee Benefits.
(a) Section 4.18 of the Company Disclosure
Letter lists each Employee Benefit Plan that any of the Company and its
Subsidiaries maintains or to which any of the Company and its Subsidiaries
contributes or is required to contribute, including all Employee Pension Benefit
Plans and Employee Welfare Benefit Plans.
(i) Each such Employee Benefit Plan
(and each related trust, insurance contract, or fund) has been operated in
accordance with its terms and complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and other
applicable laws.
(ii) All reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and
Summary Plan Descriptions) required to have been filed or distributed in respect
of the three (3) prior plan years as to each such Employee Benefit Plan have
been filed or distributed appropriately.
(iii) All contributions (including all
employer contributions and employee salary reduction contributions) which are
due have been paid by the time required by ERISA, the Code, and other applicable
laws to each such Employee Benefit Plan which is an Employee Pension Benefit
Plan.
(iv) For each such Employee Benefit Plan
which is an Employee Pension Benefit Plan and is intended to be a "qualified
plan" under Code Section 401(a), the Company has either (A) received a favorable
determination letter (a "GUST Determination Letter") from the Internal Revenue
Service that takes into account any change required to be made to such Employee
Pension Benefit Plan in order to comply with the requirements of Code Section
401(a), as amended by the Retirement Protection Act of 1994, enacted as part of
the Uruguay Round Agreements Act, the Uniform Services Employment and
Reemployment Rights Act of 1994, Small Business Job Protection Act of 1996,
Taxpayer Relief Act of 1997, Transportation Revenue Act of 1998, Internal
Revenue Service Restructuring and Reform Act of 1998, and Community Renewal Tax
Relief Act of 2000 (collectively referred to as "GUST"), (B) timely filed an
application for determination with the IRS requesting a determination that such
Employee Pension Benefit Plan meets the requirements of Code Section 401(a), as
amended by GUST, and that an any trust established in connection with the
Employee Pension Benefit Plan is exempt from federal income taxation of Code
Section 501(a) (hereinafter referred to as a "GUST Application for
Determination"), or (C) where there is no GUST Determination Letter or GUST
Application for Determination, the Employee Pension Benefit Plan is a prototype
plan on which the Company may rely upon the prototype sponsor's current and
effective opinion letter from the Internal Revenue Service. The
35
Company has provided the Buyer with a true and complete copy of each GUST
Determination Letter or GUST Application for Determination received or filed by
Company with respect to each such Employee Pension Benefit Plan, or in the case
of a prototype document (as referenced above) the sponsor's opinion letter from
the Internal Revenue Service.
(v) The Company has delivered or made
available to the Buyer correct and complete copies of the plan documents and
summary plan descriptions, the three (3) most recently filed Form 5500 Annual
Reports, all related trust agreements, insurance contracts, and other funding
agreements and third party administrative agreements which implement each such
Employee Benefit Plan.
(b) There have been no Prohibited Transactions
with respect to any Employee Benefit Plan maintained by the Company or its
Subsidiaries. To the Knowledge of the Company, no Fiduciary has any liability
for breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or, to the Knowledge of the
Company, threatened, which could reasonably be expected to have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole.
(c) None of the Company and its Subsidiaries has
incurred, and none of the Company and its Subsidiaries have any reason to expect
that any of the Company and its Subsidiaries will incur, any liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal liability). No Employee Benefit Plan that covers or
has covered employees of the Company or its Subsidiaries which is an Employee
Pension Benefit Plan is or was a Multiemployer Plan or plan subject to Code
Section 412 or Section 302 or Title IV of ERISA.
(d) None of the Company and its Subsidiaries
maintains or contributes to, or within the preceding five (5) years has
contributed to or been required to contribute to, any Employee Welfare Benefit
Plan providing medical, health, or life insurance for current or future retired
or terminated employees, their spouses, or their dependents subsequent to
termination (other than in accordance with Part 6 of Subtitle B of Title 1 of
ERISA and Code Sec. 4980B or applicable state insurance laws).
4.19 Guaranties. None of the Company and its Subsidiaries
is a guarantor for any liability or obligation (including indebtedness) of any
other Person, other than as they relate solely to intercompany guarantees.
4.20 Environment, Health and Safety. Except as set forth
in Section 4.20 of the Company Disclosure Letter:
(a) The Company and each of its Subsidiaries has
been in material compliance and has complied in all material respects with all
Environmental Laws, and no unresolved action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of the Company and its Subsidiaries alleging any failure
so to comply. The Company and each of its Subsidiaries has obtained and been in
compliance in all material respects with all of the terms and conditions of all
material permits and licenses which are required under any applicable
Environmental Laws.
36
(b) To the Knowledge of the Company, none of the
Company and its Subsidiaries has any material liability to third parties under
any applicable Environmental Laws for damage to any site, location, or body of
water (surface or subsurface) as a result of the release of any hazardous
substance, material or waste to the environment.
(c) Neither the Company nor any of its
Subsidiaries has caused any release of a hazardous material, substance or waste
to the environment at any facility now operated by the Company or any of its
Subsidiaries (or any predecessor for which they may be responsible) or, to the
Knowledge of the Company, at any facility formerly owned or operated by the
Company, in each case that could give rise to material liability under any
Environmental Law. No waste has been disposed of by the Company or any of its
Subsidiaries at any site or location that could give rise to material liability
under any Environmental Law. All Phase One and Phase Two environmental
assessments and all environmental compliance audits of facilities now or
formerly owned or operated by the Company or any of its Subsidiaries, which have
been completed since April 7, 1998, have been provided to Buyer.
4.21 Certain Business Relationships with the Company and
its Subsidiaries. Except as set forth in Section 4.21 of the Company Disclosure
Letter, none of the Significant Shareholders and/or their Affiliates, and no
director, officer or Affiliate of the Company and/or its Subsidiaries, has, or
since January 1, 1999 has had, any interest in any material asset, tangible or
intangible, used in the business of any of the Company and its Subsidiaries or
any interest in any business arrangement or relationship with any of the Company
and its Subsidiaries (other than, in the case of a Person who is a director or
officer of the Company and/or its Subsidiaries, such Person's status as such
with the Company and/or its Subsidiaries). None of the Significant Shareholders
and/or their Affiliates, and no director, officer or Affiliate of the Company
and/or its Subsidiaries, owns, or since January 1, 1999 has owned, an equity
interest or any other financial or profit interest in a Person that has (a) had
business dealings or a financial interest in any transaction with any of the
Company and its Subsidiaries or (b) engaged in competition with any of the
Company and its Subsidiaries with respect to any products or services of any of
the Company and its Subsidiaries, except, in each such case, for the ownership
by any such Person of less than 5% of the outstanding stock of any publicly
traded corporation.
4.22 Required Shareholder Vote. The affirmative vote of
the holders of (a) a majority of the outstanding shares of the Company Common
Shares, the Company Junior Preferred Shares and the Company Senior Preferred
Shares, voting together as a class (with each of the Holders of the Company
Junior Preferred Shares and the Company Senior Preferred Shares entitled to
one-half of one vote for each share then held), (b) a majority of the
outstanding shares of the Company Common Shares, voting together as a separate
class, and (c) a majority of the outstanding shares of the Company Junior
Preferred Shares and the Company Senior Preferred Shares, voting together as a
separate class (collectively, the "Required Shareholder Vote"), are the only
votes of the holders of any class or series of Company capital stock necessary
to adopt this Agreement and approve the Merger and the other transactions
contemplated hereby. As of the date of this Agreement, each of Holding and Xxxxx
Xxxxxx Xxxxxx has agreed to approve and adopt this Agreement, the Merger and the
other transactions contemplated hereby, and to vote all shares of the capital
stock of the Company held by each of them in favor thereof, and have also agreed
to validly and irrevocably waive any statutory dissenters' or appraisal rights
related thereto.
37
4.23 Company Board Approval. The Board of Directors of the
Company, by resolutions duly adopted by unanimous vote at a meeting duly called
and held and not subsequently rescinded or modified in any way, has duly (i)
determined that this Agreement, the Merger and the other transactions
contemplated hereby are fair to and in the best interests of the Company and its
shareholders, (ii) approved this Agreement, the Merger and the other
transactions contemplated hereby and (iii) declared the advisability of this
Agreement, the Merger and the other transactions contemplated hereby, and,
further, (iv) recommended that the shareholders of the Company approve and adopt
this Agreement, the Merger and the other transactions contemplated hereby and
that this Agreement be submitted for consideration by the Company's
shareholders.
4.24 Suppliers. Section 4.24 of the Company Disclosure
Letter sets forth a correct list of the top ten (10) suppliers to the Company
and its Subsidiaries, taken as a whole, ranked by the dollar amount of total
sales of products or services to the Company and its Subsidiaries, taken as a
whole, during the year ended December 31, 2003, together with the aggregate
amount of the purchases made from each such supplier since January 1, 2004. From
December 31, 2003 to the date of this Agreement, no supplier listed on Section
4.24 of the Company Disclosure Letter has notified the Company and/or its
Subsidiaries that it will stop or decrease the rate of supplying materials,
products or services to the Company or any of its Subsidiaries.
4.25 Powers of Attorney. Except as set forth in Section
4.25 of the Company Disclosure Letter, there are no outstanding powers of
attorney executed on behalf of the Company or any of its Subsidiaries.
4.26 Controls and Procedures. The Company maintains a
system of internal accounting controls that management reasonably believes is
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Chief Executive Officer and Chief Financial Officer of the
Company have, on a voluntary basis as a result of the Company's status as a
"faux filer" under the Securities Exchange Act of 1934, made all certifications
required by the Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations
promulgated by the Securities and Exchange Commission pursuant thereto. The
Company maintains "disclosure controls and procedures" (as defined in Rule
13a-14(c) under the Securities Exchange Act of 1934).
5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing:
5.1 General. Each of the Parties will use his or its
commercially reasonable efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction or waiver of
the closing conditions set forth in Section 7 below).
5.2 Notices and Consents. Subject to the provisions of
Section 5.9, the Company will, and will cause each of its Subsidiaries to, give
any notices to third parties and use its commercially reasonable efforts to
obtain any third-party consents and/or estoppel certificates that are listed on
Schedule 5.2; provided, however, that Company shall not be required to make any
38
payments to such third parties in order to obtain any such consents. Subject to
the provisions of Section 5.9, each of the Parties will give any notices to,
make any filings with, and use its commercially reasonable efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 3.1(b) and Section 3.2(b)
above. Without limiting the generality of the foregoing, each of the Parties
will file any Notification and Report Forms and related material that he or it
may be required to file with the United States Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
(the "DOJ") under the HSR Act (including, without limitation, using their
commercially reasonable efforts to file their initial Notification and Report
Forms, with all required exhibits and schedules thereto, no later than five (5)
business days after the date of this Agreement), will make, promptly, any other
filings that are required by any other government or governmental authority
under any other Antitrust Laws (including, if necessary, with the European
Competition Commission and the applicable regulatory agencies and authorities of
the governments of Germany and Brazil), and will make any further filings
pursuant thereto that may be necessary, proper or advisable in connection
therewith.
5.3 Operation of Business. Except as set forth in this
Section 5.3, the Company will not, and will not cause or permit any of its
Subsidiaries to, engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Company will not, and will not cause or permit
any of its Subsidiaries to, (a) except as set forth in Schedule 5.3, declare,
set aside, or pay any dividend or make any distribution with respect to its
capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, other than redemptions, purchases or acquisitions from employees,
officers, directors or consultants to the Company pursuant to the terms of
employee benefit plans of the Company existing as of the date of this Agreement,
(b) make any capital expenditure (or series of related capital expenditures) not
included in the Company's 2004 budget for capital expenditures (a copy of which
has been provided previously to the Buyer) or involving more than $200,000
individually or $500,000 in the aggregate, (c) amend or modify, or agree to
amend or modify, or waive compliance by any shareholder of the Company with, any
provision of the Voting Agreement providing for the waiver of any shareholder's
statutory dissenters' or appraisal rights, or (d) otherwise engage in any
practice, take any action, or enter into any transaction described in Section
4.8 above (other than amending or modifying any existing or entering into any
new (i) GPO, IDN or other agreements related to the sales, marketing or
distribution of Company products in the Ordinary Course of Business, (ii)
agreements related to the purchase of supplies and inventory in the Ordinary
Course of Business), or (iii) agreements with certain officers and employees of
the Company that provide for retention payments to such individuals in an
aggregate amount not to exceed $750,000 (inclusive of any amounts subject to
similar agreements previously entered into by and between the Company and such
class of individuals between December 31, 2003 and the date of this Agreement).
5.4 Preservation of Business. The Company will, and the
Company will cause each of its Subsidiaries to, use its commercially reasonable
efforts to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers and employees in the Ordinary
Course of Business.
5.5 Access. The Company will permit, and will cause each
of its Subsidiaries to permit, representatives of the Buyer to have (subject to
the terms of any applicable leases and subleases) access, upon reasonable
request and during normal business hours, throughout the period
39
prior to Closing, to all premises, properties, personnel, independent
accountants, attorneys, books, records (including Tax records), contracts, and
documents of or pertaining to each of the Company and its Subsidiaries. Without
limiting the generality of the preceding sentence, the Company will use its
commercially reasonable efforts (without expense to the Company) to cause its
independent accountants to provide the Buyer and its independent accountants
such access to its workpapers and other financial information as the Buyer and
its independent accountants may reasonably request in connection with a review
of the Financial Statements.
5.6 Exclusivity. The Company will not (and the
Significant Shareholders will not cause or permit any of the Company and its
Subsidiaries and/or their respective directors, officers, employees,
shareholders, agents or representatives to), and the Significant Shareholders
will not (and will not cause or permit their respective directors, officers,
employees, partners, shareholders, agents or representatives to) (a) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets of, any of the Company and its
Subsidiaries (including any acquisition structured as a merger, consolidation,
or share exchange) or (b) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. None of the Significant Shareholders will vote their
Company Shares in favor of any such acquisition structured as a merger,
consolidation, or share exchange. The Company and the Significant Shareholders
will notify the Buyer immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
5.7 Employee Benefits. Except as provided in this Section
5.7, the Company shall, and shall cause its Subsidiaries to, continue and
maintain all of their Employee Benefit Plans through the Closing, and shall
notify the Buyer in writing and in advance if any Employee Benefit Plan or any
insurance contract or other agreement relating to any such Employee Benefit Plan
is or is scheduled or proposed to be renewed, terminated or materially modified.
No such renewal, termination or material modification shall be made prior to
Closing without the prior written consent of the Buyer, which consent shall not
be unreasonably withheld or delayed; provided, that Buyer shall not be obligated
to approve any renewal, termination or modification that would materially
increase the benefits to be provided with respect to any employee.
5.8 Approval of Merger and Optional Redemption.
(a) By executing this Agreement, Holding
covenants and agrees that it will, subject to the approval of its shareholders,
consent that the Company enter into this Agreement and consummate the Merger and
other transactions contemplated by this Agreement in accordance with the terms
and conditions of this Agreement. Prior to the Closing, Holding will solicit the
approval of its shareholders, and subject to the approval of its shareholders,
Holding will execute a written consent in accordance with the CGCL and the
foregoing sentence. The Company and the Significant Shareholders will take such
action as is necessary under the CGCL to notify the other holders of Company
Shares of such consent and, if necessary, to duly call, convene and hold a
meeting of the holders of the Company Shares after the date of this Agreement
for the purpose of voting upon this Agreement and the Merger. The Company's
Board of Directors shall recommend approval and adoption of this Agreement by
the holders of the Company Shares and shall not withdraw, modify or materially
qualify in any manner adverse to Buyer such recommendation. The Company's Board
shall take all lawful action to solicit the approval of the holders of the
Company
40
Shares. To the extent required by the CGCL, the Company shall promptly prepare
and deliver to the holders of the Company Shares an information statement
relating to the transactions contemplated by this Agreement.
(b) At any meeting of the shareholders of the
Company, and at every adjournment thereof, and on every action or approval by
written consent of the shareholders of the Company, Holding shall vote or cause
to be voted its Company Shares and any additional Company Shares acquired by
such Significant Shareholder (i) in favor of (A) approval of this Agreement and
the Merger and (B) any matter that could reasonably be expected to facilitate
the Merger and (ii) against any matter that could reasonably be expected to
hinder, impede or delay the consummation of the Merger.
(c) Each Significant Shareholder agrees not (i)
to sell, transfer, pledge, encumber, assign or otherwise dispose of
(collectively, "Transfer"), or enter into any contract, option or other
arrangement or understanding with respect to the Transfer by such Significant
Shareholder of, any of its Company Shares or Warrants or offer any interest in
any thereof to any Person other than pursuant to the terms of the Merger or (ii)
to enter into any voting arrangement or understanding (other than the Voting
Agreement), whether by proxy, power of attorney, voting agreement, voting trust
or otherwise with respect to the Company Shares and agrees not to commit or
agree to take any of the foregoing actions.
(d) Holding hereby waives any applicable
appraisal rights under the CGCL.
(e) Each of the Significant Shareholders hereby
waives any and all notices that may be required from the Company, with respect
to the optional redemption of the Company Preferred Shares, pursuant to Section
(e)(iii)(B) of the Certificate of Determination of Preferences of the Company
Senior Preferred Shares filed with the State of California Office of the
Secretary of State on the 24th day of April 1998, as amended, and pursuant to
Section (f)(iii)(B) of the Certificate of Determination of Preferences of the
Company Junior Preferred Shares filed with the State of California Office of the
Secretary of State on the 2nd day of August 2001.
5.9 Antitrust.
(a) Notwithstanding anything contained in
Section 5.1 or Section 5.2 of this Agreement to the contrary, the Buyer and the
Company each agree to use their commercially reasonable good faith efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary or required by (i) the FTC or the DOJ pursuant to the HSR Act,
and (ii) any other government or governmental authority pursuant to any other
Antitrust Laws, in connection with the transactions contemplated by this
Agreement. The foregoing notwithstanding, Buyer shall not be required to divest
or hold separate any assets except that Buyer agrees, if required by the FTC or
the DOJ pursuant to HSR Act, or by any other government or governmental
authority pursuant to any other Antitrust Laws, to divest or hold separate any
product line or line of business, and the assets used in connection therewith,
of the Company and its Subsidiaries or Buyer and its Subsidiaries, that
generated less than $3.0 million in annual revenue in 2003. In the event
multiple product lines or lines of business are required to be divested or held
separate, this $3.0 million limit applies to each of these product lines or
lines of business; provided, that the combined annual revenue in 2003 of all
product lines or lines of business that Buyer agrees to divest or hold separate
may not exceed $5.5 million.
41
(b) Each party hereto shall promptly inform the
other of any material communication from the FTC, the DOJ or any other
government or governmental authority regarding any of the transactions
contemplated hereby.
(c) If either the Buyer or the Company or any of
their respective Affiliates receives a request for additional information or
documentary material from the FTC, the DOJ or any other government or
governmental authority with respect to the transactions contemplated by this
Agreement, then such party shall endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response.
5.10 Subsequent Events Disclosure; Physical Inventory. The
Company will provide prompt written notice to Buyer of any Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole, that occurs
subsequent to the date of this Agreement. The Company will, at the request of
Buyer, conduct a physical inventory as of either May 31, 2004, June 1, 2004,
June 2, 2004, June 30, 2004, July 1, 2004 or July 2, 2004 (at the Company's
election), and Buyer and its representatives shall be permitted to observe the
taking of such physical inventory.
5.11 CenterPoint. In no event shall Buyer, Merger Sub or
any of their respective Affiliates, advisors or representatives at any time
prior to the Closing contact CenterPoint Trust Properties regarding any matters
relating to the Company's Arlington Heights, Illinois facilities without the
express prior consent of the Shareholders' Representative, which may be withheld
in its sole and absolute discretion.
5.12 Removal of Certain Security Interests. The Company
will use its commercially reasonable efforts to remove, prior to the Closing
Date, the Security Interests listed under the headings "Trademarks" and
"Patents" on Section 4.5 of the Company Disclosure Letter, and shall provide
Buyer with any documentation that it obtains prior to the Closing Date that
evidences the removal of such Security Interests.
5.13 Environmental Insurance. The Company will exercise
commercially reasonable efforts to obtain, prior to Closing, environmental
insurance (the "Environmental Insurance") with respect to the release of any
hazardous substance, material or waste into the environment prior to the Closing
Date which requires remediation under Environmental Laws at either the Temecula
facility (including the area currently used on the formerly owned adjacent
parcel for hazardous substance, materials or waste accumulation) or the
Arlington Heights facility and which causes the Company to incur clean-up costs
(including pursuant to a voluntary cleanup program) or third party liability for
clean-up costs, personal injury or property damage. The form of environmental
insurance policy shall be reasonably acceptable to Buyer and issued by Steadfast
Insurance Company (a member company of the Zurich-American Insurance Group) or
other insurance carrier reasonably acceptable to Buyer. To the extent not paid
prior to Closing, the premium for the Environmental Insurance shall be treated
as a Company and Shareholder Transaction Expense. The Environmental Insurance
shall have a term of five (5) years, coverage limit of no less than $5,000,000,
and a deductible not to exceed $100,000. Buyer shall be permitted to increase
the coverage limit of the Environmental Insurance by contributing the additional
premium cost attributable to such increase in coverage limit. The failure to
obtain the Environmental Insurance prior to the Closing shall not be deemed to
be a default under or breach of this Agreement.
5.14 Environmental Covenants.
42
(a) The Company shall retain the services of a
certified asbestos consultant, which consultant shall be subject to the
reasonable approval of Buyer. The certified asbestos consultant shall perform a
survey of known and suspect asbestos containing materials at the Company's
Temecula, Arlington Heights and Elk Grove facilities, which surveys shall
include testing of suspect materials to confirm the presence or absence of
asbestos, provided that testing shall not impair the integrity of the area being
tested. The cost of the surveys and testing shall be paid by Buyer. The Company
shall use the surveys and test results to prepare new or updated, as applicable,
operations and maintenance plans for asbestos containing materials for each of
the three facilities and otherwise use commercially reasonable efforts to comply
with the requirements of 29 CFR 1910.1001 or the corresponding state statute
contained in an applicable OSHA authorized state plan. The Company shall, as
appropriate, take responsive action (encapsulate, enclose, remove or repair) for
damaged asbestos containing materials that are friable and could reasonably
release asbestos fibers in the workplace, as reasonably determined by the
certified asbestos consultant. If the survey of the Temecula facility determines
that a portion of the asbestos containing roofing material at the Temecula
facility is not covered with polyurethane foam or an elastomeric coating, to the
extent described in the representation contained in Section 4.11(c) above, then
the Company shall cause such asbestos containing roofing material to be covered
as described in such representation.
(b) The Company will apply for and use
commercially reasonably efforts to obtain a conditional exclusion from storm
water permitting based on "no exposure" of industrial activities to storm water,
or in the alternative, obtain coverage under the Illinois General Industrial
Storm Water Permit for the facility located at 000 Xxxxxxxxxx Xxxxx, Xxxxxxxxx
Xxxxxxx, Xxxxxxxx.
(c) The Company will sample, test and, to the
extent that the soil contains contaminants above naturally occurring background
levels for soil, arrange for proper disposal or reuse of the stockpiled soil
present at the facility located at 000 Xxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxxx,
Xxxxxxxx.
(d) The Company will apply for and use
commercially reasonable efforts to obtain an operating permit and a sanitary
sewer discharge permit for the facility located at Segambut, Kuala Lumpur,
Malaysia.
(e) The Company will submit a XXXX Tier I and
Tier II report, and any past or present Tier I and/or Tier II XXXX Form R
reports that may be required by XXXX and the United States Environmental
Protection Agency, for materials stored, processed or otherwise used at the
Arlington Heights facility.
5.15 Pre-Closing Environmental Testing. Buyer agrees not
to make or direct any intrusive environmental testing or soil or groundwater
sampling at any Owned Real Property or any Leased Real Property prior to the
Closing.
5.16 Buyer's Environmental Reports. Promptly after Buyer's
receipt thereof, Buyer shall deliver to the Company copies of all environmental
reports prepared for Buyer with respect to the Owned Real Property or the Leased
Real Property, as listed in Section 4.20 of the Company Disclosure Letter.
6. Additional Covenants. The Parties agree as follows with
respect to the period following the Closing.
43
6.1 General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless such action is required by the terms of this Agreement or the
requesting Party is entitled to indemnification therefore under Section 8
below). The Significant Shareholders acknowledge and agree that from and after
the Closing the Buyer will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to any of the Company and its Subsidiaries. Notwithstanding the
foregoing, Buyer shall make available to the Significant Shareholders as
reasonably requested by the Significant Shareholders, its agents and
representatives, any taxing authority, or any governmental authority, all
information, records and documents relating to any of the Company and its
Subsidiaries and employees of any of the Company and its Subsidiaries for
periods prior to Closing and shall preserve such information, records and
documents until the later of (a) six (6) years after the Closing, or (b) the
required retention period for all government contract information, records or
documents.
6.2 Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (a) any transaction contemplated under this Agreement or (b) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Company and its Subsidiaries, each of
the other Parties will cooperate with him or it and his or its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 8 below).
6.3 Non-Disparagement. None of the Significant
Shareholders will disparage, and none of the Significant Shareholders will cause
any of their respective officers, directors, employees, partners, shareholders,
agents or representatives to disparage, any of the Company and its Subsidiaries
in any way that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of any of the
Company and its Subsidiaries from maintaining the same business relationships
with the Company and its Subsidiaries after the Closing as it maintained with
the Company and its Subsidiaries prior to the Closing. Each of the Significant
Shareholders will refer all customer inquiries relating to the businesses of the
Company and its Subsidiaries to the Buyer from and after the Closing.
6.4 Certain Tax Matters.
(a) The Shareholders' Representative shall have
the right to prepare, or cause to be prepared, all federal, state and local Tax
Returns of the Company and its Subsidiaries to be filed after the Closing Date
which relate to a taxable period ending on or before the Closing Date, including
any short taxable period (and the personnel of the Company and its Subsidiaries
shall cooperate reasonably with the Shareholders' Representative in connection
therewith and shall provide, at no expense to the Shareholders' Representative,
such accounting and tax schedules and other information as is reasonably
requested by the accountants who shall prepare such Tax Returns); provided,
however, (i) Shareholders' Representative shall bear all reasonable third party
costs of preparing and filing such Tax Returns, (ii) the Shareholders'
Representative shall deliver to Buyer for
44
its review, comment and approval (which approval will not be unreasonably
withheld or delayed) a copy of the proposed Tax Returns no later than forty-five
(45) days prior to the filing date of each such Tax Return (including extensions
thereof), and (iii) the Shareholders' Representative shall confirm in writing
that the proposed Tax Return has been prepared in a manner that is consistent
with the past Tax practices and consistent with the past Tax Returns of the
Company and its Subsidiaries. The Company and its Subsidiaries shall file all
such Tax Returns and shall pay the amount of any Taxes shown due thereon to the
appropriate Tax authorities.
(b) The Buyer shall prepare, or cause to be
prepared, and shall file, or cause to be filed, all Tax Returns of the Company
and its Subsidiaries other than the Tax Returns which the Shareholders'
Representative shall prepare, or cause to be prepared, pursuant to Section
6.4(a), but if any such Tax Return relates to any period beginning before the
Closing Date, (i) the Buyer shall deliver to the Shareholders' Representative
for his or her review, comment and approval (which approval will not be
unreasonably withheld or delayed) a copy of the proposed Tax Return no later
than forty-five (45) days prior to the filing date of such Tax Return (including
extensions thereof) and (ii) the Buyer shall confirm in writing that the
proposed Tax Return has been prepared in a manner that is consistent with the
past Tax practices and consistent with the past Tax Returns of the Company and
its Subsidiaries.
(c) The Shareholders' Representative shall have
the right, at the expense of the parties to the Contribution Agreement (i) to
control, in whole or in part, any Tax audit or contest, (ii) to resolve and
defend against any assessment, notice of deficiency, or other adjustment or
proposed adjustment, (iii) to consent to any extension or waiver of the
limitations period applicable to any Tax claim or assessment, (iv) to initiate
any claim for refund, and (v) to amend any Tax Return (each, a "Tax Matter"), in
each case solely to the extent relating to all Taxes attributable to taxable
periods of the Company and its Subsidiaries covered by the representations under
Section 4.10 above and, if the Shareholder's Representative, on behalf of the
parties to the Contribution Agreement, is obligated to indemnify Buyer against
Taxes payable in connection with such Tax Matter under this Agreement, the
Shareholders' Representative has acknowledged in writing such obligation. If the
Buyer is not entitled to control the Tax Matter under the foregoing provisions,
the Shareholders' Representative will provide, or cause to be provided, to the
Buyer copies of all correspondence received from or delivered to the taxing
authority in connection with such Tax Matter.
(d) If the Shareholders' Representative does not
elect to control a Tax Matter under Section 6.4(c) or otherwise does not control
a Tax Matter which relates in whole or in part to taxable periods of the Company
and its Subsidiaries covered by the representations under Section 4.10 hereof,
(i) the Buyer will use good faith efforts for the benefit of the Company and its
Subsidiaries and the Significant Shareholders in the defense or assertion of
such Tax Matter, (ii) the Buyer will provide, or cause to be provided, to the
Shareholders' Representative, copies of all correspondence received from or
delivered to the taxing authority in connection with any such Tax Matter, (iii)
the Buyer, the Company and its Subsidiaries shall allow the Shareholders'
Representative to participate in such Tax Matter at the expense of the
Shareholders' Representative, and (iv) the Buyer, the Company and its
Subsidiaries shall not settle such Tax Matter without the consent of the
Shareholders' Representative, which consent will not be unreasonably withheld or
delayed.
45
(e) Any Tax refunds received by the Company and
its Subsidiaries relating to a period or partial period ending on or before the
Closing Date shall be paid to the Shareholders' Representative for the benefit
of the holders of the Company Shares, the Company Options and the Warrants,
except to the extent (i) any such amount is reflected as a receivable or other
asset on the Final Closing Date Balance Sheet and taken into account in
determining the Final Closing Date Net Working Capital Amount or (ii) such Tax
refund results from the carryback of a net operating loss or other tax attribute
arising in a taxable period or portion of period beginning after the Closing
Date. The amount of the refund will be reduced by any current or future Taxes
required to be paid by the Company or its Subsidiaries as a result of the Tax
refund or the adjustments giving rise to the Tax refund.
(f) The Shareholders' Representative and the
Buyer shall (i) each provide the other with such assistance as may reasonably be
requested by any of them in connection with the preparation of any Tax Return,
audit or other examination by any taxing authority or judicial or administrative
proceedings relating to liability for Taxes or as may be reasonably requested
with respect to the purchase of insurance or similar coverage for liabilities
related to Taxes, (ii) each retain and provide the other with any records or
other information which may be relevant to such Tax Return, audit or
examination, proceeding determination, or insurance purchase and (iii) each
provide the other with any final determination of any such audit or examination,
proceeding or determination that affects any amount required to be shown on any
Tax Return of the other for any period. Without limiting the generality of the
foregoing, the Buyer shall retain, and shall cause the Company to retain, and
the Shareholders' Representative shall retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all Tax Returns,
supporting work schedules and other records or information which may be relevant
to such Tax Returns for all tax periods or portions thereof ending before or
including the Closing Date; each shall allow reasonable access to such Tax
Returns, schedules and records to the other party; and each shall not destroy or
otherwise dispose of any such Tax Returns, schedules, and records without first
providing the other party with a reasonable opportunity to review and copy the
same.
(g) Buyer understands and agrees that no
election will be made by Company and Buyer under Sections 338(g) and 338(h)(10)
of the Code and any corresponding or similar elections under state, local or
foreign tax law with respect to the purchase and sale of the Company Shares
hereunder.
(h) Notwithstanding anything in this Section 6
of the Agreement to the contrary, neither the Company nor any of its
Subsidiaries will be entitled to settle, concede or compromise, either
administratively or after the commencement of litigation, any Tax Matter or file
any amended Tax Return or claim for Tax refund, which would adversely affect the
liability for Taxes of Buyer, the Company or Subsidiary or any Affiliate thereof
for any taxable period or portion thereof beginning after the Closing Date
(including the imposition of income Tax deficiencies, the reduction of asset
basis or cost adjustments, the lengthening of any amortization or depreciation
periods, the denial of amortization or depreciation deductions, or the reduction
of loss or credit carryforwards) without the prior written consent of Buyer.
Such consent will not be unreasonably withheld or delayed.
(i) Buyer and the Shareholders' Representative
and their respective Affiliates will, if necessary and to the extent permitted
by applicable Law, cause elections to be filed with the relevant taxing
authorities to treat the taxable years of each Company and Subsidiary as
46
terminated on the Closing Date. Nevertheless, whenever it is necessary under
this Agreement to determine the liability for Taxes of any Company or Subsidiary
for a taxable period that begins before and ends after the Closing Date (a
"Straddle Period"), the determination of such Taxes for the portion of the
Straddle Period ending on and including, and the portion of the Straddle Period
beginning after, the Closing Date will be determined by assuming that the
Straddle Period consisted of two taxable years or periods, one which ended at
the close of the Closing Date and the other which began at the beginning of the
day following the Closing Date; provided, however, that real and personal
property Taxes and similar Taxes, exemptions, allowances or deductions that are
calculated on an annual basis, such as the deduction for depreciation, will be
apportioned between such two taxable years or periods on a daily basis. As the
Parties have agreed that the Estimated Closing Date Balance Sheet and the Final
Closing Date Balance Sheet are to be prepared as of the opening of business on
the Closing Date, resulting in the business operations of the Company and its
Subsidiaries on the Closing Date (determined without regard to items related to
the transactions contemplated by this Agreement) being for the benefit of Buyer,
the Parties agree that such business operations will be taken into account by
the Company and its Subsidiaries for tax purposes as if such operations occur
after the Closing Date.
(j) Neither the Company nor its Subsidiaries
shall (and the Significant Shareholders shall not cause or permit the Company or
its Subsidiaries to), at any time on or after the date hereof, take any action,
including the filing of any Tax Return or taking of any Tax position, that would
reduce or have the effect of reducing the amount of the federal net operating
losses (and any other federal tax deduction and any federal tax credit (equated
to its value as a deduction)) of the Company and its Subsidiaries that will
carry over and be available to the Company and its Subsidiaries for taxable
periods after the Closing Date, below $124,450,000 (subject to reduction as
provided in the Escrow Agreement), or that would otherwise limit or adversely
affect the use by the Company and/or its Subsidiaries of such net operating
losses under Section 382 of the Code (other than the consummation of the
transactions provided for hereunder).
(k) The Buyer agrees that any and all payments
to be made by the Company and its Subsidiaries with respect to each Company
Option, any and all payments made to French pursuant to the terms of the French
Employment Agreement, any and all payments with respect to any Indebtedness to
be repaid as contemplated by Section 2.7, and any writeoff of unamortized
expenses in connection with any such Indebtedness, shall, in each case to the
extent deductible or amortizable by the Company and its Subsidiaries, be taken
into account as tax deductions that carryover and are available to the Company
and its Subsidiaries for taxable periods after the Closing Date for purposes of
Section 6.4(j) and Section 8.5(c) of this Agreement, whether or not such
payments and writeoffs are actually included as deductions by the Company and
its Subsidiaries in the taxable periods ending on or before the Closing Date.
6.5 Employee Matters.
(a) It is agreed that this Agreement and the
consummation of the transactions contemplated herein shall not result in an
"employment loss" that might trigger obligations under the Worker Adjustment and
Retraining Notification ("WARN") Act, 29 U.S.C. Section 2101 et seq., or under
any similar provisions of any federal, state, regional, or local law, rule, or
regulation (referred to collectively as "WARN obligations"). To the extent that
any WARN obligations might arise as a consequence of this agreement or the
transactions contemplated herein, it is agreed that the Company and its
Subsidiaries shall be responsible for any WARN obligations
47
arising as a result of any employment losses occurring prior to the Closing Date
and shall indemnify and defend Buyer against any claims arising out of any
employment losses occurring prior to the Closing Date, and Buyer shall be
responsible for any WARN obligations arising as a result of any employment
losses occurring upon or after the Closing Date and shall indemnify and defend
the Company and its Subsidiaries, the Significant Shareholders, the holders of
the Company Shares, the Company Options and the Warrants against any claims
arising out of any employment losses occurring upon or after the Closing Date.
Furthermore, for the first ninety (90) days following the Closing Date, Buyer
shall not engage in any mass layoff, plant closing, or other action that might
trigger WARN obligations of the Company or its Subsidiaries.
(b) From and after the Closing Date, Buyer and
the Company and its Subsidiaries, and not any of the shareholders, officers and
directors of the Company immediately prior to the Effective Time or their
Affiliates, shall provide any continuation group health plan continuation
coverage required to be provided under Sections 601 through 609 of ERISA to M&A
Qualified Beneficiaries (as defined by Treasury Regulation Section 54.4980B-9,
Q&A-4) in respect of the transactions contemplated by this Agreement. The Buyer
shall indemnify and hold the shareholders, officers and directors of the Company
immediately prior to the Closing Date and their Affiliates harmless from any
liability such shareholders, officers and directors or Affiliates may incur at
any time after the Effective Time under the provisions of Section 4890B of the
Code or Sections 601 through 609 of ERISA with respect to any individual who was
an employee or COBRA "qualified beneficiary" of Company or any of its
Subsidiaries, except to the extent that such liability was caused by a
shareholder's, officer's or director's gross negligence or willful misconduct.
The Buyer further agrees to indemnify and hold the shareholders, officers and
directors of the Company immediately prior to the Closing Date and their
Affiliates harmless for any and all obligations, liabilities and claims related
to the California Continuation Benefits Replacement Act, or "Cal-COBRA,"
California Health & Safety Code Section 1366.20, et seq. and California
Insurance Code Section 10128.50, et seq or other applicable state law concerning
continued medical benefits, except to the extent that such liability was caused
by a shareholder's, officer's or director's gross negligence or willful
misconduct.
6.6 Notice of Redemption. At the Closing, the Buyer shall
cause the Surviving Corporation to issue a notice of redemption in full with
respect to the Company Senior Subordinated Notes.
6.7 Post-Closing Environmental Testing. After the
Closing, the Buyer and/or the Company may make or consent to intrusive
environmental testing and soil or groundwater sampling; provided, that if such
testing or sampling identifies any condition for which an indemnification claim
could be made pursuant to Section 8 of this Agreement for a breach by the
Company of any of its representations or warranties in Section 4.20 of this
Agreement, then such condition shall not be eligible for any indemnification
under Section 8; provided, however, if (i) such condition does not arise from or
relate to a Potential Environmental Condition, (ii) such condition constitutes a
breach of the Company's representations or warranties in Section 4.20, (iii)
there is an applicable survival period and the Buyer makes a written claim for
indemnification within such survival period and (iv) the testing that led to the
discovery of such condition was (A) required to be performed by a governmental
agency, (B) performed as part of work required to close the UST at the Arlington
facility, (C) performed as part of the Phase II testing recommended in the
reports prepared for Buyer and listed in Section 4.20 of the Company Disclosure
Letter, (D) performed in connection with a future financing transaction or the
sale of a facility, or (E) performed in connection with the
48
construction of new infrastructure, then such condition shall be eligible for
indemnification pursuant to and subject to the conditions of Section 8.
7. Conditions to Obligation to Close.
7.1 Conditions to Obligation of the Buyer and Merger Sub.
The obligations of the Buyer and Merger Sub to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(a) the representations and warranties set forth
in Section 3.1 and Section 4 above shall be true and correct in all respects as
of the Closing Date as though made as of such date (unless such representation
or warranty recites that it is only made as of an earlier date, in which case it
shall remain true and correct as of such earlier date), except where the failure
of any representations and warranties in Section 3.1 and Section 4 to be true
and correct would not reasonably be expected to have a Material Adverse Effect
on the Company and its Subsidiaries, taken as a whole;
(b) the Company and the Significant Shareholders
shall have performed and complied with all of their covenants and agreements
hereunder in all material respects through the Closing;
(c) the Company shall have delivered Letters of
Transmittal to all holders of the Company Shares and the Significant
Shareholders shall have approved this Agreement and the Merger pursuant to
Section 5.8 above;
(d) no injunction, temporary restraining order
or other order shall have been issued which prevents the consummation of the
transactions contemplated by this Agreement, no government or governmental
authority shall have instituted any action, suit or proceeding, and no private
party shall have instituted any action, suit or proceeding which has a
reasonable likelihood of success, and in each case wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would (i) prevent
consummation of the transactions contemplated by this Agreement, (ii) cause the
transactions contemplated by this Agreement to be rescinded following
consummation, (iii) affect adversely the right of the Buyer to control the
Company and its Subsidiaries, or (iv) affect materially and adversely the right
of any of the Company and its Subsidiaries to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(e) the Company shall have delivered to the
Buyer a certificate to the effect that each of the conditions specified above in
Section 7.1(a)-(d) is satisfied in all respects;
(f) all applicable waiting periods (and any
extensions thereof) under the HSR Act and any other Antitrust Laws shall have
expired or otherwise been terminated, and the Company, its Subsidiaries and the
other Parties to this Agreement shall have received all other authorizations,
consents and approvals of governments and governmental agencies referred to in
Section 5.2 above;
(g) the Buyer shall have received from counsel
to the Company and the Shareholders' Representative one or more opinions from
the law firm of Xxxxxxx XxXxxxxxx in
49
form and substance as set forth in Exhibit F attached hereto, addressed to the
Buyer, and dated as of the Closing Date;
(h) the Buyer shall have received (i) the
resignations, effective as of the Closing, of each director of the Company, (ii)
the resignation of French as an officer of the Company and of French and Xx.
Xxxx Xxxxxx as a director or officer of each Subsidiary for which he serves as a
director or officer, as applicable, and (iii) Xx. Xxx Xxxxx shall have resigned
as a director of HRC Holding Inc.;
(i) all Indebtedness of the Company (other than
the Company Senior Subordinated Notes) shall have been paid in full, and the
Company shall have obtained payoff letters for all such Indebtedness, each in
form reasonably satisfactory to the Buyer, including, in each case, UCC-3
termination statements or other provisions satisfactory to the Buyer for the
termination and release of all liens and Security Interests in respect of such
Indebtedness);
(j) the Company shall have delivered to the
Buyer the Estimated Closing Date Net Working Capital Amount prepared in
accordance with Section 2.5(a) and the certificate required by the last sentence
of Section 2.5(a);
(k) there shall not have occurred or be
continuing any event, fact or circumstance that constitutes a Material Adverse
Effect with respect to the Company and its Subsidiaries, taken as a whole;
provided, that for purposes of determining whether the closing condition stated
in this Section 7.1(k) is satisfied, no effect or change with respect to the
Company and/or its Subsidiaries shall be deemed to constitute a Material Adverse
Effect if such effect or change results from or arises out of general industry
conditions, changes in the U.S. economy, including as a result of acts of war or
terrorism, changes in GAAP, changes in law or regulations or from the fact that
the transactions contemplated by this Agreement have been publicly disclosed;
(l) all consents, approvals and actions of,
filings with and notices to any third party required to consummate the Merger
and the other transactions contemplated hereby, in each case as specifically
identified on Schedule 7.1(l), shall have been obtained;
(m) the Required Shareholder Vote shall have
been obtained;
(n) holders of no more than 350,000 Company
Common Shares shall have exercised, or notified any party hereto of its
intention to exercise, any statutory dissenters' or appraisal rights with
respect to the Merger;
(o) the Buyer shall have received a written
release, duly executed by the Significant Shareholders, in the form attached
hereto as Exhibit G;
(p) the Company and the Subsidiaries shall, on
or prior to the Closing, have entered into a non-solicitation agreement with
each of the Significant Shareholders and Xxxxxxx X. French, each substantially
in the form attached hereto as Exhibit H, and a true, correct and complete copy
thereof duly executed by the respective parties thereto shall have been
delivered to the Buyer;
50
(q) each of the Buyer, the Significant
Shareholders, the Merger Sub and the other parties thereto shall have executed
and delivered to each other the Voting Agreement, in substantially the form
attached hereto as Exhibit E (the "Voting Agreement");
(r) each of the Buyer, the Shareholders'
Representative and the Escrow Agent (as defined therein) shall have executed and
delivered to each other the Escrow Agreement, in substantially the form attached
hereto as Exhibit I, with such changes if any as may required by the Escrow
Agent (the "Escrow Agreement"), unless pursuant to the terms of the form of the
Escrow Agreement, the Escrow Deposit would be delivered as directed by the
Shareholders' Representative, to the account or accounts designated by the
Shareholders' Representative;
(s) the Company shall have obtained the
Environmental Insurance;
(t) the Buyer shall have received a written
release, duly executed by French, in the form attached hereto as Exhibit L; and
(u) all actions to be taken by the Company and
the Significant Shareholders in connection with consummation of the transactions
contemplated hereby, and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby, will be
reasonably satisfactory in form and substance to the Buyer.
The Buyer may in its sole and absolute discretion waive any condition
specified in this Section 7.1 if it executes a writing so stating at or prior to
the Closing.
7.2 Conditions to Obligations of the Company and the
Significant Shareholders. The obligations of the Company and the Significant
Shareholders to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth
in Section 3.2 above shall be true and correct in all respects as of the Closing
Date as though made as of such date (unless such representation or warranty
recites that it is only made as of an earlier date, in which case it shall
remain true and correct as of such earlier date);
(b) the Buyer shall have performed and complied
with all of its covenants and agreements hereunder in all material respects
through the Closing;
(c) no injunction, temporary restraining order
or other order shall have been issued which prevents the consummation of the
transactions contemplated by this Agreement, no government or governmental
authority shall have instituted any action, suit or proceeding , and no private
party shall have instituted any action, suit or proceeding which has a
reasonable likelihood of success, and in each case wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would (i) prevent
consummation of the transactions contemplated by this Agreement, or (ii) cause
the transactions contemplated by this Agreement to be rescinded following
consummation , (iii) affect adversely the right of the Buyer to control the
Company and its Subsidiaries, (iv) affect materially and adversely the right of
any of the Company and its Subsidiaries to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect);
51
(d) the Buyer shall have delivered to the
Company a certificate to the effect that each of the conditions specified above
in Section 7.2(a)-(c) is satisfied in all respects;
(e) the Indebtedness of the Company, other than
the Company Senior Subordinated Notes, shall have been paid in full, and the
Buyer shall have caused the Surviving Corporation to have issued a notice of
redemption in full with respect to the Company's Senior Subordinated Notes;
(f) all applicable waiting periods (and any
extensions thereof) under the HSR Act and any other Antitrust Laws shall have
expired or otherwise been terminated, and the Company, its Subsidiaries and the
other Parties to this Agreement shall have received all other authorizations,
consents and approvals of governments and governmental agencies referred to in
Section 5.2 above;
(g) Buyer shall have purchased from each of
Xxxxx Xxxxxx Xxxxxx, Xxxx Xxxxxx and the Shareholders' Representative their
respective Warrant, in each case using and on the terms and conditions contained
in the form of Warrant Purchase Agreement attached hereto as Exhibit J (the
"Warrant Purchase Agreement");
(h) each of the Buyer, the Shareholders'
Representative and the Escrow Agent shall have executed and delivered to each
other the Escrow Agreement, and Buyer shall have delivered to the Escrow Agent
the Escrow Deposit pursuant to the terms of Section 2.3(d) hereof, or, if,
pursuant to the terms of the form of Escrow Agreement, the Escrow Deposit would
be delivered as directed by the Shareholders' Representative, to the account or
accounts designated by the Shareholders' Representative;
(i) the Buyer shall have delivered to the FS
Management Company the Net Working Capital Holdback and the Shareholder Holdback
pursuant to the terms of Section 2.3(c) hereof;
(j) each of the Buyer, the Significant
Shareholders, the Merger Sub and the other parties thereto shall have executed
and delivered to each other the Voting Agreement;
(k) the Company shall have delivered to French
the French Bonus and the French Make Whole Amount pursuant to the terms of
Section 2.3(e) hereof; and
(l) all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Shareholders' Representative.
The Shareholders' Representative may in its sole and absolute
discretion waive any condition specified in this Section 7.2 if it executes a
writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
8.1 Survival of Representations and Warranties. All of
the representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder for a period of eleven (11) months after the
Closing Date; provided, however, that the representations and
52
warranties set forth in Sections 3.1, 3.2, 4.1, 4.2, 4.3, 4.4, 4.5 and 4.6 and
the covenants and agreements set forth in this Agreement shall survive
indefinitely, without limitation; provided, further, that the representations
and warranties set forth in Section 4.10 shall survive the Closing hereunder for
a period of three (3) years after the Closing Date. Upon the expiration of the
representations and warranties as set forth in this Section 8.1, such
representations and warranties shall cease to be of any further force or effect.
No such expiration shall affect the rights of a Party in respect of any claim
made by such Party in a writing received by another Party prior to the
expiration of any such period. This Section 8 is subject to the provisions set
forth in Section 10.10 below.
8.2 Indemnification Provisions for Benefit of the Buyer.
(a) In the event the Company breaches any of its
representations or warranties contained in Section 4 above as of the date hereof
(unless such breach can be cured and is cured prior to the Closing Date), or as
of the Closing Date (unless such representation or warranty recites that it is
only made as of an earlier date, in which case it shall remain true and correct
as of such earlier date), and, if there is an applicable survival period
pursuant to Section 8.1 above, provided that the Buyer makes a written claim for
indemnification against any of the Significant Shareholders in accordance with
Section 10.8 below within such survival period, then, subject to Section 6.7,
the Significant Shareholders, jointly and severally, agree to indemnify the
Buyer (including, after the Closing, the Surviving Corporation and each of its
subsidiaries for all purposes of this Section 8) from and against any Adverse
Consequences the Buyer, the Surviving Corporation or their respective
subsidiaries actually suffer as a result of or arising from such breach.
(b) In the event the Company or any of the
Significant Shareholders breaches any of their covenants or agreements contained
herein, then the Significant Shareholders, jointly and severally, agree to
indemnify the Buyer, the Surviving Corporation and their respective subsidiaries
from and against any Adverse Consequences the Buyer, the Surviving Corporation
or their respective subsidiaries actually suffer as a result of or arising from
such breach. The Significant Shareholders further agree, jointly and severally,
to indemnify Buyer (including, after the Closing, the Surviving Corporation and
each of its subsidiaries for all purposes of this Section 8) from and against
any Adverse Consequences that Buyer, the Surviving Corporation or their
respective subsidiaries actually suffer as a result or arising out of the
failure of the Shareholders' Representative or the FS Management Company to
effect any distributions of funds in accordance with the provisions of this
Agreement.
(c) In the event any of the Significant
Shareholders breaches any of its representations or warranties in Section 3.1
above as of the Closing Date (unless such representation or warranty recites
that it is only made as of an earlier date, in which case it shall remain true
and correct as of such earlier date), and, if there is an applicable survival
period pursuant to Section 8.1 above, provided that the Buyer makes a written
claim for indemnification against the Significant Shareholder in accordance with
Section 10.8 below within such survival period, then such Significant
Shareholder, severally and not jointly, agrees to indemnify the Buyer, the
Surviving Corporation and their respective subsidiaries from and against any
Adverse Consequences the Buyer, the Surviving Corporation or their respective
subsidiaries actually suffer as a result of or arising from such breach.
(d) If the Company has not completed the items
set forth in subsections (a) through (e) of Section 5.14 above prior to the
Closing, then the Company shall complete such items following the Closing, and
the Significant Shareholders shall reimburse the Company for the
53
cost incurred by the Company subsequent to the Closing to complete such items
subsequent to the Closing. The Significant Shareholders shall indemnify the
Buyer, the Surviving Corporation or any of their respective subsidiaries from
and against any Adverse Consequences the Buyer, the Surviving Corporation and
their respective subsidiaries actually suffer arising from the foregoing items
of noncompliance or conditions, as applicable, and relating to the period of
time prior to the correction of such noncompliance or condition, as applicable.
(e) Notwithstanding anything to the contrary
contained in this Agreement, in the event (i) of the presence of any conditions
arising from or relating to the conditions described on Schedule 8.2(e) attached
hereto (the "Potential Environmental Conditions"), the Buyer's sole and
exclusive remedy shall be to make a claim under the Environmental Insurance and
(ii) the Company breaches any of its representations or warranties in Section
4.20(a), Section 4.20(b) and/or the first two sentences of Section 4.20(c)
above, and if there is an applicable survival period pursuant to Section 8.1
above, and the Buyer makes a claim for indemnification within such survival
period, then Buyer's exclusive remedy with respect to the first $2,500,000 of
Adverse Consequences, which would otherwise be recoverable by the Buyer pursuant
to the provisions of this Section 8 as a result of such breach, and which is
eligible for coverage under the Environmental Insurance, shall be to recover
under the Environmental Insurance. If Buyer waives the condition set forth in
Section 7.1(s) requiring the delivery of Environmental Insurance, then
subsection (i) above shall continue to apply and Buyer shall have no recourse
under Section 8 with respect to Adverse Consequences arising from Potential
Environmental Conditions; provided, however, that subsection (ii) above shall no
longer apply and Buyer may, subject to the other provisions of this Section 8,
recover for Adverse Consequences that arise from environmental conditions that
do not constitute Potential Environmental Conditions without regard to the
Environmental Insurance.
(f) Notwithstanding anything to the contrary
contained in this Agreement, in the event that the Company is required to make a
payment to French pursuant to the terms of Section I.6. of the French Employment
Agreement, the Shareholders' Representative shall indemnify the Company with
respect to the amount of such payment, but neither the Company nor Buyer may
make any claim under this Agreement with respect to any inability by the Company
to deduct any such payment for income tax purposes.
8.3 Indemnification Provisions for Benefit of the
Shareholders.
(a) In the event the Buyer breaches any of its
representations or warranties contained herein as of the date hereof (unless
such breach can be cured and is cured prior to the Closing Date), or as of the
Closing Date (unless such representation or warranty recites that it is only
made as of an earlier date, in which case it shall remain true and correct as of
such earlier date), and, if there is an applicable survival period pursuant to
Section 8.1 above, provided that the Shareholders' Representative makes a
written claim for indemnification against the Buyer pursuant to Section 10.8
below within such survival period, then the Buyer agrees to indemnify each of
the holders of Company Shares, the Company Options and the Warrants from and
against any Adverse Consequences the holders of Company Shares, the Company
Options and the Warrants actually suffers as a result of or arising from such
breach.
(b) In the event the Buyer breaches any of its
covenants or agreements contained herein, and, if there is an applicable
survival period pursuant to Section 8.1 above, provided that the Shareholders'
Representative makes a written claim for indemnification against the
54
Buyer pursuant to Section 10.8 below within such survival period, then the Buyer
agrees to indemnify each of the holders of Company Shares, the Company Options
and the Warrants from and against any Adverse Consequences the holders of
Company Shares, the Company Options and the Warrants actually suffers as a
result of or arising from such breach.
8.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right
to defend the Indemnified Party against the Third Party Claim with counsel of
its choice satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within fifteen (15) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will assume the defense of the Third Party Claim and (ii) the
Third Party Claim does not seek an injunction or other equitable relief.
(c) So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with Section
8.4(b) above, (i) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party Claim,
(ii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party, which will not be unreasonably
withheld or delayed, and (iii) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim unless (I) the Third Party Claim seeks only monetary damages and
(II) the Indemnified Party is completely released from liability with respect to
such Third Party Claim.
(d) In the event any of the conditions in
Section 8.4(b) above is or becomes unsatisfied, however, (i) the Indemnified
Party will be entitled to defend against the Third Party Claim, and will not
consent to the entry of any judgment or enter into any settlement without the
consent of the Indemnifying Party, which will not be unreasonably withheld or
delayed, (ii) the Indemnifying Party will reimburse the Indemnified Party
promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys' fees and expenses), and (iii) the
Indemnifying Party will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the extent provided in this
Section 8.
8.5 Limitations. The liability of the Significant
Shareholders for claims under this Agreement shall be limited by the following:
(a) No Adverse Consequences shall be recoverable
by the Buyer, the Surviving Corporation or their respective subsidiaries
pursuant to the provisions of this Section 8 unless and until, and then only to
the extent that, the amount of all such Adverse Consequences equals or exceeds
two million five hundred thousand dollars ($2,500,000) (the "Indemnity
55
Deductible") in the aggregate, in which case the Buyer, the Surviving
Corporation or their respective subsidiaries shall be entitled to
indemnification only for the amount of such excess; provided, however, that no
individual matter that involves Adverse Consequences of less than $25,000 shall
be the subject of an indemnity claim or count against the Indemnity Deductible
(provided, that if the claim is $25,000 or more, the entire amount may be the
subject of an indemnity claim and count against the Indemnity Deductible);
provided, further, that the foregoing limitations in Section 8.5(a) shall not
apply to Adverse Consequences (i) in respect of the breach by the Company or any
Significant Shareholder of any of the representations and warranties set forth
in Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 and/or 4.10, (ii) resulting from or
arising out of fraud or intentional misrepresentation by the Company or any
Significant Shareholder, (iii) in respect of claims made pursuant to Sections
8.2(b), 8.2(c) or 8.2(d), or (iv) in respect of any payments that are required
to be made by the Company to French pursuant to the terms of Section I.6. of the
French Employment Agreement.
(b) The aggregate amount of Adverse Consequences
recoverable by the Buyer, the Surviving Corporation or their respective
subsidiaries pursuant to the provisions of this Section 8 shall be limited to
Adverse Consequences not exceeding an indemnity cap (the "Indemnity Cap") of (i)
sixty million dollars ($60,000,000); provided, that (i) commencing with the day
following the eleventh (11th) month anniversary of the Closing Date, the
Indemnity Cap shall be reduced to fifty million dollars ($50,000,000) and (ii)
in the event that the Escrow Deposit is distributed to Buyer then, commencing
with the later of (x) the eleventh (11th) month anniversary of the Closing Date,
and (y) the time of such distribution to Buyer, the Indemnity Amount shall be
further reduced to twenty-five million dollars ($25,000,000). Notwithstanding
the foregoing, in no event shall the reductions in the Indemnity Cap pursuant to
(i) and (ii) reduce the amount of recovery to which Buyer, the Surviving
Corporation or their respective subsidiaries is entitled with respect to any
claim for Adverse Consequences made or pending prior to date of the reduction in
the Indemnity Cap pursuant to (i) and (ii);
provided, further, however, that the foregoing limitations in Sections 8.5(b)
above shall not apply to Adverse Consequences (i) in respect of the breach by
the Company or any Significant Shareholder of any of the representations and
warranties set forth in Sections 4.1, 4.2, 4.3, 4.4, 4.5 and/or 4.6, (ii)
resulting from or arising out of fraud or intentional misrepresentation by the
Company or any Significant Shareholder or (iii) in respect of claims made
pursuant to Section 8.2(b) or 8.2(c). For clarity, the distribution of the
Escrow Amount to Buyer shall not, except as provided in this Section 8.5(b),
reduce the Indemnity Cap, but such distribution shall, as provided in Section
1.3(d) of the Escrow Agreement, be treated as a payment in full and complete
satisfaction of all Adverse Consequences for any claim under any provision of
this Agreement with respect to the 338 Tax Benefits, as defined in the Escrow
Agreement.
(c) Under the provisions of this Section 8, if
there is any breach of the representations and warranties contained in Sections
4.7, 4.10(a) or 4.10(h) hereof related to net operating loss carryovers and
other income tax deductions and income tax credits of the Company and its
Subsidiaries that arise prior to the Closing Date and carryover to, or will
otherwise be available for, periods beginning on or after the Closing Date,
Adverse Consequences will include twenty five percent (25%) of the amount by
which the aggregate amount of the federal income tax net operating loss
carryover and other federal income tax deductions and federal income tax credits
(equated to their value as deductions) of the Company and its Subsidiaries that
will be available to
56
the Company and its Subsidiaries for periods beginning on and after the Closing
Date is less than $124,450,000 (subject to reduction as provided in the Escrow
Agreement).
8.6 Determination of Adverse Consequences. Any amounts
required to be paid to an Indemnified Party pursuant to the terms of this
Section 8 shall be (i) reduced by the amount of any Tax benefits attributable to
a payment made in respect of a claim for Adverse Consequences and actually
received by the Indemnified Party during the period after Closing and (ii)
reduced by any amount actually received by the Indemnified Party under insurance
policies. Notwithstanding the foregoing clause (i), any distribution of the
Escrow Deposit to Buyer pursuant to the terms of the Escrow Agreement, and any
payment of any Adverse Consequences as set forth in Section 8.5(c) are already
net of any Tax benefits with respect thereto. All indemnification payments under
this Section 8 shall be deemed adjustments to the Purchase Price.
8.7 Other Indemnification Provisions. After the Closing,
the right of the Buyer and the Significant Shareholders (and their respective
Affiliates, members, shareholders, officers and directors) to indemnification
pursuant to Section 8 of this Agreement, and the rights of Buyer under the
Escrow Agreement and the other agreements entered into in connection herewith,
shall be the sole and exclusive right and remedy exercisable against any other
party to this Agreement in connection with the transactions contemplated hereby;
provided, that nothing herein shall limit or affect any party's rights or
remedies with respect to fraud or intentional misrepresentation of or by any
other party hereto. Notwithstanding the foregoing, the Buyer shall not be
entitled to indemnity under this Section 8 in respect of any matter to the
extent such matter has been accrued for or reserved for on the Final Closing
Date Balance Sheet. Any such matter shall be disregarded for all purposes of
this Section 8. In no event shall the Significant Shareholders be liable for any
consequential, incidental or indirect damages, or special or punitive damages.
8.8 Directors' and Officers' Indemnification.
(a) The indemnification provisions of the
articles of incorporation and bylaws of the Surviving Corporation that continue
the indemnification provisions of the articles of incorporation and bylaws of
the Company, as in effect at the Effective Time, shall not be amended, repealed
or otherwise modified for a period of six (6) years from the Effective Time in
any manner that would adversely affect the rights thereunder of individuals who
at the Effective Time were directors or officers of the Company with respect to
acts or omissions occurring prior to the Effective Time, unless such
modification is required by law. The Surviving Corporation will honor and
perform the Company's obligations under any written indemnification agreements
with the Company's directors or officers. The Buyer shall cause the Surviving
Corporation to honor and perform its obligations under the Surviving
Corporation's articles of incorporation and bylaws and such written
indemnification agreements (including without limitation as such provisions
relate to the advancement and payment by the Surviving Corporation of the
expenses of D&O Indemnified Parties (as defined below)). In the event of the
liquidation, dissolution or winding up of the Surviving Corporation, the Buyer
agrees to assume the obligation of the Surviving Corporation under its articles
of incorporation, bylaws and such written indemnification agreements. At its
election and expense, the Shareholders' Representative may obtain tail directors
and officers liability insurance coverage for a period of up to six (6) years
after the Effective Time.
(b) In the event the Surviving Corporation or
its successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving
57
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any Person, then and in each
such case, proper provisions shall be made by the Buyer so that the successors
and assigns of the Surviving Corporation shall assume the obligations set out in
this Section 8.8.
(c) The Surviving Corporation shall pay all
reasonable expenses, including reasonable attorneys' fees, that may be incurred
by any D&O Indemnified Party (as defined below) in enforcing the indemnity and
other obligations provided in this Section 8.8.
(d) The rights of each director, former
director, officer and former officer of the Company ("D&O Indemnified Parties")
hereunder shall be in addition to any other rights such D&O Indemnified Party
may have under the charter or bylaws of the Company or the Surviving
Corporation, under the CGCL or otherwise. The provisions of this Section 8.8
shall survive the consummation of the Merger and expressly are intended to
benefit each of the D&O Indemnified Parties. Notwithstanding the foregoing, the
Buyer may cause the Surviving Corporation's articles of incorporation and bylaws
to be modified to reflect the agreement of the Parties that any obligation that
the Surviving Corporation may have, whether under the articles of incorporation,
the bylaws or otherwise, to indemnify the D&O Indemnified Parties shall not
restrict in any manner the rights of the Buyer pursuant to this Section 8 or
require the Company to indemnify D&O Indemnified Parties from any valid and
proper claim brought in good faith by the Buyer against a D&O Indemnified Party
under this Agreement once a final, adjudicated, non-appealable judgment against
such D&O Indemnified Party has been received by the Buyer, from a court of
competent jurisdiction, that such D&O Indemnified Party is not entitled to such
indemnification.
(e) Each of the Significant Shareholders hereby
agrees that it will not make any claim for indemnification against any of the
Company and its Subsidiaries by reason of the fact that it was a director,
officer, employee, or agent of any such entity or was serving at the request of
any such entity as a partner, trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand brought in good faith by the Buyer against such Significant Shareholder
under this Agreement.
8.9 Security for Obligations. In order to support its
obligations pursuant to this Section 8, the Shareholders' Representative hereby
agrees that it shall either (i) retain, and not distribute to its partners, or
shall have the ability to cause its partners to contribute to the Shareholders'
Representative, assets (including without limitation, cash or debt or equity
securities) with a fair market value in an amount, or (ii) purchase and maintain
insurance that supports its obligation to indemnify Buyer, the Surviving
Corporation and their respective subsidiaries pursuant to the terms and
conditions of this Section 8 in an amount, in each case or in the aggregate,
which is sufficient to satisfy the Indemnity Cap (as defined in Section 8.5(b)),
as such amount, after taking into account any pending claims, may change from
time to time pursuant to the terms of Section 8.5(b). The Shareholders'
Representative shall have no further obligation under this Section 8.9 on or
after the later of (i) the three (3) year anniversary of the Closing Date, and
(ii) the resolution of claims for indemnification pending at the three year
anniversary of the Closing Date. In the event that the Shareholders'
Representative elects to purchase insurance to support its obligations to
indemnify Buyer, the Surviving Corporation and their respective subsidiaries,
the Shareholder's
58
Representative shall provide Buyer with advance notice thereof, and the policy
shall be in a form reasonably acceptable to Buyer, which acceptance may not be
unreasonably withheld. The Shareholders' Representative shall provide Buyer with
a copy of the applicable insurance policy or policies promptly following the
purchase of such insurance.
9. Termination.
9.1 Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(a) the Buyer and the Shareholders'
Representative may terminate this Agreement by mutual written consent at any
time prior to the Closing;
(b) the Buyer may terminate this Agreement by
giving written notice to the Shareholders' Representative at any time prior to
the Closing (i) in the event the Company or any of the Significant Shareholders
has breached any (x) covenant or agreement contained in this Agreement in any
material respect, or (y) representation or warranty contained in this Agreement
in any respect that would result in a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole, the Buyer has notified the Company and the
Shareholders' Representative of the breach, and the breach has continued without
cure for a period of fifteen (15) days after the notice of breach, or (ii) if
the Closing shall not have occurred for any reason on or before (x) August 17,
2004, by reason of the failure of any condition precedent under Section 7.1
hereof (unless the failure results primarily from the Buyer itself breaching any
material representation, warranty, covenant or agreement contained in this
Agreement) other than Section 7.1(d) or Section 7.1(f), or (y) October 17, 2004,
by reason of the failure of the conditions precedent under Section 7.1(d) and
Section 7.1(f) hereof (unless the failure results primarily from the Buyer
itself breaching any material representation, warranty, covenant or agreement
contained in this Agreement, including in particular its covenants and
agreements contained in Section 5.9 of this Agreement); and
(c) the Shareholders' Representative may
terminate this Agreement by giving written notice to the Buyer at any time prior
to the Closing (i) in the event the Buyer has breached any material
representation, warranty, covenant or agreement contained in this Agreement in
any respect, the Shareholders' Representative has notified the Buyer of the
breach, and the breach has continued without cure for a period of fifteen (15)
days after the notice of breach, or (ii) if the Closing shall not have occurred
for any reason on or before (x) August 17, 2004, by reason of the failure of any
condition precedent under Section 7.1 hereof (unless the failure results
primarily from the Significant Shareholders themselves breaching any material
representation, warranty, covenant or agreement contained in this Agreement)
other than Section 7.1(d) or Section 7.1(f), or (y) October 17, 2004, by reason
of the failure of the conditions precedent under Section 7.1(d) and Section
7.1(f) hereof (unless the failure results primarily from the Significant
Shareholders themselves breaching any material representation, warranty,
covenant or agreement contained in this Agreement, including in particular its
covenants and agreements contained in Section 5.9 of this Agreement);
9.2 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 9.1 above, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
10.13 and 10.18 will survive; provided, however, that if this Agreement is
terminated by a Party because of the willful breach of the Agreement by another
Party or because one or more of the conditions to the terminating Party's
obligations under this Agreement is not satisfied as a result of another Party's
willful failure to comply with its obligations under this
59
Agreement, the terminating Party's right to pursue all legal remedies will
survive such termination unimpaired.
10. Miscellaneous.
10.1 Nature of Certain Obligations.
(a) The representations and warranties of each
of the Significant Shareholders in Section 3.1 above concerning the transaction
are several obligations. This means that only the particular Significant
Shareholder making the representation, warranty, covenant or agreement will be
responsible to the extent provided in Section 8 above for any Adverse
Consequences the Buyer may suffer as a result of any breach thereof.
(b) The representations, warranties, covenants
and agreements of the Significant Shareholders in Section 8 of this Agreement
are joint and several obligations. This means that each such Party making a
joint and several representation, warranty, covenant or agreement will be
responsible to the extent provided in Section 8 above for the entirety of any
Adverse Consequences the Buyer may suffer as a result of any breach thereof.
10.2 Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to or immediately after the Closing
without the prior review and written approval of the Buyer and the Shareholders'
Representative, other than such disclosures that may be required by the rules
and regulations of any exchange on which such Party's securities may be traded
or as may be otherwise required by any applicable laws.
10.3 No Third-Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns, except pursuant to Section
6.5 and Section 8.8.
10.4 Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the Parties
and supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
10.5 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Shareholders'
Representative; provided, however, that the Buyer may (a) assign any or all of
its rights and interests hereunder to one or more of its Affiliates and (b)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
10.6 Counterparts; Facsimile Signatures. This Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile shall be as effective as delivery of a manually executed counterpart
of this Agreement.
60
10.7 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.8 Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall for all purposes of this Agreement
be treated as effective or having been given (a) when delivered if delivered
personally, (b) upon receipt if sent by registered or certified mail (postage
prepaid, return receipt requested), (c) upon receipt if transmitted by
telecopier (with receipt acknowledged) or (d) the day after it is sent, if sent
for next day delivery to a domestic address by a recognized overnight delivery
service or overnight courier service, as set forth below:
If to the Shareholders' Representative, the FS
Management Company or Holding:
Xxxxxxx Xxxxxx & Co.
00000 Xxxxx Xxxxxx Xxxx.
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx
Copy to:
Xxxxxxx XxXxxxxxx LLP
000 Xxxxx Xxxxx Xxx.
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
If to the Company:
Xxxxxx Respiratory Care Inc.
00000 Xxxx Xxxx
X.X. Xxx 0000
Xxxxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. French
If to the Buyer or the Merger Sub:
Teleflex Incorporated
000 X. Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: General Counsel
61
Copy to:
O'Melveny & Xxxxx
000 Xxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: J. Xxx Xxxxxx and Xxxxx X. Xxxxx
Any Party may change the address, telex or telecopy to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
10.9 Governing Law.
(a) This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
(b) The parties hereto agree that any action,
suit or proceeding (a "Proceeding") arising out of the transactions contemplated
by this Agreement shall be commenced and litigated exclusively in the United
States District Court for the Central District of California or in a state court
of the State of California.
(c) Each of the parties hereto hereby
irrevocably and unconditionally (i) consents to submit to the exclusive
jurisdiction of the federal and state courts in the State of California for any
Proceeding (and each such party agrees not to commence any Proceeding, except in
such courts), (ii) waives any objection to the laying of venue of any Proceeding
in the courts of the State of California, and (iii) waives, and agrees not to
plead or to make, any claim that any Proceeding brought in any court of the
State of California has been brought in an improper or otherwise inconvenient
forum.
(d) Each party hereto hereby irrevocably
designates and appoints CT Corporation, 000 0xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(hereinafter called the "Agent"), as its attorney-in-fact to receive service of
process in such Proceeding, it being agreed that service upon such
attorney-in-fact shall constitute valid service upon each such party or its
successors or assigns, and each such party agrees that (i) the sole
responsibilities of the Agent shall be (x) to receive such process, (y) to send
a copy of any such process so received to such party, by registered airmail,
return receipt requested, at the address set out in Section 10.8 of this
Agreement, or at the last address filed in writing by such party with the Agent
and (z) to give prompt telegraphic notice of receipt thereof to such party at
such address, and (ii) the Agent shall have no responsibility for the receipt or
non-receipt by such party of such process, nor for any performance or
non-performance by such party, or any other party to this Agreement or their
successors or assigns. The Company hereby agrees to pay to the Agent such
compensation as shall be agreed upon from time to time for services of the Agent
hereunder. Each Party hereto hereby agrees that its submission to jurisdiction
and its designation of the Agent set out above is made for the express benefit
of the Parties hereto. Each party further covenants and agrees that so long as
this Agreement shall be in effect, such party shall maintain a
62
duly appointed agent for the service of summonses and other legal processes in
Los Angeles, California and will notify the other Parties hereto of the name and
address of such agent if it is no longer the Agent. Each Party hereto hereby
agrees to execute such documents as may be required by Agent for the purpose of
appointing it as attorney-in-fact to receive service of process as provided in
this Section 10.9(d).
10.10 Notice of Developments. The Company will give prompt
written notice to the Buyer of any material adverse development causing a breach
of any of the representations and warranties contained in Section 4 above or of
any covenant or agreement contained in this Agreement. Each Party will give
prompt written notice to the others of any material adverse development causing
a breach of any of his or its own representations and warranties contained in
Section 3 above.
10.11 Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by the Buyer and the Shareholders' Representative. No waiver by any Party of any
default, misrepresentation, or breach of warranty, covenant or agreement
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty, covenant or
agreement hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
10.12 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
10.13 Fees, Costs and Expenses. Each of the Parties will
bear his or its own costs and expenses (including legal and advisory fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby, except that the Buyer will pay (a) the HSR Act filing fee
and any other filing fees required by any government or governmental authority
in connection with any other Antitrust Laws, (b) any sales, use or other
transfer Taxes incurred by the Company or its Subsidiaries in connection with
the transactions contemplated by this Agreement, and (c) one-half of the Agreed
Upon Retention Amount. The Company and Shareholder Transaction Expenses shall
reduce the Purchase Price hereunder as set forth in the definition of
Preliminary Purchase Price above. The Significant Shareholders agree that,
except as provided in Section 2.3(e) with respect to payments to be made at the
Closing, none of the Company and its Subsidiaries has borne or will bear any of
the costs and expenses of the Company and the Significant Shareholders
(including any of their legal fees and expenses and the fee and expenses of
Citigroup) in connection with this Agreement or any of the transactions
contemplated hereby.
10.14 Construction. The Parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that
63
each representation, warranty, covenant and agreement contained herein shall
have independent significance.
10.15 Specific Performance. Each of the Parties
acknowledges and agrees that the other Parties would be damaged irreparably in
the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the Parties agrees that the other Parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter (subject
to the provisions set forth in Section 10.9 above), in addition to any other
remedy to which they may be entitled, at law or in equity.
10.16 Attorneys' Fees. In the event any litigation arises
out of or in connection with this Agreement, the prevailing Party in such
litigation will be entitled to recover from the other Party or Parties to such
litigation all reasonable attorneys' fees, expenses and litigation costs,
including those associated with any appellate or post-judgment collection
proceeding.
10.17 Shareholders' Representative.
(a) The Company and the Significant Shareholders
hereby authorize, direct and appoint the Shareholders' Representative to act as
sole and exclusive agent, attorney-in-fact and representative of the Significant
Shareholders and the other holders of Company Shares, Company Options and
Warrants, with full power of substitution with respect to all matters under this
Agreement and the Escrow Agreement, including, without limitation, determining,
giving and receiving notices and processes hereunder and thereunder, receiving
certain distributions to or for the benefit of the holders of the Company
Shares, the Company Options and the Warrants, entering into any documents
required or permitted under Section 8, contesting and settling any and all
claims for indemnification pursuant to Section 8 hereof, resolving any other
disputes hereunder (including disputes with respect to purchase price
adjustments or calculations), performing the duties expressly assigned to the
Shareholders' Representative hereunder and thereunder and to engage and employ
agents and representatives and to incur such other expenses as the Shareholders'
Representative shall reasonably deem necessary or prudent in connection with the
foregoing. The Shareholders' Representative shall have the sole and exclusive
right on behalf of any holder of Company Shares, Company Options and Warrants
(including the Significant Shareholders) to take any action or provide any
waiver, or receive any notice with respect to any claims for indemnification
under Section 8 and to settle any claim or controversy arising with respect
thereto. Any such actions taken, exercises of rights, power or authority, and
any decision or determination made by the Shareholders' Representative
consistent herewith, shall be absolutely and irrevocably binding on each holder
of Company Shares, Company Options and Warrants (including the Significant
Shareholders) as if such Person personally had taken such action, exercised such
rights, power or authority or made such decision or determination in such
Person's individual capacity, and no Person shall have the right to object,
dissent, protest or otherwise contest the same. Any action required to be taken
by the Significant Shareholders hereunder or pursuant to the Escrow Agreement or
any action which Significant Shareholders, at their election, have the right to
take hereunder or thereunder, shall be taken only by the Shareholders'
Representative, and no Significant Shareholder acting on its own shall be
entitled to take any such action. All deliveries and payments to be made by the
Buyer to the Shareholders' Representative pursuant to Sections 2.3(c), 2.5(d)
and 2.8 above shall be made on
64
behalf of the holders of Company Shares, Company Options and Warrants and shall
constitute full performance of the obligations of the Buyer to the Shareholders'
Representative pursuant to such sections with respect to such amounts. The Buyer
shall not be liable for allocation of particular deliveries and payments of such
amounts by the Shareholders' Representative. Notwithstanding the foregoing, the
Shareholders' Representative shall not take any action on behalf of the
Significant Shareholders without the approval of such action by a majority of
the Significant Shareholders.
(b) The appointment of the Shareholders'
Representative as each Significant Shareholder's attorney-in-fact revokes any
power of attorney heretofore granted that authorized any other person or persons
to represent such Significant Shareholder with regard to this Agreement or the
Escrow Agreement. The appointment of the Shareholders' Representative as
attorney-in-fact pursuant hereto is coupled with an interest and is irrevocable.
The obligations of each Significant Shareholder pursuant to this Agreement (i)
will not be terminated by operation of law, death, mental or physical
incapacity, liquidation, dissolution, bankruptcy, insolvency or similar event
with respect to such Significant Shareholder or any proceeding in connection
therewith, or in the case of a trust, by the death of any trustee or trustees or
the termination of such trust, or any other event, and (ii) shall survive the
delivery of an assignment by any Significant Shareholders of the whole or any
fraction of its interest in any payment due to it under this Agreement or the
Escrow Agreement.
(c) The Shareholders' Representative hereby
accepts the foregoing appointment and agrees to serve as Shareholders'
Representative, subject to the provisions hereof, for the period of time from
and after the date hereof without compensation except for the reimbursement from
the holders of the Company Shares, the Company Options and the Warrants, out of
the Net Working Capital Holdback, of reasonable out of pocket expenses incurred
by the Shareholders' Representative in its capacity as such. Each of the
Significant Shareholders and the Company hereby acknowledges and agrees, that in
appointing Shareholders' Representative as their representative pursuant to the
terms and provisions of this Section 10.17, and as specified herein, the
Shareholders' Representative shall not, in the absence of bad faith, willful
misconduct or gross negligence, have any liability to the Significant
Shareholders or the holders of Company Shares, Company Options or Warrants
whatsoever with respect to their actions, decisions and determinations, and
shall be entitled to assume that all actions, decisions and determinations are
fully authorized by each and every one of the Significant Shareholders, the
holders of Company Shares, the holders of the Company Options and the holders of
the Warrants; provided, that such actions take by the Shareholders'
Representative have been approved by a majority of the Significant Shareholders.
(d) The provisions of this Section 10.17 shall
in no way impose any obligations on the Buyer. In particular, notwithstanding
any notice received by the Buyer to the contrary and absent Buyer's bad faith or
willful misconduct, the Buyer (i) shall be fully protected in relying upon and
shall be entitled to rely upon, shall have no liability to the Significant
Shareholders with respect to, actions, decisions and determinations of the
Shareholders' Representative and the FS Management Company and (ii) shall be
entitled to assume that all actions, decisions and determinations of the
Shareholders' Representative and the FS Management Company are fully authorized
by all of the Significant Shareholders and the holders of the Company Shares,
the Company Options and the Warrants.
(e) With respect to the rights and obligations
of the Shareholders' Representative relating to the Net Working Capital
Holdback, the Shareholder Holdback and the
65
Contingent Purchase Price in this Agreement, the FS Management Company is hereby
substituted for the Shareholders' Representative throughout this Agreement, and
the FS Management Company hereby accepts such substitution and appointment for
all such purposes.
10.18 Confidentiality.
(a) The terms of that certain Confidentiality
Agreement by and between the Company and Buyer dated January 22, 2004, shall
remain in full force and effect, notwithstanding the execution and delivery of
this Agreement.
(b) Notwithstanding anything in this Agreement
to the contrary, each Party (and each employee, representative or other agent of
any Party) may disclose to any and all persons, without limitation of any kind,
the U.S. Federal income Tax treatment and U.S. Federal income Tax structure of
any and all transactions contemplated by this Agreement (the "Transactions") and
all materials of any kind (including opinions or other tax analyses) that are or
have been provided to any Party (or to any employee, representative or other
agent of any such Party) relating to such Tax treatment or Tax structure;
provided, however, that such disclosure may not be made (i) until the earlier of
(x) the date of the public announcement of discussions relating to the
Transactions, (y) the date of the public announcement of the Transactions and
(z) the date of the execution of any agreement to enter into the Transactions
and (ii) to the extent required to be kept confidential to comply with any
applicable federal or state securities laws.
10.19 No Reliance on Other Information. Except for the
representations and warranties contained in this Agreement, none of the Company,
the Significant Shareholders or any representative or Affiliate or other person
acting for any of them makes any other representation or warranty, express or
implied, with respect to the Company and its Subsidiaries or the financial
condition or prospects of the Company and its Subsidiaries or the execution,
delivery or performance by the Company or the Significant Shareholders of this
Agreement or with respect to the transactions contemplated hereby, and the
Company and the Significant Shareholders hereby disclaim any such representation
or warranty, whether oral or written, whether by the Company, the Significant
Shareholders or any of their respective representatives or Affiliates or any
other person. Buyer acknowledges that none of the Company, the Significant
Shareholders or any other person has made any representation or warranty,
express or implied, as to the accuracy or completeness of any information
regarding the Company and its Subsidiaries not included in this Agreement or the
Company Disclosure Letter attached hereto, and none of the Company, the
Significant Shareholders nor any other person will have or be subject to any
liability to Buyer or any other person resulting from the distribution to Buyer,
or Buyer's use of, any such information (including, without limitation, any
brochures, descriptive memoranda or other publications distributed in connection
with the sale of the Company or in any presentations by the management of the
Company and any estimates of anticipated performance of the Company and its
Subsidiaries.) The parties hereto hereby agree that nothing in this Section
10.19 shall limit or affect any party's rights or remedies with respect to fraud
or intentional misrepresentation of or by any other party hereto.
66
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
effective as of the date first above written.
BUYER:
TELEFLEX INCORPORATED
By: /s/ Xxxxx X. Xxxxxx
________________________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
MERGER SUB:
TELEFLEX ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxxxxx
________________________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
COMPANY:
XXXXXX RESPIRATORY CARE INC.
By: /s/ Xxxxxxx X. French
________________________________________
Name: Xxxxxxx X. French
Title: President and Chief Executive
Officer
67
SHAREHOLDERS' REPRESENTATIVE:
FS EQUITY PARTNERS IV, L.P.
By: FS Capital Partners LLC
Its: General Partner
By: /s/ Xxx X. Xxxxx
____________________________________
Name: Xxx X. Xxxxx
__________________________________
Title: Vice President
_________________________________
HOLDING:
RIVER HOLDING CORP.
By: /s/ Xxxxxxx X. French
________________________________________
Name: Xxxxxxx X. French
Title: President
FS MANAGEMENT COMPANY
XXXXXXX XXXXXX & CO. LLC
By: /s/ Xxx X. Xxxxx
________________________________________
Name: Xxx X. Xxxxx
__________________________________
Title: Vice President
_________________________________
68
TABLE OF CONTENTS
Page
----
1. DEFINITIONS............................................................................................ 1
2. THE MERGER AND CONVERSION OF SECURITIES................................................................ 10
2.1 The Merger.................................................................................... 10
2.2 The Closing................................................................................... 11
2.3 Deliveries at the Closing..................................................................... 11
2.4 Effect on Capital Stock....................................................................... 11
2.5 Purchase Price Adjustment..................................................................... 12
2.6 Method of Payment............................................................................. 16
2.7 Repayment of Indebtedness..................................................................... 19
2.8 Contingent Purchase Price..................................................................... 19
2.9 Retention Payment Amount...................................................................... 19
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.............................................. 20
3.1 Representations and Warranties of the Significant Shareholders................................ 20
3.2 Representations and Warranties of the Buyer and the Merger Sub................................ 21
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES............................. 22
4.1 Organization, Qualification, and Corporate Power.............................................. 22
4.2 Capitalization................................................................................ 22
4.3 Noncontravention.............................................................................. 23
4.4 Brokers' Fees................................................................................. 23
4.5 Title to Assets............................................................................... 24
4.6 Subsidiaries.................................................................................. 24
4.7 Financial Statements.......................................................................... 24
4.8 Events Subsequent to the Most Recent Fiscal Year End.......................................... 25
4.9 Legal Compliance; Permits and Licenses........................................................ 27
4.10 Tax Matters................................................................................... 28
4.11 Real Property................................................................................. 29
4.12 Intellectual Property......................................................................... 30
4.13 Tangible Assets............................................................................... 32
4.14 Contracts..................................................................................... 32
4.15 Insurance..................................................................................... 33
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4.16 Litigation.................................................................................... 34
4.17 Employees..................................................................................... 34
4.18 Employee Benefits............................................................................. 35
4.19 Guaranties.................................................................................... 36
4.20 Environment, Health, and Safety............................................................... 36
4.21 Certain Business Relationships with the Company and its Subsidiaries.......................... 37
4.22 Required Shareholder Vote..................................................................... 37
4.23 Company Board Approval........................................................................ 38
4.24 Suppliers..................................................................................... 38
4.25 Powers of Attorney............................................................................ 38
4.26 Controls and Procedures....................................................................... 38
5. PRE-CLOSING COVENANTS.................................................................................. 38
5.1 General....................................................................................... 38
5.2 Notices and Consents.......................................................................... 38
5.3 Operation of Business......................................................................... 39
5.4 Preservation of Business...................................................................... 39
5.5 Access........................................................................................ 39
5.6 Exclusivity................................................................................... 40
5.7 Employee Benefits............................................................................. 40
5.8 Approval of Merger and Optional Redemption.................................................... 40
5.9 Antitrust..................................................................................... 41
5.10 Subsequent Events Disclosure; Physical Inventory.............................................. 42
5.11 CenterPoint................................................................................... 42
5.12 Removal of Certain Security Interests......................................................... 42
5.13 Environmental Insurance....................................................................... 42
5.14 Environmental Covenants....................................................................... 42
5.15 Pre-Closing Environmental Testing............................................................. 43
5.16 Buyer's Environmental Reports................................................................. 43
6. ADDITIONAL COVENANTS................................................................................... 43
6.1 General....................................................................................... 44
6.2 Litigation Support............................................................................ 44
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6.3 Non-Disparagement............................................................................. 44
6.4 Certain Tax Matters........................................................................... 44
6.5 Employee Matters.............................................................................. 47
6.6 Notice of Redemption.......................................................................... 48
6.7 Post-Closing Environmental Testing............................................................ 48
7. CONDITIONS TO OBLIGATION TO CLOSE...................................................................... 49
7.1 Conditions to Obligation of the Buyer and Merger Sub.......................................... 49
7.2 Conditions to Obligations of the Company and the Significant Shareholders..................... 51
8. REMEDIES FOR BREACHES OF THIS AGREEMENT................................................................ 52
8.1 Survival of Representations and Warranties.................................................... 52
8.2 Indemnification Provisions for Benefit of the Buyer........................................... 53
8.3 Indemnification Provisions for Benefit of the Shareholders.................................... 54
8.4 Matters Involving Third Parties............................................................... 55
8.5 Limitations................................................................................... 55
8.6 Determination of Adverse Consequences......................................................... 57
8.7 Other Indemnification Provisions.............................................................. 57
8.8 Directors' and Officers' Indemnification...................................................... 57
8.9 Security for Obligations...................................................................... 58
9. TERMINATION............................................................................................ 59
9.1 Termination of Agreement...................................................................... 59
9.2 Effect of Termination......................................................................... 59
10. MISCELLANEOUS.......................................................................................... 60
10.1 Nature of Certain Obligations................................................................. 60
10.2 Press Releases and Public Announcements....................................................... 60
10.3 No Third-Party Beneficiaries.................................................................. 60
10.4 Entire Agreement.............................................................................. 60
10.5 Succession and Assignment..................................................................... 60
10.6 Counterparts; Facsimile Signatures............................................................ 60
10.7 Headings...................................................................................... 61
10.8 Notices....................................................................................... 61
10.9 Governing Law................................................................................. 62
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10.10 Notice of Developments........................................................................ 63
10.11 Amendments and Waivers........................................................................ 63
10.12 Severability.................................................................................. 63
10.13 Fees, Costs and Expenses...................................................................... 63
10.14 Construction.................................................................................. 63
10.15 Specific Performance.......................................................................... 64
10.16 Attorneys' Fees............................................................................... 64
10.17 Shareholders' Representative.................................................................. 64
10.18 Confidentiality............................................................................... 66
10.19 No Reliance on Other Information.............................................................. 66
Exhibit A - Form of Release by Holder of Company Option
Exhibit B - Form of Letter of Transmittal (Common)
Exhibit C - Form of Letter of Transmittal (Preferred)
Exhibit D - Financial Statements
Exhibit E - Form of Voting Agreement
Exhibit F - Form of Opinion of Counsel to the Company and the Significant
Shareholders
Exhibit G - Form of Release by Significant Shareholders
Exhibit H - Form of Non-Solicitation Agreement
Exhibit I - Form of Escrow Agreement
Exhibit J - Form of Warrant Purchase Agreement
Exhibit K - Form of Agreement of Merger
Exhibit L - Form of Release by French
Schedule 1.1(a) - Net Working Capital Calculation
Schedule 1.1(b) - Application of GAAP
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Schedule 2.6 - Persons and Entities omitted from the Contribution Agreement
and Subject to the Shareholder Holdback
Schedule 5.2 - Notices and Consents
Schedule 5.3 - Operation of Business
Schedule 7.1(l) - Required Consents
Schedule 8.2(e) - Potential Environmental Conditions
Significant Shareholder - Exceptions to the Representations and Warranties of the
Disclosure Letter Significant Shareholders
Buyer Disclosure Letter - Exceptions to the Representations and Warranties of the Buyer
Company Disclosure Letter - Exceptions to the Representations and Warranties of the Company
and its Subsidiaries
Section 4.1 Organization, Qualification, and Corporate Power
Section 4.2 Capitalization
Section 4.3 Noncontravention
Section 4.5 Title to Assets
Section 4.6 Subsidiaries
Section 4.7 Financial Statements; No Undisclosed Liabilities
Section 4.8 Events Subsequent to the Most Recent Fiscal Year End
Section 4.9 Legal Compliance; Permits and Licenses
Section 4.10 Federal Net Operating Losses
Section 4.11 Real Property
Section 4.12(b) Third Party Infringement Upon Intellectual Property Rights
Section 4.12(c) Issued or Pending Intellectual Property
Section 4.12(d) Licensed Intellectual Property
Section 4.13 Sufficiency of Assets
Section 4.14 Contracts
Section 4.15 Insurance
Section 4.16 Litigation
Section 4.17 Employees
Section 4.18 Employee Benefit Plans
Section 4.19 Guaranties
Section 4.20 Environment, Health and Safety Matters
Section 4.21 Business Relationships With the Company and its
Subsidiaries
Section 4.24 Suppliers
Section 4.25 Powers of Attorney
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