EXHIBIT 10.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated
August 29, 2003
by and among
KEYSTONE AUTOMOTIVE HOLDINGS, INC.,
KEYSTONE MERGER SUB, INC.,
KEYSTONE AUTOMOTIVE OPERATIONS, INC.
and
LAGE LLC, AS HOLDER REPRESENTATIVE
TABLE OF CONTENTS
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ARTICLE I CERTAIN DEFINITIONS..............................................2
Section 1.1. Definitions................................................2
Section 1.2. Interpretation............................................12
ARTICLE II THE MERGER; EFFECTS OF THE MERGER; MERGER
CONSIDERATION; AND CONVERSION OF SECURITIES...................................13
Section 2.1. The Merger................................................13
Section 2.2. Conversion of Capital Stock...............................14
Section 2.3. Outstanding Options.......................................16
Section 2.4. The Closing...............................................16
Section 2.5. Payments at Closing and Exchange of Certificates..........18
Section 2.6. Estimated Adjustment Amount...............................20
Section 2.7. Adjustment Amount.........................................21
Section 2.8. Company Expenses..........................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF KEYSTONE......................25
Section 3.1. Corporate Organization of Keystone........................25
Section 3.2. Subsidiaries..............................................25
Section 3.3. Capitalization of Keystone................................25
Section 3.4. Capitalization of Keystone Subsidiaries...................26
Section 3.5. Due Authorization.........................................26
Section 3.6. No Conflict...............................................27
Section 3.7. Financial Statements......................................27
Section 3.8. Contracts.................................................28
Section 3.9. Machinery, Equipment and Other Tangible Property..........29
Section 3.10. Intellectual Property.....................................30
Section 3.11. Real Property.............................................31
Section 3.12. Litigation and Proceedings................................31
Section 3.13. Employee Plans............................................32
Section 3.14. Labor Relations...........................................33
Section 3.15. Legal Compliance..........................................34
Section 3.16. Environmental Matters.....................................34
Section 3.17. Taxes. 34
Section 3.18. Governmental Licenses, Permits and Authorizations.........35
Section 3.19. No Material Undisclosed Liabilities and Absence of
Certain Changes...........................................36
Section 3.20. Insurance.................................................38
Section 3.21. Product Warranties........................................38
Section 3.22. Directors and Officers....................................38
Section 3.23. Brokers' Fees.............................................38
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Section 3.24. Affiliate Transactions....................................38
Section 3.25. Exclusivity of Representations and Warranties.............38
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB.......39
Section 4.1. Corporate Organization....................................39
Section 4.2. Due Authorization.........................................39
Section 4.3. No Conflict...............................................39
Section 4.4. Litigation and Proceedings................................40
Section 4.5. Financial Ability.........................................40
Section 4.6. Accredited Investor Status; Access to Information.........40
Section 4.7. Acknowledgement of No Other Representations...............40
ARTICLE V COVENANTS OF KEYSTONE...........................................41
Section 5.1. Conduct of Business.......................................41
Section 5.2. Inspection................................................42
Section 5.3. HSR Act and Foreign Antitrust Approvals...................43
Section 5.4. Termination of Discussions; No Solicitations..............43
Section 5.5. Update Information........................................43
Section 5.6. Shareholder Approval......................................44
Section 5.7. Financial Information; Financing..........................44
ARTICLE VI COVENANTS OF ACQUIROR...........................................45
Section 6.1. HSR Act and Foreign Antitrust Approvals...................45
Section 6.2. Indemnification and Insurance.............................46
Section 6.3. Confidentiality of Evaluation Material....................47
Section 6.4. Preservation of Books and Records.........................47
Section 6.5. Commitment Letters........................................47
ARTICLE VII COVENANTS APPLICABLE TO KEYSTONE AND ACQUIROR...................47
Section 7.1. Consents and Approvals....................................47
Section 7.2. Level of Efforts..........................................48
ARTICLE VIII CONDITIONS TO OBLIGATIONS.......................................48
Section 8.1. Conditions to Obligations of Acquiror, Merger Sub and
Keystone..................................................48
Section 8.2. Conditions to Obligations of Acquiror and Merger Sub......48
Section 8.3. Conditions to the Obligations of Keystone.................50
ARTICLE IX TERMINATION.....................................................50
Section 9.1. Termination...............................................50
Section 9.2. Effect of Termination.....................................51
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ARTICLE X INDEMNIFICATION.................................................52
Section 10.1. Indemnification by Holder Representative..................52
Section 10.2. Certain Provisions Applicable to Indemnification by
Holder Representative.....................................52
Section 10.3. Indemnification by Acquiror and Merger Sub................54
Section 10.4. Certain Provisions Applicable to Indemnification by
Acquiror..................................................54
Section 10.5. Notice; and Defense of Claims.............................55
Section 10.6. Sole Remedy; Limited Recourse; and Release................56
Section 10.7. Characterization of Indemnity Payments....................57
ARTICLE XI HOLDER REPRESENTATIVE...........................................57
Section 11.1. Designation and Replacement of Holder Representative......57
Section 11.2. Authority and Rights of Holder Representative; and
Limitations on Liability..................................58
Section 11.3. Disbursements from the Escrow Account.....................58
Section 11.4. Allocation and Treatment of Income........................59
ARTICLE XII MISCELLANEOUS...................................................59
Section 12.1. Survival of Representations and Warranties................59
Section 12.2. Waiver....................................................59
Section 12.3. Notices...................................................60
Section 12.4. Assignment................................................62
Section 12.5. Rights of Third Parties...................................62
Section 12.6. Expenses..................................................62
Section 12.7. Governing Law.............................................63
Section 12.8. Facsimile Execution; and Counterparts.....................63
Section 12.9. Entire Agreement..........................................63
Section 12.10. Amendments................................................63
Section 12.11. Publicity.................................................63
Section 12.12. Severability..............................................63
Section 12.13. Tax Returns...............................................64
Section 12.14. Tax Refunds...............................................64
Section 12.15. Tax Audits................................................64
Section 12.16. Jurisdiction; WAIVER OF TRIAL BY JURY.....................65
Section 12.17. Schedules.................................................65
Section 12.18. Specific Performance......................................65
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Exhibits and Schedules
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Exhibit A - Form of Holder Representative Agreement
Exhibit B - Form of Voting Agreement
Exhibit C - Form of Articles of Merger
Exhibit D - Form of Statement of Net Working Capital
Exhibit E - Form of Escrow Agreement
Exhibit F - Commitment Letters
Exhibit G - Form of Legal Opinions
Schedule 1.1 - Permitted Liens
Schedule 3.1 - Corporate Organization of Keystone
Schedule 3.2 - Subsidiaries
Schedule 3.3 - Capitalization of Keystone
Schedule 3.6 - No Conflict
Schedule 3.7 - Financial Statements
Schedule 3.8 - Contracts
Schedule 3.10 - Intellectual Property
Schedule 3.11 - Real Property
Schedule 3.12 - Litigation and Proceedings
Schedule 3.13 - Employee Plans
Schedule 3.14 - Labor Relations
Schedule 3.15 - Legal Compliance
Schedule 3.17 - Taxes
Schedule 3.18 - Governmental Licenses, Permits and Authorizations
Schedule 3.19(a) - No Material Undisclosed Liabilities
Schedule 3.19(c) - Absence of Certain Changes
Schedule 3.20 - Insurance
Schedule 3.21 - Product Warranties
Schedule 3.22 - Directors and Officers
Schedule 3.24 - Affiliate Transactions
Schedule 8.2(i) - Liens
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated August 29,
2003, is entered into by and among Keystone Automotive Holdings, Inc., a
Delaware corporation ("Acquiror"), Keystone Merger Sub, Inc., a Pennsylvania
corporation and a wholly-owned subsidiary of Acquiror ("Merger Sub"), Keystone
Automotive Operations, Inc., a Pennsylvania corporation ("Keystone"), and LAGE
LLC, a Delaware limited liability company, solely in its representative capacity
as set forth in Article XI of this Agreement and not in any other capacity
("Holder Representative").
W I T N E S S E T H:
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A. Acquiror, Merger Sub and Keystone intend to effect the Merger (as
defined below) of Merger Sub with and into Keystone in accordance with the
Pennsylvania Business Corporation Law of 1988, as amended (the "BCL"), and on
the terms and subject to the conditions set forth in this Agreement.
B. The board of directors of Keystone has approved this Agreement, the
Merger and the other transactions contemplated hereby, and has recommended that
the Shareholders (as defined in Article I below) approve and adopt this
Agreement, the Merger and the other transactions contemplated hereby in
accordance with the BCL.
C. The respective boards of directors of Acquiror (including in its
capacity as the sole shareholder of Merger Sub) and Merger Sub have approved and
adopted this Agreement, the Merger and the other transactions contemplated
hereby in accordance with applicable law.
D. Certain capitalized terms used herein have the meanings ascribed to
such terms in Article I hereof.
E. For certain limited purposes, and subject to the terms set forth
herein, Holder Representative shall serve as a representative of the holders of
Common Shares, Preferred Shares and Outstanding Options pursuant to a Holder
Representative Agreement in substantially the form of Exhibit A attached hereto,
the terms and conditions of which are incorporated herein by this reference (the
"Holder Representative Agreement"), to be entered into prior to the Closing.
F. In order to induce Acquiror to enter into this Agreement, certain
Shareholders (representing in the aggregate in excess of 70% of the issued and
outstanding Common Shares and 70% of the issued and outstanding Preferred
Shares), simultaneously with the execution of this Agreement, have entered into
voting agreements and irrevocable proxies in the form of Exhibit B attached
hereto.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, the parties hereto, hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions.
(a) As used herein, the following terms shall have the following
meanings:
"Affiliate" means, with respect to any specified Person, any Person
that, directly or indirectly, Controls, is Controlled by, or is under common
Control with, such specified Person, directly, through one or more
intermediaries or otherwise.
"Agent" means Wachovia (formerly known as First Union National Bank),
as administrative agent under the Credit Agreement.
"Aggregate Enterprise Value" means $440,000,000, as adjusted, if at
all, by Section 2.6 below.
"Aggregate Equity Value" means (a) the Aggregate Enterprise Value
minus (b) the sum of (i) Funded Indebtedness plus (ii) Company Expenses.
"Aggregate Expense Cap" means $1,000,000, as reduced from time to time
by the amount of monies distributed from the Indemnity Escrow Account to pay
either (a) Allowed Expenses or (b) Holder Representative Section 2.7 Expenses
pursuant to clause (y)(B) of Section 2.7(c).
"Aggregate Preferred Accreted Value" means the sum of (a)
$112,090,647.98 plus, (b) the product of (i) the number of Outstanding Preferred
Shares, multiplied by (ii) $0.24103 for each calendar day continuing from
September 30, 2003 until the date immediately prior to the Closing Date.
"Aggregate Preferred Participation Amount" means the quotient obtained
by dividing (a) the difference between (i) the Aggregate Equity Value minus (ii)
the sum of (A) the Aggregate Preferred Accreted Value plus (B) the Shareholder
Escrow Portion, by (b) two.
"Allowed Expenses" means fees and disbursements of counsel, experts,
consultants and other advisors, and other out-of-pocket costs and expenses,
incurred by Holder Representative in connection with (a) any investigation,
defense, prosecution or settlement of any matter (including any counterclaim,
crossclaim or other similar matter) as to which indemnification may be sought by
an Acquiror Indemnified Party, and (b) actions taken or omitted to be taken in
its capacity as Holder Representative after the Closing (except for those
arising out of Holder Representative's bad faith or willful misconduct),
pursuant to this Agreement or the Holder Representative Agreement; provided,
however, that the sum of (i) the aggregate amount of all Allowed Expenses and
(ii) the aggregate amount of all Holder Representative Section 2.7 Expenses paid
from the Indemnity Escrow Account pursuant to clause (y)(B) in the last sentence
of Section 2.7(c) shall not exceed $1,000,000.
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"Alternative Transaction" means, with respect to Keystone and the
Keystone Subsidiaries, any transaction or series of related transactions
involving (a) the sale of all or substantially all of the assets of Keystone and
the Keystone Subsidiaries, (b) the sale of such number of shares of capital
stock of Keystone entitling the holder thereof to elect a majority of the
members of the board of directors of Keystone, or (c) a merger, consolidation,
recapitalization or similar transaction involving Keystone in which the
beneficial owners of capital stock of Keystone immediately prior to such
transaction do not beneficially own, immediately after the consummation of such
transaction, sufficient shares of capital stock of Keystone entitling them to
elect a majority of the members of the board of directors of Keystone.
"Antitrust Authorities" means the Antitrust Division of the United
States Department of Justice, the United States Federal Trade Commission or the
antitrust or competition law authorities of any other jurisdiction (whether
United States, foreign or multinational).
"beneficial owner" and "beneficially own" shall be determined with
reference to Section 13(d) of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Business" means the sale, marketing and distribution of Specialty
Products and replacement parts, in each case, to the automotive aftermarket by
Keystone and the Keystone Subsidiaries.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in the State of New York are authorized or required by
law to be closed.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Section 4980B of the Code and any similar state law.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
"Common Share Merger Consideration" means the quotient obtained by
dividing (a) the difference between (i) the Aggregate Equity Value minus (ii)
the sum of (A) the Aggregate Preferred Accreted Value plus (B) the Shareholder
Escrow Portion, by (b) two.
"Confidential Memorandum" means that certain confidential information
memorandum dated, Summer 2003, regarding Keystone and the Keystone Subsidiaries,
and distributed on behalf of Keystone by UBS Securities LLC (formerly known as
UBS Warburg LLC).
"Confidentiality Agreement" means that certain confidentiality letter
agreement, dated April 21, 2003, as amended on June 13, 2003, by and between
Acquiror and UBS Securities LLC (formerly known as UBS Warburg LLC), as agent
for Keystone.
"Contracts" means any written contracts, agreements, leases, licenses
and purchase orders (including all amendments, extensions, renewals, guarantees
and other agreements with respect thereto), but excluding Employee Plans.
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"Control" means, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise (the terms "Controlled
by" and "under common Control with" shall have correlative meanings).
"Credit Agreement" means that certain Credit Agreement, dated March 6,
1998, as amended, by and among Keystone, the Agent, the co-syndication agents
referred to therein, and the lenders referred to therein.
"Dissenting Common Shares" means Common Shares owned of record by
Persons who do not vote any such Common Shares in favor of the adoption of this
Agreement and the Merger and who comply with the provisions of the BCL
concerning the rights of holders of Common Shares to dissent from the Merger and
require appraisal of their Common Shares.
"Dissenting Preferred Shares" means Preferred Shares owned of record
by Persons who do not vote any such Preferred Shares in favor of adoption of
this Agreement and the Merger and who comply with the provisions of the BCL
concerning the rights of holders of Preferred Shares to dissent from the Merger
and require appraisal of their Preferred Shares.
"Dissenting Shareholders" means the holders of Dissenting Shares.
"Dissenting Shares" means Dissenting Preferred Shares and Dissenting
Common Shares.
"Effective Time of the Merger" means the date and time of the filing
of the Articles of Merger with the Department of State of the Commonwealth of
Pennsylvania.
"Employee Option Exercise Loans" means loans evidenced by promissory
notes executed by employees of Keystone or any of the Keystone Subsidiaries who
are holders of Outstanding Options, in each case, in order to facilitate the
exercise by such employees of Outstanding Options, which notes are payable in
full at the earlier of (a) the Closing and (b) the 180/th/ day following the
issuance of such notes.
"Employee Plan" means any pension, profit-sharing, bonus, incentive,
deferred compensation, premium conversion, medical, hospitalization, vision,
dental or other health, life, disability, severance or other employee benefit
plan, program, arrangement or policy, whether or not subject to ERISA.
"Environmental Laws" means all applicable Federal, state, municipal or
local laws, all common law, judgments, orders, statutes, ordinances, rules, or
regulations regarding occupational health or safety, pollution or the protection
of the environment, as in effect on or prior to the date hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means (a) a member of any "controlled group" (as
defined in Section 414(b) of the Code) of which Keystone or any Keystone
Subsidiary is a member, (b) a
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trade or business, whether or not incorporated, under common control (within the
meaning of Section 414(c) of the Code) with Keystone or any Keystone Subsidiary,
or (c) a member of any affiliated service group (within the meaning of Section
414(m) of the Code) of which Keystone or any Keystone Subsidiary is a member.
"Escrow Agent" means Wachovia or, if Wachovia declines to act as
Escrow Agent under the Escrow Agreement, such other financial institution which
is reasonably acceptable to both Holder Representative and Acquiror, in its
capacity as escrow agent under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement amount the Acquiror, the
Holder Representative and the Escrow Agent in substantially the form of Exhibit
E attached hereto.
"Fiduciary" has the meaning set forth in Section 3(21) of ERISA.
"Funded Indebtedness" means the sum of all amounts owing by Keystone
or any of the Keystone Subsidiaries to repay in full amounts and obligations due
under the Credit Agreement, the Swap Agreement and the Subordinated Loan and all
other Indebtedness of Keystone and the Keystone Subsidiaries as of the Closing
Date, immediately before the Effective Time of the Merger but, in all instances,
after giving effect to all Indebtedness incurred, if any, by Keystone or any
Keystone Subsidiary to fund Keystone's payment of all or any portion of the
Transaction Bonus Amount and of the amounts paid by Keystone to cancel all
Outstanding Options not exercised prior to the Effective Time of the Merger, and
to obtain the release of Liens in favor of the Agent securing the indebtedness
evidenced by the Credit Agreement, the promissory notes executed and delivered
in connection therewith and all other agreements evidencing such other
Indebtedness.
"GAAP" means United States generally accepted accounting principles
consistently applied and maintained throughout the applicable periods.
"Governmental Authority" means any Federal, state, municipal, local or
foreign government, governmental authority, regulatory or administrative agency,
governmental commission, department, board, bureau, agency or instrumentality,
court, tribunal, arbitrator or arbitral body.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, without duplication, (i) any obligations of
Keystone or any Keystone Subsidiary for borrowed money (including, without
limitation, all obligations for principal, interest premiums, penalties, fees,
expenses and breakage costs), (ii) any obligations of Keystone or any Keystone
Subsidiary evidenced by any note, bond, debenture or other debt security, (iii)
any obligations of Keystone or any Keystone Subsidiary for or on account of the
deferred purchase price of property (excluding trade payables incurred in the
ordinary course of business), including capitalized leases, (iv) any obligations
of a Person other than Keystone or any Keystone Subsidiary secured by a Lien
against any of Keystone's or any Keystone Subsidiary's assets, whether or not
such obligations secured thereby have been incurred or
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assumed by Keystone or any Keystone Subsidiary, (v) all obligations of Keystone
or any Keystone Subsidiary for the reimbursement of letters of credit, bankers'
acceptance or similar credit transactions, (vi) any obligations of Keystone or
any Keystone Subsidiary under any currency or interest rate swap, hedge or
similar protection device, and (vii) all obligations of the types described in
clauses (i), (ii), (iii), (iv), (v), and (vi) above of any Person other than
Keystone or any Keystone Subsidiary, the payment of which is guaranteed,
directly or indirectly, by Keystone or any Keystone Subsidiary.
"Indemnity Escrow Account" means the account into which the Indemnity
Escrow Amount is deposited with the Escrow Agent and held by it, subject to
disbursement as provided in Sections 2.7 and 11.3 below and in the Escrow
Agreement.
"Indemnity Escrow Amount" means $15 million, as reduced from time to
time by the amount of monies distributed therefrom in accordance with Section
11.3 and the Escrow Agreement.
"Intellectual Property" means all of the following in any jurisdiction
throughout the world: (i) patents, patent applications and patent disclosures;
(ii) trademarks, service marks, trade dress, trade names, corporate names, logos
and slogans (and all translations, adaptations, derivations and combinations of
the foregoing) and Internet domain names, together with all goodwill associated
with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
registrations and applications for any of the foregoing; (v) trade secrets,
confidential information, know-how and inventions; (vi) computer software
(including but not limited to source code, executable code, data, databases and
documentation); and (vii) all other intellectual property.
"Keystone Employee Plan" means an Employee Plan which Keystone or any
Keystone Subsidiary sponsors or maintains or to which Keystone or any Keystone
Subsidiary contributes to or for the benefit of its current or former employees.
"Knowledge" or any other similar phrase, when used with respect to
Keystone, means the actual knowledge after reasonable inquiry of Xxxxxx Vor
Broker, Xxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxxxxx and Xxxx Xxxxxxxx.
"Leased Real Property" means all real property leased by Keystone or
any of the Keystone Subsidiaries as of the date hereof.
"Letter of Transmittal" means (a) the letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery by a shareholder of his, her
or its Certificates in accordance with the instructions thereto), together with
(b) the instructions thereto for use in effecting the surrender of the
Certificates in exchange for the consideration contemplated to be paid pursuant
to this Agreement, in form and substance reasonably acceptable to both Acquiror
and Keystone.
"Lien" means, with respect to any property or asset, any mortgage,
deed of trust, lien, pledge, charge, security interest, encumbrance or other
similar restriction in respect of such property or asset.
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"Management Agreement" means that certain Management Consulting
Services Agreement, effective as of March 6, 1998, as amended, by and among
Keystone, Xxxxxxxxxx & Co., LLC, Advent International Corporation and General
Electric Capital Corporation.
"Material Adverse Effect on the Business" means a material adverse
effect on the business, properties, financial condition or results of operations
of Keystone and the Keystone Subsidiaries, taken as a whole; provided, however,
that events, facts or circumstances arising from the execution, delivery or
performance of this Agreement, including the consummation of the transactions
contemplated hereby, or the announcement thereof shall not be taken into account
in determining whether there has been a Material Adverse Effect on the Business.
"Merger Consideration" means the sum of (a) the Preferred Share Merger
Consideration and (b) the Common Share Merger Consideration.
"Net Working Capital" means, with respect to a particular date, (a)
the consolidated current assets of Keystone and the Keystone Subsidiaries as of
such date, minus (b) the consolidated current liabilities of Keystone and the
Keystone Subsidiaries as of such date, in each case utilizing only the line
items set forth on the form of Statement of Net Working Capital.
"Note Purchase Agreement" means that Note Purchase Agreement, dated as
of March 6, 1998, as amended, by and between Keystone and First Union Investors,
Inc.
"Option Shares" means Common Shares acquired after the date of this
Agreement and prior to the Effective Time of the Merger through the exercise of
Outstanding Options utilizing, in whole or in part, the issuance of Employee
Option Exercise Loans to pay the exercise price thereof.
"Outstanding Common Shares" means the number of Common Shares
outstanding immediately prior to the Effective Time of the Merger (including
Option Shares).
"Outstanding Preferred Shares" means the number of Preferred Shares
outstanding immediately prior to the Effective Time of the Merger.
"Owned Real Property" means all real property owned by Keystone or any
of the Keystone Subsidiaries.
"Paying Agent" means Wachovia or, if Wachovia declines to act as
Paying Agent under the Paying Agent Agreement, such other financial institution
which is reasonably acceptable to both Holder Representative and Acquiror, in
its capacity as Paying Agent under the Paying Agent Agreement.
"Paying Agent Agreement" means the agreement to be entered into by and
among Keystone, Acquiror and Paying Agent before the Effective Time of the
Merger governing the Paying Agent's duties in form and substance reasonably
satisfactory to both Acquiror and Holder Representative.
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"Per Common Share Merger Consideration" means the quotient obtained by
dividing (a) the Common Share Merger Consideration by (b) the Outstanding Common
Shares.
"Per Preferred Share Merger Consideration" means the quotient obtained
by dividing (a) the Preferred Share Merger Consideration by (b) the Outstanding
Preferred Shares.
"Permitted Liens" means (a) mechanics, materialmen's, carrier's
repairer's and other similar Liens arising or incurred in the ordinary course of
business consistent with past custom and practice or that are not yet due and
payable or are being contested in good faith; (b) Liens for Taxes not yet due
and payable or which are being contested in good faith and which would not,
individually or in the aggregate, be material; (c) encumbrances and restrictions
on real property (including easements, covenants, rights of way and similar
restrictions of record) that do not materially interfere with the uses of such
real property; (d) Liens securing the obligations of Keystone and the Keystone
Subsidiaries under the Credit Agreement; and (e) Liens described on Schedule
1.1.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"Preferred Share Merger Consideration" means the sum of the Aggregate
Preferred Accreted Value plus the Aggregate Preferred Participation Amount.
"Pricing Date" shall mean the date on which Acquiror and the initial
purchasers of the Senior Subordinated Notes initially determine the principal
amount, interest rate and other material terms of the Senior Subordinated Notes.
"Prohibited Transaction" has the meaning set forth in Section 406 of
ERISA and Section 4975 of the Code.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated March 6, 1998, by and among Keystone and the shareholders party
thereto.
"Road Show Commencement Date" shall mean the first date on which
meetings are held between representatives of the Acquiror, Keystone and
potential purchasers of the Senior Subordinated Notes.
"Rolled Options" means such of the Outstanding Options, if any, that
are exchanged by the holders thereof of Keystone for securities of the Acquiror,
provided, however, each such exchange shall be approved by the Acquiror.
"Rolled Stock" means such of the Common Shares and Preferred Shares,
as applicable, that are exchanged by Shareholders of Keystone for equity
interests in Acquiror, provided, however, each such exchange shall be approved
by the Acquiror.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
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"Senior Subordinated Notes" has the meaning set forth in the Debt
Commitment Letters.
"Shareholder" means any shareholder of record of Keystone immediately
prior to the Effective Time of the Merger.
"Shareholder Escrow Portion" means that portion of each of the
Indemnity Escrow Amount and Working Capital Escrow Amount, as applicable, which
is allocated to the holders of Common Shares and Preferred Shares pursuant to
the Holder Representative Agreement; provided, that, at all times, the sum of
the Shareholder Escrow Portion, plus the Transaction Bonus Escrow Portion,
expressed as a percentage, shall represent 100% of each of the Indemnity Escrow
Amount and the Working Capital Escrow Amount.
"Shareholders' Agreement" means that certain Shareholders' Agreement
dated as of March 6, 1998, as amended, by and among Keystone and the
shareholders of Keystone party thereto.
"Specialty Products" means manufacturers' branded automotive
accessories and trim products, high performance and speed automotive products,
and sport utility vehicle and light truck products.
"Statement of Net Working Capital" means the statement of Net Working
Capital in substantially the form of Exhibit D attached hereto.
"Subordinated Loan" means that certain loan evidenced by a floating
rate note, dated March 6, 1998, as amended, issued pursuant to the Note Purchase
Agreement by Keystone in favor of First Union Investors, Inc. in the original
principal amount of $22,500,000.
"Swap Agreement" means that certain ISDA Master Agreement, dated as of
March 31, 2003, as amended, between Keystone and PNC Bank, National Association.
"Target Working Capital" means $51,600,000.
"Tax" means any income, employment, franchise, property, sales and
use, withholding, payroll, stamp, environmental (including taxes under Section
59A of the Code), duties, capital stock, social security, unemployment,
estimated, alternative or add-on minimum excise taxes, any other tax of a
similar kind and any other similar charges imposed by a Governmental Authority
including any interest, penalty or addition thereto, and any liability for
another person under Treas. Reg. Sec. 1.1502-6, or similar state or foreign law.
"Tax Benefit" shall mean the foreign, Federal, state and local income
tax savings that have resulted from any tax deduction or tax credit that (i) an
indemnified party is entitled to claim in accordance with applicable law
(without regard to the entitlement of such indemnified party to any
indemnification payment pursuant to the terms of Article X) on a foreign,
Federal, state or local income tax return filed for any tax year of Keystone or
any Keystone Subsidiary and (ii) is directly attributable to such claim.
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"Transaction Bonus Amount" means the amount, determined by the Board
or a committee thereof, not to exceed $27,500,000 in the aggregate, payable by
Keystone upon the consummation of the Merger pursuant to the Transaction Bonus
Plan.
"Transaction Bonus Plan" means the Keystone Automotive Operations,
Inc. 2003 Transaction Bonus Plan, a copy of which has been provided to Acquiror.
"Transaction Bonus Escrow Portion" means that portion of each of the
Indemnity Escrow Amount and the Working Capital Escrow Amount, as applicable,
which is allocated to the Transaction Bonus Recipients pursuant to the Holder
Representative Agreement; provided, that, at all times, the sum of the
Shareholder Escrow Portion, plus the Transaction Bonus Escrow Portion, expressed
as a percentage, shall represent 100% of each of the Indemnity Escrow Amount and
the Working Capital Escrow Amount.
"Transaction Bonus Recipients" means those directors, employees and
former employees of Keystone or any of the Keystone Subsidiaries who are awarded
transaction bonuses pursuant to the Transaction Bonus Plan.
"Transaction Tax Benefit Amount" means the product of (a) 38.5%
multiplied by (b) the sum of (i) the amount of gross compensation income to be
realized by the holders of Outstanding Options as a result of the exercise
thereof and the sale pursuant to the Merger of the Common Shares received upon
exercise thereof plus, (ii) the amount of any bonuses paid or payable by
Keystone or the Keystone Subsidiaries as a result of the consummation of the
transactions contemplated hereby; provided, however, that in no event shall the
Transaction Tax Benefit Amount for purposes hereof exceed $10,500,000.
"Wachovia" means Wachovia Bank, N.A.
"Working Capital Escrow Account" means the account into which the
Working Capital Escrow Amount is deposited with the Escrow Agent and held by it,
subject to disbursement as provided in Sections 2.7 and 11.3 and in the Escrow
Agreement.
"Working Capital Escrow Amount" means $5,000,000.
(b) Each of the following additional terms is defined in the
Section set forth opposite such term:
Term Section
Acquiror........................................................ Preamble
Acquiror Cure Period............................................ 9.1(c)
Acquiror Indemnified Party(ies)................................. 10.1(a)
Acquiror Noticed Loss........................................... 10.2(c)
Adjustment Amount............................................... 2.7(d)
Aggregate Option Payment Amount................................. 2.3
Agreement....................................................... Preamble
Articles of Merger.............................................. 2.1(a)
Auditor......................................................... 2.7(c)
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Term Section
Balance Sheet Date.............................................. 3.7
BCL............................................................. Preamble
Board........................................................... 5.6
Cap............................................................. 10.2(a)
Certificates.................................................... 2.5(e)
Closing......................................................... 2.4
Closing Balance Sheet........................................... 2.7(a)
Closing Date.................................................... 2.4
Closing Date Net Working Capital................................ 2.7(a)
Commitment Letters.............................................. 4.5
Common Share.................................................... 3.3(a)
Company Expense Recipients...................................... 2.5(b)(ii)
Company Expense Statement....................................... 2.8
Company Expenses................................................ 2.8
Constituent Corporations........................................ 2.1(a)
Covered Matters................................................. 10.6
Debt Commitment Letters......................................... 4.5
Debt Payoff Recipients.......................................... 2.5(b)(i)
Defense Notice.................................................. 10.5
Determination Date.............................................. 2.7(c)
Disputed Line Items............................................. 2.7(c)
Equity Commitment Letter........................................ 4.5
Estimated Adjustment Amount..................................... 2.6(b)
Estimated Closing Date Net Working Capital...................... 2.6(a)
Expiration Time................................................. 10.2(c)
Final Termination Date.......................................... 9.1(b)
Finance Employees............................................... 2.7(a)
Funding Amount.................................................. 2.5(a)(i)
Holder Representative........................................... Preamble
Holder Representative Agreement................................. Preamble
Holder Representative Section 2.7 Expenses...................... 2.7(c)
Interim Balance Sheet........................................... 3.7
Interim Financial Statements.................................... 3.7
Key Employees................................................... 3.14(b)
Keystone........................................................ Preamble
Keystone Cure Period............................................ 9.1(b)
Keystone Charter Documents...................................... 3.1
Keystone Group.................................................. 5.4
Keystone Intellectual Property.................................. 3.10
Keystone Shareholders' Meeting.................................. 5.6
Keystone Subsidiary(ies)........................................ 3.2
Losses.......................................................... 10.1
Majority Holders................................................ 11.1
Material Contract............................................... 3.8(a)
Merger.......................................................... 2.1(a)
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Term Section
Merger Sub...................................................... Preamble
Notice of Disagreement.......................................... 2.7(c)
Option Payment Amount........................................... 2.3
Outstanding Options............................................. 2.3(a)
Paying Agent.................................................... 2.5(a)(i)
Permits......................................................... 3.18
Preferred Share................................................. 3.3(a)
Proxy Statement................................................. 5.6
PWC............................................................. 2.7(a)
Real Property................................................... 3.11
Real Property Leases............................................ 3.8(a)(v)
Record Retention Period......................................... 6.4
Reimbursable Loss............................................... 11.3(b)
Releasing Parties............................................... 10.6
Representatives................................................. 5.2
September Tax Payment........................................... 5.1
Shareholder Indemnified Party(ies).............................. 10.3(a)
Shareholder Noticed Loss........................................ 10.4(c)
Surviving Corporation........................................... 2.1(b)
Surviving Corporation Constitutive Documents.................... 2.1(c)
Tax Disagreement Notice......................................... 12.13(a)
Tax Returns..................................................... 3.17(a)
Terminating Acquiror Breach..................................... 9.1(c)
Terminating Keystone Breach..................................... 9.1(b)
Threshold Amount................................................ 10.2(b)
Section 1.2 Interpretation. In this Agreement, unless otherwise
specified or where the context otherwise requires:
(a) the headings of particular provisions of this Agreement are
inserted for convenience only and will not be construed as a part of this
Agreement or serve as a limitation or expansion on the scope of any term or
provision of this Agreement;
(b) words importing any gender shall include other genders;
(c) words importing the singular only shall include the plural
and vice versa;
(d) the words "include," "includes" or "including" shall be
deemed to be followed by the words "without limitation";
(e) the words "hereof," "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement;
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(f) references to "Articles," "Exhibits," "Sections" or
"Schedules" shall be to Articles, Exhibits, Sections or Schedules of or to this
Agreement;
(g) references to any Person include the successors and permitted
assigns of such Person;
(h) references to any agreement or contract, unless otherwise
stated, are to such agreement or contract as amended, modified or supplemented
from time to time in accordance with the terms hereof and thereof; and
(i) the parties hereto have participated jointly in the
negotiation and drafting of this Agreement; accordingly, in the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party hereto by virtue
of the authorship of any provisions of this Agreement.
ARTICLE II
THE MERGER; EFFECTS OF THE MERGER; MERGER CONSIDERATION; AND
CONVERSION OF SECURITIES
Section 2.1. The Merger.
(a) General. At the Effective Time of the Merger, Merger Sub
shall be merged with and into Keystone (the "Merger"), with Keystone being the
surviving corporation in the Merger (Merger Sub and Keystone sometimes being
referred to herein as the "Constituent Corporations"). The Merger will be
consummated on the Closing Date in accordance with this Agreement by the filing
of Articles of Merger between Merger Sub and Keystone in substantially the form
of Exhibit C hereto (the "Articles of Merger").
(b) Effect of the Merger. At the Effective Time of the Merger,
the separate corporate existence of Merger Sub shall cease and Keystone, as the
surviving corporation in the Merger (hereinafter referred to for the periods at
and after the Effective Time of the Merger as the "Surviving Corporation"),
shall continue its corporate existence under the BCL as a wholly-owned
subsidiary of Acquiror. At and after the Effective Time of the Merger, the
Merger shall have the effects specified in Section 1929 of the BCL, including:
(i) the Surviving Corporation shall thereupon and thereafter possess all of the
rights, privileges, powers, immunities, purposes and franchises, of a public as
well as a private nature, of the Constituent Corporations, and shall become
subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations; (ii) all rights, privileges, powers and franchises of
each Constituent Corporation, and all property, real, personal and mixed, and
all debts due to each such Constituent Corporation, on whatever account, and all
choses in action belonging to each such corporation, shall become vested in the
Surviving Corporation; (iii) all property, rights, privileges, powers and
franchises, and all and every other interest shall become thereafter the
property of the Surviving Corporation as they are of the Constituent
Corporations; and (iv) the title to any real property vested by deed or
otherwise or any other interest in real estate vested by any instrument or
otherwise in either of such Constituent Corporations shall not revert or become
in any way impaired by reason of the Merger, but all Liens upon any property of
either
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Constituent Corporation shall thereforth attach to the Surviving Corporation and
shall be enforceable against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it; all of the foregoing in
accordance with the applicable provisions of the BCL.
(c) Constitutive Documents and Officers and Directors of the
Surviving Corporation. At the Effective Time of the Merger, the Articles of
Incorporation and Bylaws of Merger Sub in effect immediately prior to the
Effective Time of the Merger shall be the Articles of Incorporation and Bylaws
of the Surviving Corporation immediately after the Effective Time of the Merger,
until thereafter amended as provided therein and under the BCL (the "Surviving
Corporation Constitutive Documents"). The directors of Merger Sub in office
immediately prior to the Effective Time of the Merger shall be the directors of
the Surviving Corporation immediately after the Effective Time of the Merger,
until their successors are duly elected and qualify as provided under the
Surviving Corporation Constitutive Documents and the BCL. The officers of
Keystone immediately prior to the Effective Time of the Merger shall be the
officers of the Surviving Corporation immediately after the Effective Time of
the Merger, until their successors are duly appointed and qualify as provided
under the Surviving Corporation Constitutive Documents and the BCL.
(d) Taking of Necessary Actions; Further Action. Keystone,
Acquiror and Merger Sub, respectively, shall take all such lawful action as may
be necessary or appropriate to effectuate the transactions contemplated by this
Agreement (including, without limitation, the financing described in Section
4.5). In case at any time after the Effective Time of the Merger, any further
action is necessary to carry out the purposes of this Agreement and to vest in
the Surviving Corporation title to all assets, rights, privileges, powers,
immunities, purposes and franchises of either of the Constituent Corporations,
the officers and directors of such corporation shall be empowered to take all
such lawful action.
Section 2.2 Conversion of Capital Stock.
(a) Common Shares. At the Effective Time of the Merger, by virtue
of the Merger and without any action on the part of any holder of Common Shares,
Keystone, Acquiror or Merger Sub, each Common Share (or fraction of a Common
Share rounded to the nearest hundredth of one Common Share) that is then issued
and outstanding, other than Dissenting Common Shares and other than the Rolled
Stock, will be canceled, extinguished and converted into the right to receive an
amount in cash equal to the Per Common Share Merger Consideration (or in the
case of fractional shares, the applicable fraction thereof); provided, however,
in the case of any Option Shares, the Surviving Corporation shall be entitled to
deduct from the Per Common Share Merger Consideration payable with respect to
any such Option Shares an amount equal to the then outstanding principal amount
(together with accrued and unpaid interest thereon, if any) of any Employee
Option Exercise Loans made to such holder to exercise such Option Shares. Holder
Representative is authorized hereby (i) to determine the amount of any
fractional Common Shares that is outstanding at the Effective Time of the Merger
and (ii) to make appropriate rounding to the nearest dollar of the consideration
receivable by each holder of Common Shares in its sole discretion. Each holder
of a Certificate, which immediately prior to the Effective Time of the Merger
represented any Common Shares shall cease to have any rights with respect
thereto, except the right to receive the Per Common Share Merger Consideration
upon the surrender of such Certificate(s) in accordance with Section 2.5.
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At the Effective Time of the Merger, each Common Share held in the treasury of
Keystone or any Keystone Subsidiary shall be canceled and retired, and no
payment shall be made in respect thereof.
(b) Preferred Shares. At the Effective Time of the Merger, by
virtue of the Merger and without any action of the part of any holder of
Preferred Shares, Keystone, Acquiror or Merger Sub, each Preferred Share (or
fraction of a Preferred Share rounded to the nearest hundredth of one Preferred
Shares) that is then issued and outstanding, other than Dissenting Preferred
Share and other than the Rolled Stock, will be canceled, extinguished and
converted into the right to receive an amount in cash equal to the Per Preferred
Share Merger Consideration (or in the case of fractional shares, the applicable
fraction thereof). Holder Representative is authorized hereby (i) to determine
the amount of any fractional Preferred Shares that is outstanding at the
Effective Time of the Merger and (ii) to make appropriate rounding to the
nearest dollar of the consideration receivable by each holder of Preferred
Shares in its sole discretion. Each holder of a Certificate, which immediately
prior to the Effective Time of the Merger represented any Preferred Shares shall
cease to have any rights with respect thereto, except the right to receive the
Per Preferred Share Merger Consideration upon the surrender of such
Certificate(s) in accordance with Section 2.5. At the Effective Time of the
Merger, each Preferred Share held in the treasury of Keystone or any Keystone
Subsidiary shall be canceled and retired, and no payment shall be made in
respect thereof.
(c) Merger Sub Shares. At the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of Acquiror or Merger
Sub, each share of common stock, par value $0.01 per share, of Merger Sub shall
be converted into one share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(d) Dissenting Shares. Any Dissenting Shares which, as of the
Effective Time of the Merger, the holder thereof has not withdrawn or otherwise
lost any right to such appraisal, shall not be entitled to receive the
consideration set forth in Sections 2.2(a) or (b), as applicable, but instead
shall be converted into the right to receive such amount as may be determined to
be due with respect to such Dissenting Shares pursuant to the BCL. Keystone
shall give the Acquiror (i) prompt notice of any written notice or demands for
appraisal of Preferred Shares or Common Shares, written withdrawals or
modifications of such demands, and any other instruments served pursuant to the
BCL and received by Keystone which relate to any such demand for appraisal, and
(ii) the opportunity to participate in all negotiations and proceedings which
take place prior to the Closing. Keystone agrees that, except with the prior
written consent of Acquiror, which will not be unreasonably withheld, delayed or
conditioned, it will not make any payment with respect to or settle any claim,
demand or other obligation it may have with respect to any Dissenting Shares.
Each Dissenting Shareholder who, pursuant to the provisions of the BCL, becomes
entitled to payment of the fair value for any Dissenting Shares, shall receive
payment therefore (but only after the value therefore shall have been agreed
upon or finally determined pursuant to the BCL) and thereupon such Dissenting
Shares shall be canceled and retired, and shall cease to exist. If, after the
Effective Time of the Merger, any Dissenting Shares shall lose their status as
Dissenting Shares for any reason, including because the Dissenting Shareholder
withdraws, fails to perfect or otherwise loses the right to appraisal, then
Acquiror shall pay (or cause the Surviving Corporation to pay) the
consideration, without interest, which such Dissenting Shareholder would have
been entitled to receive pursuant to
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Sections 2.2(a) or (b), as applicable, assuming such shares were not Dissenting
Shares at the Effective Time of the Merger.
Section 2.3 Outstanding Options. Prior to the Effective Time of the
Merger, the Company shall use commercially reasonable efforts to cause each
unexercised option (other than the Rolled Options) to purchase Common Shares
that is then outstanding (the "Outstanding Options") to become fully vested and
to be exercised by the holder thereof. To the extent that any Outstanding
Options are not exercised prior to the Effective Time of the Merger, such
Outstanding Options shall be canceled and extinguished and the holder of each
such Outstanding Option shall be entitled to receive, in complete satisfaction
of all obligations owing from the Company to such holder on account of such
Outstanding Option, an amount in cash equal to the excess, if any, of the Per
Common Share Merger Consideration over the exercise price per Common Share of
such Outstanding Option multiplied by the number of Common Shares previously
subject to such Outstanding Option less any required withholding (as to each
such Outstanding Option, the "Option Payment Amount," and as all of such
Outstanding Options in the aggregate, the "Aggregate Option Payment Amount").
All plans, programs and arrangements providing for the issuance or grant of any
other interest in respect of the capital stock of Keystone or any of the
Keystone Subsidiaries shall terminate as of the Effective Time of the Merger,
and no holder of Outstanding Options or any participant in any such plans,
programs or arrangements shall have any rights thereunder to acquire any equity
securities of Keystone, the Surviving Corporation or any Subsidiary thereof
other than the right to receive the Option Payment Amount payable to such holder
in accordance with this Section 2.3.
Section 2.4 The Closing. The consummation of the Merger shall occur at
a closing (the "Closing") to be held at the offices of Xxxxxx Xxxxxxxx LLP, 0000
Xxx Xxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000-0000, on the third Business Day
following the date when the last of the conditions precedent to the Closing set
forth in Article VIII has been satisfied or waived (other than those conditions
precedent which may only be satisfied at the Closing itself), but, without the
prior written consent of Keystone and Acquiror, in no event later than the Final
Termination Date (the "Closing Date"). At the Closing and simultaneously with
the payment by Acquiror of all of the amounts set forth in Section 2.5(a),
Keystone shall cause, and Acquiror shall cause Merger Sub to cause, the Articles
of Merger to be executed and delivered by a duly authorized officer and filed
with the Department of State of the Commonwealth of Pennsylvania in accordance
with the requirements of the BCL, and the documents and instruments described in
subsections (a), (b), (c) and (d) below shall be executed and delivered.
(a) At the Closing, Acquiror shall deliver to Keystone:
(i) a certificate, duly executed by an authorized
executive officer of Acquiror, dated the Closing Date, certifying that the
conditions specified in Sections 8.3(a) and (b) have been fulfilled;
(ii) a certificate, duly executed by an authorized
Secretary or Assistant Secretary of Acquiror, dated the Closing Date, to the
effect that: (A) (1) the charter, by-laws or other constitutive documents
(including any operating or partnership agreement) of Acquiror and Merger Sub
attached to such certificate are true, correct and complete, and were in full
force and effect in the form as attached to such certificate on the date of
adoption of the
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resolutions referred to in clause (3) below, (2) no amendment to such charter,
by-laws or other constitutive documents (including any operating or partnership
agreement) of either Acquiror or Merger Sub has occurred since the date of
adoption of the resolutions referred to in clause (3) below other than as shown
in such certificate, (3) the resolutions adopted by the respective boards of
directors (or similar governing bodies) authorizing this Agreement and the
transactions contemplated hereby, including the Merger, were duly adopted at a
duly convened meeting thereof, at which a quorum was present and acting
throughout, or by unanimous written consent, and such resolutions remain in full
force and effect, and have not been amended, rescinded or modified, except to
the extent attached thereto; and (B) the respective officers of Acquiror and
Merger Sub executing this Agreement and the other documents, agreements and
instruments to be executed and delivered by Acquiror or Merger Sub pursuant to
this Agreement are incumbent officers of Acquiror or Merger Sub, as applicable,
and the specimen signatures on such certificate are their genuine signatures;
and
(iii) the Escrow Agreement, duly executed by the Acquiror.
(b) At the Closing, Keystone shall execute and deliver to
Acquiror:
(i) a certificate, duly executed by an authorized
executive officer of Keystone, dated the Closing Date, certifying that the
conditions specified in Sections 8.2(a), (b), (d), (e) and (f) have been
fulfilled;
(ii) a certificate, duly executed by an authorized
Secretary or Assistant Secretary of Keystone, dated the Closing Date, to the
effect that: (A) (1) the Keystone Charter Documents attached to such certificate
are true, correct and complete, and were in full force and effect in the form as
attached to such certificate on the date of adoption of the resolutions referred
to in clause (3) below, (2) no amendment to the Keystone Charter Documents has
occurred since the date of adoption of the resolutions referred to in clause (3)
below other than as shown in such certificate, (3) the resolutions adopted by
the board of directors of Keystone authorizing this Agreement and the
transactions contemplated hereby, including the Merger, were duly adopted at a
duly convened meeting thereof, at which a quorum was present and acting
throughout, or by unanimous written consent, and such resolutions remain in full
force and effect, and have not been amended, rescinded or modified, except to
the extent attached thereto; and (B) Keystone's officers executing this
Agreement and the other documents, agreements and instruments to be executed and
delivered by Keystone pursuant to this Agreement are incumbent officers and the
specimen signatures on such certificate are their genuine signatures.
(iii) the Escrow Agreement, duly executed by the Holder
Representative; and
(iv) a FIRPTA affidavit under Section 1445 of the Code,
duly executed by Keystone and each Keystone Subsidiary which owns any Owned Real
Property.
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Section 2.5 Payments at Closing and Exchange of Certificates.
(a) At the Closing, Acquiror will make the following payments:
(i) to an account, in the name of the Paying Agent, that
is designated in writing by Holder Representative, by wire transfer of
immediately available funds, an amount (the "Funding Amount") equal to the
difference between (A) the Merger Consideration, minus (B) the sum of (1) the
product of (x) the number of Dissenting Common Shares multiplied by (y) the Per
Common Share Merger Consideration, (2) the product of (x) the number of
Dissenting Preferred Shares multiplied by (y) the Per Preferred Share Merger
Consideration, (3) the principal amount (together with accrued and unpaid
interest thereon, if any) of all Employee Option Exercise Loans which are unpaid
as of the Effective Time of the Merger and any withholding taxes described in
Section 2.5(g); (4) the product of (x) the number of Preferred Shares comprising
a part of the Rolled Stock, multiplied by (y) the Per Preferred Share Merger
Consideration; and (5) the product of (x) the number of Common Shares comprising
part of the Rolled Stock, multiplied by (y) the Per Common Share Merger
Consideration;
(ii) to the Indemnity Escrow Account, by wire transfer of
immediately available funds, an amount equal to the Shareholder Escrow Portion
of the Indemnity Escrow Amount, which funds shall be disbursed in accordance
with Sections 2.7 and 11.3 below and in accordance with the Escrow Agreement;
and
(iii) to the Working Capital Escrow Account, by wire
transfer of immediately available funds, an amount equal to the Shareholder
Escrow Portion of the Working Capital Escrow Amount, which funds shall be
disbursed in accordance with Section 2.7 and 11.3 below and in accordance with
the Escrow Agreement.
(b) At the Closing, Acquiror will make (or cause to be made) the
following additional payments:
(i) on behalf of Keystone, to such accounts designated in
writing by Keystone by wire transfer of immediately available funds, an amount,
in the aggregate, equal to the Funded Indebtedness to enable Keystone to repay
the Funded Indebtedness (the recipients of such monies being, collectively, the
"Debt Payoff Recipients"); and
(ii) on behalf of Keystone, to one or more accounts
designated in writing by Keystone, by wire transfer of immediately available
funds, the amount of Company Expenses determined pursuant to Section 2.8 below
to pay such Company Expenses (the recipients of such monies being, collectively,
the "Company Expense Recipients").
(c) Upon (i) receipt by the Paying Agent of the Funding Amount,
(ii) receipt by Escrow Agent of the Shareholder Escrow Portion, (iii) receipt by
the Debt Payoff Recipients of an amount equal to the Funded Indebtedness, and
(iv) receipt by the Company Expense Recipients of the amount of Company
Expenses, Acquiror shall be deemed to have satisfied its obligations to make
payments pursuant to this Agreement other than (A) the obligation of Acquiror or
the Surviving Corporation to make payments required by Section 2.7
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hereof, (B) the obligation of Acquiror or the Surviving Corporation to make
payments to Dissenting Shareholders, if any, following the Effective Time of the
Merger, and (C) the obligation of Acquiror and the Surviving Corporation to
indemnify the Shareholder Indemnified Parties pursuant to Article X of this
Agreement.
(d) At the Closing, Keystone will cause to be made the following
payments:
(i) to an account, in the name of the Paying Agent, that
is designated in writing by Holder Representative, by wire transfer of
immediately available funds, an amount equal to the Transaction Bonus Amount
less the Transaction Bonus Escrow Portion;
(ii) to the Indemnity Escrow Account, by wire transfer of
immediately available funds, an amount equal to the Transaction Bonus Escrow
Portion of the Indemnity Escrow Amount, which funds shall be disbursed in
accordance with Sections 2.7 and 11.3 below and in accordance with the Escrow
Agreement; and
(iii) to the Working Capital Escrow Account, by wire
transfer of immediately available funds, an amount equal to the Transaction
Bonus Escrow Portion of the Working Capital Escrow Amount, which funds shall be
disbursed in accordance with Sections 2.7 and 11.3 below and in accordance with
the Escrow Agreement.
(e) As promptly as practicable after the Effective Time of the
Merger, the Surviving Corporation shall cause to be mailed to each Shareholder
the form of Letter of Transmittal. After the Effective Time of the Merger, each
holder of a certificate or certificates for then issued and outstanding Common
Shares or Preferred Shares (collectively, the "Certificates"), upon surrender of
such Certificates to the Paying Agent, together with the completed Letter of
Transmittal, shall be entitled to receive from the Paying Agent in exchange
therefore such portion of the Common Share Merger Consideration or Preferred
Share Merger Consideration, as the case may be, into which each of such holder's
Common Shares or Preferred Shares shall have been converted as a result of the
Merger and the Certificates so surrendered shall be cancelled. In the event of a
transfer of ownership of any Common Shares or Preferred Shares that is not
registered in the transfer books of Keystone, subject to subsection (g) below,
payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer. Notwithstanding the
foregoing, if any Certificate shall be lost, stolen or destroyed, upon the
making of an affidavit of that fact and an undertaking of indemnity by the
Person claiming such Certificate to be lost, stolen or destroyed, the Surviving
Corporation will issue in exchange for such lost, stolen or destroyed
Certificate, the consideration deliverable in respect thereof pursuant to this
Agreement. No interest will be paid or accrued on any cash payable to holders of
Certificates. Pending such surrender and exchange, a holder's Certificate or
Certificates for Common Shares and Preferred Shares shall be deemed for all
purposes (other than the exchange contemplated by this Section 2.5) to evidence
such holder's portion of the Common Share Merger Consideration or Preferred
Share Merger Consideration, as the case may be, into which such Common Shares or
Preferred Shares shall have been converted by the Merger.
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(f) At any time following the expiration of twelve months after
the Effective Time of the Merger, the Surviving Corporation shall, in its sole
discretion, be entitled to require the Paying Agent to deliver to it any funds
(including any interest received with respect thereto) which had been made
available to the Paying Agent and which have not been disbursed to holders of
Certificates, and such funds shall become the property of the Surviving
Corporation; provided, that, any such funds representing amounts payable as
Transaction Bonus Amounts pursuant to the Transaction Bonus Plan shall be
delivered to Holder Representative. Such funds may be commingled with the
general funds of the Surviving Corporation and shall be free and clear of any
claims on interests of any Person. Thereafter such holders shall be entitled to
look to the Surviving Corporation (subject to any applicable abandoned property,
escheat or similar law) only as general creditors thereof with respect to the
applicable Merger Consideration payable (net of any amounts that would be
subject to withholding and net of such holder's share of the Shareholder Escrow
Portion) upon due surrender of their Certificates, without any interest thereon.
Any portion of such remaining cash unclaimed by holders of Common Shares or
Preferred Shares as of a date which is immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental
Authority shall, to the extent permitted by applicable law, become the property
of the Surviving Corporation free and clear of any claims or interest of any
Person previously entitled thereto.
(g) Notwithstanding anything contained herein in this Agreement,
Merger Sub, Surviving Corporation and Paying Agent shall be entitled to deduct
and withhold from the applicable Merger Consideration otherwise payable pursuant
to this Agreement to any holder of Common Shares or Preferred Shares, such
amount as Merger Sub, Surviving Corporation or Paying Agent is required to
deduct and withhold with respect to such payment (or with respect to Options the
issuance of Option Shares) under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of Common Shares or Preferred Shares, as applicable, in respect of
which such deduction and withholding was made.
(h) At the Effective Time of the Merger, the stock transfer books
of Keystone shall be closed, and there shall be no further registration of
transfers an the stock transfer books of the Surviving Corporation of the Common
Shares or Preferred Shares, as applicable, that were outstanding immediately
prior to the Effective Time of the Merger. If, after the Effective Time of the
Merger, Certificates are presented to the Surviving Corporation or the Paying
Agent for any reason, they shall be canceled and exchanged as provided in this
Article II.
Section 2.6 Estimated Adjustment Amount.
(a) Within ten Business Days prior to the Closing Date, and in no
event less than five Business Days prior to the Closing Date, Keystone shall
deliver to the Acquiror a certificate signed by the Chief Financial Officer of
Keystone attaching a statement setting forth (i) the Transaction Tax Benefit
Amount and (ii) its reasonable, good faith estimate of the Net Working Capital
as of the Closing Date (the "Estimated Closing Date Net Working Capital") in
substantially the form of the Statement of Net Working Capital, each of which
shall be reasonably acceptable to Acquiror. The Estimated Closing Date Net
Working Capital shall be determined in accordance with GAAP using the same
accounting methods, policies, practices and procedures, with consistent
classifications, judgments and estimation methodology, as were
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used in preparation of the Interim Balance Sheet, and shall not include any
changes in assets or liabilities as a result of purchase accounting adjustments
or other changes arising from or resulting as a consequence of the transactions
contemplated hereby other than as set forth in the footnotes on Exhibit D
attached hereto.
(b) The "Estimated Adjustment Amount," which may be positive or
negative, means (i) the sum of (x) the Estimated Closing Date Net Working
Capital plus (y) the Transaction Tax Benefit Amount, minus (ii) the amount of
the Target Working Capital. For purposes of the Closing (and the payments to be
made pursuant to Section 2.5 at the Closing), if the Estimated Adjustment Amount
is a positive number, then the Aggregate Enterprise Value will be increased by
the Estimated Adjustment Amount, or if the Estimated Adjustment Amount is a
negative number, the Aggregate Enterprise Value will be decreased by the
absolute value of the Estimated Adjustment Amount.
Section 2.7 Adjustment Amount.
(a) As soon as reasonably practicable following the Closing Date,
and in any event within sixty calendar days thereafter, with the reasonable
assistance of those employees of the Surviving Corporation performing the
functions of chief financial officer, controller and director of financial
planning and analysis for the Surviving Corporation and those individuals who,
directly or indirectly, report to such employees (collectively, the "Finance
Employees"), Holder Representative and, to the extent requested by Holder
Representative, with the assistance of the Philadelphia, Pennsylvania office of
PricewaterhouseCoopers LLC ("PWC"), Holder Representative shall cause to be
prepared and delivered to Acquiror (i) an unaudited consolidated balance sheet
of Keystone and the Keystone Subsidiaries as at the Closing (the "Closing
Balance Sheet") and (ii) a calculation of Net Working Capital as derived from
the Closing Balance Sheet (the "Closing Date Net Working Capital") in
substantially the form of the Statement of Net Working Capital. The Closing
Balance Sheet shall be prepared and the Closing Date Net Working Capital shall
be determined in accordance with GAAP, using the same accounting methods,
policies, practices and procedures, with consistent classifications, judgments
and estimation methodology, as were used in preparation of the Estimated Closing
Date Net Working Capital, and shall not include any changes in assets or
liabilities as a result of purchase accounting adjustments or other changes
arising from or resulting as a consequence of the transactions contemplated
hereby. The parties agree that the purpose of preparing the Closing Balance
Sheet and determining the Closing Date Net Working Capital and the related the
purchase price adjustment contemplated by Section 2.7 is to measure changes in
Net Working Capital, and such processes are not intended to permit the
introduction of different judgments, accounting methods, policies, practices,
procedures, classifications or estimation methodologies for the purpose of
preparing the Closing Balance Sheet or determining the Closing Date Net Working
Capital.
(b) Following the Closing, Acquiror shall provide Holder
Representative, the Finance Employees and any employees of PWC who are assisting
Holder Representative in the preparation of the Closing Balance Sheet and the
determination of the Closing Date Net Working Capital, with full and complete
access to the records of the Surviving Corporation and the Keystone
Subsidiaries, solely for the purpose of preparing the Closing Balance Sheet and
determining the Closing Date Net Working Capital in accordance with this
Agreement, all to the
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extent deemed reasonably necessary by Holder Representative and in a manner not
unreasonably disruptive to the Surviving Corporation's business. Acquiror agrees
that, following the Closing through the date that the Closing Date Net Working
Capital becomes final and binding on the parties hereto in accordance with the
terms of this Agreement, it will not take any actions with respect to any
accounting books, records, policies or procedures on which the Closing Date Net
Working Capital is to be based or derived from that (i) are materially
inconsistent with Keystone and the Keystone Subsidiaries' past practice, except
that Acquiror may take any actions necessary in connection with the financing
described in Section 4.5 or Acquiror's or the Surviving Corporation's
obligations thereunder so long as the original books, records, policies and
procedures are preserved for the purposes of the preparation of the Closing
Balance Sheet or the determination of the Closing Date Net Working Capital in
the manner and utilizing the methods required by this Agreement or (ii) would
impede or delay the preparation of the Closing Balance Sheet or the
determination of the Closing Date Net Working Capital in the manner and
utilizing the methods required by this Agreement.
(c) If Acquiror disagrees with the Closing Date Net Working
Capital, then within sixty calendar days after its receipt of the Closing
Balance Sheet and the Closing Date Net Working Capital, it shall notify Holder
Representative of such disagreement in writing (the "Notice of Disagreement"),
setting forth in reasonable detail the particulars of such disagreement;
provided, however, that any such objection shall be limited to any failure on
the part of Holder Representative to prepare the Closing Balance Sheet or the
Net Working Capital Statement in accordance with the standards set forth in
Section 2.7(a). To be effective, any such Notice of Disagreement shall include
a copy of Holder Representative's Statement of Net Working Capital setting forth
Holder Representative's determination of the Closing Date Net Working Capital
marked to indicate those specific line items that are in dispute (the "Disputed
Line Items") and shall be accompanied by the Acquiror's calculation of each of
the Disputed Line Items and Acquiror's revised Statement of Net Working Capital
setting forth its determination of the Closing Date Net Working Capital. To the
extent the Acquiror provides a Notice of Disagreement within such sixty calendar
day period, all items that are not Disputed Line Items shall be final, binding
and conclusive for all purposes hereunder. In the event that Acquiror does not
provide a Notice of Disagreement within such sixty calendar day period, Acquiror
shall be deemed to have accepted in full the Closing Balance Sheet as prepared
by Holder Representative and the Closing Date Net Working Capital as determined
by Holder Representative, which shall be final, binding and conclusive for all
purposes hereunder. In the event any Notice of Disagreement is timely provided
and contains the proper information as aforesaid, Acquiror and Holder
Representative shall use commercially reasonable efforts for a period of
twenty-five Business Days (or such longer period as they may mutually agree) to
resolve any Disputed Line Items. During such twenty-five Business Day period,
Acquiror and Holder Representative shall have access to the working papers,
schedules and calculations of the other used in the preparation of the Closing
Balance Sheet and the Notice of Disagreement and the determination of the
Closing Date Net Working and Disputed Line Items. If, at the end of such period,
they are unable to resolve such Disputed Line Items, then an office of Ernst &
Young LLP mutually acceptable to Acquiror and Holder Representative or, failing
such office's willingness to so serve, such other independent accounting firm of
recognized national standing as may be mutually selected by Acquiror and Holder
Representative (the "Auditor"), shall resolve any remaining Disputed Line Items.
Acquiror and Holder Representative will enter into such reasonable and customary
arrangements for the services to be rendered by the Auditor
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under this Section 2.7 which the Auditor as the Auditor may reasonably request.
The Auditor shall determine as promptly as practicable (and in any event within
thirty calendar days from the date that the dispute is submitted to it), whether
the Closing Balance Sheet and the Closing Net Working Capital were prepared or
determined, as applicable, in accordance with the standards set forth in Section
2.7(a) and whether and to what extent (if any) the Closing Date Net Working
Capital requires adjustment, limiting its review, however, only to the Disputed
Line Items so submitted. The Auditor shall only resolve the Disputed Line Items
by choosing the amounts submitted by either Acquiror or Holder Representative or
amounts in between. The Surviving Corporation and Holder Representative shall
each furnish to the Auditor such workpapers and other documents and information
relating to the disputed issues as such Auditor may request. The determination
of the Auditor shall be final, conclusive and binding on the parties. The date
on which Closing Date Net Working Capital is finally determined in accordance
with this Section 2.7(c) is hereinafter referred as to the "Determination Date."
The fees and expenses of the Auditor shall be allocated between Acquiror and
Holder Representative in the same proportion that the total amount of the
Disputed Line Items submitted to the Auditor that is unsuccessfully disputed by
each such party (as finally determined by the Auditor) bears to the total amount
of the Disputed Line Items so submitted by each such party. The Acquiror shall
be responsible for its own costs and expenses incurred in connection with this
Section 2.7 (including, without limitation, the amount it is required to pay to
the Auditor). The costs and expenses reasonably incurred by Holder
Representative in connection with this Section 2.7 including, without
limitation, the amount it is required to pay to the Auditor (collectively, the
"Holder Representative Section 2.7 Expenses"), shall be paid by Holder
Representative as follows: (x) Holder Representative shall be entitled to pay
(or cause to be paid) the Holder Representative Section 2.7 Expenses from the
Working Capital Escrow Account pursuant to Section 2.7(d) and (y) to the extent
that the amount so paid from the Working Capital Escrow Account pursuant to
Section 2.7(d) is insufficient to enable Holder Representative to pay all of the
Holder Representative Section 2.7 Expenses, then, at Holder Representative's
election, Holder Representative may either (A) instruct the Escrow Agent to pay
the Holder Representative Section 2.7 Expenses from the Adjustment Amount, if
any, payable to Holder Representative pursuant to Section 2.7(d) or (B)
authorize the Escrow Agent to pay to such Holder Representative Section 2.7
Expenses from the Indemnity Escrow Account.
(d) The "Adjustment Amount," which may be positive or negative,
shall mean (i) the Closing Date Net Working Capital as finally determined
pursuant to Section 2.7(c), minus (ii) the Estimated Closing Date Net Working
Capital. If the Adjustment Amount is a positive number, then within three
Business Days following the Determination Date, (x) Acquiror shall, or shall
cause the Surviving Corporation to, deliver, by wire transfer of immediately
available funds to an account, in the name of the Paying Agent, designated in
writing by Holder Representative, an amount equal to the Adjustment Amount,
together with interest thereon from the Closing Date to the date of payment at
the rate of interest published as the "Prime Rate" in the "Money Rates" column
of the Eastern Edition of The Wall Street Journal (or the average of such rates
if more than one rate is indicated) on the Closing Date and (y) the Acquiror and
Holder Representative shall provide a joint written instruction to the Escrow
Agent to deliver, by wire transfer of immediately available funds to an account,
in the name of the Paying Agent, designated in writing by Holder Representative,
all funds in the Working Capital Escrow Account. Upon receipt of the Adjustment
Amount and interest and the funds in the Working Capital Escrow Account, Holder
Representative shall direct the Paying Agent to
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promptly disburse the amounts so received by it in accordance with the terms and
conditions of Section 11.3 and the Holder Representative Agreement. If the
Adjustment Amount is a negative number, then, within three Business Days
following the Determination Date, (A) the Acquiror and Holder Representative
shall provide a joint written instruction to the Escrow Agent to deliver from
the Working Capital Escrow Account (and, if and to the extent the funds in the
Working Capital Escrow Account are insufficient to make the full payment
required by this clause (A), then from the Indemnity Escrow Account to the
extent of such insufficiency) to the Surviving Corporation, by wire transfer of
immediately available funds to an account designated in writing by the Surviving
Corporation, an amount equal to the absolute value of the Adjustment Amount,
together with interest thereon from the Closing Date to the date of payment at
the rate of interest published as the "Prime Rate" in the "Money Rates" column
of the Eastern Edition of The Wall Street Journal (or the average of such rates
if more than one rate is indicated) on the Closing Date and (B) if the amount
paid from the Working Capital Escrow Account to the Surviving Corporation
pursuant to the foregoing Clause (A) is less than the funds then in the Working
Capital Escrow Account, then the Acquiror and the Holder Representative shall
provide a joint written instruction to the Escrow Agent to deliver, by wire
transfer of immediately available funds to an account, in the name of the Paying
Agent, designated in writing by Holder Representative, an amount equal to the
amount by which funds then in the Working Capital Escrow Account exceeds the
Adjustment Amount required to be paid to the Surviving Corporation pursuant to
the foregoing clause (A) above. Upon receipt by the Paying Agent of the amount
described in the foregoing clause (B) above, Holder Representative shall direct
the Paying Agent to promptly disburse the amounts so received by it in
accordance with Section 11.3 and the Holder Representative Agreement. The amount
of any Adjustment Amount paid pursuant to this Section 2.7(d) shall be deemed an
adjustment to the Merger Consideration. For purposes of this Section 2.7(d), all
computations of interest shall be made on the basis of a year of 365 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest is payable.
Section 2.8 Company Expenses. Simultaneously with the delivery of
the statement of Estimated Closing Date Net Working Capital pursuant to Section
2.6, Holder Representative will provide to Acquiror a true, complete and correct
list (the "Company Expense Statement") of the amount of the following then
unpaid fees and expenses which are payable as of the Closing Date that have been
or are expected to be incurred on or prior to the Closing Date on behalf of
Keystone and the holders of the Common Shares, Preferred Shares or Outstanding
Options in connection with the preparation, negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereby,
including the Merger: (i) the fees and disbursements of special outside counsel
to Keystone and/or Holder Representative, (ii) the fees and expenses of any
accountants or other agents, advisors, consultants and experts employed by
Keystone and/or Holder Representative, including all investment banking fees or
other similar amounts payable to any financial advisor to Keystone and/or Holder
Representative, and (iii) the out-of-pocket expenses of Holder Representative
incurred in such capacity (collectively, the "Company Expenses").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KEYSTONE
Keystone represents and warrants to Acquiror and Merger Sub as
follows:
Section 3.1. Corporate Organization of Keystone. Keystone is duly
incorporated and validly subsisting as a corporation in good standing under the
laws of the Commonwealth of Pennsylvania and has the requisite corporate power
and authority to own or lease its properties and to conduct its business as it
is now being conducted. The Articles of Incorporation and Bylaws of Keystone
previously made available by Keystone to Acquiror (the "Keystone Charter
Documents") are true, correct and complete. Keystone is duly licensed or
qualified to transact business, and is in good standing, as a foreign
corporation in each other jurisdiction set forth on Schedule 3.1 and in each
other jurisdiction in which the failure to so qualify would reasonably be
expected to have a Material Adverse Effect on the Business.
Section 3.2. Subsidiaries. A true, correct and complete list of the
direct and indirect subsidiaries of Keystone is set forth on Schedule 3.2 (each
a "Keystone Subsidiary" and, collectively, the "Keystone Subsidiaries"). Each of
the Keystone Subsidiaries is duly incorporated and validly existing or
subsisting under the laws of its jurisdiction of incorporation, which is set
forth on Schedule 3.2, and has the requisite corporate power and authority to
own or lease its properties and to conduct its business as it is now being
conducted. The charter and bylaws of the Keystone Subsidiaries previously made
available by Keystone to Acquiror are true, correct and complete. Each Keystone
Subsidiary is duly licensed or qualified to transact business, and is in good
standing, as a foreign corporation in each other jurisdiction as set forth on
Schedule 3.2 and in each jurisdiction in which the failure to so qualify would
reasonably be expected to have a Material Adverse Effect on the Business. Except
as set forth on Schedule 3.2, neither Keystone nor any Keystone Subsidiary has
any investment (whether through acquisition, equity ownership or otherwise) in
any Person, joint venture or business.
Section 3.3. Capitalization of Keystone.
(a) The authorized capital stock of Keystone consists of
30,000,000 shares, of which (i) 29,800,000 are classified as common stock, $.01
par value per share (each, a "Common Share"), of which 11,204,527 shares are
issued and outstanding as of the date hereof; (ii) 200,000 shares are classified
as preferred stock, of which (A) 175,000 shares are designated as Series A
Preferred Stock, stated value $649.99 per share (each, a "Preferred Share"), of
which 114,983.11 shares are issued and outstanding as of the date hereof; and
(B) 25,000 shares of preferred stock are not designated, none of which shares
are issued and outstanding as of the date hereof. All of the Common Shares and
Preferred Shares that are issued and outstanding as of the date hereof have been
duly authorized and validly issued and are fully paid and nonassessable and held
of record by the Persons set forth on Schedule 3.3. Except as set forth on
Schedule 3.3 or as contemplated by the Voting Agreement, none of the Common
Shares or Preferred Shares that is issued and outstanding as of the date hereof
is subject to any restriction on transfer or voting agreement or arrangement
pursuant to an agreement, contract or instrument to which Keystone is a party or
by which it is otherwise expressly bound.
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(b) Except as set forth on Schedule 3.3, (i) there are no
outstanding options, warrants, rights, calls or other securities convertible
into or exchangeable or exercisable for Common Shares, Preferred Shares or other
capital stock of Keystone which have been issued by Keystone, (ii) there are no
other commitments on the part of Keystone providing for the issuance of
additional shares or the repurchase or redemption of shares of the capital stock
of Keystone, and (iii) there are no outstanding stock appreciation rights,
phantom stock or similar plans or rights pursuant to which Keystone has any
obligations.
Section 3.4. Capitalization of Keystone Subsidiaries. The
outstanding shares of capital stock of each of the Keystone Subsidiaries have
been duly authorized and validly issued and are fully paid and nonassessable.
Keystone or one of the Keystone Subsidiaries owns of record and beneficially all
the issued and outstanding shares of capital stock of each of the Keystone
Subsidiaries free and clear of any Liens other than Permitted Liens. There are
no (a) outstanding options, warrants, rights, calls or other securities
exercisable or exchangeable for the capital stock of any Keystone Subsidiary
which have been issued by Keystone or a Keystone Subsidiary, (b) commitments on
the part of Keystone or any Keystone Subsidiary, or agreements to which Keystone
or a Keystone Subsidiary is a party, in either case providing for the issuance
of shares, the sale of treasury shares, or the repurchase or redemption of
shares, of the capital stock of any Keystone Subsidiary, (c) there are no
outstanding stock appreciation rights, phantom stock or similar plans or rights
pursuant to which any Keystone Subsidiary has any obligations, and (d) there are
no voting trusts, proxies, shareholder or similar agreements with respect to the
capital stock of any Keystone Subsidiary.
Section 3.5. Due Authorization.
(a) Keystone has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations to be performed
by it hereunder, and (subject to the receipt of the approvals set forth in
Section 3.5(b) below) to consummate the Merger. The execution and delivery of
this Agreement, the performance by Keystone of its obligations hereunder, and
the consummation by Keystone of the Merger, have been duly and validly
authorized and approved by the Board of Directors of Keystone, and, except for
approval of this Agreement and the transactions contemplated hereby by the
shareholders of Keystone in accordance with the provisions of Section 3.5(b)
below, no other corporate proceeding or approval on the part of Keystone is
necessary to authorize this Agreement on behalf of Keystone. This Agreement has
been duly and validly executed and delivered by Keystone and this Agreement
constitutes a legal, valid and binding obligation of Keystone, enforceable
against Keystone in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(b) The affirmative vote of the holders of a majority of (i) the
Common Shares outstanding on the record date of such vote; and (ii) the
Preferred Shares outstanding on the record date of such vote, in each case
voting as separate classes of stock, are the only votes necessary (under
applicable law, the Keystone Charter Documents or any agreement, contract or
instrument to which Keystone is a party or by which it is expressly bound) to be
obtained from
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the holders of any class or series of the capital stock of Keystone to approve
this Agreement and the Merger.
Section 3.6. No Conflict. Except as set forth in Schedule 3.6, and
assuming (a) compliance with the applicable requirements of the HSR Act or any
similar foreign law, rule or regulation, (b) receipt of the approval of this
Agreement, the Merger and the other transactions contemplated hereby by the
Shareholders in accordance with Section 3.5(b) above, and (c) the due and proper
filing of the Articles of Merger and a Docketing Statement with the Department
of State of the Commonwealth of Pennsylvania, the execution and delivery of this
Agreement by Keystone, the performance by Keystone of its obligations hereunder,
and the consummation by Keystone of the Merger do not and will not: (i) violate,
result in the breach of, or in the case of clause (C) below cause the
termination of, (A) any applicable law, rule or regulation of any Governmental
Authority, (B) the Keystone Charter Documents or the articles or certificate of
incorporation, or the bylaws, of Keystone or any of the Keystone Subsidiaries,
(C) any Contract listed on Schedule 3.8 attached hereto, or (D) any order,
judgment or decree which, expressly by its terms, is applicable to Keystone or
any of the Keystone Subsidiaries; (ii) result in the creation of any Lien (other
than a Permitted Lien) upon any of the properties or assets of Keystone or any
of the Keystone Subsidiaries; (iii) constitute an event which, after notice or
lapse of time or both, would result in any such violation, breach, termination,
acceleration, or creation of a Lien; (iv) result in a violation or revocation of
any Permit, or (v) require any consent, approval, authorization, filing or
registration with any Governmental Authority, except where the occurrence of any
of the foregoing described in clauses (i)(A), (i)(D),(iv) or (v) would not have
either a material adverse effect on the ability of Keystone to execute and
deliver this Agreement, perform its obligations hereunder and consummate the
Merger, or a Material Adverse Effect on the Business.
Section 3.7. Financial Statements. Attached as Schedule 3.7 hereto
are (a) the consolidated balance sheet and consolidated statements of operations
and comprehensive income, cash flow and changes in shareholders' equity of
Keystone and the Keystone Subsidiaries as of, and for the period ended, December
31, 2002, together with the auditor's report thereon, (b) the consolidated
balance sheet and consolidated statements of operations and comprehensive
income, cash flow and changes in shareholders' equity of Keystone and the
Keystone Subsidiaries as of, and for the period ended, December 31, 2001,
together with the auditor's report thereon, (c) the consolidated balance sheet
and consolidated statements of operations and comprehensive income, cash flow
and changes in shareholders' equity of Keystone and the Keystone Subsidiaries as
of, and for the period ended, December 31, 2000, together with the auditor's
report thereon; and (d) the unaudited consolidated balance sheet of Keystone and
the Keystone Subsidiaries (the "Interim Balance Sheet") as of June 30, 2003 (the
"Balance Sheet Date") and the unaudited consolidated income statement of
Keystone and the Keystone Subsidiaries for the six-month period ended on the
Balance Sheet Date (together with the Interim Balance Sheet, the "Interim
Financial Statements"), all of which (i) have been prepared in accordance with
GAAP, and (ii) present fairly, in all material respects, the consolidated
financial position of Keystone and the Keystone Subsidiaries at and as of the
dates stated in such financial statements and the results of operations of
Keystone and the Keystone Subsidiaries for the periods stated therein (subject,
in the case of the Interim Financial Statements, with respect to clauses (i) and
(ii), to year-end adjustments and to the absence of
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footnotes) are consistent, in all material respects, with the books and records
of Keystone and the Keystone Subsidiaries.
Section 3.8. Contracts.
(a) Schedule 3.8 contains a true, correct and complete list of
Contracts of the type or nature described in clauses (i) through (x) below to
which Keystone or any of the Keystone Subsidiaries is a party (each, a "Material
Contract") and which are in effect on the date hereof. True, correct and
complete copies of the Contracts listed on Schedule 3.8 have been made available
to the Acquiror.
(i) Each Contract, excluding individual purchase or
supply orders or offers of prices or price discounts, that involves performance
of services by Keystone or any of the Keystone Subsidiaries, or the sale of
goods or materials by Keystone or any of the Keystone Subsidiaries, in each case
involving payments to Keystone or any of the Keystone Subsidiaries in excess of
$250,000, in the aggregate, during the twelve-month period ending June 30, 2003;
(ii) Each Contract, excluding individual purchase or
supply orders or offers of prices or price discounts, that involves the third
party performance of services in favor of Keystone or any of the Keystone
Subsidiaries, or the purchase of goods or materials by Keystone or any of the
Keystone Subsidiaries, in each case involving payments by Keystone or any of the
Keystone Subsidiaries in excess of $250,000, in the aggregate, during the twelve
month period ending June 30, 2003, but excluding, however, Contracts involving
the purchase of goods or materials held for resale as inventory;
(iii) The twenty-five Contracts involving the largest U.S.
dollar amount of purchases during the twelve-month period ending June 30, 2003
by Keystone or any of the Keystone Subsidiaries of goods or materials to be held
for resale by Keystone or any of the Keystone Subsidiaries, excluding, however,
any arrangements of such nature solely by or among Keystone or any of the
Keystone Subsidiaries;
(iv) Each note, debenture, other evidence of indebtedness,
guarantee, loan, credit or financing agreement or instrument for money borrowed
involving a principal amount of at least $25,000 or the granting of Liens or
lines of credit to which either Keystone or one of the Keystone Subsidiaries is
a party (whether as borrower, guarantor or lender), but excluding, however, any
arrangements of such nature solely by or among Keystone or any of the Keystone
Subsidiaries;
(v) Each lease, sublease, license, rental or occupancy or
other agreement (including all amendments, extensions, renewals, and guarantees
with respect thereto) to which Keystone or any of the Keystone Subsidiaries is a
party (whether as landlord, tenant, sublandlord or subtenant), involving the
leasing of, or any leasehold interest in, any real property (the "Real Property
Leases") or any personal property, and in each case involving base rental
payments from and after the date of this Agreement to or from Keystone or one or
more of the Keystone Subsidiaries in excess of $125,000 in any calendar year,
but excluding, however, any arrangements of such nature solely by or among
Keystone or any of the Keystone Subsidiaries;
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(vi) Each licensing agreement (or series of related
licensing agreements) to which Keystone or any of the Keystone Subsidiaries is a
party with respect to Intellectual Property involving payments from and after
the date of this Agreement to or from Keystone or one or more of the Keystone
Subsidiaries in excess of $125,000 in any calendar year, but excluding, however,
any arrangements of such nature solely by or among Keystone or any of the
Keystone Subsidiaries;
(vii) Each joint venture agreement, partnership agreement,
or limited liability company agreement to which Keystone or any of the Keystone
Subsidiaries is a party;
(viii) Each Contract (or series of related Contracts with
Affiliated Persons) to which Keystone or any of the Keystone Subsidiaries is a
party requiring capital expenditures from and after the date of this Agreement
by Keystone or one or more of the Keystone Subsidiaries in excess of $125,000 in
any calendar year;
(ix) Each Contract (or series of related Contracts with
Affiliated Persons) between Keystone or any of the Keystone Subsidiaries, on the
one hand, and any Affiliate of Keystone, other than a Keystone Subsidiary, on
the other hand;
(x) Each Contract to which Keystone or any of the
Keystone Subsidiaries is a party which contains a restriction on Keystone or on
any of the Keystone Subsidiaries involving competing with a third party in the
business;
(xi) Each Contract between Keystone (or any Keystone
Subsidiary) and a Governmental Authority; and
(xii) Each written power of attorney provided by Keystone
or any Keystone Subsidiary, except for any powers of attorney granted to any
counter parties pursuant to any agreement related to Indebtedness.
(b) All of the Contracts listed on Schedule 3.8 are the legal,
valid and binding obligations of Keystone or the Keystone Subsidiaries party
thereto and, to the Knowledge of Keystone, of the other parties thereto, and
such Contracts are enforceable in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally. Neither Keystone nor any of the Keystone Subsidiaries party thereto
nor, to the Knowledge of Keystone, any other party thereto, is in breach of or
default under any of the Material Contracts, except where the occurrence of such
breach or default would not have a Material Adverse Effect on the Business.
Section 3.9. Machinery, Equipment and Other Tangible Property.
Keystone or one of the Keystone Subsidiaries owns and has good title to or a
leasehold interest in or a license to use, all material machinery, equipment and
other tangible property reflected on the books of Keystone and the Keystone
Subsidiaries as owned by Keystone or the Keystone Subsidiaries, free and clear
of all Liens other than Permitted Liens. Keystone and the Keystone Subsidiaries
own, have a leasehold interest in or have a license to use, all the material
assets, properties and rights, whether tangible or intangible, reasonably
necessary for the conduct of the
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Business as it is currently conducted, except where such failure to own, have a
leasehold interest in or have a license to use those material assets, properties
and rights would not have a Material Adverse Effect on the Business. All
material machinery, equipment and other tangible assets being used by the
Keystone and the Keystone Subsidiaries or which are owned or leased by Keystone
and the Keystone Subsidiaries are in good operating condition, maintenance and
repair, ordinary wear and tear excepted.
Section 3.10. Intellectual Property.
(a) Schedule 3.10 is a true, correct and complete list of all
patented or registered Intellectual Property or applications owned by Keystone
or any of the Keystone Subsidiaries, which is both (i) owned or used by Keystone
or any of the Keystone Subsidiaries in the operation of the Business as of the
date hereof and (ii) material and/or required to the operation of the Business
as currently conducted and as currently proposed to be conducted. Keystone or
one or more of the Keystone Subsidiaries (x) either owns and possesses all
right, title and interest in and to, or has valid and enforceable rights or
licenses to use each item of, Intellectual Property owned or used by Keystone or
any of the Keystone Subsidiaries in the operation of the Business as conducted
on the date hereof (the "Keystone Intellectual Property"), free and clear of any
Liens other than Permitted Liens, and (y) is not subject to any restrictions or
limitations regarding the use of the Keystone Intellectual Property other than
pursuant to a written license agreement.
(b) Except as set forth on Schedule 3.10, neither Keystone nor
any Keystone Subsidiary has (i) received written notice of any infringement by
Keystone or any of the Keystone Subsidiaries of the rights of any Person with
respect to such Person's Intellectual Property (including without limitation any
demands or offers to license any Intellectual Property from any third parties)
or (ii) to the Knowledge of Keystone, infringed, misappropriated or otherwise
violated (and the operation of the Business as currently conducted does not
infringe, misappropriate or otherwise violate) any Intellectual Property rights
of any Person. To Keystone's Knowledge, no Person has infringed, misappropriated
or otherwise violated any of the Keystone Intellectual Property owned by
Keystone or any of the Keystone Subsidiaries.
(c) Except as set forth in Schedule 3.10, immediately subsequent
to the Closing, except as a result of actions taken by the Acquiror or Merger
Sub, the Keystone Intellectual Property will be owned by or available for use by
Keystone or any Keystone Subsidiary, as applicable, on terms and conditions
substantially the same as those under which Keystone or such Keystone Subsidiary
owned or used the Keystone Intellectual Property immediately prior to the
Closing.
(d) Except as set forth in Schedule 3.10, to Keystone's
Knowledge, no claim by any Person contesting the validity, enforceability, use
or ownership of any of the Keystone Intellectual Property owned by Keystone
and/or the Keystone Subsidiaries has been made, is currently outstanding or is
threatened.
(e) To Keystone's Knowledge, the computer software, computer
hardware (whether general or special purpose), telecommunications capabilities
(including all voice, data and video networks) and other similar or related
items of automated, computerized, and/or
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software systems and any other networks or systems and related services that are
used by or relied on by Keystone and/or the Keystone Subsidiaries in connection
with the Business as it is currently conducted (collectively, the "Systems") are
reasonably sufficient for the immediate needs of the Business as conducted at
the date of this Agreement, including, without limitation, as to capacity and
ability to process current peak volumes and anticipated volumes in a timely
manner except for insufficiencies which would not have a Material Adverse Effect
and except for such insufficiencies that result from actions of Acquiror or
Merger Sub. As of the date hereof, to Keystone's Knowledge, no action is
necessary to enable such Systems to continue to be used in connection with the
Business as it is currently conducted to the same extent and in the same manner
as they have been used prior to the date hereof.
Section 3.11. Real Property. Schedule 3.11 is a true, correct and
complete list of the addresses and locations of all Owned Real Property.
Keystone or one of the Keystone Subsidiaries has (a) good and marketable
indefeasible fee simple title to the Owned Real Property, free and clear of all
liens, subject only to Permitted Liens, and (b) other than the right of Acquiror
pursuant to this Agreement, there are no outstanding options, rights of first
offer or rights of first refusal to purchase any such Owned Real Property, or
any portion thereof or interest therein. Neither Keystone nor any of the
Keystone Subsidiaries is a party to any agreement or option to purchase any real
property or interest therein other than as set forth on Schedule 3.11 and 3.8.
Except for Leased Real Property which Keystone or one of the Keystone
Subsidiaries has subleased to another Person (as set forth on Schedule 3.11),
Keystone or one or more of the Keystone Subsidiaries has a valid and subsisting
leasehold estate in, and enjoys peaceful and undisturbed possession in all
material respects of, the Leased Real Property listed thereon, subject only to
any Permitted Liens. Each of the Real Property Leases is the legal, valid,
binding obligation of Keystone or one of the Keystone Subsidiaries party thereto
and, to the knowledge of Keystone, of the other parties thereto. The Owned Real
Property identified in Schedule 3.11 and the Leased Real Property identified in
Schedu1e 3.8 (collectively, the "Real Property") comprise all of the real
property used in the Business.
Section 3.12. Litigation and Proceedings. Except as set forth on
Schedule 3.12, matters with respect to Environmental Laws (as to which certain
representations and warranties are made pursuant to Section 3.16) and matters
with respect to Keystone Employee Plans (as to which certain representations and
warranties are made pursuant to Section 3.13), as of the date hereof, there are
no lawsuits, actions, suits, claims or other proceedings at law or in equity, or
to the Knowledge of Keystone, investigations, before or by any Governmental
Authority pending or, to the Knowledge of Keystone, overtly threatened, against
Keystone or any of the Keystone Subsidiaries that would have or is reasonably
likely to have a Material Adverse Effect on the Business or a material adverse
effect on the ability of Keystone to execute and deliver this Agreement, perform
its obligations hereunder and consummate the Merger. Except as set forth on
Schedule 3.12, there is no (a) unsatisfied judgment, order or decree requiring
payment by Keystone or one or more of the Keystone Subsidiaries in excess of
$100,000, or (b) any open injunction, expressly binding by its terms upon
Keystone or any of the Keystone Subsidiaries which limits the operation of the
Business by Keystone or any of the Keystone Subsidiaries other than such
limitations which would not have a Material Adverse Effect on the Business.
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Section 3.13. Employee Plans.
(a) Disclosure. Schedule 3.13 contains a true, correct and
complete list of each Keystone Employee Plan.
(b) Representations. Except as disclosed on Schedule 3.13:
(i) Compliance Generally. Each Keystone Employee Plan has
been operated, funded and administered in compliance with its terms and all
applicable laws;
(ii) No Pension Plans. Neither Keystone, any Keystone
Subsidiary, nor any ERISA Affiliate sponsors or contributes to, nor since March
6, 1998 has sponsored or contributed to, any plan subject to Title IV of ERISA
(including any "multiemployer plan" within the meaning of Section 3(37) of
ERISA); and neither Keystone, any Keystone Subsidiary, nor any ERISA Affiliate
has any liability or potential liability under Title IV of ERISA;
(iii) Other Qualified Plans. The IRS has issued a favorable
opinion letter with respect to the form of prototype document for each Keystone
Employee Plan that is intended to be qualified under Section 401(a) of the Code;
(iv) Plan Changes. Since the Balance Sheet Date, except as
permitted pursuant to this Agreement, there has been no amendment to or change
in employee participation or coverage under, the Keystone Employee Plans that
would increase materially the total expenses of maintaining the Keystone
Employee Plans above the level of the expense incurred in respect thereof for
the fiscal year of Keystone, or any Keystone Subsidiary, as applicable, ending
immediately prior to the date hereof;
(v) Claims. There are no pending or, to the Knowledge of
Keystone, threatened claims by or on behalf of any Keystone Employee Plan, or by
or on behalf of any participants or beneficiaries of any Keystone Employee Plan,
alleging any violation of ERISA or other applicable law, or alleging a violation
of the terms of any such plan, and, to the knowledge of Keystone, (A) no
Keystone Employee Plan is the subject of any pending or threatened investigation
or audit by the Internal Revenue Service, the U.S. Department of Labor or the
Pension Benefit Guaranty Corporation or any other Governmental Authority, (B)
there have been no non-exempt Prohibited Transactions with respect to any
Keystone Employee Plan and (C) no Fiduciary has any liability for breach of
fiduciary duty in connection with the administration or investment of the assets
of any Keystone Employee Plan;
(vi) COBRA. Neither Keystone nor any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to, or has any
liability or potential liability with respect to, any employee welfare benefit
plan providing health or life insurance or other welfare-type benefits for
current or future retired or terminated employees other than in accordance with
COBRA, and Keystone, each Keystone Subsidiary and each ERISA Affiliate have
complied in all material respects with the provisions of COBRA;
(vii) Payments. All contributions (including all employer
contributions and employee salary reduction contributions ) to any Keystone
Employee Plan that
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are due have been made within the time periods prescribed by ERISA and the Code
and all contributions not yet due to a Keystone Employee Plan have been accrued
in accordance with past practice and custom of Keystone; and all premiums or
other payments due for all periods ending on or before the Closing Date have
been paid or properly accrued;
(viii) No Other Employee Plan Liability. Neither Keystone
nor any Keystone Subsidiary has any material liability or material potential
liability with respect to any Employee Plan that is not a Keystone Employee
Plan; and
(ix) Documents. Keystone has made available to Acquiror
true, correct and complete copies of the following documents relating to each
Keystone Employee Plan: (i) all currently applicable plan documents, amendments,
trust agreements, summary plan descriptions and summaries of material
modifications; (ii) the most recent periodic accounting of plan assets (if any);
(iii) the three most recently filed annual reports on Form 5500 (including
accompanying schedules), if such reports were required to be filed; and (iv) for
each Keystone Employee Plan intended to be qualified under Section 401(a) of the
Code, the most recent Internal Revenue Service determination, opinion or
notification letter.
Section 3.14. Labor Relations.
(a) Neither Keystone nor any of the Keystone Subsidiaries is a
party to any collective bargaining agreement covering any of its employees.
Schedule 3.14 is a true, correct and complete list of all employment or
severance agreements to which either Keystone or one or more of the Subsidiaries
is, as of the date hereof, a party with respect to any employee or former
employee whose base salary and cash bonus during the calendar year ended
December 31, 2002 exceeded $150,000 and which may not be terminated at will, or
by giving notice of 30 calendar days or less, without material cost or penalty.
(b) Schedule 3.14 is a true, correct and complete list of all
employees (herein referred to as "Key Employees") of Keystone and each Keystone
Subsidiary entitled to receive annual compensation (base salary and cash bonus)
in excess of $100,000 and their respective positions and compensation. Keystone
has delivered or made available to Acquiror true, correct and complete copies of
each such Contract listed on Schedule 3.14, as amended to date.
(c) Except as set forth in Schedule 3.14, the execution of this
Agreement by Keystone and the consummation of the Merger will not obligate
Keystone or any Keystone Subsidiary to make any payments (severance or
otherwise) to any employee of Keystone or the Keystone Subsidiaries pursuant to
any Keystone Employee Plan or Contract or agreement to which Keystone or any
Keystone Subsidiary is a party or is otherwise bound.
(d) Except as set forth in Schedule 3.14, there are no disputes
pending or, to Keystone's Knowledge, threatened between Keystone and any
Keystone Subsidiary and any of their respective employees which would have a
Material Adverse Effect on the Business, and to Keystone's Knowledge, there are
no organizational efforts currently being made or threatened involving any of
such employees. To the Knowledge of Keystone, no Key Employee has plans to
terminate employment with Keystone or any Keystone Subsidiary.
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Section 3.15. Legal Compliance. Except with respect to: (i) matters
set forth on Schedule 3.15; (ii) compliance with Environmental Laws (as to which
certain representations and warranties are made pursuant to Section 3.16); and
(iii) matters with respect to Employee Plans (as to which certain
representations and warranties are made pursuant to Section 3.13), Keystone and
the Keystone Subsidiaries are in compliance with all laws, rules, regulations,
ordinances, codes and statutes of Federal, state, local or foreign governments
(and all agencies thereof) applicable thereto and all orders, writs, judgments
and decrees which are expressly by their terms binding on Keystone or the
Keystone Subsidiaries, except where such instances of non-compliance would not
have a Material Adverse Effect on the Business.
Section 3.16. Environmental Matters. (a) Keystone and the Keystone
Subsidiaries have complied with and are in compliance with all Environmental
Laws, and have obtained, maintained and complied with all licenses, franchises,
authorizations and permits required under Environmental Laws, except where any
such instance of non-compliance would not have a Material Adverse Effect on the
Business, and (b) neither Keystone nor any of the Keystone Subsidiaries has any
liability under any Environmental Law which would have a Material Adverse Effect
on the Business. No written notices of any violation or alleged violation of or
potential or actual liability under any Environmental Law relating to the
operations or properties of Keystone or any of the Keystone Subsidiaries have
been received by Keystone or by any of the Keystone Subsidiaries, except where
any such instance of non-compliance or liability would not have a Material
Adverse Effect on the Business. There are no outstanding writs, injunctions,
decrees, orders or judgments which, expressly by their respective terms, are
binding upon Keystone or any of the Keystone Subsidiaries, or any actions,
suits, claims or proceedings pending against Keystone or any of the Keystone
Subsidiaries or, to the knowledge of Keystone, overtly threatened against
Keystone or any of the Keystone Subsidiaries, relating to compliance by Keystone
or any of the Keystone Subsidiaries with or liability under any Environmental
Law, except where any such instance of non-compliance would not have a Material
Adverse Effect on the Business. None of Keystone, the Keystone Subsidiaries, or
their respective predecessors has treated, stored, disposed of, arranged for or
permitted the disposal of, handled or released any substance, including without
limitation any hazardous substance, or owned or operated any property or
facility (and no such property or facility is contaminated by any such
substance) so as would give rise to liability under Environmental Laws, except
for such liability that would not have a Material Adverse Effect on the
Business. None of Keystone or any of the Keystone Subsidiaries has assumed or
undertaken any liability of any other Person relating to Environmental Laws,
except for such liability that would not have a Material Adverse Effect on the
Business. Keystone has provided to Acquiror true and correct copies of all
material environmental reports, audits, assessments, and investigations, and any
other material environmental documents, related to the past or present
facilities, properties or operations of the Keystone, the Keystone Subsidiaries,
or any of their respective predecessors, to the extent the foregoing are in the
possession, custody, or control of Keystone or any of the Keystone Subsidiaries.
Section 3.17. Taxes. Except as otherwise disclosed in Schedule 3.17:
(a) all material Federal, state, local and foreign Tax returns of
Keystone and the Keystone Subsidiaries required to have been filed by Keystone
or any of the Keystone Subsidiaries, taking into account valid extensions of the
filing deadline ("Tax Returns"), have
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been duly and timely filed; and all such Tax Returns are true, correct and
complete in all respects;
(b) all Taxes owed by Keystone or any of the Keystone
Subsidiaries have been timely and appropriately paid, except for amounts being
contested in good faith by appropriate proceedings and adequately reserved on
the Interim Balance Sheets, as adjusted for operations from the date of the
Interim Balance Sheet to the Closing Date;
(c) none of the Tax Returns for tax years for which the statute
of limitations is still open have been audited or is being audited by any taxing
authority;
(d) to the Knowledge of Keystone, no assessment, audit or other
proceeding involving a Tax Return by any taxing authority, court or other
Governmental Authority is pending, and Keystone has not received any written
notice of any intention on the part of any taxing authority to audit any Tax
Return;
(e) there are no outstanding agreements, waivers or arrangements
extending the statutory period of limitations applicable to any claim for or the
period for the collection or assessment of Taxes due for any taxable period;
(f) no consent to the application of Section 341(f)(2) of the
Code (or any predecessor thereof) has been made or filed by or with respect to
any of Keystone or any of the Keystone Subsidiaries or any of their assets and
properties;
(g) none of Keystone or any of the Keystone Subsidiaries is a
party to any tax sharing agreement, arrangement or similar obligation;
(h) neither Keystone nor any of the Keystone Subsidiaries has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code;
(i) neither Keystone nor any of the Keystone Subsidiaries will be
required to include an amount in income after the Closing Date or will be
required to forego an amount of deduction after the Closing Date under Section
481 of the Code (or any similar provision of state, local or foreign law) as a
result of a change in accounting method (or similar act) occurring prior to the
Closing Date;
(j) neither Keystone nor any of the Keystone Subsidiaries either
(i) distributed the stock of a controlled corporation (as defined for purposes
of Section 355 of the Code) or (ii) had its stock distributed by a controlling
corporation in a transaction meant to comply with section 355 of the Internal
Revenue Code during the preceding five years; and
(k) none of Keystone or any of the Keystone Subsidiaries, from
and after March 7, 1998, has been a member of an affiliated group (within the
meaning of Section 1504(a) of the Code) other than an affiliated group of which
Keystone was the common parent.
Section 3.18. Governmental Licenses, Permits and Authorizations.
Schedule 3.18 contains a true, correct and complete list of all licenses,
franchises, registrations,
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authorizations and other permits of or with any Governmental Authority, which
are held by Keystone or any of the Keystone Subsidiaries (the "Permits") which
are material to the Business. All such Permits are, and at the Closing will be
in full force and effect and there are no proceedings pending or, to the
knowledge of Keystone, overtly threatened that seek the revocation,
cancellation, suspension, non-renewal or adverse modification thereof, except to
the extent such revocation, cancellation, suspension, non-renewal or adverse
modification would not have a Material Adverse Effect on the Business. Such
Permits constitute all of the licenses, franchises, authorizations and other
permits from any Governmental Authority necessary to permit Keystone and the
Keystone Subsidiaries to own, operate, use and maintain their assets
substantially consistent with the manner in which they are now operated and
maintained and to conduct the Business as currently conducted, except where the
absence of any such license, franchise, authorization or other permit would not
have a Material Adverse Effect on the Business.
Section 3.19. No Material Undisclosed Liabilities and Absence of
Certain Changes.
(a) Except as otherwise disclosed on Schedule 3.19(a), there are
no liabilities of Keystone or any Keystone Subsidiary whether accrued,
contingent, unliquidated, absolute, determined, determinable or otherwise, and
there is no existing condition, situation or set of circumstances which would
reasonably be expected to result in such a liability, other than:
(i) liabilities provided for in the Interim Balance Sheet
or disclosed in the notes thereto;
(ii) liabilities which would not be required to be provided
for in an audited balance sheet or disclosed in the notes thereto that is
prepared in accordance with GAAP;
(iii) liabilities disclosed on any Schedule to this
Agreement; and
(iv) other undisclosed liabilities which, individually or
in the aggregate, are not material to Keystone and the Keystone Subsidiaries,
taken as a whole.
(b) Except for leases for personal or real property entered into
in the ordinary course of business, and except for instruments, arrangements or
agreements referred to in this Agreement or disclosed in the Schedules hereto,
Keystone has not issued any instruments, entered into any agreements,
commitments or arrangements or incurred any obligations that would reasonably be
expected to have the effect of providing Keystone with "off balance sheet"
financing, including, without limitation, any sale-leaseback arrangements,
"synthetic leases", "GIC"s, "Synthetic GIC"s, shared trust arrangements and "off
balance sheet" debt.
(c) Except as set forth in Schedule 3.19(c) or as otherwise
contemplated or permitted by, or as a consequence of, this Agreement, since the
Balance Sheet Date until the date of this Agreement, Keystone and each of the
Keystone Subsidiaries has conducted the Business in the ordinary course and in a
manner substantially consistent with past practice, and there has not been:
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(i) any amendment to the Keystone Charter Documents or
the articles or certificate of incorporation or bylaws of any of the Keystone
Subsidiaries;
(ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) on any class
of capital stock of Keystone, or any redemption or repurchase by Keystone of
shares of its capital stock;
(iii) any split, combination, reclassification, or other
modification of the terms of the capital stock of Keystone or any of the
Keystone Subsidiaries;
(iv) any sale, purchase, transfer, pledge or other
disposition by Keystone or any of the Keystone Subsidiaries of any material
portion of their respective assets or properties not in the ordinary course of
business consistent with past practice or any damage, distribution or casualty
loss exceeding $500,000 in the aggregate, not covered by insurance;
(v) any increase in the salary or other compensation
payable to any of the employees or consultants (including its executive officers
or directors) of Keystone or any of the Keystone Subsidiaries, or the payment or
commitment to pay any bonus, or other additional salary or compensation to any
of the employees or consultants of Keystone or any of the Keystone Subsidiaries,
other than customary compensation increases awarded to its employees or
consultants which have been awarded in the ordinary course of business
consistent with past practice;
(vi) any issuance, sale, delivery or grant of any options,
warrants, subscriptions or other rights for any class of capital stock of
Keystone or any Keystone Subsidiary, or any securities convertible into or
exchangeable or exercisable for share of any class of capital stock of Keystone
or any Keystone Subsidiary;
(vii) any incurrence of any capital expenditure, obligation
or other liability in connection therewith that is below, or in excess of, in
any material respect, the amounts budgeted;
(viii) any acquisition by merger, consolidation or
otherwise, or any agreement to acquire a substantial portion of the assets of,
or in any other manner, any business of any other Person;
(ix) any discharge or satisfaction of any material Lien,
material obligation or liability, other than current liabilities payable in the
ordinary course of business consistent with past practice;
(x) any change by Keystone or any of the Keystone
Subsidiaries in the cash management practices (it being understood that the use
of cash to reduce Indebtedness will not result in a breach of this Agreement by
Keystone), accounting methods, principles or practices utilized by Keystone or
the Keystone Subsidiaries; or
(xi) any agreement or commitment entered into by Keystone
or any of the Keystone Subsidiaries to do any act described in clauses (i)
through (vi) above.
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Section 3.20. Insurance. Schedule 3.20 contains a copy of the
declarations page for each policy of property, fire and casualty, product
liability, workers' compensation, and other forms of insurance held by Keystone
or any of the Keystone Subsidiaries (other than policies held in connection with
a Keystone Employee Plan) as of the date hereof. True, correct and complete
copies of such insurance policies have been made available to Acquiror. All
premiums and other amounts due on such policies have been paid, and Keystone and
the Keystone Subsidiaries have complied with the provisions of such policies,
except insofar as non-payment or non-compliance would not have a Material
Adverse Effect on the Business. Neither Keystone nor any Keystone Subsidiary has
received notices of any pending or threatened terminations or premium increases
with respect to any such policies except as set forth in Schedule 3.20.
Section 3.21. Product Warranties. Except pursuant to Keystone's or
any of the Keystone Subsidiary's standard merchandise return policies (a copy of
which is attached in Schedule 3.21), which provide for the replacement or return
for credit of defective or damaged products or other returns for credit at the
request of the customer other than for the replacement or return for credit of
defective or damaged products, there are no pending or, to the knowledge of
Keystone, overtly threatened warranty claims, against Keystone or any of the
Keystone Subsidiaries which would have a Material Adverse Effect on the
Business.
Section 3.22. Directors and Officers. Schedule 3.22 contains a true,
correct and complete list of all current directors and officers of Keystone and
each of the Keystone Subsidiaries.
Section 3.23. Brokers' Fees. Except for the fees, costs and expenses
payable to UBS Securities LLC or its Affiliates (which fees, costs and expenses
shall be paid by as a Company Expense), no broker, finder, investment banker or
other Person is entitled to any brokerage fee, finders' fee or other commission,
cost or expense, in connection with this Agreement or the Merger based upon
arrangements made by Keystone or any of the Keystone Subsidiaries or their
Affiliates.
Section 3.24. Affiliate Transactions. Neither Keystone nor any
Keystone Subsidiary is a party to any Contract or agreement with any of its
directors, officers, shareholders, employees or Affiliates that was not
negotiated on an arms'-length basis and entered into in the ordinary course of
business.
Section 3.25. Exclusivity of Representations and Warranties. The
representations and warranties expressly made by Keystone in this Agreement are
in lieu of and are exclusive of all other representations and warranties,
including any implied warranties (including implied warranties of
merchantability or fitness for a particular purpose), made to Acquiror, Merger
Sub or any of their respective Affiliates by Keystone, any of the Keystone
Subsidiaries or any of their respective Affiliates. Keystone hereby disclaims
any such other or implied representations or warranties, notwithstanding the
delivery or disclosure to Acquiror or Merger Sub, their Affiliates and their
respective officers, directors, employees and Representatives of any
documentation or other information. Without limiting the generality of the
foregoing, Keystone is not making any representation or warranty with respect to
the information (a) contained in any presentation made by or on behalf of
Keystone, or (b) set forth in the Confidential Memorandum or any financial
projection or forecast relating to Keystone or
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any of the Keystone Subsidiaries that may have been made available to Acquiror
or Merger Sub, their Affiliates and their respective officers, directors,
employees and Representatives.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub, jointly and severally, represent and warrant
to Keystone as follows:
Section 4.1. Corporate Organization. Each of Acquiror and Merger Sub
has been duly organized and is validly existing in good standing under the laws
of its jurisdiction of organization and each has the requisite power and
authority to own or lease its properties and to conduct its business as it is
now being conducted.
Section 4.2. Due Authorization. Each of Acquiror and Merger Sub has
the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations to be performed by it hereunder and to
consummate the Merger. The execution and delivery by each of Acquiror and Merger
Sub of this Agreement, the performance by each of Acquiror and Merger Sub of its
obligations hereunder and the consummation by each of Acquiror and Merger Sub of
the Merger have been duly and validly authorized and approved by the respective
Boards of Directors of Acquiror and Merger Sub and approved by the shareholders
of Merger Sub, and no other corporate proceeding or approval on the part of
either Acquiror or Merger Sub is necessary to authorize this Agreement or the
Merger on behalf of either Acquiror or Merger Sub. This Agreement has been duly
and validly executed and delivered by each of Acquiror and Merger Sub and this
Agreement constitutes a legal, valid and binding obligation of each of Acquiror
and Merger Sub, enforceable against each of Acquiror and Merger Sub in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.3. No Conflict. Assuming (a) compliance with the
applicable requirements of the HSR Act or any similar foreign law, rule or
regulation, and (b) the due and proper filing of the Articles of Merger and a
Docketing Statement with the Department of State of the Commonwealth of
Pennsylvania, the execution and delivery of this Agreement by each of Acquiror
and Merger Sub, the performance by each of Acquiror and Merger Sub of its
obligations hereunder and the consummation by each of Acquiror and Merger Sub of
the Merger do not and will not: (i) violate, or result in the breach of, (A) any
applicable law, rule or regulation of any Governmental Authority, (B) the
charter, bylaws or other organizational documents of either Acquiror or Merger
Sub, (C) any agreement, indenture or other instrument to which either Acquiror
or Merger Sub is a party or by which either Acquiror or Merger Sub is expressly
bound, or (D) any order, judgment or decree which, expressly by its terms, is
applicable to either Acquiror or Merger Sub; or (ii) constitute an event which,
after notice or lapse of time or both, would result in any such violation or
breach; except where the occurrence of any of the foregoing described in clauses
(i)(A), (i)(C) or (i)(D) would not have a material adverse effect on the ability
of either Acquiror or Merger Sub to execute and deliver this
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Agreement, perform its obligations hereunder and consummate the Merger on the
Closing Date (including to pay the amounts required to be paid pursuant to
Section 2.5).
Section 4.4. Litigation and Proceedings. There are no lawsuits,
actions, suits, claims or other proceedings at law or in equity or, to the
knowledge of Acquiror, investigations, pending before or by any Governmental
Authority or, to the knowledge of Acquiror, overtly threatened, against Acquiror
or Merger Sub which, if determined adversely, would have a material adverse
effect on the ability of either Acquiror or Merger Sub to enter into and perform
its obligations under this Agreement, or to consummate the Merger on the Closing
Date (including to pay the amounts required to be paid pursuant to Section 2.5).
There is no unsatisfied judgment, order or decree or any open injunction binding
upon either Acquiror or Merger Sub which would have a material adverse effect on
the ability of Acquiror or Merger Sub to enter into and perform its obligations
under this Agreement, or to consummate the Merger on the Closing Date (including
to pay the amounts required to be paid pursuant to Section 2.5).
Section 4.5. Financial Ability. Attached hereto as Exhibit F are
senior and subordinated debt financing commitment letters (the "Debt Commitment
Letters") and an equity commitment letter (the "Equity Commitment Letter" and,
together with the Debt Commitment Letter, the "Commitment Letters"). As of the
date hereof, the Commitment Letters are in full force and effect and have not
been amended. The funds to be received at Closing pursuant to the Commitment
Letters will be sufficient to consummate the Merger and make the payments
required pursuant to Section 2.5.
Section 4.6. Accredited Investor Status; Access to Information.
Acquiror and each of its equity holders is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act. Acquiror has such knowledge and
experience in financial and business matters and investments in general that
make it capable of evaluating the merits and risks of the Merger. Acquiror
acknowledges that it has been afforded: (a) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
Representatives of Keystone and the Keystone Subsidiaries concerning the merits
and risks of investing in Keystone and the Keystone Subsidiaries; (b) access to
information about Keystone and the Keystone Subsidiaries, their respective
results of operations, financial condition and cash flow, and the Business
generally, in each case sufficient to enable Acquiror to evaluate whether to
proceed with the execution and delivery of this Agreement and the consummation
of the Merger; and (c) the opportunity to obtain such additional information
that either Keystone or any of the Keystone Subsidiaries possesses, or can
acquire without unreasonable effort or expense, that is necessary to make an
informed investment decision with respect to the execution and delivery of this
Agreement and the consummation of the Merger. Neither such inquiries nor any
other investigation conducted by or on behalf of Acquiror or its
Representatives, nor any other provisions of this Section 4.6, shall modify,
amend or affect Acquiror's right to rely on the representations and warranties
made by Keystone in Article III of this Agreement.
Section 4.7. Acknowledgement of No Other Representations. Acquiror
and Merger Sub hereby acknowledge that: (a) the representations and warranties
expressly made by Keystone in this Agreement are in lieu of and are exclusive of
all other representations and warranties, including any implied warranties
(including implied warranties of merchantability or fitness for a particular
purpose), made to Acquiror, Merger Sub or any of their respective
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Affiliates by Keystone, any of the Keystone Subsidiaries or any of their
respective Affiliates; and (b) they are not relying upon any such other or
implied representations or warranties, notwithstanding the delivery or
disclosure to Acquiror or Merger Sub, their Affiliates and their respective
officers, directors, employees and Representatives of any documentation or other
information. Without limiting the generality of the foregoing, Acquiror and
Merger Sub hereby acknowledge that, except to the extent expressly set forth in
this Agreement, Keystone is not making any representation or warranty with
respect to the information (i) made available pursuant to any presentation made
by or on behalf of Keystone or (ii) set forth in the Confidential Memorandum or
any financial projection or forecast relating to Keystone or the Keystone
Subsidiaries that may have been made available to Acquiror or Merger Sub, their
Affiliates and their respective officers, directors, employees and
Representatives.
ARTICLE V
COVENANTS OF KEYSTONE
Section 5.1. Conduct of Business. From the date hereof through the
Closing, Keystone shall, and shall cause each of the Keystone Subsidiaries to,
except as contemplated by this Agreement, or as consented to by Acquiror in
writing (which consent shall not be unreasonably withheld, delayed or
conditioned), conduct the Business in the ordinary course and substantially
consistent with past practices. Keystone shall, and shall cause the Keystone
Subsidiaries to, use reasonable commercial efforts to: (i) preserve intact the
business organization of Keystone and the Keystone Subsidiaries, (ii) keep
available the services of its and their officers, subject to terminations and
departures occurring in the ordinary course of business, (iii) preserve in all
material respects, the goodwill and the current relationships of Keystone and
the Keystone Subsidiaries with customers, distributors, suppliers, licensors,
licensees, and contractors and (iv) continue to make capital expenditures in
accordance with the amounts budgeted. Without limiting the generality of the
foregoing, except as required by applicable law, Keystone shall not, and
Keystone shall cause each of the Keystone Subsidiaries not to, unless consented
to by Acquiror in writing (which consent shall not be unreasonably withheld,
delayed or conditioned) or except as specifically contemplated by this
Agreement:
(a) change or amend the Keystone Charter Documents or the
articles or certificate of incorporation, bylaws or other organizational
documents of any of the Keystone Subsidiaries, except for amendments which (i)
will not impair the ability of Keystone to consummate the Merger or (ii) have an
adverse effect on the Surviving Corporation or any of the Keystone Subsidiaries
after the consummation of the Merger;
(b) enter into, extend, materially modify, terminate or renew any
Contract of a type required to be listed on Schedule 3.8(a) or Schedule 3.14,
except in the ordinary course of business;
(c) sell, assign, transfer, convey, lease or otherwise dispose of
any material assets or properties, except in the ordinary course of business
consistent with past practice;
(d) (i) grant any severance, termination pay or transaction
bonuses (otherwise than pursuant to policies or agreements of Keystone or any of
the Keystone
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Subsidiaries in effect on the date hereof) which will become due and payable on
or after the Closing Date, except in the ordinary course of business or pursuant
to Keystone Employee Plans in effect on the date of this Agreement; (ii) make
any material change in the key management structure of Keystone or any of the
Keystone Subsidiaries, including the hiring of additional officers or the
termination of existing officers, except in the ordinary course of business; or
(iii) adopt, enter into or amend in any material respect any Employee Plan;
(e) acquire by merger or consolidation with, or merge or
consolidate with, or purchase substantially all of the assets of, any
corporation, partnership, association or other business organization or division
thereof;
(f) make any material loans or advances to any Person, except for
(i) advances to employees or officers of Keystone or any of the Keystone
Subsidiaries for expenses incurred in the ordinary course of business consistent
with past practice; and (ii) any Employee Option Exercise Loans;
(g) make any material income Tax election;
(h) incur any indebtedness for borrowed money other than pursuant
to the Funded Indebtedness;
(i) change a corporate name or permit the use thereof by any
other Person;
(j) make any change in the cash management practices (except that
Keystone and the Keystone Subsidiaries may use cash to reduce Indebtedness) or
in the accounting principles or practices utilized by Keystone or the Keystone
Subsidiaries;
(k) make any amendment to Section 5 of the Transaction Bonus
Plan; and
(l) enter into any agreement, or otherwise become obligated, to
do any action prohibited under this Section 5.1.
Notwithstanding anything contained in this Agreement to the contrary, Keystone
shall not be required to make, and Acquiror and Merger Sub acknowledge that
Keystone shall not make, any of its estimated Tax payments to any taxing
authority that are required to be paid on or before September 30, 2003 (the
"September Tax Payment").
Section 5.2. Inspection. Subject to confidentiality obligations and
similar restrictions that may be applicable to information furnished to Keystone
or any of the Keystone Subsidiaries by third parties that may be in Keystone's
or any of the Keystone Subsidiaries' possession from time to time, Keystone
shall, and shall cause the Keystone Subsidiaries to, afford to Acquiror, its
Affiliates and employees, and the accountants, counsel, advisors and other
representatives (collectively, "Representatives") of Acquiror, reasonable
access, during normal business hours, in such manner as to not materially
interfere with the normal operation of the Business, to all of their respective
properties, assets, Contracts, liabilities, Tax Returns, records and appropriate
officers and employees of Keystone and the Keystone Subsidiaries, and shall
furnish Acquiror, its Affiliates, employees and Representatives with all
financial and operating
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data and other information concerning the affairs of Keystone and the Keystone
Subsidiaries as they may reasonably request. Any information received by
Acquiror, its Affiliates, employees or Representatives from Keystone, any
Keystone Subsidiary or any of their respective Affiliates, employees or
Representatives shall be deemed to be Evaluation Material (as defined in the
Confidentiality Agreement) for purposes of the Confidentiality Agreement.
Section 5.3. HSR Act and Foreign Antitrust Approvals. In connection
with the transactions contemplated by this Agreement, Keystone shall (and, to
the extent required, shall cause its Affiliates to): (a) comply promptly with
the notification and reporting requirements of the HSR Act and use its
commercially reasonable efforts to obtain early termination of the waiting
period under the HSR Act; and (b) make such other filings with any similar
foreign Governmental Authorities as may be required under any applicable similar
foreign law. Keystone shall substantially comply with any additional requests
for information, including requests for production of documents and production
of witnesses for interviews or depositions, made by any Antitrust Authority.
Section 5.4. Termination of Discussions; No Solicitations.
Immediately after the execution of this Agreement, each of Holders
Representative and Keystone shall terminate and cease, and shall direct its
Affiliates, officers, directors, Representatives and agents (such Persons
collectively shall be referred to as the "Keystone Group") to terminate and
cease, all discussions and negotiations that may then be ongoing by any of them
with respect to an Alternative Transaction. From the date hereof through the
earlier of (a) the Closing or (b) the termination of this Agreement in
accordance with its terms, Keystone shall not, and shall not knowingly permit
any member of the Keystone Group to, directly or indirectly, (i) solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any Person or group of Persons (other than Acquiror, Merger Sub
or any of their respective Affiliates) concerning any Alternative Transaction.
Keystone shall notify Acquiror within two Business Days if Keystone, UBS
Securities LLC, Advent International Corporation, Xxxxxxxxxx & Co., LLC, General
Electric Capital Corporation, Xxxxxx vor Broker or Xxxxxx Xxxxx receives a bona
fide, written offer in respect of an Alternative Transaction; or (ii) enter into
any agreement, arrangement or understanding requiring any of the Holder
Representative, Keystone or any Keystone Subsidiaries to abandon, terminate or
fail to consummate the transactions contemplated under this Agreement.
Section 5.5. Update Information. Prior to the Closing, Keystone
shall deliver to Acquiror written notice of any event or development that (a)
constitutes or results in a breach by Keystone of, or a failure by Keystone to
comply with, any agreement or covenant in this Agreement applicable to it; (b)
constitutes or results in a Material Adverse Effect on the Business or (c)
occurs after the date hereof which, if it had occurred prior to the date hereof,
would have caused or constituted a breach of any of the representations or
warranties of Keystone contained in this Agreement (including any Schedules). It
is agreed that the furnishing of such corrected and supplemental information
pursuant to the foregoing clause (c) shall be deemed to amend the Schedules for
all purposes hereunder, and such amended Schedules shall be the definitive
Schedules for all purposes hereunder including the satisfaction of the
conditions to the obligations of each party hereto set forth in Article VIII
hereof; provided, however, that any information provided or contained in such
amended Schedules by Keystone would not either (i) have a material adverse
effect on the ability of Keystone to perform its obligations hereunder and
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consummate the Merger, or (ii) result in the condition contained in Section
8.2(a) to not be satisfied.
Section 5.6. Shareholder Approval. Keystone shall promptly call, and
use its commercially reasonable efforts to promptly convene, a special meeting
of its Shareholders (the "Keystone Shareholders' Meeting") on or before October
31, 2003 to vote on this Agreement and to obtain any approvals of its
shareholders required in connection with the transactions contemplated by this
Agreement, or, in lieu thereof, shall use its commercially reasonable efforts to
obtain, on or before October 31, 2003, any such approval by the written consent
of its Shareholders as provided in Section 1766 of the BCL. In connection with
the Keystone Shareholders' Meeting or obtaining the written consent of the
Shareholders, Keystone shall distribute to its shareholders a proxy statement
including all such information with respect to this Agreement and the
transactions contemplated hereby (the "Proxy Statement"), as shall be determined
by the Board of Directors of Keystone (the "Board"). As soon as practicable
following the execution of this Agreement, Keystone shall prepare a draft of the
Proxy Statement and shall deliver a copy of such draft to Acquiror. Immediately
following such delivery, Acquiror shall have three Business Days to provide
Keystone its reasonable comments, if any, regarding portions of the Proxy
Statement solely relating to "parachute payments" within the meaning of Section
280G of the Code and Keystone shall, in good faith, incorporate such reasonable
comments. Keystone shall provide a copy of the Proxy Statement to Acquiror prior
to its distribution to its Shareholders for approval of the Merger at the
Keystone Shareholders' Meeting or by written consent, as the case may be.
Keystone will endeavor to deliver to its Shareholders the Voting Agreement
attached to Exhibit B and to obtain the execution of such Voting Agreement by
its Shareholders prior to the Keystone Shareholders' Meeting. Approval of this
Agreement by the Shareholders of Keystone shall not restrict the ability of the
board of directors of Keystone thereafter to terminate this Agreement in
accordance with Section 9.1 hereof or to cause Keystone to enter into an
amendment to this Agreement pursuant to Section 12.10 hereof to the extent
permitted under the BCL.
Section 5.7. Financial Information; Financing. (a) No later than
September 30, 2003, Keystone shall furnish to Acquiror copies of such financial
statements and other financial information (including pro forma financial
information), in a form meeting the requirements of Regulation S-X under the
Securities Act, which would be required to be filed with the United States
Securities and Exchange Commission in a registration statement relating to a
registered offering of debt securities issued in connection with the Merger;
(b) Keystone shall use commercially reasonable efforts to cause
the Auditor to take such actions as Acquiror may reasonably request in
connection with Acquiror's financing, including, without limitation, to (i)
obtain the consent of the Auditor to the use of its report on the audited
financial statements, (ii) deliver a "comfort letter" in a form meeting the
requirements of SAS 72 or such other form as may be reasonably requested by
Acquiror, (iii) perform a SAS 100 review of the Interim Financial Statements and
any additional interim financial statements which may be required or desirable,
(iv) participate, at Acquiror's request, in the preparation of any registration
statement, prospectus or offering memorandum that includes, or incorporates by
reference, the foregoing financial information, and (v) furnish to the Auditor,
as promptly as practicable, any additional financial statements (including with
respect to subsequent periods) reasonably requested by the Auditor and, with
respect to the Financial
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Statements for any fiscal year, together with the Auditor's report thereon in
the customary form of the Auditor;
(c) Keystone agrees to cause the Keystone Subsidiaries, and to
use its commercially reasonable efforts to cause its and their respective
officers, employees and advisors to, take all actions and provide all
cooperation reasonably necessary in connection with the arrangement of any
financing to be consummated contemporaneously with the Closing Date in respect
of the transactions contemplated by this Agreement, including participation in
meetings, due diligence sessions, road shows, the preparation of offering
memoranda, private placement memoranda, prospectuses and similar documents, the
execution and delivery of any commitment letters, underwriting or placement
agreements, pledge and security documents, other definitive financing documents,
or other requested certificates or documents, including a certificate of the
chief financial officer of Keystone with respect to solvency matters, and legal
opinions as may be reasonably requested by Acquiror, and taking such other
actions as are reasonably required to be taken by Keystone; and
(d) Keystone acknowledges that Acquiror will use and disclose the
Financial Statements and other financial information pertaining to Keystone in
the course of the financing described in Section 4.5 and consents to such use
and disclosure.
ARTICLE VI
COVENANTS OF ACQUIROR
Section 6.1. HSR Act and Foreign Antitrust Approvals.
(a) In connection with the transactions contemplated by this
Agreement, Acquiror shall (and, to the extent required, shall cause its
Affiliates to): (i) comply promptly with the notification and reporting
requirements of the HSR Act, including paying all fees associated with any
filing under or pursuant to the HSR Act that is required in connection with this
Agreement and the Merger, and use its commercially reasonable efforts to obtain
early termination of the waiting period under the HSR Act and (ii) make such
other filings and pay all fees associated with any such filings, with any
foreign Governmental Authorities as may be required under any applicable similar
foreign law. Acquiror shall substantially comply with any additional requests
for information, including requests for production of documents and production
of witnesses for interviews or depositions, made by any Antitrust Authorities.
(b) Acquiror shall exercise commercially reasonable efforts to
prevent the entry in any action brought by an Antitrust Authority or any other
Person of any Governmental Authority order which would prohibit, make unlawful
or delay the consummation of the Merger.
(c) Acquiror shall cooperate in good faith with the Antitrust
Authorities and undertake promptly any and all action required to complete
lawfully the transactions contemplated by this Agreement; provided, that
Acquiror shall not be required to prefer or consent to a Governmental Authority
order providing for the sale or other disposition, or the holding separate, of
particular assets, categories of assets or lines of business, of either assets
or lines of business of Keystone, or any other assets or lines of business of
Acquiror.
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Section 6.2. Indemnification and Insurance.
(a) From and after the Effective Time of the Merger, Acquiror
shall cause the Surviving Corporation to continue to indemnify and hold harmless
each present and former director and officer of Keystone or any of the Keystone
Subsidiaries against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities of any nature
whatsoever, incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time of the Merger (other than any such claim, action, suit,
proceeding or investigation against any member of the Board of Directors who are
employees of any of Xxxxxxxxxx & Co., LLC, Advent International Corporation and
GE Commercial Finance arising out of or pertaining to the Merger to the extent
that the Surviving Corporation does not receive payment in respect of any
damages or liabilities arising from such claim, action, suit, proceeding or
investigation under any directors' and officers' liability insurance policy
maintained by the Surviving Corporation and covering any such Person so long as
the Surviving Corporation timely submits to the underwriter of such insurance
policy a claim with respect thereto and thereafter diligently pursues such
claim, whether asserted or claimed prior to, at or after the Effective Time of
the Merger, to the fullest extent that Keystone or any of the Keystone
Subsidiaries, as the case may be, would have been permitted under applicable law
and the Keystone Charter Documents in effect on the date hereof to indemnify
such person (including the advancing of expenses as incurred to the fullest
extent permitted under applicable law), provided, however, the person to whom
such expenses are advanced provides an unsecured undertaking to the Surviving
Corporation to repay such advances if it is ultimately determined that such
person is not entitled to indemnification; provided, further, that any
determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under applicable law or
the Keystone Charter Documents shall be made by independent counsel selected by
the Surviving Corporation and reasonably acceptable to Holder Representative.
(b) For six years from the Effective Time of the Merger, Acquiror
shall cause the Surviving Corporation to maintain in effect directors' and
officers' liability insurance covering those Persons who are currently covered
by Keystone's directors' and officers' liability insurance in their capacities
as directors and officers to the same extent as such directors and officers are
currently covered; provided, however, if the aggregate annual premiums for such
insurance exceed two hundred percent of the per annum rate of premiums currently
paid by Keystone for such insurance, then the Surviving Corporation shall
provide the maximum coverage that shall then be available at an annual premium
equal to two hundred percent of such rate. Keystone represents and warrants to
Acquiror that the total amount of the current prepaid premium for directors' and
officers' liability insurance for the coverage period commencing on April, 2003
and ending on April 1, 2004 is approximately $75,000.
(c) In the event the Acquiror or the Surviving Corporation or any
of their respective successors or assigns (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving corporation or
entity in such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any Person, then, and in each case, proper
provision shall be made so that the successors and assigns of the Acquiror or
the
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Surviving Corporation, as the case may be, honor the indemnification and other
obligations set forth in this Section 6.2.
Section 6.3. Confidentiality of Evaluation Material. Acquiror hereby
confirms its obligations under the Confidentiality Agreement to use and disclose
Evaluation Material only in accordance with the terms and conditions thereof,
and further agrees that all information received by Acquiror, its Affiliates,
employees and Representatives, pursuant to Section 5.2, shall be deemed
Evaluation Material for purposes of the Confidentiality Agreement.
Notwithstanding the foregoing, Keystone hereby consents to the disclosure of
Evaluation Material by Acquiror solely to the extent necessary to make filings
with Governmental Authorities or otherwise obtain the consent or approval of a
Governmental Authority that is necessary to be made or obtained in order to
consummate the Merger or to obtain financing to consummate the transactions
contemplated hereby.
Section 6.4. Preservation of Books and Records. Each of Acquiror and
Merger Sub agrees that each of Acquiror and the Surviving Corporation shall
preserve and keep, or cause to be preserved and kept, all material, original
books and records in respect of the Business in the possession of Acquiror, the
Surviving Corporation or their respective Affiliates for a period of six years
after the Closing Date (the "Record Retention Period"). Holder Representative or
its Representatives, upon reasonable notice and for any reasonable business
purpose, shall have access during normal business hours to examine, inspect and
copy such books and records. Acquiror and the Surviving Corporation shall
provide Holder Representative and its Representatives with, or cause to be
provided to Holder Representative and its Representatives, such original books
and records of the Business as Holder Representative shall reasonably request in
connection with any action to which Holder Representative or any Shareholder is
a party or in connection with the requirements of any law applicable to Holder
Representative or any Shareholder. After the Record Retention Period, before
Acquiror, the Surviving Corporation or any of their respective Affiliates shall
dispose of any of such books and records, Acquiror or the Surviving Corporation
shall give at least 45 calendar days' prior written notice of such intention to
dispose to Holder Representative, and Holder Representative shall be given an
opportunity to remove and retain all or any part of such books and records as
Holder Representative may elect.
Section 6.5. Commitment Letters. Acquiror will not terminate, amend
or otherwise modify in any manner adverse to Acquiror any of the Commitment
Letters without the written consent of Keystone, which consent shall not be
unreasonably withheld.
ARTICLE VII
COVENANTS APPLICABLE TO KEYSTONE AND ACQUIROR
Section 7.1. Consents and Approvals. Acquiror and Keystone shall
each (and shall each cause its Affiliates to): (a) in addition to complying with
their respective obligations under Sections 5.3 and 6.1 with respect to
Antitrust Authorities, including obtaining the termination of the waiting period
under the HSR Act, use commercially reasonable efforts to assemble, prepare and
file any information (and, as needed, to supplement such information) as may be
reasonably necessary in order to obtain, as promptly as practicable, all
consents and approvals required to be obtained from any Governmental Authority
in order to execute and
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deliver this Agreement and consummate the Merger in accordance with the terms
and conditions of this Agreement; and (b) use commercially reasonable efforts to
obtain all consents referred to on Schedule 3.6, and approvals of Persons (other
than Governmental Authorities) that any of Acquiror, Keystone, or their
respective Affiliates are required to obtain in order to execute and deliver
this Agreement and consummate the Merger in accordance with the terms and
conditions of this Agreement.
Section 7.2. Level of Efforts. Between the date of this Agreement
and the Closing Date, each party shall (a) use its commercially reasonable
efforts to cause the conditions applicable to it as set forth in Article VIII to
be satisfied, (b) use commercially reasonable efforts to take all action
necessary to render true and correct as of the Closing its respective
representations and warranties contained in this Agreement, (c) refrain from
taking any action that would knowingly render any such representation or
warranty untrue or incorrect as of such time and (d) perform or cause to be
satisfied each agreement or covenant to be performed or satisfied by it.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS
Section 8.1. Conditions to Obligations of Acquiror, Merger Sub and
Keystone. The obligations of Acquiror, Merger Sub and Keystone to consummate, or
cause to be consummated, the Merger are subject to the satisfaction of the
following conditions, any one or more of which may be waived in writing by such
parties:
(a) the Shareholders of Keystone shall have taken all necessary
action to duly authorize, approve and adopt this Agreement and the transactions
contemplated hereby in accordance with the BCL;
(b) all waiting periods (and any extensions thereof) under the
HSR Act shall have expired or been terminated, and all waiting periods, consents
or approvals under any other laws, rules or regulations applicable to the Merger
and administered by any Antitrust Authority shall have expired, been terminated
or been obtained, as applicable;
(c) all other necessary permits, approvals, clearances, and
consents of Governmental Authorities required to be procured by Acquiror, Merger
Sub or Keystone in connection with the Merger, the failure of which to obtain
would have a material adverse effect on the ability of Keystone of the Acquiror
to complete the Merger or a Material Adverse Effect on the Business, shall have
been procured by Acquiror, Merger Sub or Keystone, as applicable;
(d) there shall not be in force any order or decree, statute,
rule, regulation, stay, judgment or injunction restraining, enjoining,
prohibiting or making illegal the consummation of the Merger; and
(e) the Holder Representative, the Company and certain
Shareholders shall have entered into the Holder Representative Agreement.
Section 8.2. Conditions to Obligations of Acquiror and Merger Sub.
The obligations of Acquiror and Merger Sub to consummate, or cause to be
consummated, the
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transactions contemplated by this Agreement are subject to the satisfaction of
the following additional conditions, any one or more of which may be waived in
writing by Acquiror and Merger Sub:
(a) except where the failure to be true and correct would not,
individually or in the aggregate, have a Material Adverse Effect on the Business
and except for changes contemplated or permitted by this Agreement, the
representations and warranties of Keystone contained in this Agreement (without
giving effect to any "material", "materiality," or Material Adverse Effect on
the Business qualification contained in such representations and warranties)
shall be true and correct as of the date hereof and as if made anew, after
giving effect to any changes to the Schedules permitted by Section 5.5 hereof,
immediately prior to the Closing; provided, however, representations and
warranties made as of a particular date need only be true and correct as of the
particular date referenced therein; and
(b) each of the covenants and agreements of Keystone contained in
this Agreement to be performed by Keystone as of or prior to the Closing shall
have been performed in all material respects;
(c) Keystone shall have delivered the documents, agreements and
instruments required to be delivered by it pursuant to Section 2.4;
(d) Keystone shall have obtained the consent of the holders of
the requisite percentage of the Common Shares and the Preferred Shares, each
voting as separate classes of securities, to terminate the Shareholders'
Agreement and the Registration Rights Agreement, in each case as of the
Effective Time of the Merger;
(e) Keystone shall have cancelled all of the Outstanding Options
that have not been exercised by the holders thereof;
(f) Keystone shall have caused the Management Agreement to
terminate effective as of the Effective Time of the Merger; and
(g) Acquiror shall have received an opinion of Xxxxxx Xxxxxxxx
LLP, counsel for Keystone, dated the Closing Date, addressed to Acquiror (and
authorizing reliance by the lenders under the Debt Commitment Letter) in form
and substance reasonably satisfactory to Acquiror and its counsel, which shall
be limited to the opinions set forth on Exhibit G.
(h) Holder Representative shall have executed and delivered the
Holder Representative Agreement, and such Holder Representative Agreement shall
be in full force and effect;
(i) Acquiror shall have obtained at least $275,000,000 of cash
proceeds from the financing transactions sufficient to consummate the
transactions on terms and conditions no less favorable in the aggregate to
Acquiror than those term and conditions set forth in the term sheets attached to
the Debt Commitment Letters;
(j) Acquiror shall have received fully executed UCC-3 termination
statements and other termination, pay-offs and/or releases, or, at Acquiror's
option, assignments,
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necessary to terminate, release or assign, as the case may be, all Liens set
forth on Schedule 8.2.(j), and payoff letters with respect to all outstanding
Funded Indebtedness of Keystone and the Keystone Subsidiaries;
(k) since December 31, 2002, there shall not have occurred any
fact, event, or circumstance that has had a Material Adverse Effect on the
Business; and
(l) the Dissenting Common Shares, if any, shall not include
greater than 5% of the Outstanding Common Shares, the Dissenting Preferred
Shares, if any, shall not include greater than 5% of the Outstanding Preferred
Shares, and the Dissenting Shares, if any, shall not include greater than 5% of
the sum of the Outstanding Common Shares, plus the Outstanding Preferred Shares.
Section 8.3. Conditions to the Obligations of Keystone. The
obligation of Keystone to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following additional conditions,
any one or more of which may be waived in writing by Keystone:
(a) except where the failure to be true and correct would not,
individually or in the aggregate, have a material adverse effect on the ability
of either Acquiror or Merger Sub to perform its obligations hereunder and
consummate the Merger on the Closing Date (including to pay the amounts required
to be paid pursuant to Section 2.5) and except for changes contemplated or
permitted by this Agreement, the representations and warranties of Acquiror and
Merger Sub contained in this Agreement shall be true and correct as of the date
hereof and as if made anew immediately prior to the Closing; provided, however,
representations and warranties made as of a particular date need only be true
and correct as of the particular date referenced therein;
(b) each of the covenants and agreements of Acquiror and Merger
Sub contained in this Agreement to be performed by Acquiror or Merger Sub as of
or prior to the Closing shall have been performed in all material respects; and
(c) Acquiror and Merger sub shall have delivered the documents,
agreements and instruments required to be delivered by it pursuant to Section
2.4.
ARTICLE IX
TERMINATION
Section 9.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned:
(a) by mutual written consent of the Acquiror and Keystone
authorized by their respective boards of directors (or similar governing body),
at any time prior to the Closing.
(b) prior to the Closing, by written notice to Keystone from
Acquiror, authorized by the board of directors (or similar governing body) of
Acquiror, if: (i) there is any material breach of any representation, warranty,
covenant or agreement on the part of Keystone set forth in this Agreement, such
that the condition specified in Section 8.2(a) or Section 8.2(b)
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hereof would not be satisfied at the Closing (a "Terminating Keystone Breach"),
except that, if such Terminating Keystone Breach is curable by Keystone, then,
for a period of twenty Business Days, for so long as Keystone continues to use
its commercially reasonable efforts to cure such Terminating Keystone Breach
(the "Keystone Cure Period"), such termination shall not be effective, and such
termination shall become effective only if the Terminating Keystone Breach is
not cured within the Keystone Cure Period; provided however, that if such
Terminating Keystone Breach occurs on or after the Pricing Date, if such
Terminating Keystone Breach is curable by Keystone, then termination shall
become effective only if the Terminating Keystone Breach is not cured within two
Business Days; and provided, further, that if such Terminating Keystone Breach
occurs on or after the Road Show Commencement Date but prior to the Pricing
Date, if such Terminating Keystone Breach is curable by Keystone, then
termination shall become effective only if the Terminating Keystone Breach is
not cured within seven Business Days; (ii) the Agreement shall fail to receive
the requisite votes for approval and adoption of the shareholders of Keystone;
or (iii) the Closing has not occurred on or before December 15, 2003 (the "Final
Termination Date"), provided, however, in the event that as of the Final
Termination Date all of the conditions in Sections 8.1 and 8.2 have been
satisfied or waived except for the condition set forth in Section 8.1(d), the
Final Termination Date shall be extended for a period of thirty Business Days,
after which this Agreement may be terminated by Acquiror in accordance with this
clause (iii).
(c) prior to the Closing, by written notice to Acquiror from
Keystone, authorized by its board of directors, if: (i) there is any material
breach of any representation, warranty, covenant or agreement on the part of
Acquiror or Merger Sub set forth in this Agreement, such that the condition
specified in Section 8.3(a) or Section 8.3(b) hereof would not be satisfied at
the Closing (a "Terminating Acquiror Breach"), except that, if such Terminating
Acquiror Breach is curable by Acquiror, then, for a period of up to twenty
Business Days, but only as long as Acquiror continues to exercise such
commercially reasonable efforts to cure such Terminating Acquiror Breach (the
"Acquiror Cure Period"), such termination shall not be effective, and such
termination shall become effective only if the Terminating Acquiror Breach is
not cured within the Acquiror Cure Period; and (ii) the Closing has not occurred
on or before the Final Termination Date, provided, however, in the event that as
of the Termination Date all of the conditions in Sections 8.1 and 8.3 have been
satisfied or waived except for the condition set forth in Section 8.1(d), the
Final Termination Date shall be extended for a period of thirty Business Days,
after which this Agreement may be terminated by Keystone in accordance with this
clause (ii).
Section 9.2. Effect of Termination. In the event of termination and
abandonment of this Agreement pursuant to Section 9.1, this Agreement shall
forthwith become void and have no further effect, without any liability on the
part of any party hereto or its Affiliates, officers, directors, shareholders or
Representatives, other than liability of Keystone, Acquiror or Merger Sub, as
the case may be, for (i) fraud, (ii) willful or intentional breach of any
representation or warranty or (iii) any breach of its covenants and agreements
under this Agreement occurring prior to such termination; provided that the
parties hereto acknowledge that it is intention of the parties hereto that no
party shall have any remedy or right to recover for any losses, damages, costs
or expenses whatsoever resulting from any breach of any representation or
warranty contained in this Agreement; provided, however, nothing herein shall be
deemed to (i) waive any rights of specific performance of this Agreement
available to a party by reason of
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any intentional breach by the other party of this Agreement, or (ii) relieve any
party of any liability in the event that this Agreement is terminated pursuant
to Section 9.1(b)(ii) by reason of Keystone's breach of any of its obligations
under this Agreement with respect to the obtaining of the requisite Shareholder
votes for approval and adopting of the Merger. The provisions of Sections 6.3
and 12.6, 12.11 and Article IX, hereof shall survive any termination of this
Agreement.
ARTICLE X
INDEMNIFICATION
Section 10.1. Indemnification by Holder Representative. Holder
Representative agrees that, from and after the Closing, subject to the
provisions of Sections 10.2, 10.5, 10.6 and 10.7, it will indemnify and hold
harmless Acquiror and the Surviving Corporation, their respective Affiliates,
and persons serving as officers or directors thereof, and each of such parties'
respective successors, executors, administrators, estates, heirs and permitted
assigns (individually, an "Acquiror Indemnified Party" and, collectively, the
"Acquiror Indemnified Parties"), from and against any claims, litigation,
investigations, proceedings, damages, liabilities, losses, Taxes, fines,
interest, penalties, costs and expenses, including reasonable fees and
disbursements of experts, consultants and other Representatives in connection
with any investigation, defense, prosecution or settlement of any matter as to
which indemnification is sought (collectively, "Losses"), which may be sustained
or suffered by any of them arising out of or based upon (a) any breach by
Keystone of any of its representations or warranties contained in this
Agreement, (b) any breach by Keystone of any of its covenants or agreements
contained in this Agreement, (c) any claim, action or proceeding asserted or
instituted by a Person other than an Acquiror Indemnified Party arising out of
any matter or thing constituting a breach of such representations, warranties or
covenants, (d) the amount of any Funded Indebtedness in excess of the amount of
Funded Indebtedness set forth on the pay-off statements received from the Debt
Payoff Recipients, (e) the amount of Company Expenses in excess of the amount of
Company Expenses set forth on the Company Expense Statement, and (f) any failure
to pay any Transaction Bonus Amount to any Transaction Bonus Recipient.
Section 10.2. Certain Provisions Applicable to Indemnification by
Holder Representative. The right of any Acquiror Indemnified Party to
indemnification for Losses shall be subject to the provisions set forth in
subsections (a) through (h) below.
(a) The liability of Holder Representative to indemnify for
Losses and to pay any Adjustment Amount pursuant to Section 2.7 (including
expenses incurred in connection therewith), in the aggregate, shall not exceed
an amount equal to the Indemnity Escrow Amount (the "Cap").
(b) Holder Representative shall not be required to indemnify,
defend or hold harmless any Acquiror Indemnified Party, unless the cumulative
amount of all Losses suffered in the aggregate by any or all of the Acquiror
Indemnified Parties exceeds $4,000,000 (the "Threshold Amount"), whereupon only
the amount of all such Losses exceeding the Threshold Amount shall be
recoverable by the Acquiror Indemnified Parties to the extent otherwise entitled
to indemnification pursuant to this Agreement; provided, that, such Threshold
Amount limitation shall not apply to any Losses relating to (i) a breach of the
representations and
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warranties contained in Sections 3.17 and 3.23, (ii) a breach by Keystone of any
of its covenants or agreements contained in this Agreement, and (iii) the
determination of the amounts to which an Acquiror Indemnified Party is entitled
to indemnification under Sections 10.1 (d) and (e). The determination of whether
a Loss has been sustained or suffered arising out of or based upon the breach of
any representation and warranty of Keystone in Article III, for purposes of
Section 10.1(a) shall be made without giving effect to any "material,"
"materially," or "Material Adverse Effect on the Business" qualification
contained in any such representation and warranty.
(c) Holder Representative shall not be required to indemnify,
defend or hold harmless any Acquiror Indemnified Party with respect to Losses
which are asserted after 5:00 p.m., New York City time, on October 30, 2004 (the
"Expiration Time"); provided that if on or prior to the Expiration Time a
specific state of facts giving rise to a Loss shall have become known to any
Acquiror Indemnified Party and Holder Representative shall have received written
notice of such specific facts from an Acquiror Indemnified Party prior to the
Expiration Time (an "Acquiror Noticed Loss"), then the right to indemnification
from Holder Representative in favor of any Acquiror Indemnified Party, solely
with respect to any such Acquiror Noticed Loss, shall remain in effect, subject
to the other terms and conditions of indemnification set forth in this
Agreement, but without regard to when such matter shall be finally determined.
(d) Notwithstanding anything herein to the contrary, Holder
Representative shall not be obligated to indemnify an Acquiror Indemnified Party
with respect to, and shall not otherwise be liable for, any Losses resulting
from matters as to which Holder Representative can demonstrate that Acquiror or
its counsel or its other Representatives had actual knowledge at or prior to the
Closing (which, for purposes of this sentence, shall be deemed to include
knowledge of all matters disclosed in the Schedules to this Agreement).
(e) Indemnification of an Acquiror Indemnified Party by Holder
Representative shall be limited to the amount of any liability or damage that
remains after deducting therefrom any Tax Benefit actually received by such
Acquiror Indemnified Party, (assuming that the deductions relating to such Tax
Benefit is the last item of deduction used by such Acquiror Indemnified Party).
The Acquiror Indemnified Party shall use all commercially reasonable efforts to
seek all deductions available to it in order to actually receive a Tax Benefit.
(f) Notwithstanding anything to the contrary contained in this
Agreement, (i) Holder Representative shall have no liability to indemnify any
Acquiror Indemnified Party for (A) any Losses to the extent that such Losses
result from or arise out of actions taken by Acquiror, the Surviving
Corporation, any Keystone Subsidiary or any of their respective Affiliates after
the Closing Date (including the filing of amended Tax Returns affecting any
pre-Closing Tax period without the prior written consent of Holder
Representative which shall not be unreasonably withheld), or (B) any
consequential, punitive, exemplary, incidental or special damages, or any
diminution in value, and (ii) in no event shall any such Losses, damages or
diminution in value be included in the determination of whether the Threshold
Amount has been reached.
(g) Acquiror shall take, and shall cause the Surviving
Corporation (and the Keystone Subsidiaries) to take, all commercially reasonable
steps to mitigate Losses upon and after becoming aware of any event which could
reasonably be expected to give rise to Losses;
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provided, however, the amount of any reasonable out-of-pocket costs and expenses
(including reasonable fees and disbursements of counsel and others) incurred by
Acquiror or the Surviving Corporation directly to so mitigate the Losses shall
be added to the amount of Losses for which indemnification may be sought under
this Article X.
(h) None of the Acquiror Indemnified Parties shall be entitled to
recover any Losses relating to any matter arising under one provision of this
Agreement to the extent that any Acquiror Indemnified Party had already
recovered Losses with respect to the same matter pursuant to other provisions of
this Agreement. Without limiting the generality of the foregoing, the operation
of Section 2.7 is an exclusive remedy in respect of the assets and liabilities
and related items taken into account in connection with the determination of the
Closing Date Net Working Capital, and no Acquiror Indemnified Party shall be
entitled to any additional recourse in respect thereof, whether arising from a
breach of a representation or warranty or otherwise.
Section 10.3. Indemnification by Acquiror and Merger Sub. Each of
Acquiror and Merger Sub agrees that, from and after the Closing, subject to the
provisions of Sections 10.4, 10.5, 10.6 and 10.7, Acquiror and the Surviving
Corporation (as the successor to Merger Sub), jointly and severally, will
indemnify and hold harmless the Shareholders, their respective Affiliates, and
persons serving as officers or directors thereof, and each of such parties'
respective successors, executors, administrators, estates, heirs and permitted
assigns (individually, a "Shareholder Indemnified Party" and, collectively, the
"Shareholder Indemnified Parties"), from and against any Losses, which may be
sustained or suffered by any of them arising out of or based upon (a) any breach
by Acquiror or Merger Sub of any of its representations or warranties contained
in this Agreement, (b) any breach by Acquiror or Merger Sub of any of its
covenants or agreements contained in this Agreement, (c) the operation of
business of the Surviving Corporation, any Keystone Subsidiary or any of their
respective Affiliates after the Closing, or (d) any claim, action or proceeding
asserted or instituted by a Person other than a Shareholder Indemnified Party
arising out of any matter or thing constituting a breach of such
representations, warranties or covenants.
Section 10.4. Certain Provisions Applicable to Indemnification by
Acquiror. The right of any Shareholder Indemnified Party to indemnification for
Losses shall be subject to the provisions of subsections (a) through (g) below.
(a) The aggregate liability of the Acquiror and the Surviving
Corporation to indemnify for Losses shall not exceed the Cap.
(b) Neither the Acquiror nor the Surviving Corporation shall be
required to indemnify, defend or hold harmless any Shareholder Indemnified
Party, unless the cumulative amount of all Losses suffered in the aggregate by
any and all of the Shareholder Indemnified Parties exceeds the Threshold Amount,
whereupon only the amount of all such Losses exceeding the Threshold Amount
shall be recoverable by the Shareholder Indemnified Parties to the extent
otherwise entitled to indemnification pursuant to this Agreement; provided that,
such Threshold Amount limitation shall not apply to any Losses relating to (i)
any breach of the representation and warranties contained in Sections 4.1, 4.2
and 4.6, (ii) a breach by Acquiror or Merger Sub of any of its covenants and
agreements contained in this Agreement, or (iii) the determination of the
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amounts to which a Shareholder Indemnified Party is entitled to indemnification
under Section 10.3(c).
(c) Neither Acquiror nor the Surviving Corporation shall be
required to indemnify, defend or hold harmless any Shareholder Indemnified Party
with respect to Losses which are asserted after the Expiration Time; provided
that if on or prior to the Expiration Time a specific state of facts giving rise
to a Loss shall have become known to any Shareholder Indemnified Party and the
Acquiror shall have received written notice of such specific facts from a
Shareholder Indemnified Party prior to the Expiration Time (a "Shareholder
Noticed Loss"), then the right to indemnification from the both the Acquiror and
the Surviving Corporation in favor of any Shareholder Indemnified Party, solely
with respect to any such Shareholder Noticed Loss, shall remain in effect,
subject to the other terms and conditions of indemnification set forth in this
Agreement, but without regard to when such matter shall be finally determined.
(d) Indemnification of a Shareholder Indemnified Party by either
Acquiror or the Surviving Corporation shall be limited to the amount of any
liability or damage that remains after deducting therefrom any Tax Benefit
actually received by such Shareholder Indemnified Party (assuming that the
deduction relating to such Tax Benefit is the last item of deduction used by
such Shareholder Indemnified Party). The Shareholder Indemnified Party shall use
all commercially reasonable efforts to seek all deductions available to it in
order to actually receive a Tax Benefit.
(e) Shareholder Indemnified Party shall take all commercially
reasonable steps to mitigate Losses upon and after becoming aware of any event
which could reasonably be expected to give rise to Losses; provided, however,
the amount of any reasonable out-of-pocket costs and expenses (including
reasonable fees and disbursements of counsel and others) incurred by such
Shareholder Indemnified Party directly to so mitigate the Losses shall be added
to the amount of Losses for which indemnification may be sought under this
Article X.
(f) Notwithstanding anything to the contrary contained in this
Agreement, (i) neither Acquiror nor the Surviving Corporation shall have any
liability to indemnify any Shareholder Indemnified Party for any consequential,
punitive, exemplary, incidental or special damages, or any diminution in value,
and (ii) in no event shall any such Losses, damages or diminution in value be
included in the determination of whether the Threshold Amount has been reached.
(g) None of the Shareholder Indemnified Parties shall be entitled
to recover any Losses relating to any matter arising under one provision of this
Agreement to the extent that any Shareholder Indemnified Party had already
recovered Losses with respect to the same matter pursuant to other provisions of
this Agreement.
Section 10.5. Notice; and Defense of Claims. An indemnified party may
make claims for indemnification hereunder by giving written notice thereof to
the indemnifying party within the period in which indemnification claims can be
made hereunder. If indemnification is sought for a claim or liability asserted
by a third party, the indemnified party also shall give written notice thereof
to the indemnifying party as promptly as practicable after it receives notice of
the claim or liability being asserted, but the failure to do so shall not
relieve the indemnifying
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party from any liability except to the extent that the indemnifying party is
prejudiced by the failure or delay in giving such notice. Such notice shall
summarize in reasonable detail the bases for the claim for indemnification and
any claim or liability being asserted by a third party. After receiving such
notice, the indemnifying party shall have the right to assume, conduct and
control the defense of, and compromise or settle such claim, at its own cost and
expense, by giving written notice (the "Defense Notice") to the indemnified
party of its intention to do so within ten Business Days after receipt of the
notice of claim; provided, that the indemnified party may retain control over
the defense of any claims (i) for an injunction or other equitable relief or
(ii) that could reasonably be expected, when aggregated with all other
unresolved Acquiror Noticed Losses, to exceed the Indemnity Escrow Amount at the
time of such claim. The indemnifying party shall be entitled to direct the
defense against a third-party claim or liability with counsel selected by it
(such selection to be subject to the consent of the indemnified party, which
consent shall not be unreasonably withheld, delayed or conditioned) as long as
the indemnifying party is conducting a good faith and reasonably diligent
defense. To the extent that the indemnifying party is controlling the defense of
any claim, the indemnifying party shall not compromise or settle such claim or
liability without the consent of the indemnified party, which consent shall not
be unreasonably withheld, delayed or conditioned, unless (x) the compromise or
settlement solely involves a claim for monetary damages, (y) the amount to be
paid pursuant to such compromise or settlement, when aggregated with all other
unresolved Acquiror Noticed Losses, does not exceed the amount remaining in the
Indemnity Escrow Account, and (z) the settlement or compromise contains an
unconditional release of the indemnified party as to the claims settled or
compromised. The indemnified party shall at all times have the right to fully
participate in the defense of a third-party claim or liability at its own
expense directly or through counsel; provided, that such indemnified party shall
be entitled to participate in any such defense with separate counsel at the
expense of the indemnified party if, in the reasonable opinion of such
indemnified party's counsel, a conflict or potential conflict exists between the
indemnified party and the indemnifying party. If no Defense Notice is given by
the indemnifying party, or if such good faith and reasonably diligent defense is
not being or ceases to be conducted by the indemnifying party, the indemnified
party shall have the right, at the expense of the indemnifying party, to
undertake the defense of such claim or liability (with counsel selected by the
indemnified party), provided in no event shall the indemnified party compromise
or settle such claim or liability without the consent of the indemnifying party,
which consent shall not be unreasonably withheld, delayed or conditioned. The
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
Without limiting the generality of the foregoing, and without any further cost
or expense, the Surviving Corporation shall make available and shall direct the
employees of the Surviving Corporation, to fully cooperate with Holder
Representative and its Representatives in connection with any investigation,
defense, prosecution or settlement of any matter as to which indemnification is
sought by the Acquiror or the Surviving Corporation.
Section 10.6. Sole Remedy; Limited Recourse; and Release.
Notwithstanding anything contained in this Agreement to the contrary, after the
Closing: (a) the provisions contained in this Article X shall be the sole and
exclusive remedy of the Acquiror Indemnified Parties and the Shareholder
Indemnified Parties (except with respect to any equitable remedy to which any
such party may be entitled and except for any remedy to which any such party may
be entitled on account of fraud), and any of their respective Affiliates,
successors or permitted
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assigns, with respect to any and all matters relating to Keystone and any of the
Keystone Subsidiaries, the Common Shares, the Preferred Shares, the Outstanding
Options, this Agreement, the Merger any of the agreements, documents and
instruments executed and delivered in connection herewith and therewith, and the
transactions contemplated hereby and thereby (collectively, the "Covered
Matters"); and (b) except as expressly set forth in this Article X, each of the
Acquiror, and the Surviving Corporation hereby waives any and all rights and
claims that it may have with respect to any of the Covered Matters, including
any and all claims and rights for breach, misrepresentation (including negligent
misrepresentation), contribution, indemnity or other rights of recovery and all
other rights and claims for breach of duty. Without limiting the generality of
the foregoing, Acquiror and the Surviving Corporation hereby acknowledge that
the indemnification provided by Holder Representative pursuant to Section 10.1
above shall be non-recourse to the assets of Holder Representative or the
Shareholders and that the only monies from which any Acquiror Indemnified Party
may seek to pursue indemnification for Losses arising out of or in connection
with, or otherwise related to, the Covered Matters, is the Indemnity Escrow
Account. Accordingly, each of Acquiror and the Surviving Corporation, for itself
and each of the other Acquiror Indemnified Parties (collectively, the "Releasing
Parties"), effective as of the Closing, hereby remises, releases and forever
discharges (a) each of the Shareholders and their respective Affiliates and
employees, and each of their respective successors, executors, administrators,
estates, heirs and permitted assigns, and (b) except as expressly set forth in
Section 10.1 above, the Holder Representative (or any successor Holder
Representative), and any such Person's Affiliates and employees, and their
respective successors and permitted assigns, in each case from and against any
Losses which any of the Releasing Parties may sustain or suffer arising out of
or in connection with, or otherwise related to, the Covered Matters.
Section 10.7. Characterization of Indemnity Payments. Any payment
made pursuant to or in connection with this Article X shall be deemed to be an
adjustment to the Merger Consideration.
ARTICLE XI
HOLDER REPRESENTATIVE
Section 11.1. Designation and Replacement of Holder Representative.
The parties have agreed that it is desirable to designate a representative to
act on behalf of holders of the Common Shares and Preferred Shares, and the
Transaction Bonus Recipients, for certain limited purposes as specified herein.
The parties have designated LAGE LLC as the initial Holder Representative, and
approval of this Agreement by the holders of a majority of the Outstanding
Common Shares and the holders of a majority of the Outstanding Preferred Shares
shall constitute ratification and approval of such designation. Holder
Representative may resign at any time, and Holder Representative may be removed
by the vote of Persons which collectively owned more than 50% of the Outstanding
Preferred Shares ("Majority Holders"). In the event that a Holder Representative
has resigned or been removed, a new Holder Representative shall be appointed by
a vote of Majority Holders, such appointment to become effective upon the
written acceptance thereof by the new Holder Representative. Any such new Holder
Representative must be either a Shareholder or an Affiliate of a Shareholder.
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Section 11.2. Authority and Rights of Holder Representative; and
Limitations on Liability. Holder Representative shall have such powers and
authority as are necessary to carry out all of the functions assigned to it
under this Agreement; provided, however, that Holder Representative will have no
obligation to act on behalf of the holders of Common Shares or Preferred Shares,
or the Transaction Bonus Recipients, except as expressly provided herein or in
the Holder Representative Agreement. Without limiting the generality of the
foregoing, Holder Representative, on behalf of the holders of Common Shares and
Preferred Shares and the Transaction Bonus Recipients, shall have full power,
authority and discretion (a) to determine the Adjustment Amount and the amount
of any expenses incurred pursuant to Section 2.7 hereof, (b) to determine the
amounts of Company Expenses, (c) to investigate, defend, prosecute or settle any
matter as to which indemnification is sought by an Acquiror Indemnified Party,
(d) to provide notices and instructions to the Escrow Agent and otherwise act in
its capacity as Holder Representative under the Escrow Agreement and (e) to
authorize disbursement of funds from each of the Working Capital Escrow Account
and Indemnity Escrow Account in accordance with Section 11.3 below. Acquiror,
Merger Sub and the Surviving Corporation may conclusively rely upon, without
independent verification or investigation, all decisions made by Holder
Representative in connection with this Agreement in writing and signed by an
officer of Holder Representative. Holder Representative will have no liability
to Keystone or the holders of Common Shares or Preferred Shares, or to the
Transaction Bonus Recipients, with respect to actions taken or omitted to be
taken in its capacity as Holder Representative, except with respect to Holder
Representative's bad faith or willful misconduct. Holder Representative will at
all times be entitled to rely on any directions received from the Majority
Holders. Holder Representative shall be entitled to engage such counsel,
experts, consultants and other advisors or Representatives as it shall deem
necessary in connection with exercising its powers and performing its function
hereunder and (in the absence of bad faith on the part of Holder Representative)
shall be entitled to conclusively rely on the opinions and advice of such
Persons. Holder Representative shall be entitled to reimbursement for any and
all Allowed Expenses as provided in Section 11.3 below.
Section 11.3. Disbursements from the Escrow Account. Holder
Representative shall be entitled to authorize disbursements from each of the
Working Capital Escrow Account and Indemnity Escrow Account in accordance with
the provisions of this Agreement and the Escrow Agreement only as follows:
(a) to pay the Adjustment Amount and any Holder Representative
Section 2.7 Expenses, in each case in accordance with the provisions of Section
2.7 above;
(b) to pay, from time to time, the amount of any Losses that an
Acquiror Indemnified Party is entitled to receive reimbursement for pursuant to
Article X (a "Reimbursable Loss");
(c) to pay, from time to time, the amount of any Allowed Expenses
as and when they are incurred by Holder Representative;
(d) to pay, following the Determination Date, the portion of the
Working Capital Escrow Amount to the Paying Agent, to be disbursed by the Paying
Agent in accordance with the Holder Representative Agreement; and
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(e) to pay, following the Expiration Time, all amounts remaining
in the Indemnity Escrow Account to the Paying Agent, to be disbursed by the
Paying Agent in accordance with the Holder Representative Agreement; provided,
however, if prior to the Expiration Time, Holder Representative has received one
or more Acquiror Noticed Losses which set forth indemnification claims under
Article X for Losses that are unresolved at the Expiration Time, then an amount
equal to the lesser of (i) the sum of (x) 100% of the amount of the aggregate
Loss claimed in, and reasonably expected to be incurred in connection with, each
such unresolved Acquiror Noticed Loss, plus (y) the Aggregate Expense Cap at
such time, or (ii) the amount remaining in the Indemnity Escrow Account, shall
continue to be held in the Indemnity Escrow Account by the Escrow Agent to pay
Allowed Expenses and Reimbursable Losses; and provided, further, from time to
time promptly after final resolution of each such indemnification claim set
forth in any such Acquiror Noticed Loss, Holder Representative and Acquiror will
authorize the Escrow Agent to disburse all amounts remaining in the Indemnity
Escrow Account to the Paying Agent, to be disbursed by the Paying Agent in
accordance with the Holder Representative Agreement; provided, that, if at such
time there remains unresolved any Loss described in any Acquiror Noticed Loss,
an amount equal to the lesser of (A) the sum of (1) 100% of the amount of the
aggregate Losses claimed in, and reasonably expected to be incurred in
connection with, each such Acquiror Noticed Losses, plus (2) the Aggregate
Expense Cap at such time or (B) the amount remaining in the Indemnity Escrow
Account shall be maintained in the Indemnity Escrow Account;
provided, however, that prior to Holder Representative's making of any
authorization for payment from the Escrow Account or Indemnity Escrow Account
for (x) any Holder Representative Section 2.7 Expenses or (y) any Allowed
Expenses, Holder Representative shall provide Acquiror with written notice of
the determination of the amounts so payable, such notice to set forth, in
reasonable detail, the amounts payable to each payee and such notice to include
copies of any applicable invoices.
Section 11.4. Allocation and Treatment of Income. The parties agree
(i) that the income earned on the Escrow Account shall be reported for federal
and state income tax purposes as income earned by Acquiror consistent with
proposed treasury regulation Section1.468B-8, and Acquiror shall provide Holder
Representative with an executed form W-9 at Closing for this purpose and (ii) to
the extent distributed to the Paying Agent pursuant to Section 11.3(e) above,
amount representing income earned on the Retained Fund will be treated as
additional purchase price, including interest as required by Section 483 of the
Code.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Survival of Representations and Warranties. The
representations and warranties contained in this Agreement shall expire,
terminate and no longer be of any force or effect at the Expiration Time.
Section 12.2. Waiver. Any party to this Agreement may, at any time
prior to the Closing, by action taken by its board of directors, or officers
thereunto duly authorized, waive any of the terms or conditions of this
Agreement or agree to an amendment or modification to
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this Agreement by an agreement in writing executed in the same manner (but not
necessarily by the same Persons) as this Agreement.
Section 12.3. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given by (a) courier service guaranteeing either same day or next
Business Day delivery, (b) United States overnight express mail, return receipt
requested, or (c) facsimile transmission, to the following addresses:
(i) if to Acquiror or Merger Sub, to:
Acquiror
x/x Xxxx Xxxxxxx XX, LLC
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Telephone No.: 000-000-0000
Facsimile No.: 212.421.2235
with copies to (which shall not constitute notice to
Acquiror or Merger Sub):
Xxxxxxxx & Xxxxx LLP
Citigroup Center
000 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxx, Esq.
Telephone No.: 000.000.0000
Facsimile No.: 212.446.4900
(ii) If to Keystone, to:
Keystone Automotive Operations, Inc.
00 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone No.: 000.000.0000
Facsimile No.: 570.655.8203
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with copies to (which shall not constitute notice):
Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
00/xx/ & Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone No.: 000.000.0000
Facsimile No.: 215.981.4750
(iii) If to Holder Representative, to:
LAGE LLC
c/x Xxxxxxxxxx & Co. LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone No.: 000.000.0000
Facsimile No.: 203.552.3550
with copies to (which shall not constitute notice):
Advent International Corporation
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
Telephone No.: 000.000.0000
Facsimile No.: 617.946.2907
Xxxxxxxxxx & Co. LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone No.: 000.000.0000
Facsimile No.: 203.552.3550
GE Capital Corp.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxx
Telephone No.: 000.000.0000
Facsimile No.: 203.357.3047
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Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
00/xx/ & Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone No.: 000.000.0000
Facsimile No.: 215.981.4750
or to such other address or facsimile number as such party hereto may hereafter
specify for such purpose by notice to the other parties hereto. All such
notices, requests and communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a Business Day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding Business Day in the place of receipt.
Section 12.4. Assignment. No party hereto shall assign this Agreement
or any part hereof without the prior written consent of the other parties;
provided, however, the Acquiror may assign this Agreement to (i) any subsequent
purchaser of all or substantially all of the Business, (ii) to any of the
Acquiror's Controlled Affiliates, and (iii) to any sources of financing as
collateral solely to secure the Acquiror's obligations under any credit
arrangements entered into in connection with this Agreement (and any
refinancings or substitutions thereof) without the consent of any other parties;
and provided, further, any party may assign its right to receive a payment
entitled to be received by it pursuant to this Agreement. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns.
Section 12.5. Rights of Third Parties. Except for (a) the provisions
of Section 6.2, which are intended to be enforceable by the officers and
directors of Keystone and the Keystone Subsidiaries, (b) the provisions of the
last sentence of Section 10.6, which are intended to be enforceable by the
Shareholders, (c) the provisions of Section 10.1, which are intended to be
enforceable by the Acquiror Indemnified Parties, and (d) the provisions of
Section 10.3, which are intended to be enforceable by the Shareholder
Indemnified Parties, nothing expressed or implied in this Agreement is intended
or shall be construed to confer upon or give any Person, other than the parties
hereto, any right or remedies under or by reason of this Agreement.
Section 12.6. Expenses. Except as set forth in this Agreement, each
party hereto, other than Holder Representative (whose expenses shall be paid in
accordance with Section 2.8 in the event the transactions contemplated hereby
are consummated), shall bear its own costs and expenses incurred in connection
with this Agreement and the transactions herein contemplated, including all fees
of its legal counsel, financial advisers, brokers and accountants, whether or
not such transactions shall be consummated; provided, that upon Closing, the
Surviving Corporation shall be responsible for all costs and expenses incurred
by Acquiror or its Affiliates. In the event the transactions contemplated hereby
are not consummated, Keystone shall reimburse Holder Representative for all
costs and expenses incurred by Holder Representative in connection with the
transactions contemplated hereby.
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Section 12.7. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of Pennsylvania without regard to its
principals of conflicts of law.
Section 12.8. Facsimile Execution; and Counterparts. This Agreement
may be executed (including by facsimile) in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
Section 12.9. Entire Agreement. This Agreement (including the
Schedules and Exhibits to this Agreement), the Holder Representative Agreement,
the Voting Agreement and the Confidentiality Agreement constitute the entire
agreement among the parties and supersede any other agreements, whether written
or oral, that may have been made or entered into by or among any of the parties
hereto or any of their respective subsidiaries relating to the transactions
contemplated hereby. No representations, warranties, covenants, understandings,
agreements, oral or otherwise, relating to the transactions contemplated by this
Agreement exist between the parties except as expressly set forth in this
Agreement and the Confidentiality Agreement.
Section 12.10. Amendments. This Agreement may be amended or modified
in whole or in part, only by a duly authorized agreement in writing executed in
the same manner as this Agreement and which makes reference to this Agreement.
Section 12.11. Publicity. All press releases or other public
communications of any nature whatsoever relating to the transactions
contemplated by this Agreement, and the method of the release for publication
thereof, shall be subject to the prior mutual approval of Acquiror, Keystone and
Holder Representative, which approval shall not be unreasonably withheld,
delayed or conditioned by any party; provided, however, that, nothing herein
shall prevent any party from publishing such press releases or other public
communications required to be made by such party under applicable law; provided,
however, that such party shall promptly inform the non-disclosing parties of
such determination, shall cooperate with the non-disclosing parties in
attempting to obtain a protective order or to otherwise restrict such
disclosure, and shall only make announcements and disclosure to the minimum
extent necessary to comply with any such determination. Notwithstanding anything
contained herein to the contrary, the parties hereto and their respective
Representatives shall not use the name of Xxxx Capital Partners, LLC, Advent
International Corporation, General Electric Capital Corporation, Xxxxxxxxxx &
Co., LLC, or any of their respective Affiliates without such party's prior
written consent.
Section 12.12. Severability. If any provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. The parties
further agree that if any provision contained herein is, to any extent, held
invalid or unenforceable in any respect under the laws governing this Agreement,
they shall take any actions necessary to render the remaining provisions of this
Agreement valid and enforceable to the fullest extent permitted by law and, to
the extent necessary, shall amend or otherwise modify this Agreement to replace
any provision contained herein that is held invalid or unenforceable with a
valid and enforceable provision giving effect to the intent of the parties.
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Section 12.13. Tax Returns.
(a) Keystone shall prepare the Tax returns for the periods that
end before or on or that include the Closing Date in a manner that is consistent
with prior Tax returns, and shall deliver them to Holder Representative no later
than 45 days prior to the due date for the filing of the Tax return, for the
review and approval of the Tax return. Holder Representative shall be deemed to
have accepted such Tax return, unless it delivers to Acquiror a written notice
of disagreement (the "Tax Disagreement Notice") within ten (10) days of having
received the Tax return, in which is set forth the items of disagreement. Holder
Representative and Acquiror shall negotiate in good faith to resolve the issues,
but if they are not resolved within ten (10) days after Acquiror's receipt of
the Tax Disagreement Notice, the issue shall be resolved in a manner similar to
that set forth in Section 2.7(c) of this Agreement.
(b) In preparing the Tax returns for the period that ends on the
Closing Date, Acquiror, Keystone and the Keystone Subsidiaries agree that the
deduction for the bonuses that will be paid by Keystone or the Keystone
Subsidiaries as a result of the consummation of the transactions contemplated
under this Agreement, and the deduction for the amount of gross compensation
income to be realized by the holders of the Outstanding Options as a result of
the exercise thereof and the sale pursuant to the Merger of the Common Shares
received upon exercise thereof shall be properly allocable to the Closing Date,
and not to the day after, for purposes of Reg. Sec. 1.1502-76.
Section 12.14. Tax Refunds. Acquiror shall cause Keystone or the
Keystone Subsidiaries to deliver promptly to Holder Representative any refunds
of Taxes received by Keystone or a Keystone Subsidiary attributable to the
period through the Effective Time of the Merger, other than refunds that are (i)
attributable to the deductions for items identified in the Transaction Tax
Benefit Amount calculation or (ii) the carry back of losses or deductions
generated in a post-Closing period.
Section 12.15. Tax Audits. Acquiror, Keystone and any Keystone
Subsidiary shall notify Holder Representative in writing within five (5)
Business Days after the receipt prior to October 30, 2004 of a written or oral
notice of an intention of a taxing authority to audit a Keystone or a Keystone
Subsidiary Tax Return for a period that ends before, on or includes the
Effective Time of the Merger. If the audit could give rise to a claim for
indemnification by the Acquiror pursuant to Article X of this Agreement, Holder
Representative, through its representatives, shall be allowed to control the
audit and any related administrative or judicial Tax contests that arise by
virtue of the audit, and Acquiror shall, or shall cause Keystone or a Keystone
Subsidiary, to execute such powers of attorney as are needed to authorize such
control. Holder Representative shall allow Acquiror to participate in the audit
or Tax contest, at Acquiror's expense, through representatives reasonably
acceptable to Holder Representative. None of Acquiror, Keystone, or Keystone
Subsidiary shall settle, compromise or close any audit or Tax contest that
Holder representative has the right to control without the prior written consent
of Holder Representative Acquiror, Keystone and any Keystone Subsidiaries will
cooperate with Holder Representative in any audit or Tax contest, including,
without limitation the provision of books and records as needed, and making
available personnel as needed to prepare responses or materials for the audit or
Tax contest that are based on knowledge or
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experience of such personnel or materials in the control of such personnel. To
the extent this Section 12.15 conflicts with Section 10.4, this Section shall
control.
Section 12.16. Jurisdiction; WAIVER OF TRIAL BY JURY. Any proceeding
or action arising out of or relating to this Agreement or the transactions
contemplated hereby may be brought in the courts of Pennsylvania located in the
County of Lackawanna, or, if it has or can acquire jurisdiction, in the United
States District Court for the Middle District of Pennsylvania located therein,
and each of the parties irrevocably submits to the exclusive jurisdiction of
each such court in any such proceeding or action, waives any objection it may
now or hereafter have to venue or to convenience of forum, agrees that all
claims in respect of the proceeding or action shall be heard and determined only
in any such court, and agrees not to bring any proceeding or action arising out
of or relating to this Agreement or the transactions contemplated hereby in any
other court. EACH OF THE PARTIES WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY, INCLUDING THE MERGER.
Section 12.17. Schedules. The representations and warranties contained
in Article III are qualified by reference to the Schedules attached hereto. The
parties agree that the Schedules are not intended to constitute, and shall not
be construed as constituting, representations or warranties of Keystone except
as and to the extent expressly provided in this Agreement. Acquiror and Merger
Sub acknowledge that: (a) the Schedules may include items or information which
Keystone is not required to disclose under this Agreement; (b) disclosure of
such items or information shall not affect, directly or indirectly, the
interpretation of this Agreement or the scope of the disclosure obligation of
Keystone under this Agreement; and (c) inclusion of information in the Schedules
shall not be construed as an admission that such information is material to
Keystone. Acquiror and Merger Sub acknowledge that: (i) headings have been
inserted on sections of the Schedules for the convenience of reference only and
shall not affect the construction or interpretation of any of the provisions of
the Agreement or the Schedules; (ii) cross references that may be contained in
certain of the Schedules to other Schedules are not all-inclusive of all
disclosures contained on such referenced Schedules; and (iii) information
contained in various Schedules or sections and subsections of the Schedules may
be applicable to other Schedules or sections and subsections; accordingly, every
matter, document or item referred to, set forth or described in one Schedule
shall be deemed to be disclosed under each and every part, category or heading
of that Schedule and all other Schedules and shall be deemed to qualify the
representations and warranties of Keystone in the Agreement, to the extent such
matter, document or item may apply if (X) a cross reference to such other
Schedule is made, or (Y) it is reasonably apparent that the disclosed matter,
document or item would relate to other representations or warranties or the
matters covered thereby.
Section 12.18. Specific Performance. The Acquiror, Merger Sub,
Keystone and the Holder Representative recognize that any breach of the terms of
this Agreement may give rise to irreparable harm for which money damages would
not be an adequate remedy, and accordingly agree that, in addition to other
remedies, any non-breaching party shall be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce the terms and provisions of this Agreement by a decree of specific
performance in any action instituted in any court of the United States or any
state thereof, or any other jurisdiction,
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having jurisdiction without the necessity of proving the inadequacy as a remedy
of money damages.
[Execution Page Follows]
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IN WITNESS WHEREOF the parties have hereunto caused this Agreement to
be duly executed on the date first above written.
KEYSTONE AUTOMOTIVE HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxxx X. Xxxx
-----------------------------------
Title: President
----------------------------------
KEYSTONE MERGER SUB, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxxx X. Xxxx
-----------------------------------
Title: President
----------------------------------
KEYSTONE AUTOMOTIVE OPERATIONS, INC.
By: /s/ XXXXXX VOR BROKER
-------------------------------------
Name: XXXXXX VOR BROKER
-----------------------------------
Title: PRESIDENT
----------------------------------
LAGE LLC, solely in its representative
capacity and in no other capacity
By: /s/ XXXXXX X XXXXXX XX.
-------------------------------------
Name: XXXXXX X XXXXXX XX.
-----------------------------------
Title:
----------------------------------
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Exhibit D
Form of Statement of Net Working Capital
----------------------------------------
Current Assets:
Cash and cash equivalents/1/ $_______
Trade accounts receivables $_______
Inventories $_______
Notes receivable-employee loans $_______
Prepaid expenses and other
current assets/2/ $_______
Total Current Assets $________
Current Liabilities:
Trade accounts payable $_______
Accrued liabilities/3/ $_______
Accrued income taxes/4/ $________
Total Current Liabilities $________
NET WORKING CAPITAL $
===========
----------
/1/ After giving effect to the use of any cash to fund the payments of Keystone
prior to the Effective Time of the Merger of the Transaction Bonus Amount
and the Aggregate Option Payment.
/2/ Excludes deferred financing costs.
/3/ Excludes current portion of Funded Indebtedness and accrued interest, and
includes accrued expenses, accrued compensation and deferred and
advertising revenue.
/4/ Reflects the use of a part of the current portion of the deferred tax asset
and includes the non-payment of the September Tax Payment pursuant to
Section 5.1 but excludes the effects of the Transaction Tax Benefit Amount.
D-1
