STOCK CONTRIBUTION AND MERGER AGREEMENT
DATED AS OF JULY 23, 1998
BY AND AMONG
DETAILS HOLDINGS CORP.
AND
DYNAMIC CIRCUITS INC.
AND
THE STOCKHOLDERS OF
DYNAMIC CIRCUITS INC.
TABLE OF CONTENTS
ARTICLE I
CONTRIBUTION AND MERGER............................................... 4
1.1. CONTRIBUTION OF DCI COMMON STOCK................................ 4
1.2. DISCOUNT NOTES.................................................. 4
1.3. MERGERCO I MERGER............................................... 4
1.4. OPTION AND BONUS PLAN PAYMENTS.................................. 5
1.5. CONVERSION OF OPTIONS........................................... 5
1.6. DETAILS BANK DEBT............................................... 6
1.7. MERGERCO II MERGER.............................................. 6
1.8. DELIVERIES...................................................... 7
ARTICLE II
THE CLOSING........................................................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES............................................. 7
3.1. Representations and Warranties of Details Holdings and DCI...... 7
3.2. SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS...... 23
ARTICLE IV
COVENANTS............................................................. 25
4.1. Waiver of Rights and Termination of DCI Stockholders Agreement.. 25
4.2. Termination of Certain Agreements............................... 26
4.3. ACCESS TO INFORMATION........................................... 26
4.4. OPERATION OF BUSINESS........................................... 26
4.5. EFFORTS TO CONSUMMATE; COOPERATION.............................. 27
4.6. STOCKHOLDERS AGREEMENT.......................................... 27
4.7. INDEMNIFICATION................................................. 27
4.8. NON-COMPETITION................................................. 28
4.9. ASSIGNMENT OF RIGHTS............................................ 28
4.10. TAX REPORTING................................................... 28
4.11. CONTINUATION OF CUPLEX OBLIGATIONS.............................. 29
4.12. STOCKHOLDER CONSENT............................................. 29
ARTICLE V
CONDITIONS OF CLOSING................................................. 30
5.1. GENERAL CONDITIONS.............................................. 30
5.2. CONDITIONS TO OBLIGATION OF DETAILS HOLDINGS.................... 30
5.3. CONDITIONS TO OBLIGATION OF DCI AND THE STOCKHOLDERS............ 32
ARTICLE VI
INDEMNIFICATION....................................................... 34
6.1. INDEMNIFICATION................................................. 34
6.2. MONETARY LIMITATIONS............................................ 35
6.3. CALCULATION OF LOSSES........................................... 35
6.4. SMALL CLAIMS THRESHOLD.......................................... 36
6.5. SATISFACTION OF CLAIMS.......................................... 36
6.6. NATURE AND SURVIVAL; TIME LIMITS................................ 37
6.7. LIMITATION ON REMEDIES.......................................... 38
6.8. THIRD PARTY CLAIMS.............................................. 38
6.9. NON-CIRCULARITY................................................. 39
6.10. BENEFICIARIES................................................... 39
6.11. RESOLUTION OF CLAIMS............................................ 39
ARTICLE VII
TERMINATION........................................................... 39
7.1. RIGHT OF TERMINATION............................................ 39
7.2. EFFECT OF TERMINATION........................................... 40
ARTICLE VIII
MISCELLANEOUS......................................................... 40
8.1. INTERPRETIVE PROVISIONS; CERTAIN DEFINITIONS.................... 40
8.2. STOCKHOLDER REPRESENTATIVE...................................... 41
8.3. EXPENSES........................................................ 41
8.4. LEGAL COUNSEL................................................... 42
8.5. ENTIRE AGREEMENT; AMENDMENT..................................... 42
8.6. SEVERABILITY.................................................... 42
8.7. PUBLIC ANNOUNCEMENT............................................. 42
8.8. NOTICES......................................................... 43
8.9. COUNTERPARTS.................................................... 45
8.10. GOVERNING LAW................................................... 45
8.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.................. 45
8.12. BENEFITS OF AGREEMENT........................................... 46
ANNEXES
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I - DCI Security Ownership
II - Redemption & Contribution
III - Details Holdings Security Ownership
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SCHEDULES
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1.8 - Closing Date Deliveries
3.1(b) - Consents
3.1(c) - Equity Investments
3.1(e) - Financial Statements
3.1(f) - Undisclosed Liabilities
3.1(g) - Changes
3.1(h) - Contracts, Agreements, and Purchase Orders
3.1(i) - Litigation and Claims
3.1(j) - Real Property
3.1(l) - Intellectual Property
3.1(m) - ERISA Matters
3.1(n) - Transactions with Affiliates
3.1(o) - Insurance Policies
3.1(p) - Taxes
3.1(q) - Compliance with Laws
3.1(r) - Environmental Matters
3.1(s) - Customers and Suppliers
3.1(t) - Bank Accounts
4.2 - Contracts to be terminated At Closing
5.1 - Documents
8.2 - Expenses
EXHIBITS
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EXHIBIT 1.3 - Form of Mergerco I Merger Agreement
EXHIBIT 1.7 - Form of Mergerco II Merger Agreement
EXHIBIT 4.8 - Details Holdings Charter Amendment
EXHIBIT 4.12 - Stockholders Consent
EXHIBIT 5.2(h) - Form of Opinion of McCutchen, Doyle, Xxxxx & Xxxxxxx
EXHIBIT 5.3(f)(i) - Form of Opinion of Ropes & Xxxx
EXHIBIT 5.3(f)(ii)- Form of Opinion of Straddling, Xxxxx, Xxxxxxx & Xxxxx
DEFINITIONS
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The following capitalized terms, which may be used in more than one Section
or other location of this Agreement, are defined in the following Sections or
other locations:
TERM SECTION
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Affiliate.......................................................... 3.1(n)
Agreement.......................................................... Caption
Audited Balance Sheet.............................................. 3.1(e)
Audited Financial Statements....................................... 3.1(e)
Xxxx Funds......................................................... 1.2(b)
By-Laws............................................................ 3.1(a)
Capital............................................................ Preamble
Charter............................................................ 3.1(a)
Class A Stock...................................................... Preamble
Class L Stock...................................................... Preamble
Closing............................................................ Article III
Closing Date....................................................... Article III
Code............................................................... 3.1(m)
Conflicting Organization........................................... 4.9
Contribution....................................................... Preamble
Conversion Securities.............................................. 3.1(d)(iii)
Cuplex Agreement................................................... 4.13
DCI................................................................ Caption
DCI Common Stock................................................... Preamble
DCI Disclosure Schedules........................................... 3.1
DCI Indemnitees.................................................... 6.1(a)
DCI Options........................................................ Preamble
DCI Securities..................................................... Preamble
DCI Stockholders Agreement......................................... 4.1
Details Capital.................................................... Preamble
Details Holdings................................................... Caption
Details Holdings Charter Amendment................................. 4.8
Details Holdings Common Stock...................................... Preamble
Details Holdings Disclosure Schedules.............................. 3.1
Details Holdings Stockholders Agreement............................ 4.6
Details Indemnitees................................................ 6.1(b)
Details Intermediate............................................... Preamble
Details Options.................................................... 1.4(b)
Details Securities................................................. 3.1(d)
Details Stockholders............................................... 3.1(d)
Discount Notes..................................................... Preamble
Document(s)........................................................ 5.1
Employee Plan...................................................... 3.1(m)(ii)
Employment Agreements.............................................. 5.2(e)
Encumbrances....................................................... 3.1(k)
Environmental Laws................................................. 3.1(r)(i)
Environmental Permits.............................................. 3.1(r)(i)
ERISA.............................................................. 3.1(m)
ERISA Affiliate.................................................... 3.1(m)
Financial Statements............................................... 3.1(e)
Former Cuplex Shareholders......................................... 4.11
GAAP............................................................... 3.1(e)
Governmental Authority............................................. 3.1(b)
Hazardous Substance................................................ 3.1(r)(iv)
Indebtedness....................................................... 3.1(h)
Indemnified Party.................................................. 6.7
Indemnifying Party................................................. 6.7
Intercompany Note.................................................. Preamble
Interim Balance Sheet.............................................. 3.1(e)
Interim Financial Statements....................................... 3.1(e)
Laws............................................................... 3.1(q)(i)
Leased Real Property............................................... 3.1(j)(ii)
Leases............................................................. 3.1(j)(ii)
Listed Intellectual Property....................................... 3.1(l)
Loss(es)........................................................... 6.1(a)
Material Adverse Effect............................................ 3.1(a)
Material Contract(s)............................................... 3.1(h)
Mergerco I......................................................... Preamble
Mergerco I Merger Agreement........................................ 1.3(c)
Mergerco II........................................................ Preamble
Mergerco II Merger Agreement....................................... 1.7(b)
Material Intellectual Property..................................... 3.1(l)
Minimal Amount..................................................... 6.4
New Details Warrants............................................... 1.1
New Senior Credit Facility......................................... 1.2
Option Agreements.................................................. 5.2(f)
Ordinary Course of Business........................................ 3.1(f)
Out-of-the-Money Options........................................... 1.4
Permits............................................................ 3.1(q)(ii)
Permitted Encumbrances............................................. 3.1(k)
Person............................................................. 3.1(b)
Preferred Stock.................................................... Preamble
Relying Party...................................................... 3.1
Representing Party................................................. 3.1
Returns............................................................ 3.1(p)(i)
Series A Preferred Stock........................................... Preamble
Series B Preferred Stock........................................... Preamble
Shares............................................................. 3.2(c)
Stockholder(s)..................................................... Caption
Stockholder Representative......................................... 8.2
Stockholder Representative Indemnitee.............................. 8.2
Tax(es)............................................................ 3.1(p)
Termination Date................................................... 7.1(b)
Unvested DCI Options............................................... Preamble
Unvested Details Options........................................... 1.4
Vested DCI Options................................................. Preamble
Vested Details Options............................................. 1.4
Warrants........................................................... Preamble
STOCK CONTRIBUTION AND MERGER AGREEMENT dated as of July 23, 1998 (the
"Agreement"), among DETAILS HOLDINGS CORP., a California corporation ("Details
Holdings"), DYNAMIC CIRCUITS INC., a Delaware corporation ("DCI"), and EACH OF
THE PERSONS OR ENTITIES IDENTIFIED ON THE SIGNATURE PAGES HERETO AS A
STOCKHOLDER (each, a "Stockholder" and collectively, the "Stockholders").
WHEREAS, the Stockholders are the only holders of all of the issued
and outstanding shares of capital stock of DCI, with each Stockholder owning
that number of shares of common stock, $.001 par value (the "DCI Common Stock"),
and/or Series A Cumulative Redeemable Preferred Stock, $.001 par value (the
"Series A Preferred Stock") and/or Series B Redeemable Preferred Stock, $.001
par value (the "Series B Preferred Stock", and together with the Series A
Preferred Stock, the "Preferred Stock");
WHEREAS, certain Stockholders and other Persons listed on Annex I are
the only holders of vested options to acquire DCI Common Stock (the "Vested DCI
Options") and/or unvested options to acquire DCI Common Stock (the "Unvested DCI
Options" and together with the Vested DCI Options, the "DCI Options"). The
shares of DCI Common Stock, the shares of Preferred Stock, the Vested DCI
Options, the Unvested DCI Options and the Warrants held by the Stockholders are
referred to herein as the "DCI Securities";
WHEREAS, at the Closing, each Stockholder will contribute a portion of
his shares of DCI Common Stock to Details Holdings in exchange for Details
Holdings Common Stock (as defined below) and warrants to purchase shares of
Class A Common Stock, no par value, of Details Holdings (the "Class A Stock"),
all upon the terms and subject to the conditions set forth in this Agreement
(the "Contribution");
WHEREAS, the parties intend that the Contribution qualify as an
exchange under Section 351 of the Code;
WHEREAS, on the Closing Date, immediately after the Contribution,
Details Holdings will contribute all of the DCI Common Stock received by it in
connection with the Contribution to Details Intermediate Holdings Corp.
("Details Intermediate"), its wholly-owned subsidiary;
WHEREAS, immediately thereafter, Details Intermediate and each of the
Xxxx Funds will contribute all of their remaining DCI Common Stock to Details
Merger Corp. I, a Delaware corporation ("Megerco I") in exchange for common
stock of Mergerco I;
WHEREAS, immediately thereafter, (a) Details Intermediate will issue
discount notes from which it will receive cash proceeds of approximately $33.4
million (the "Discount Notes") and will lend those proceeds to DCI in return for
an intercompany note (the "Intercompany Note") and (b) DCI will use the proceeds
of the borrowing evidenced by the
intercompany note to repay, in part, the outstanding indebtedness under its
existing senior credit facility (the "DCI Facility");
WHEREAS, immediately thereafter, Mergerco I will merge with and into
DCI in a transaction in which (a) each outstanding share of common stock of
Mergerco I will be converted into one outstanding share of common stock of the
surviving corporation, (b) each outstanding share of DCI Common Stock held by
Mergerco I will be cancelled for no consideration, (c) each outstanding share of
DCI Common Stock not held by Mergerco I will be converted into the right to
receive a cash payment from the surviving corporation, (d) each outstanding
share of Series A Preferred Stock will be converted into the right to receive a
cash payment from the surviving corporation, and (e) each outstanding share of
Series B Preferred Stock will remain outstanding;
WHEREAS, the parties intend that Mergerco I be treated as a transitory
corporation and disregarded for tax purposes;
WHEREAS, DCI will incur indebtedness under a new senior credit
facility and use the proceeds thereof to (a) repay the remaining outstanding
indebtedness under the DCI Facility, (b) pay the merger consideration owed to
former holders of shares of DCI Common Stock and Series A Preferred Stock, (c)
make cash payments to the holders of DCI Options to the extent set forth in
written agreements among Details Holdings, DCI and such holders and (d) pay
certain fees and expenses;
WHEREAS, the inclusion of DCI in the consolidated group of Details
Holdings following the consummation of the transactions contemplated by this
Agreement will provide sufficient additional earning capacity to permit Details
Holdings to incur approximately $180 million of additional indebtedness;
WHEREAS, Details, Inc., an indirect wholly-owned subsidiary of Details
Holdings will incur indebtedness under a new senior credit facility and will use
the proceeds thereof to repay in full the outstanding indebtedness under its
existing senior credit facility;
WHEREAS, at the Closing, Details Holdings, DCI and each holder of DCI
Options are expected to enter into agreements pursuant to which DCI will make
cash payments to holders of vested DCI Options and agree to make deferred cash
payments, under certain circumstances, to holders of Unvested DCI Options;
WHEREAS, at the Closing, (a) the Vested DCI Options are to be
converted into vested options to acquire shares of Class A Stock and Class L
Common Stock, no par value, of Details Holdings (the "Class L Stock" and
together with the Class A Stock the "Details Holdings Common Stock") and (b) the
Unvested DCI Options are to be converted into unvested options to acquire shares
of Class A Stock and Class L Stock, respectively;
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WHEREAS, at the Closing, each holder of DCI Options will be granted
Cash Bonus Units under Details Holdings' newly adopted Bonus Plan;
WHEREAS, on the business day following the Closing, Details
Intermediate will contribute all of its DCI Common Stock to Details Merger Corp.
II, a Delaware corporation ("Mergerco II") in exchange for common stock of
Mergerco II;
WHEREAS, immediately thereafter, Mergerco II will merge with and into
DCI in a transaction in which (a) the outstanding shares of Mergerco II will be
converted into 100 shares of common stock of the surviving corporation, (b) each
outstanding share of DCI Common Stock held by Mergerco II will be cancelled for
no consideration, (c) each outstanding share of DCI Common Stock not held by
Mergerco II will be converted into the right to receive a cash payment from the
surviving corporation and (d) each outstanding share of Series B Preferred Stock
will remain outstanding;
WHEREAS, the parties intend that Mergerco II be treated as a
transitory corporation and disregarded for tax purposes;
WHEREAS, immediately thereafter, DCI will incur additional
indebtedness under its new senior credit facility and use the proceeds thereof
to pay the merger consideration owed to former holders of shares of DCI Common
Stock, after which DCI will be a wholly-owned subsidiary of Details Intermediate
(except for approximately $1.2 million face amount of Series B Preferred Stock);
WHEREAS, immediately following the merger of Mergerco II with and into
DCI, Details Intermediate will contribute the Intercompany Note of DCI to DCI as
a capital contribution;
WHEREAS, immediately thereafter Details Holdings will contribute all
of the issued and outstanding capital stock of Details Capital Corp. ("Details
Capital") to Details Intermediate; and
WHEREAS, immediately thereafter, Details Intermediate will contribute
all of the issued and outstanding DCI Common Stock to Details Capital, its
wholly-owned subsidiary, which will then contribute all of the issued and
outstanding DCI Common Stock to Details, Inc., its wholly-owned subsidiary.
NOW, THEREFORE, in consideration of the premises and the mutual
representations hereinafter set forth, the parties hereto hereby agree as
follows:
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ARTICLE I
CONTRIBUTION AND MERGER
Upon the terms, subject to the conditions, and in reliance on the
representations, warranties and covenants set forth herein, the following events
shall occur in the order presented:
1.1. CONTRIBUTION OF DCI COMMON STOCK.
--------------------------------
Each Stockholder hereby agrees to contribute to Details Holdings at the
Closing the number of shares of DCI Common Stock set forth across from such
Stockholder's name on Annex II under the heading "Contributed Stock" in exchange
for (a) the shares of Class A Stock and Class L Stock set forth across from such
Stockholder's name on Annex II under the headings "Class A Shares" and "Class L
Shares" and (b) warrants to purchase the number of shares of Class A Stock set
forth across from such Stockholder's name on Annex II under the heading "O-T-M
Class A Warrants" which shall have an exercise price of $61.17 per share (the
"New Details Warrants").
1.2. DISCOUNT NOTES.
--------------
Details Intermediate will issue the Discount Notes and lend the proceeds
to DCI in return for the Intercompany Note. DCI will use the proceeds of the
borrowing evidenced by the Intercompany Note to repay, in part, the DCI
Facility.
1.3. MERGERCO I MERGER.
-----------------
On the Closing Date:
(a) Details Holdings will contribute all of the DCI Common Stock received
by it pursuant to Section 1.1 to Details Intermediate;
(b) Each of Xxxx Capital Fund V, L.P., Xxxx Capital Fund V-B, L.P., BCIP
Associates and BCIP Trust Associates, L.P. (collectively, the "Bain Funds") and
Details Intermediate will contribute all of the remaining DCI Common Stock then
owned by it to Mergerco I in exchange for common stock of Mergerco I;
(c) Mergerco I will merge with and into DCI pursuant to a merger
agreement (the "Mergerco I Merger Agreement") attached hereto as Exhibit 1.3.
Pursuant to the Mergerco I Merger Agreement, (i) each outstanding share of
common stock of Mergerco I will be converted into one outstanding share of
common stock of the surviving corporation, (ii) each outstanding share of DCI
Common Stock held by Mergerco I will be cancelled for no
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consideration, (iii) each outstanding share of DCI Common Stock not held by
Mergerco I will be converted into the right to receive a cash payment from the
surviving corporation equal to $21,3473 per share (the number of shares of DCI
Common Stock held by each Stockholder to be so converted and the aggregate cash
consideration to be paid to such Stockholder as a result of such conversion are
set forth on Annex II under the heading "Merger Stock" and "Common Cash Merger
Consideration," respectively); (iv) each outstanding share of Series A Preferred
Stock will be converted into the right to receive a cash payment from the
surviving corporation equal to $102.63 per share (the aggregate cash
consideration to be paid each Stockholder as a result of such conversion is set
forth on Annex II under the heading "Preferred Stock Merger Consideration"), and
(v) each outstanding share of Series B Preferred Stock will remain outstanding;
and
(d) With the proceeds of borrowings under a new senior credit facility
into which DCI will enter on the Closing Date (the "New Senior Credit
Facility"), DCI will (i) repay the remaining outstanding indebtedness under the
DCI Facility, (ii) pay the Common Cash Merger Consideration and Preferred Stock
Merger Consideration, (ii) make cash payments to the holders of DCI Options to
the extent set forth in written agreements among Details Holdings, DCI and such
holders and (iv) pay certain fees and expenses.
1.4. OPTION AND BONUS PLAN PAYMENTS.
------------------------------
(a) Pursuant to the Employment Agreements and the Option Agreements, DCI
has agreed to make cash payments, on or prior to the Closing Date, to each
holder of Vested DCI Options party to such an agreement in the manner and to the
extent set forth in each such holder's agreement.
(b) Pursuant to the Employment Agreements and the Option Agreements, DCI
has agreed to make cash payments to each holder of Unvested DCI Options party to
such an agreement at the time, in the manner and to the extent set forth in each
such holder's agreement.
(c) Effective on the date hereof, Details Holdings has adopted the
Details Holdings Bonus Plan pursuant to which participants thereunder will be
entitled to cash bonuses from Details Holdings upon the terms and subject to the
conditions set forth in such Bonus Plan.
1.5. CONVERSION OF OPTIONS.
---------------------
(a) Conversion of Vested DCI Options. At the Closing, pursuant to the
--------------------------------
Employment Agreements and the Option Agreements, the Vested DCI Options are to
be converted into (i) vested options to purchase shares of Class A-5 Stock, (ii)
vested options to purchase shares of Class L Stock (the options described in
clauses (i) and (ii) collectively, the "Vested Details Options") and (iii)
vested options to purchase Class A-5 Stock with an exercise price of $61.17 per
share (the "Out-of-the-Money Options").
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(b) Conversion of Unvested DCI Options. At the Closing, pursuant to the
----------------------------------
Employment Agreements and the Option Agreements, the Unvested DCI Options are to
be converted into (i) unvested options to purchase shares of Class A-5 Stock,
(ii) unvested options to purchase shares of Class L Stock (the options described
in clauses (i) and (ii) collectively, the "Unvested Details Options" and
together with the Vested Details Options, the "Details Options") and (iii)
unvested Out-of-the-Money Options. Except as may be otherwise agreed in writing
by Details Holdings and any holder of Unvested DCI Options, no Unvested DCI
Options shall vest as a result of, or in connection with, the Closing or the
transactions contemplated by the Documents. The vesting schedule for each
holder's unvested options shall be as set forth in such holder's Employment
Agreement or Option Agreement, as applicable.
1.6. DETAILS BANK DEBT.
-----------------
With borrowings it incurs under the New Senior Credit Facility and other
cash available to it, Details, Inc. will repay in full the outstanding
indebtedness under its existing senior credit facility.
1.7. MERGERCO II MERGER.
------------------
One business day after the Closing Date:
(a) Details Intermediate will contribute all of the DCI Common Stock then
owned by it to Mergerco II in exchange for common stock of Mergerco II;
(b) Mergerco II will merge with and into DCI pursuant to a merger
agreement (the "Mergerco II Merger Agreement") attached hereto as Exhibit 1.7.
Pursuant to the Mergerco II Merger Agreement, (i) all of the outstanding shares
of common stock of Mergerco II will be converted into 100 outstanding shares of
common stock of the surviving corporation, (ii) each outstanding share of DCI
Common Stock held by Mergerco II will be cancelled for no consideration, (iii)
each outstanding share of DCI Common Stock not held by Mergerco II will be
converted into the right to receive a cash payment from the surviving
corporation equal to $21.3473 per share (the number of shares of DCI Common
Stock held by each Xxxx Fund to be so converted and the aggregate cash
consideration to be paid such Xxxx Fund as a result of such conversion are set
forth on Annex II under the heading "Merger Stock" and "Common Cash Merger
Consideration," respectively); and (iv) each outstanding share of Series B
Preferred Stock will remain outstanding; and
(c) With the proceeds of borrowings under the New Senior Credit Facility,
DCI will pay the merger consideration owed to the Xxxx Funds.
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1.8. DELIVERIES.
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At the Closing, Details Holdings, the Stockholders, and DCI shall make
such deliveries as are set forth on Schedule 1.8.
ARTICLE II
THE CLOSING
The closing of the Contribution and the Mergerco I Merger Agreement (the
"Closing") shall take place at the offices of Ropes & Xxxx, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx ("Ropes & Xxxx"), or at such other place as shall be mutually
agreeable to the parties hereto, on or prior to July 23, 1998 or if, despite all
commercially reasonable efforts of the parties hereto, the conditions to the
Closing set forth herein have not been satisfied by such date, as soon as
possible thereafter (the "Closing Date"). The closing of the Mergerco II Merger
Agreement shall take place at Ropes & Xxxx one business day after the Closing
Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF DETAILS HOLDINGS AND DCI.
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As an inducement to enter into this Agreement and the other Documents
to which it is a party and to consummate the transactions contemplated hereby
and thereby, DCI (in such capacity, together with its subsidiaries, a
"Representing Party") hereby represents and warrants to Details Holdings (in
such capacity, a "Relying Party") as to the matters set forth in this Article
III.
As an inducement to enter into this Agreement and the other Documents
to which it is a party and to consummate the transactions contemplated hereby
and thereby, Details Holdings (in such capacity, together with its subsidiaries,
a "Representing Party") hereby represents and warrants to DCI and the
Stockholders (in such capacity, collectively, a "Relying Party") as to the
matters set forth in this Article III.
Each reference to a "Schedule" with respect to Details Holdings as the
Representing Party shall mean the disclosure schedules of Details Holdings (the
"Details Holdings Disclosure Schedules"), and each reference to a "Schedule"
with respect to DCI as the Representing Party shall mean the disclosure
schedules of DCI (the "DCI Disclosure Schedules").
(a) Organization, Good Standing, Qualification and Power. The Representing
----------------------------------------------------
Party is a corporation duly organized, validly existing and in good standing
under the laws of its
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state of incorporation and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as presently
conducted. The Representing Party has delivered to the Relying Party correct and
complete copies of the Representing Party's Charter and By-Laws (as hereinafter
defined), as in effect on the date hereof. The Representing Party is qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction where the conduct of its business requires such qualification,
except where the failure to be so qualified has not had and could not reasonably
be expected to have a material adverse effect on the assets, properties, rights,
obligations, liabilities, condition (financial or otherwise), operations or
business of the Representing Party, taken as a whole (a "Material Adverse
Effect"). As used in this Agreement, the terms "Charter" and "By-Laws"
respectively mean, with respect to any corporation, those instruments that,
among other things, (i) define its existence, as filed or recorded with the
applicable Governmental Authority (as hereinafter defined), including such
corporation's Articles or Certificate of Incorporation, Organization or
Association and (ii) otherwise govern its internal affairs, in each case as
amended, supplemented, or restated.
(b) Authority, Enforceability, No Violation, Etc. The Representing Party
--------------------------------------------
has all requisite corporate power and authority to execute and deliver this
Agreement and the other Documents to which it is a party, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
under each Document. The execution and delivery by the Representing Party of
each of the Documents to which it is or will be a party and the performance by
the Representing Party of its obligations thereunder have been duly and validly
authorized by all necessary corporate action on the part of the Representing
Party. Each of the Documents to which the Representing Party is or will be a
party is, or upon its execution and delivery will be, a valid and binding
obligation of the Representing Party, enforceable against it in accordance with
the terms thereof. Except as set forth on SCHEDULE 3.1(B), neither the
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execution or delivery by the Representing Party of any of the Documents to which
it is or will be a party nor the consummation by the Representing Party of the
transactions contemplated by the Documents or the performance by the
Representing Party of its obligations thereunder will (i) conflict with or
result in a breach of any provision of the Representing Party's Charter or By-
Laws, (ii) violate any law, statute, rule or regulation or judgment, order,
writ, injunction or decree of any Governmental Authority, in each case
applicable to the Representing Party or its assets, properties or rights, (iii)
result in the imposition or creation of any Encumbrance upon or with respect to
any of the assets, properties or rights owned or used by the Representing Party
or (iv) violate, conflict with or constitute (with notice or lapse of time or
both) a default or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of, or result in
the creation of any Encumbrance upon any of the assets or properties of the
Representing Party pursuant to the terms of, any material note, bond, lease,
mortgage, indenture, license, agreement or other material instrument or
obligation to which the Representing Party is a party or by which it or any of
its properties or assets may be bound except any such violation, conflict, or
default which is not reasonably likely to have a Material Adverse Effect.
Except as set forth on SCHEDULE 3.1(B), no material filing with, and no material
---------------
permit, authorization, consent or approval of, any individual,
-8-
corporation, association, partnership, joint venture or other entity or
organization of any kind or Governmental Authority (collectively, a "Person") is
necessary for the Representing Party's execution and delivery of the Documents
to which it is or will be a party, the consummation by the Representing Party of
the transactions contemplated thereby or the Representing Party's performance of
its obligations thereunder. As used in this Agreement, the term "Governmental
Authority" means any federal, state, local or foreign government, authority,
instrumentality, department commission, board, bureau, agency or court.
(c) Equity Investments. Except as otherwise set forth on SCHEDULE 3.1(C),
------------------ ---------------
the Representing Party does not have any subsidiaries and does not, directly or
indirectly, own or have the right to acquire any capital stock of, or other
ownership interest in, any Person. The Representing Party owns 100% of the
capital stock of each of its subsidiaries, free and clear of any Encumbrances
(except for Permitted Encumbrances and those Encumbrances listed on SCHEDULE
--------
3.1(C) and there are no outstanding options, warrants, rights, calls,
------
agreements, convertible securities or other commitments or rights to purchase or
acquire any unissued stock or other securities from such subsidiary (including
securities held in treasury) and no other securities of such subsidiary are
reserved for any purpose nor are there any contracts, commitments, voting
trusts, proxies (coupled with an interest or otherwise) agreement,
understandings, arrangements or restrictions to which, directly or indirectly,
the Representing Party or any of its subsidiaries is a party which relate to the
capital stock of such subsidiary.
(d) Capital Structure of the Representing Party, Title to Securities, Etc.
---------------------------------------------------------------------
(i) DCI represents and warrants that:
The authorized capital stock of DCI consists of 9,000,000 shares of
DCI Common Stock and 1,000,000 shares of Preferred Stock, of which (A)
7,073,723 shares of DCI Common Stock, 120,000 shares of Series A Preferred
Stock and 124,465 shares of Series B Preferred Stock are validly issued and
outstanding, fully paid and nonassessable and free of preemptive rights,
and are held of record by the Stockholders in the amounts listed on Annex
I, (B) 506,444 shares and 911,193 shares, respectively, are reserved for
issuance to the Persons listed on Annex I pursuant to the DCI Options and,
(C) no shares of DCI Common Stock and no shares of Preferred Stock are held
in DCI's treasury. Except for the Options there are no outstanding
options, warrants, rights, calls, agreements, convertible securities or
other commitments or rights to purchase or acquire any unissued stock or
other securities from DCI (including securities held in treasury) and no
other securities of DCI are reserved for any purpose. Except for any
Option, Warrant or agreement relating to the DCI Securities listed on
SCHEDULE 4.2, there are no contracts, commitments, voting trusts, proxies
------------
(coupled with an interest or otherwise), agreements, understandings,
arrangements or restrictions to which, directly or indirectly, DCI is a
party which relate to the DCI Securities.
-9-
(ii) Details Holdings represents and warrants that:
The authorized capital stock of Details Holdings consists of 300,000
shares of Class A-1 Common Stock, 640,000 shares of Class A-2 Common Stock,
950,000 shares of Class A-3 Common Stock, 550,000 shares of Class A-4
Common Stock, 1,460,000 shares of Class A-5 Common Stock, 150,000 shares of
Class A-6 Common Stock, 650,000 shares of Class A-7 Common Stock and
475,000 shares of Class L Common Stock of which:
(A) 208,620.0204 shares of Class A-1 Common Stock, 543,244.9310
shares of Class A-2 Common Stock, 422,718.3128 shares of Class A-3
Common Stock, 449,079.4109 shares of Class A-4 Common Stock,
467,114.4504 shares of Class A-5 Common Stock, no shares of Class A-6
Common Stock, no shares of Class A-7 Common Stock and 233,593.7596
shares of Class L Common Stock are validly issued and outstanding,
fully paid and nonassessable and free of preemptive rights, and are
held of record by the Persons listed on Annex III;
(B) 157,962.5146 shares of Class A-5 are reserved for issuance to
the Persons listed on Annex III pursuant to options granted under the
1996 Performance Option Plan, the 1996 Employee Option Plan and the
1997 Equity Incentive Plan;
(C) 14,348.8558 shares of Class L Stock are reserved for issuance
to the Persons listed on Annex III pursuant to options granted under
the 1996 Performance Option Plan and the 1996 Employee Option Plan;
(D) 70,210.8536 shares of Class A-4 Stock are reserved for
issuance to Persons listed on Annex III pursuant to warrants;
(E) 8,677.7557 shares of Class L Stock are reserved for issuance
to the Persons listed on Annex III pursuant to warrants; and
(F) No shares of Class A Common Stock and no shares of Class L
Common Stock are held in Details Holdings treasury (all such
securities, collectively, the "Details Securities").
All Persons listed on Annex III are referred to herein as the "Details
Stockholders." Except for the above referenced options and warrants, there
are no outstanding options, warrants, rights, calls, agreements,
convertible securities or other commitments or rights to purchase or
acquire any unissued stock or other securities from Details Holdings
(including securities held in treasury) and no other securities of Details
Holdings are reserved for any purpose. Except for the above referenced
options
-10-
and warrants and the Details Holdings Stockholders Agreement, there are no
contracts, commitments, voting trusts, proxies (coupled with an interest or
otherwise), agreements, understandings, arrangements or restrictions to
which, directly or indirectly, Details Holdings is a party which relate to
the Details Securities.
(iii) Details Holdings further represents and warrants that:
(A) 1,276,279.1690 shares of the Class A Common Stock and
162,064.5077 shares of the Class L Common Stock of Details Holdings
have been authorized for issuance to the Stockholders under the
Agreement;
(B) Options and Warrants to purchase 345,813.4610 shares of the
Class A Common Stock and 33,260.4275 shares of the Class L Common
Stock have been authorized for grant to the holders of the DCI Options
under the Agreement;
(C) Sufficient shares of Class A Common Stock and Class L Common
Stock are reserved for issuance upon exercise of the Details Options
to be granted under the Employment Agreements and the Option
Agreements and the New Details Warrants (the shares of Class A Common
Stock and Class L Common Stock issuable upon the foregoing exercise
together with the shares of Details Holdings Common Stock described in
subparagraph (A) above and the Options and Warrants collectively
referred to as the "Conversion Securities");
(D) Assuming the validity of the representations and warranties
of each Stockholder contained in Section 3.2 hereof, the Details
Holdings Common Stock to be issued pursuant to this Agreement, when
issued in compliance with the Agreement, will be (i) validly issued,
fully paid and nonassessable, free and clear of any Encumbrances
except as set forth in the Details Holdings Stockholders Agreement and
(ii) issued in compliance with all applicable federal and state
securities laws;
(E) No holder of any security of Details Holdings or any other
Person is entitled to any preemptive or similar statutory or
contractual rights, either arising pursuant to any agreement or
instrument to which Details Holdings or any of its subsidiaries is a
party or that are otherwise binding upon Details Holdings in
connection with the issuance of the Conversion Securities.
(e) Financial Information.
---------------------
(i) Annex A to SCHEDULE 3.1(E) contains complete and accurate copies
---------------
of (A) the audited consolidated balance sheet of the Representing Party as
of December 31, 1997 (the "Audited Balance Sheet"), and the related audited
consolidated
-11-
statements of income and cash flows for the year then ended (together with
the Audited Balance Sheet, the "Audited Financial Statements"), together
with the report thereon of the Representing Party's independent certified
public accountants and (B) the unaudited consolidated balance sheet of the
Representing Party as of March 31, 1998 (the "Interim Balance Sheet") and
the related unaudited statements of income and cash flows for the 3-month
period then ended (together with the Interim Balance Sheet, the "Interim
Financial Statements"). The Audited Financial Statements and the Interim
Financial Statements are collectively called the "Financial Statements."
(ii) Except as set forth on SCHEDULE 3.1(E), the Representing
---------------
Party's Financial Statements (A) were prepared in accordance with the books
and records of the Representing Party, (B) fairly present, in all material
respects, the financial position of the Representing Party at and as of the
dates indicated and the results of operations of the Representing Party for
the periods indicated (subject, in the case of the Interim Balance
Financial Statements, to normal year-end adjustments which will not, in the
aggregate, be material and to the lack of footnotes) and (C) have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied throughout the period covered
thereby, subject, in the case of Interim Financial Statements, to normal
year-end adjustments which will not, in the aggregate, be material and to
the lack of footnotes.
(iii) Annex B of SCHEDULE 3.1(E) contains (A) the Consolidated
---------------
EBITDA of the Representing Party for the 12 months ended on each of March
31, 1998 and June 30, 1998 after giving pro forma effect to each Investment
by the Representing Party or any of its subsidiaries in any subsidiary of
the Representing Party (or any Person which becomes a subsidiary of the
Representing Party) and each acquisition of assets (including, in each
case, the Incurrence of Indebtedness in connection therewith) as if such
Investment and/or acquisition occurred on the first day of each such period
(adjusted for bona fide pro forma expense and cost reductions and related
adjustments) and (B) the Representing Party's contribution to the
Consolidated EBITDA of Details Holdings for the 12 months ended on each of
March 31, 1998 and June 30, 1998 after giving pro forma effect to the items
described in clause (a) and the transactions contemplated hereby (including
the Incurrence of Indebtedness in connection with the transactions
contemplated hereby) as if the Closing occurred on the first day of each
such period (adjusted for bona fide pro forma expense and cost reductions
and related adjustments). No representation is being made that the
adjustments described above for bona fide pro forma expense and cost
reductions and related adjustments were calculated on a basis consistent
with Regulation S-X under the Securities Act. For purposes of this Section
3.1(e)(iii), "Consolidated EBITDA," "Investment," "Incurrence" and
"Indebtedness" shall have the respective meanings set forth in the
Indenture dated November 18, 1997 between Details Capital Corp. (as
successor to Details Holdings Corp.) and the State Street Bank and Trust
Company, as trustee (as amended).
-12-
(f) Absence of Undisclosed Liabilities. The Representing Party does not
----------------------------------
have any liabilities or obligations (accrued, absolute, contingent or otherwise)
of a type required to be reflected on a balance sheet prepared in accordance
with GAAP that were not disclosed or reflected on the Interim Balance Sheet
except (i) those liabilities incurred in the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
frequency and timing) ("Ordinary Course of Business") since the date of the
Interim Balance Sheet and (ii) liabilities disclosed on SCHEDULE 3.1(F).
---------------
(g) Absence of Changes. Since the date of the Interim Balance Sheet there
------------------
has been no event or circumstance which has had or could reasonably be expected
to have a Material Adverse Effect. Further, since the date of the Interim
Balance Sheet, the business of the Representing Party has been operated in the
Ordinary Course of Business and, except as set forth in the Documents or on
SCHEDULE 3.1(G), there has been no (i) deviation from historical methods of
---------------
accounting, including any change in accounting practices concerning slow selling
inventory, or material deviations from other practices in connection with the
maintenance of the Representing Party's books and records, (ii) damage,
destruction or loss which is not fully covered by insurance and which has had or
can reasonably be expected to have a Material Adverse Effect on the Representing
Party, (iii) declaration or payment of any dividend or other distribution on or
with respect to the shares of capital stock of the Representing Party, or any
direct or indirect redemption, purchase or other acquisition of any of such
shares (except, in the case of DCI, for the transactions set forth in Section
1.2), (iv) increase in or prepayment of compensation payable or to become
payable by the Representing Party to any of its senior executives, or the making
of any bonus payment or similar arrangement to or with any of them, except in
the Ordinary Course of Business or pursuant to any of the Documents, (v)
cancellation of material indebtedness due to the Representing Party from others
(other than the write-off of accounts receivable in the Ordinary Course of
Business), (vi) material change in the manner in which the Representing Party
extends discounts or credits to customers, (vii) material change in the manner
in which the Representing Party markets inventory, (viii) sale, transfer or
other disposition of a material portion of the assets of the Representing Party,
except in the Ordinary Course of Business and for fair value, or scrapping of a
material portion of the assets of the Representing Party as obsolete, (ix)
binding commitments for capital expenditures of the Representing Party in excess
of $1,000,000 in the aggregate, or (x) change in the Representing Party's
policies with respect to the payment of accounts payable or other current
liabilities and the collection of accounts receivable, including any
acceleration or deferral of the payment or collection thereof, as applicable.
(h) Agreements, Etc. SCHEDULE 3.1(H) sets forth an accurate and complete
---------------- ---------------
list of each contract or agreement, whether written or oral (including any and
all amendments thereto) to which the Representing Party is a party or by which
the Representing Party is bound (each such contract or agreement, a "Material
Contract," and collectively, the "Material Contracts") and which:
-13-
(i) relates to Indebtedness (as defined below) including a letter
of credit or similar arrangement issued for the account or benefit of the
Representing Party or a guarantee of any Indebtedness or any other Person;
(ii) relates to the purchase, maintenance or acquisition, or sale or
furnishing or materials, supplies, merchandise, machinery, equipment, parts
or any other property or services (excluding any such contract made in the
Ordinary Course Business of the Representing Party and which is expected to
be fully performed within twelve (12) months of the date hereof or which
involves revenues or expenditures of less than $1,000,000);
(iii) is a collective bargaining agreement or contract with any
labor union;
(iv) prohibits or restricts the Representing Party from competing
with any business, or obligates the Representing Party to conduct any
business with only certain parties, or otherwise restrains or prevents the
Representing Party from carrying on any lawful business in any geographic
area;
(v) relates to the use and protection of confidential information
and Intellectual Property of the Representing Party's customers and end-
users;
(vi) relates to employment, compensation, severance or consulting
between the Representing Party and any of its respective officers,
directors, employees or consultants who are entitled to compensation
thereunder (including any profit-sharing, bonus, stock option, pension,
retirement, savings, stock purchase, stock appreciation, hospitalization
insurance or similar plan or agreement, formal or informal, providing
benefits to any current or former officers, directors, employees or
consultants);
(vii) is a purchase agreement, conditional sales agreement,
occupancy agreement, license, lease or sublease for real property, which in
the case of a license, lease or sublease has a term of more than twelve
(12) months, and involves annual payments in excess of $500,000;
(viii) is a lease, sublease or other title retention agreement or
conditional sales agreement involving payments aggregating in excess of
$1,000,000 for any machinery, equipment, vehicle or other tangible personal
property (whether the Representing Party is a lessor or lessee);
(ix) is a contract for capital expenditures or the acquisition or
construction of fixed assets involving payments in excess of $1,000,000; or
(x) is a joint venture or partnership contract or other contract
involving the sharing of profits, losses, costs or liabilities.
-14-
Except as set forth on SCHEDULE 3.1(H), (A) all of the Material Contracts are in
---------------
full force and effect and enforceable in all material respects by the
Representing Party in accordance with their terms except to the extent that such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally and to
general principles of equity, (B) the Representing Party is not in material
breach of or default under (and no event has occurred which with notice or the
passage of time or both would constitute a material breach or default under) any
Material Contract listed, and (C) the Representing Party has not given nor, to
the Representing Party's knowledge, has it received from any other Person, at
any time since December 31, 1997, any notice or other communication regarding
any material breach of, or default under, any Material Contract which has not
been cured or waived.
For purposes of this Agreement, "Indebtedness" of any Person means all
obligations of such Person (i) for borrowed money, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) under capital leases or (iv) in
the nature of guarantees of the obligations described in clauses (i) through
(iii) above of any other Person.
(i) Litigation. Except as set forth on SCHEDULE 3.1(I), there is no
---------- ---------------
action, suit, claim, audit, investigation or legal, administrative or
arbitration proceeding pending or, to the Representing Party's knowledge,
threatened against the Representing Party, whether at law or in equity, whether
civil or criminal in nature and whether before or by any Governmental Authority,
excluding workers compensation claims incurred in the Ordinary Course of
Business. Except as set forth on SCHEDULE 3.1(I), there are no judgments,
---------------
decrees, injunctions or orders of any Governmental Authority binding upon the
Representing Party. The Representing Party is not in default under any
judgment, decree, injunction or order.
(j) Real Property.
-------------
(i) The Representing Party does not own, directly or indirectly,
any real property or improvements thereon.
(ii) Set forth on SCHEDULE 3.1(J) is a list of all real property
---------------
leased (the "Leased Real Property") by the Representing Party, the date of
each lease agreement and any amendments thereto or modifications thereof
(whether written or oral) (collectively, the "Leases"), and whether there
is any requirement to obtain the consent of any Person under each Lease to
the transactions contemplated by this Agreement (including the placement of
Encumbrances on such Lease or the property subject thereto).
(iii) Except as set forth on SCHEDULE 3.1(J), the Representing Party
---------------
does not own or hold and is not obligated under or a party to any option,
right of first refusal or other contractual right to purchase, acquire,
sell or dispose of any parcel of Leased Real Property or any portion
thereof or interest therein. The Representing Party is not
-15-
a lessor, sublessor or grantor under any contract granting to another
Person any right to the possession, use, occupancy or enjoyment of any
parcel of Leased Real Property.
(k) Title to Assets, Properties and Rights and Related Matters. The
----------------------------------------------------------
Representing Party has marketable title to all the properties, interests in
properties and assets, real, personal or mixed, reflected as being owned on the
Interim Balance Sheet by the Representing Party (except for those sold or
otherwise disposed of in the Ordinary Course of Business since the Interim
Balance Sheet Date), and to those acquired by the Representing Party after the
Interim Balance Sheet Date and not sold or otherwise disposed of since their
acquisition, free and clear of all Encumbrances (as defined below) of any kind
or character, except (i) liens for current taxes not yet due and payable, (ii)
Encumbrances securing taxes, assessments, governmental charges or levies or the
Encumbrances of materialmen, carriers, landlords and like persons, all of which
are not yet due and payable, (iii) minor Encumbrances of a character which are
not reasonably expected to have a Material Adverse Effect on the Representing
Party, (iv) Encumbrances securing Indebtedness listed on SCHEDULE 3.1(K) or (v)
---------------
Encumbrances securing Indebtedness incurred in connection with the Agreement
("Permitted Encumbrances"). As used herein, the term "Encumbrances" shall mean
and include any security interests, mortgages, liens, pledges, charges,
easements, reservations, restrictions, rights of way, servitudes, options,
rights of first refusal, rights of first offer, community property interests,
restrictions of any kind and all other encumbrances, whether or not relating to
the extension of credit or the borrowing of money.
(l) Intellectual Property. Part A of SCHEDULE 3.1(L) sets forth an
--------------------- ---------------
accurate and complete list of all material patents, pending patent applications,
trademarks, service marks, pending trademark or service xxxx applications and
trade names licensed to, assigned to, applied for or registered in the name of,
the Representing Party, or which the Representing Party uses in its business,
and all material copyright registrations or pending applications for copyright
registrations of the Representing Party, or which the Representing Party uses in
its business, including the nature (e.g., patent, trademark, etc.) of such
----
intellectual property, the application or registration number, the jurisdiction
and the record owner (all such intellectual property which is or should have
been listed on Part A of SCHEDULE 3.1(L) being referred to as the "Listed
---------------
Intellectual Property"). Part B of SCHEDULE 3.1(L) also sets forth all material
---------------
licenses (other than licenses for "shrink wrapped" off-the-shelf software) to
which the Representing Party is a party and that directly relate to the Listed
Intellectual Property or any other material intellectual property rights
(including inventions, drawings, mask works, trade secrets, customer lists,
software, technical information, data, process technology, plans, blueprints,
know-how and confidential information) currently used by the Representing Party
or necessary to permit the Representing Party to conduct its business as now
conducted (the Listed Intellectual Property and the other intellectual property
rights are collectively called the "Material Intellectual Property"). Except as
set forth on Part C of SCHEDULE 3.1(L):
---------------
(i) no registration, patent or other governmental document relating
to the Material Intellectual Property has lapsed, expired or been abandoned
or canceled or is
-16-
the subject of cancellation proceedings or otherwise held invalid or
unenforceable with respect to the Material Intellectual Property;
(ii) the Representing Party owns or possesses adequate and
enforceable licenses, assignments, or other authorizations (free of
Encumbrances other than Permitted Encumbrances and free of any obligation
to make payment to any third party for the use thereof) to use all Material
Intellectual Property;
(iii) the Representing Party has not infringed on or misappropriated,
and is not now infringing on or misappropriating, any intellectual property
right belonging to any Person based on the operations of the Representing
Party within the last three years, and no claim has been made or is pending
or, to the knowledge of the Representing Party, threatened to the effect
that any Material Intellectual Property is invalid, unenforceable or
infringes on or misappropriates the rights of any other Person;
(iv) to the Representing Party's knowledge, no Person is infringing
upon, misappropriating or violating any of the Material Intellectual
Property in any material respect;
(v) the Representing Party has taken reasonable security measures
to protect the secrecy, confidentiality and value of its and its customers'
trade secrets, proprietary processes and formulae, inventions, know-how,
customer lists and other confidential and proprietary information; and
(vi) the Representing Party has not licensed or granted rights to
any third party to use any of the Material Intellectual Property, other
than to customers in the Ordinary Course of Business.
(m) Benefit Plans; ERISA Matters. Except as set forth in SCHEDULE 3.1(M):
---------------------------- ---------------
(i) All Employee Plans (as defined below) have been operated and
administered in all material respects in accordance with applicable law
(including ERISA and the Code);
(ii) neither the Representing Party nor any of it ERISA Affiliates
has maintained, currently maintains, is obligated to make any contributions
to, or has any liability with respect to, any Employee Plan;
(iii) neither the Representing Party nor any of its ERISA Affiliates,
any other "disqualified person" or "party in interest" (as defined in
Section 4975 of the Code and Section 3 of ERISA respectively) with respect
to an Employee Plan has breached the fiduciary rules of the ERISA or
engaged in a prohibited transaction which could subject
-17-
the Representing Party or its ERISA Affiliates to any tax or penalty
imposed under Sections 495 of the Code or Section 502(i), (j) or (1) of
ERISA;
(iv) all reporting and disclosure obligations imposed under ERISA
and the Code have been satisfied in all material respects with respect to
each Employee Plan;
(v) each Employee Plan which is a "group health plan" within the
meaning of Section 5000 of the Code has been maintained in all material
respects in compliance with Section 4980B of the Code and Title I, Subtitle
B, Part 6 of ERISA and no tax payable on account of Section 4980B of the
Code has been or would reasonably be expected to be incurred;
(vi) no benefit payable or which may become payable by the
Representing Party or its ERISA Affiliates pursuant to any Employee Plan
shall constitute an "excess parachute payment," within the meaning of
Section 280G of the Code, which is or may be subject to the imposition of
an excise tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code;
(vii) no Employee Plan currently maintained by the Representing
Party or its ERISA Affiliates is or was a "multiple employer plan" (within
the meaning of Section 413 of the Code);
(viii) neither the Representing Party nor any of its ERISA Affiliates
is, or ever has been, obligated to contribute to any "multi-employer plan"
(within the meaning of Section 3 of ERISA) or other plan subject to Title
IV of ERISA; and
(ix) other than as required under Section 601 et seq. of ERISA, no
------
Employee Plan provides benefits or coverage following retirement or
termination of employment.
As used in this Agreement, "Employee Plan" means any "employee benefit plan" (as
that term is defined in Section 3 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), as well as any other plan, program or arrangement
involving direct and indirect compensation, whether covering a single individual
or a group of individuals, under which the Representing Party, or any entity
that is a member of a "controlled group of corporations" with, or is under
"common control" with, the Representing Party as defined in Section 414(b) or
(c) of the Internal Revenue Code of 1986, as amended (the "Code") (an "ERISA
Affiliate"), has or may have any present or future obligations or liability on
behalf of its employees or former employees, contractual employees or their
dependents or beneficiaries. The Representing Party has delivered to the
Relying Party correct and complete copies of all Employee Plans and related
documents. The Relying Party acknowledges and agrees that the only
representations and warranties of the Representing Party herein as to any ERISA
matters are those contained in this Section 3.1(m).
-18-
(n) Transactions with Affiliates. Except as set forth in Part A of
----------------------------
SCHEDULE 3.1(N) and except for employment arrangements entered into in the
---------------
Ordinary Course of Business and which are disclosed on SCHEDULE 3.1(H), (i)
---------------
since August 19, 1996, in the case of DCI and its subsidiaries as Representing
Party, and October 28, 1997, in the case of Details Holdings and its
subsidiaries as Representing Party, the Representing Party has not purchased,
acquired or leased any property or services from, or sold, transferred or leased
any property or services to, or loaned or advanced any money to, or borrowed any
money from or entered into or been subject to any management, consulting or
similar agreement with, Affiliates and (ii) the Representing Party is not party
to an agreement pursuant to which it is obligated to do any of the foregoing.
The term "Affiliate," with respect to any Person, means any stockholder of such
Person or any other Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
Person. Except as set forth in Part B of SCHEDULE 3.1(N), no Affiliate of the
---------------
Representing Party is indebted to the Representing Party for money borrowed or
other loans or advances (except for advances of business expenses in the
Ordinary Course of Business).
(o) Insurance. SCHEDULE 3.1(O) contains an accurate and complete list and
--------- ---------------
a brief description of all material insurance policies currently in effect which
are presently owned or held by the Representing Party, insuring the products,
properties, assets, business and operations of the Representing Party and its
potential liabilities to third parties, copies of which have been delivered to
Relying Party. As of the date of this Agreement, all premiums due have been
paid and no notice of cancellation or termination or intent to cancel has been
received by the Representing Party with respect to any such policy. To the
knowledge of the Representing Party, the Representing Party is not in material
default under any such insurance policies.
(p) Taxes. Except as set forth on SCHEDULE 3.1(P):
----- ---------------
(i) The Representing Party has filed all material returns,
declarations of estimated tax, tax reports, information returns and
statements required to be filed by it prior to the Closing Date relating to
any material Taxes with respect to any income, assets or operations of the
Representing Party, other than those for which extensions shall have been
granted prior to the Closing Date (collectively, the "Returns");
(ii) the Returns are true and correct in all material respects;
(iii) the Representing Party has paid, or made adequate provision in
accordance with GAAP, for the payment of all Taxes for the periods ending
on or before the Closing Date;
(iv) the Representing Party has not waived any statute of
limitations affecting any Tax liability or agreed to any extension of time
during which a Tax assessment or deficiency assessment may be made;
-19-
(v) there are no pending examinations by any taxing authority of
any Returns of the Representing Party and the Representing Party has not
received written notice of any unresolved questions or claims concerning
its Tax liability;
(vi) the Representing Party has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to
any shareholder, employee, creditor, independent contractor, or other third
party;
(vii) other than Encumbrances for Taxes not yet due and payable,
there are no Encumbrances on any of the assets of the Representing Party
that arose in connection with any failure (or alleged failure) to pay any
Tax; and
(viii) the unpaid Taxes of the Representing Party do not exceed the
reserve for Tax liability set forth in the Interim Balance Sheet as
adjusted for the passage of time including any Tax liability incurred in
the Ordinary Course of Business since the date of the Interim Balance Sheet
established in accordance with GAAP.
The term "Tax" or "Taxes" means, with respect to any Person, all income taxes
(including any tax on or based upon net income, gross income, or income as
specifically defined, or earnings, profits, or selected items of income,
earnings or profits) and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment or windfall profits taxes,
alternative or add-on minimum taxes, imposts or customs duties together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority on such Person. The Representing Party is not a party to
any Tax sharing agreement. The Relying Party acknowledges and agrees that the
only representations and warranties of the Representing Party herein as to any
Tax matters (other than ERISA matters, which are covered by Section 3.1(m)
above) are those contained in this Section 3.1(p).
(q) Compliance with Laws. Except as set forth on SCHEDULE 3.1(Q):
-------------------- ---------------
(i) the Representing Party is (and since June 30, 1996 has been) in
material compliance with all applicable laws, rules, regulations,
ordinances, decrees and orders of any Governmental Authority (other than
Environmental Laws, which are covered by Section 3.1(r)) (collectively,
"Laws") and has not received any notice of any alleged claim or threatened
claim, violation of or liability under any such Law which has not
heretofore been cured or for which there is no remaining liability;
(ii) The Representing Party has all governmental permits, licenses,
consents, approvals, franchises and other authorizations necessary for the
conduct of its business as presently conducted ("Permits");
(iii) all of the Permits are valid, binding, and in full force and
effect;
-20-
(iv) no loss or expiration of any such Permit is pending or
reasonably foreseeable or to the knowledge of the Representing Party
threatened; and
(v) the Representing Party is in compliance with the material terms
of such Permits.
(r) Environmental Matters.
---------------------
(i) The Representing Party has all Permits (collectively, the
"Environmental Permits") which are required in connection with the
ownership of its assets and properties and the operation of its business
under all federal, state and local statutes, laws, codes, regulations,
ordinances, rules, principles of common law, judgments, orders, decrees,
injunctions, concessions, grants, franchises, agreement or governmental
restrictions relating to the environment, including relating to health or
safety, pollution or the generation, handling, storage, transport,
disposal, discharge or release of any materials or substances into the
environment except for those failures which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect (collectively,
"Environmental Laws");
(ii) all such Environmental Permits are in full force and effect,
and no action or proceeding is pending or to the knowledge of the
Representing Party threatened to revoke, rescind, limit or otherwise modify
any Environmental Permit;
(iii) the Representing Party is in compliance in all material
respects with the terms and conditions of all Environmental Permits and
other limitations, restrictions, conditions, rules and regulations,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in or issued, entered or promulgated under or pursuant
to any Environmental Law applicable to it or its business;
(iv) the Leased Real Property and owned Real Property is free of
contamination from any toxic or hazardous substance or waste, including any
petroleum or petroleum-derived substance or waste or any asbestos
containing material, as defined in any applicable Environmental Laws (a
"Hazardous Substance") except for such contamination that could not
reasonably be expected to have a Material Adverse Effect and except as set
forth in Schedule 3.1(r)(iv);
(v) Except as set forth in Schedule 3.1(r)(v), the Representing
Party:
(A) has not discharged or released any Hazardous Substance
except for discharges or releases which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect;
-21-
(B) is not liable or responsible for clean up costs,
remedial work or damages (including any natural resource damages) in
connection with the generation, handling, storage, transport,
disposal, discharge or release of any Hazardous Substance prior to the
Closing Date;
(C) has not received any notice under any Environmental
Laws of any asserted violation, proceeding, investigation or lawsuit
arising out of or related to the operation, of the business of the
Representing Party or any-claim for clean-up costs, remedial work or
damages from any Person in connection with the generation, handling,
storage, transport, disposal, discharge or release of any Hazardous
Substance except for those which, in the aggregate could not
reasonably be expected to have a Material Adverse Effect;
(D) has not entered into any agreement with any Person
pursuant to which the Representing Party has assumed responsibility
for, either directly or indirectly as a guarantor or surety, or
otherwise agreed to contribute to, the remediation of any condition
arising from or relating to the generation, handling, storage,
transport, disposal, discharge or release of any Hazardous Substance;
and
(E) has not filed any notice under any applicable
Environmental Law reporting any past or present generation, handling,
storage, transport, disposal, discharge or release of any Hazardous
Substance.
The Representing Party has delivered to the Relying Party, correct and complete
copies of all environmental studies, reports, audits, or analyses in the
Representing Party's possession relating to the assets and properties owned or
leased by the Representing Party. The Relying Party acknowledges and agrees that
the only representations and warranties of the Representing Party herein as to
any environmental matters are those contained in this Section 3.1(r).
(s) Intentionally Omitted.
---------------------
(t) Banking Facilities. SCHEDULE 3.1(T) sets forth a true, correct and
------------------ ---------------
complete list of:
(i) each bank, savings and loan or similar financial institution in
which the Representing Party has an account or safety deposit box or other
arrangement, and any number or other identifying codes of such accounts,
safety deposit boxes or other arrangements; and
(ii) the names of all persons authorized to draw one each such
account or have access to any such safety deposit facility or such other
arrangement.
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(u) Labor Relations; Employees. There is no pending or, to the knowledge
--------------------------
of the Representing Party, threatened unfair labor practices complaint against
the Representing Party before the National Labor Relations Board or any
comparable governmental authority. There is no labor strike, dispute, slowdown
or stoppage pending or, to the knowledge of the Representing Party, threatened
against the Representing Party. No representation question currently exists
respecting the employees of the Representing Party. No collective bargaining
agreement is currently in force or is being negotiated by the Representing
Party.
(v) Brokers. Other than Xxxx Capital, Inc. and Celerity Partners, no
-------
agent, broker, investment banker or other Person acting on behalf of the
Representing Party or under the authority of the Representing Party is or will
be entitled to any fee or commission directly or indirectly from the
Representing Party in connection with any of the transactions contemplated
hereby.
(w) NO ADDITIONAL REPRESENTATIONS. THE REPRESENTING PARTY IS NOT MAKING
-----------------------------
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER
WITH RESPECT TO THE REPRESENTING PARTY, INCLUDING ANY OF THE ASSETS, PROPERTIES
OR RIGHTS OF THE REPRESENTING PARTY, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 3.1, AND EXCEPT AS EXPRESSLY SET
FORTH IN THIS SECTION 3.1, THE CONDITION OF THE ASSETS, PROPERTIES AND RIGHTS OF
THE REPRESENTING PARTY, SHALL BE "AS IS" AND "WHERE IS."
3.2. SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
----------------------------------------------------------
Each Stockholder, severally as to himself or itself only and not
jointly or as to any other Stockholder of DCI, represents and warrants to
Details Holdings as follows:
(a) Authority, Enforceability, No Violation, Etc. Such Stockholder has the
---------------------------------------------
full and absolute power to enter into each Document to which it is or will be a
party and perform its other obligations under each such Document. The execution
and delivery by such Stockholder of each Document to which it is or will be a
party and the performance by such Stockholder of its obligations thereunder have
been duly and validly authorized by all necessary action (corporate or
otherwise) on the part of such Stockholder. Each Document to which such
Stockholder is or will be a party has been, or upon its execution and delivery
will be, duly and validly executed and delivered by such Stockholder and is, or
upon its execution and delivery will be, a valid and binding obligation of such
Stockholder, enforceable against such in accordance with its terms. Neither the
execution or delivery by such Stockholder of any Document to which it is or will
be a party, the consummation by such Stockholder of the transactions
contemplated by the Documents nor the performance by such Stockholder of its
obligations thereunder will (i) conflict with or result in a breach of any
provision of such Stockholder's Charter or By-Laws (if applicable), (ii) violate
any material law, statute, rule or
-23-
regulation or judgment, order, writ, injunction or decree of any Governmental
Authority, in each case applicable to such Stockholder or the Securities owned
by such Stockholder, or (iii) conflict with or result in a default or breach of
any provision of any material contract or agreement to which Stockholder is a
party or by which the DCI Securities owned by such Stockholder may be bound and
which would have a material adverse effect on such Stockholder's ability to
perform its obligations under the Documents to which such Stockholder is or will
be party. Assuming that no Representing Party has breached the representation
set forth in the fourth sentence of Section 3.1(b) and no other Stockholder has
breached the representation set forth in this sentence, no material filing with,
and no material permit, authorization, consent or approval of, any Person is
necessary on the part of the Stockholder for the consummation by the Stockholder
of the transactions contemplated by the Documents.
(b) Ownership. Such Stockholder is the lawful owner, of record and
---------
beneficially, of the DCI Securities owned by such Stockholder (which are those
DCI Securities listed across from such Stockholder's name on Annex I) and has
good title to such Securities, free and clear of any and all Encumbrances other
than liens for taxes not yet due and payable and has no other interest in any
DCI Securities.
(c) Details Common Stock. Such Stockholder understands that the
--------------------
securities of Details Holdings to be delivered in connection with the
Contribution and which may be purchased upon exercise of the Options and the
Warrants (the "Shares") have not been registered or qualified under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws by reason of specified exemptions therefrom which depend upon,
among other things, the representations and warranties, of such Stockholder set
forth in this Section 3.2(c). Such Stockholder is able to bear the economic risk
of holding the Shares for an indefinite period of time and is experienced and
has such knowledge and experience in financial and business matters that he is
capable of evaluating the risks and merits of acquiring the Shares. Such
Stockholder acknowledges that all of the securities of Details Holdings received
hereunder will bear a legend to the effect that transfers are restricted unless
(i) the transfer is exempt from the registration requirements under the
Securities Act and Details Holdings receives an opinion of counsel satisfactory
to it to that effect, or (ii) the transfer is made pursuant to an effective
registration statement under the Securities Act.
(d) Registration of Details Common Stock. Such Stockholder understands
------------------------------------
that Details Holdings is under no obligation to effect a registration of the
Shares under the Securities Act and that the obligation of Details Holdings to
effect a registration of the Shares is limited as set forth in the Details
Holdings Stockholders Agreement.
(e) Investment Intent. Such Stockholder is acquiring the Shares for such
-----------------
Stockholder's own account and not with a view to, or for sale in connection
with, the distribution thereof within the meaning of the Securities Act.
-24-
(f) Accredited Investor. Such Stockholder is an Accredited Investor
-------------------
within the definition set forth in Rule 501(a) of the Securities Act with
respect to the Shares and is resident at the address set forth on his or her
Employment Agreement or Option Agreement, as applicable.
(g) Access to Information regarding Details Holdings and DCI. Such
--------------------------------------------------------
Stockholder has been provided access to such information and documents regarding
Details Holdings and DCI as such Stockholder has requested and has been afforded
an opportunity to ask questions of, and receive answers from, representatives of
Details Holdings and DCI concerning the terms and conditions of this Agreement
and the Shares.
(h) Independent Investment Decision. Recognizing that each Stockholder,
-------------------------------
officer and director of DCI has his own distinct financial interest in the
transactions contemplated by this Agreement and that certain Stockholders and
directors have a financial interest in DCI, Details Holdings and/or a
prospective purchaser of the Discount Notes, each Stockholder hereby approves
and ratifies the actions of each other Stockholder, the officers and directors
of DCI in the negotiation of this Agreement and the transactions contemplated
hereby and confirms that he has made an independent investment decision to enter
into this Agreement.
(i) Brokers. No agent, broker, investment banker or other Person acting
-------
on behalf of such Stockholder or under the authority of such Stockholder is or
will be entitled to any fee or commission directly or indirectly from Details
Holdings or DCI in connection with any of the transactions contemplated hereby.
(j) NO ADDITIONAL REPRESENTATIONS. SUCH STOCKHOLDER IS NOT MAKING ANY
REPRESENTATION OR WARRANTY, JOINT OR SEVERAL, EXPRESS OR IMPLIED, OF ANY NATURE
WHATSOEVER WITH RESPECT TO ITSELF (EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
EXPRESSLY SET FORTH IN THIS SECTION 3.2), OR WITH RESPECT TO ANY OTHER
STOCKHOLDER OR DCI (INCLUDING AS TO ANY OF THE ASSETS, PROPERTIES OR RIGHTS OF
DCI).
ARTICLE IV
COVENANTS
4.1. WAIVER OF RIGHTS AND TERMINATION OF DCI STOCKHOLDERS AGREEMENT.
--------------------------------------------------------------
Each Stockholder (a) hereby waives application of the provisions of
the Stockholders Agreement, dated as of August 19, 1996 among DCI and the
shareholders of DCI party thereto (as amended, the "DCI Stockholders Agreement")
in connection with the transactions contemplated by the Documents to the extent
such rights are applicable and
-25-
(b) agrees that the DCI Stockholders Agreement shall terminate and the
provisions thereof shall be of no further force and effect concurrently with the
Closing.
4.2. TERMINATION OF CERTAIN AGREEMENTS.
----------------------------------
Concurrently with the Closing, each of the Contracts and option plans
listed on SCHEDULE 4.2 shall be automatically terminated without any further
------------
action by the parties thereto or any further liability of any party thereunder.
4.3. ACCESS TO INFORMATION.
---------------------
From and after the date hereof until the Closing Date, DCI and Details
Holdings will afford to each other, their counsel and authorized representatives
free and full access upon reasonable notice and during normal business hours
(but without reasonable interruption of either's business) to all of its
facilities, management and books and records relating to their business
(including tax returns filed and in preparation) as either Details Holdings or
DCI may reasonably request.
4.4. OPERATION OF BUSINESS.
---------------------
(a) From and after the date hereof until the Closing, except as
contemplated by the Documents or as otherwise consented to in writing, DCI and
Details Holdings and each of their respective subsidiaries will:
(i) conduct their business only in the Ordinary Course of Business;
(ii) not dispose of any assets with a fair market value of $100,000
individually or $500,000 in the aggregate, except sales of inventories in
the Ordinary Course of Business;
(iii) use commercially reasonable efforts to maintain their
business, assets, properties and rights in accordance with past custom and
practice;
(iv) not reclassify, combine, split, subdivide, or pay or declare a
dividend in respect of, or redeem or otherwise repurchase any capital stock
or issue, deliver, pledge or encumber any additional capital stock or other
securities equivalent to or exchangeable for capital stock;
(v) not acquire or agree to acquire by merging or consolidating
with, or by purchasing any material portion of the capital stock,
partnership interests or assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof;
-26-
(vi) not pay, discharge or satisfy any material claims, liabilities
or obligations (whether absolute, accrued, contingent or otherwise), other
than the payment, discharge or satisfaction of liabilities in the Ordinary
Course of Business;
(vii) not change the accounting methods or practices followed,
including any change in any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve, except as may be
required by changes in GAAP; and
(viii) not amend or modify in any way their respective Charters or
By-Laws.
4.5. EFFORTS TO CONSUMMATE; COOPERATION.
----------------------------------
(a) Subject to the terms and conditions of this Agreement, each party
hereto shall use commercially reasonable efforts to take or cause to be taken
all actions and do or cause to be done all things required under applicable
laws, regulations and ordinances in order to consummate the transactions
contemplated hereby, including (i) obtaining all material permits,
authorizations, consents and approvals of any Governmental Authority which are
required for or in connection with the consummation of the transactions
contemplated hereby and by the other Documents, (ii) taking any and all
reasonable actions necessary to satisfy all of the conditions to the other
party's obligations hereunder as set forth in Article V and (iii) executing and
delivering all agreements and documents required by the terms hereof to be
executed and delivered by such party on or prior to the Closing.
(b) Each party hereby agrees to cooperate with each other in determining
whether any filings are required to be made or consents required bo be obtained
in any jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents.
4.6. STOCKHOLDERS AGREEMENT.
----------------------
By executing this Agreement, each Stockholder agrees that from and after
the Closing Date, without any further action on the part of such Stockholder,
such Stockholder shall be a party to the Stockholders Agreement dated as of
October 28, 1997 among Details Holdings and its Stockholders (as defined
therein) (as amended from time to time, the "Details Holdings Stockholders
Agreement"), and the Conversion Securities acquired by such Stockholder shall be
Shares (as defined in the Details Holdings Stockholders Agreement) of the type
set forth across from such Stockholder's name on Annex II.
4.7. INDEMNIFICATION.
---------------
(a) All rights against DCI to indemnification and exculpation (including
the advancement of expenses) from liabilities for acts or omissions occurring at
or prior to the
-27-
Closing Date (including with respect to the transactions contemplated by this
Agreement) existing as of the date hereof in favor of the current or former
directors or officers of DCI as provided in its Certificate of Incorporation,
its By-laws and the indemnification agreements set forth in SCHEDULE 4.7 shall
------------
continue in full force and effect without amendment, modification or repeal in
accordance with their terms for a period of not less than six years after the
Closing Date; provided however, that if any claims are asserted or made within
-------- -------
such period, all rights to indemnification (and to advancement of expenses)
thereunder in respect of any such claims shall continue, without diminution,
until disposition of any and all such claims. Notwithstanding the foregoing, no
DCI Indemnitee will be entitled to make any claim for indemnification against
Details Holdings by reason of the fact that he, she or it (or any of his, her or
its officers, directors, agents or other representatives) was a controlling
person, director, officer, employee, agent or other representative of DCI or of
any of its subsidiaries or was serving as such for another Person at the request
of any of DCI or any of its shareholders, subsidiaries or other Affiliates
(whether such claim is pursuant to any statute, charter, by-law, contractual
obligation or otherwise) with respect to any action brought under this Agreement
by Details Holdings against any Stockholder.
(b) The provisions of this Section 4.7 are intended to be for the benefit
of, and will be enforceable by, each indemnified party, his or her heirs and his
or her representatives.
4.8. NON-COMPETITION.
---------------
In consideration of the benefits which each of them will realize upon
consummation of the transactions contemplated by this Agreement (including
receipt of substantial cash payments and equity ownership in Details Holdings in
respect of their equity ownership of DCI), each Stockholder who is an employee
of DCI immediately prior to the Closing Date hereby confirms and agrees to be
bound by the terms of the Non-Compete and Technology Transfer Agreement (or
other similar agreement) to which such employee is party. Each of the parties
to such agreements intend that such agreement be enforceable to the fullest
extent permitted by law.
4.9. ASSIGNMENT OF RIGHTS.
--------------------
Effective upon the Closing, without any further action, Celerity Circuits,
LLC hereby assigns and transfers to Details Holdings any and all rights to
indemnification it may have under the Acquisition Agreement dated as of June 12,
1996 among Celerity Circuits, LLC, DCI and Xxxxxxx X. Xxxxxx and the other
stockholders and options holders of Dynamic Circuits Inc. listed therein.
0.00.XXX REPORTING.
-------------
For tax purposes, the parties will report the transactions executed
pursuant to this Agreement on a basis consistent with the parties' intention
that the Contribution qualify as an
-28-
exchange under section 351 of the Code and that Mergerco I and Mergerco II be
treated as transitory corporations and disregarded for tax purposes.
4.11. CONTINUATION OF CUPLEX OBLIGATIONS.
----------------------------------
Each of Xxxxxx Xxxx, Xxxxxxx Xxxx, Xxxxxx Xxxxxx and Xxxxxxx Xxxxxxxx
(collectively, the "Former Cuplex Shareholders") who are party, together with
DCI, to that certain Stock Purchase Agreement (as amended or otherwise modified
from time to time, the "Cuplex Agreement") dated as of August 22, 1997 hereby
agree as follows:
(a) To the extent it may be required under the Cuplex Agreement or DCI's
Certificate of Incorporation, each of the Former Cuplex Shareholders hereby
consents to the consummation of each of the transactions contemplated by the
Documents.
(b) For purposes of Section 2.3 of the Cuplex Agreement, upon
consummation of the Contribution, the term Buyer Common Stock shall be deemed to
be a reference to the Class A-5 Common Stock and the Class L Common Stock
received by the Former Cuplex Shareholders pursuant to this Agreement. Any
reduction in the number of shares of Class A-5 Common Stock or Class L Common
Stock pursuant to Section 2.3 of the Cuplex Agreement (as modified by the
preceding sentence) shall be effected only at an agreed upon amount of $241.7925
per share of Class L Common Stock and $1.0468 per share of Class A-5 Common
Stock.
(c) DCI and the Former Cuplex Shareholders hereby agree that any
obligation of the Former Cuplex Shareholders to be satisfied by a reduction in
the number of shares of Series B Preferred Stock or Buyer Common Stock (as
modified by clause (b) above) of the Former Cuplex Shareholders may be satisfied
by the cancellation of such shares by DCI or Details Holdings, as applicable.
(d) Except as modified by this Section 4.11, DCI and the Former Cuplex
Shareholders hereby confirm the Cuplex Agreement as being in full force and
effect.
4.12. STOCKHOLDER CONSENT. By his execution of this Agreement, each Stockholder
-------------------
hereby grants his written consent to the adoption of the resolutions set forth
on Exhibit 4.12.
-29-
ARTICLE V
CONDITIONS OF CLOSING
5.1. GENERAL CONDITIONS.
------------------
The respective obligations of each party to consummate the transactions
contemplated by this Agreement and the other agreements, instruments,
certificates and documents listed on SCHEDULE 5.1 (together with this Agreement,
------------
each a "Document" and, collectively, the "Documents") is subject to the
satisfaction at or prior to the Closing Date of the following conditions, unless
waived by Details Holdings and DCI:
(a) HSR Act. Any waiting period (and any extension thereof) applicable to
-------
the consummation of the transactions contemplated hereby under the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended, shall have expired or
been terminated.
(b) Charter Amendment. The Details Holdings Charter Amendment shall have
-----------------
become effective.
(c) No Litigation or Legislation. There shall not be any statute, rule or
----------------------------
regulation that could reasonably be expected to have the effect of preventing,
delaying or making the transactions contemplated by any of the Documents illegal
or otherwise prohibited or any pending or threatened investigation, hearing,
order, decree or judgment enjoining or seeking to enjoin the performance of any
of the Documents or the transactions contemplated hereby or thereby or involving
any challenge to, or seeking damages, or other relief in connection with such
transactions.
(d) Funding. Details Holdings and DCI shall have received adequate
-------
assurances to their reasonable satisfaction that the permanent debt financing
described in the letters attached hereto as Exhibit 5.1(d) will be available on
the Closing Date.
5.2. CONDITIONS TO OBLIGATION OF DETAILS HOLDINGS.
--------------------------------------------
The obligation of Details Holdings to perform this Agreement is subject to
the satisfaction at or prior to the Closing Date of the following conditions,
unless waived by Details Holdings:
(a) Authorization. All corporate or other action necessary to authorize
-------------
the execution, delivery and performance of this Agreement and the other
Documents by DCI and the Stockholders and the consummation of the transactions
contemplated by this Agreement and the other Documents shall have been duly and
validly taken by DCI and the Stockholders and DCI and the Stockholders shall
have full power and authority to enter into and consummate the transactions
contemplated by this Agreement and the other Documents.
-30-
(b) Performance of Obligations of DCI and Stockholders. DCI and each of
--------------------------------------------------
the Stockholders shall have performed and complied in all material respects with
all agreements and obligations and satisfied all conditions to be performed,
complied with and satisfied by it under this Agreement and the other Documents
prior to or at the Closing and DCI shall have supplied Details Holdings with a
certificate to such effect with respect to DCI.
(c) Secretary Certificate. Details Holdings shall have received a
---------------------
certificate, dated as of the Closing Date, signed by the Secretary of DCI and
certifying as to:
(i) the Charter, By-Laws, incumbency of officers executing each of
the Documents to which DCI is a party; and
(ii) resolutions of the Board of Directors of DCI authorizing the
execution, delivery and performance by DCI of each of the Documents to
which DCI is a party.
(d) Representations and Warranties.
------------------------------
(i) the representations and warranties of DCI, in its capacity as a
Representing Party, set forth in Section 3.1 shall be true and correct as
of the date of this Agreement and except, in the case of such
representations and warranties not qualified by materiality, for those
failures which in the aggregate have not had and which could not reasonably
be expected to have a Material Adverse Effect, as of the Closing Date as
though made on and as of the Closing Date (other than any representation or
warranty that expressly relates to a specific date, which representations
and warranty shall be correct in all material respects on the date so
specified) and Details Holdings shall have received a certificate of the
President of DCI to such effect; and
(ii) the representations and warranties of each Stockholder set
forth in Section 3.2 shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date except in the case of such representations and warranties not
qualified by materiality, for those failures which could not reasonably be
expected to have a Material Adverse Effect.
(e) Employment Agreements. Details Holdings shall have received duly
---------------------
executed employment agreements from each of Xxxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxxxxx
Xxxxxxxxx, Xxxxxx Xxxxxxxx and Xxxx Xxxxxxx (the "Employment Agreements").
(f) Option Agreements. Details Holdings shall have received duly executed
-----------------
Option Agreements from each holder of a DCI Option who is not party to an
Employment Agreement (the "Option Agreements").
-31-
(g) Fairness Opinion. Details Holdings shall have received an opinion
----------------
dated the Closing Date from Xxxxxx, Xxxxxx & Company (or such other independent
expert reasonably satisfactory to Details Holdings) to the effect that in its
opinion, as of the Closing Date, the transactions contemplated by this Agreement
are fair to Details Holdings from a financial point of view.
(h) Opinions of Counsel to DCI. Details Holdings shall have received an
--------------------------
opinion dated the Closing Date from McCutchen, Doyle, Xxxxx & Enersen, counsel
to DCI, substantially in the form attached hereto as Exhibit 5.2(h).
(i) No Material Adverse Change. Since December 31, 1997, there shall not
--------------------------
have been any change which has resulted in a Material Adverse Effect with
respect to DCI and its subsidiaries and no event shall have occurred or
circumstance exist that could reasonably be expected to result in such a
Material Adverse Effect.
(j) Other Documents. Each of the Stockholders shall have duly executed
---------------
and delivered each of the Documents to which it is a party.
(k) Consents. DCI shall have received all consents set forth on SCHEDULE
-------- --------
3.1(B) of the DCI Disclosure Schedules.
------
5.3. CONDITIONS TO OBLIGATION OF DCI AND THE STOCKHOLDERS.
----------------------------------------------------
The obligation of DCI and each Stockholder to perform this Agreement is
subject to the satisfaction at or prior to the Closing Date of the following
conditions, unless waived by DCI:
(a) Authorization. All corporate or other action necessary to authorize
-------------
the execution, delivery and performance of this Agreement and the other
Documents by Details Holdings and the consummation of the transactions
contemplated by this Agreement and the other Documents shall have been duly and
validly taken by Details Holdings and Details Holdings shall have full power and
authority to enter into and consummate the transactions contemplated by this
Agreement and the other Documents.
(b) Performance of Obligations of Details Holdings. Details Holdings
----------------------------------------------
shall have performed and complied in all material respects with all agreements
and obligations and satisfied all conditions to be performed, complied with and
satisfied by it under this Agreement and the other Documents prior to or at the
Closing and shall have supplied DCI with a certificate to such effect.
(c) Secretary Certificate. DCI shall have received a certificate dated as
---------------------
of the Closing Date, signed by the Secretary of Details Holdings and certifying
as to:
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(i) the Charter, By-Laws, incumbency of officers executing each of
the Documents to which Details Holdings is a party; and
(ii) the resolutions of the Board of Directors of Details Holdings
authorizing the execution, delivery and performance by Details Holdings of
each of the Documents to which Details Holdings is a party.
(d) Representations and Warranties. The representations and warranties of
------------------------------
Details Holdings, in its capacity as a Representing Party, set forth in Section
3.1 shall be true and correct as of the date of this Agreement and except, in
the case of such representations and warranties not qualified by materiality,
for those failures which in the aggregate have not had and which could not
reasonably be expected to have a Material Adverse Effect, as of the Closing Date
as though made on and as of the Closing Date (other than any representation or
warranty that expressly relates to a specific date, which representations and
warranty shall be correct in all material respects on the date so specified) and
DCI shall have received a certificate of the President of Details Holdings to
such effect.
(e) Fairness Opinion. DCI shall have received an opinion dated the
----------------
Closing Date from Xxxxxx, Xxxxxx & Company (or such other independent expert
reasonably satisfactory to DCI) to the effect that in its opinion, as of the
Closing Date, the transactions contemplated by this Agreement are fair to DCI
from a financial point of view.
(f) Opinion of Counsel to Details Holdings. DCI and the Stockholders
--------------------------------------
shall have received an opinion dated the Closing Date of (i) Ropes & Xxxx,
counsel to Details Holdings, substantially in the form attached hereto as
Exhibit 5.3(f)(i) and (ii) Straddling, Xxxxx, Xxxxxxx & Xxxxx, special counsel
to Details Holdings, substantially in the form attached hereto as Exhibit
5.3(f)(ii).
(g) Solvency Opinion. DCI shall have received an opinion dated the Closing
----------------
Date from Xxxxxx Xxxxxx & Company (or such other independent expert reasonably
satisfactory to DCI) to the effect that in its opinion, as of the Closing Date,
the transactions contemplated by the Agreement shall not render DCI and its
subsidiaries or Details Capital and its subsidiaries insolvent.
(h) No Material Adverse Change. Since December 31, 1997, there shall not
--------------------------
have been any change which has resulted in a Material Adverse Effect with
respect to Details Holdings and its subsidiaries and no event has occurred or
circumstance exists that could reasonably be expected to result in such a
Material Adverse Effect.
(i) Consents. Details Holdings shall have received all consents set forth
--------
on SCHEDULE 3.1(B) of the Details Disclosure Schedules.
---------------
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ARTICLE VI
INDEMNIFICATION
6.1. INDEMNIFICATION.
---------------
(a) From and after the Closing Date, Details Holdings shall indemnify and
hold harmless, to the fullest extent permitted by law, subject to the
limitations set forth in Sections 6.2, 6.3, 6.4, 6.6 and 6.7, the Stockholders
and their respective partners, officers, directors, employees and agents
(collectively, the "DCI Indemnitees") from, against and in respect of any
liability, loss, cost, damage, diminution of value, deficiency, demand, claim,
suit, action or cause of action, fine, penalty, cost or expense, including the
cost or expense of any and all investigations or proceedings, settlements,
compromises, reasonable attorney's fees and expenses (being referred to herein
as, "Losses") arising from, related to or in connection with any of the
following:
(i) any breach or default in performance prior to the Closing Date
by Details Holdings of any covenant or agreement of Details Holdings
contained in this Agreement; or
(ii) any breach of any representation or warranty made by Details
Holdings and/or any of its subsidiaries, in their capacity as a
Representing Party, in this Agreement (as each such representation or
warranty would read if all qualifications as to materiality (including in
the definition of Material Adverse Effect) were deleted therefrom).
(b) From and after the Closing Date, Details Holdings shall indemnify and
hold harmless, to the fullest extent permitted by law and subject to the
limitations set forth in Sections 6.2, 6.3, 6.4, 6.6 and 6.7, the holders of
Details Holdings Common Stock on the Closing Date (as reflected in Annex III)
and their respective partners, officers, directors, employees and agents
(collectively, the "Details Indemnitees") from, against and in respect of any
Losses arising from, related to or in connection with any of the following:
(i) any breach or default in performance by DCI prior to the Closing
Date of any covenant or agreement of DCI contained in this Agreement; or
(ii) any breach of any representation or warranty made by DCI and/or
any of its subsidiaries, in their capacity as a Representing Party, in this
Agreement (as each such representation or warranty would read if all
qualifications as to materiality (including in the definition of Material
Adverse Effect) were deleted therefrom).
(c) From and after the Closing Date, each Stockholder shall, on a several
and not a joint basis, indemnify and hold harmless, to the fullest extent
permitted by law, subject to the
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limitations set forth in Sections 6.3, 6.4, 6.6 and 6.7, the Details Indemnitees
from, against and in respect of Losses arising from, related to or in connection
with (i) any breach or default in performance by such Stockholder prior to the
Closing Date of any covenant or agreement of such Stockholder contained in this
Agreement or (ii) any breach of any representation or warranty made by such
Stockholder in this Agreement (as each such representation or warranty would
read if all qualifications as to materiality (including in the definition of
Material Adverse Effect) were deleted therefrom).
6.2. MONETARY LIMITATIONS.
--------------------
(a) Except as provided in Section 6.2(c) below, Details Holdings shall not
have any obligation to indemnify any DCI Indemnitee pursuant to Section
6.1(a)(ii) unless and until (and then only to the extent that) the aggregate of
all individual Losses for which indemnity is not precluded by Section 6.4
incurred or sustained by the DCI Indemnitees in respect of Section 6.1(a)(ii)
exceeds $4,000,000. The aggregate liability of Details Holdings to indemnify
the DCI Indemnitees for Losses in respect of Section 6.1(a)(ii) shall in no
event exceed $25,000,000.
(b) Except as provided in Section 6.2(c) below, Details Holdings shall not
have any obligation to indemnify any Details Indemnitee pursuant to Section
6.1(b)(ii) unless and until (and then only to the extent that) the aggregate of
all individual Losses for which indemnity is not precluded by Section 6.4
incurred or sustained by the Details Indemnitees in respect of Section
6.1(b)(ii) exceeds $4,000,000. The aggregate liability of Details Holdings to
indemnify the Details Indemnitees for Losses in respect of Section 6.1(b)(ii)
shall in no event exceed $25,000,000.
(c) Notwithstanding the foregoing, (i) the minimum dollar limitation set
forth in the first sentence of each of Section 6.2(a) and 6.2(b) and the
provisions of Section 6.4 shall not apply to Losses arising from, related to or
in connection with any claim with respect to the representations and warranties
contained in the first sentence of Section 3.1(a), the first three sentences of
Section 3.1(b) and all of Section 3.1(d) and (ii) the minimum dollar limitation
set forth in the first sentence of each of Section 6.2(a) and 6.2(b) shall not
apply to Losses arising from any claim with respect to the representations and
warranties contained in Section 3.1(p).
6.3. CALCULATION OF LOSSES.
---------------------
The amount of the Loss of an Indemnified Party as to which indemnification
exists under this Agreement shall be calculated by taking into account (a) the
present value, based on a discount rate equal to the mid-term applicable federal
rate as determined under Section 1274(d) of the Code at the time, of any Tax
benefit actually realized by such Indemnified Party (as defined below) in
connection with or as a result of the occurrence of such Loss to the extent the
present value of such Tax benefit exceeds the present value of any Tax to be
paid by such Indemnified Party in connection with the indemnification proceeds,
(b) any insurance proceeds
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actually received by such Indemnified Party (and not applied by such Indemnified
Party on an equitable basis against any portion of a Loss that is not
indemnified hereunder) and increased insurance costs incurred in connection with
or as a direct result of the occurrence of such Loss, (c) any indemnification
proceeds received by Details Holdings or such Indemnified Party (including
proceeds from the indemnification provisions described in Section 4.9 and the
indemnification provisions set forth in (i) the Amended and Restated
Recapitalization Agreement dated as of October 4, 1997 by and among DI
Acquisition Corp., Details Holdings and the stockholders listed on Schedule 1
thereto and (ii) the Cuplex Agreement) and (d) if such Loss results from the
diminution in value of such Indemnified Party's equity interest in Details
Holdings, such Loss shall be calculated based on such Indemnified Party's fully
diluted equity interest in Details Holdings at the later of the business day
after the Closing Date or the date such Loss is incurred. If the amount to be
netted pursuant to this Section 6.3 against any payment by an Indemnifying Party
of any amount otherwise required to be paid pursuant to this Article VI shall be
undetermined, the Indemnified Party shall repay to the Indemnifying Party,
promptly after such determination, any amount that Indemnifying Party would not
have had to pay (or, in the case of a payment by Details Holdings pursuant to
section 6.5(a), surrender to Details Holdings for cancellation shares of Class L
Stock Details Holdings would not have had to issue) pursuant to this Article VI
had such determination been made at the time of such payment (or issuance).
6.4. SMALL CLAIMS THRESHOLD.
----------------------
Except to the extent set forth in Section 6.2(c), no DCI Indemnitee or
Details Indemnitee shall be entitled to seek indemnification under Section
6.1(a)(ii) or Section 6.1(b)(ii) in respect of any Loss unless the amount of
such Loss incurred by all DCI Indemnitees or all Details Indemnities, as the
case may be, exceeds $50,000 (the "Minimal Amount"). If a Loss exceeds the
Minimal Amount, the DCI Indemnitees or Details Indemnitees, as the case may be,
shall be entitled to seek indemnification, subject to the other limitations in
this Section 6, for the full amount of such Loss. Notwithstanding the
foregoing, any DCI Indemnitee or Details Indemnitee shall be entitled to seek
indemnification under Section 6.1(a)(ii) or 6.1(b)(ii) in respect of an
individual Loss which does not exceed $50,000 if the claim in respect of such
Loss is one of more than one claim based on the same or related set of facts,
circumstances or occurrences, or the same or a series of related transactions
giving rise to an indemnification claim and such claims taken together involve a
Loss in excess of $50,000.
6.5. SATISFACTION OF CLAIMS.
----------------------
(a) Any claim by an Indemnified Party under Sections 6.1(a) and 6.1(b)
shall be satisfied by issuing to such Indemnified Party shares of Class L Stock.
The number of shares of Class L Stock to be issued to any individual Indemnified
Party in respect of any claim by such Indemnified Party shall be determined by
(i) calculating the amount of the Loss in respect of such claim in accordance
with Section 6.3, (ii) dividing such amount by $364.0909 and
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(iii) taking the result and dividing it by (A) one minus (B) the fully diluted
-----
equity ownership percentage of Details Holdings represented by the Details
Holdings Common Stock held by such Indemnified Party at the time such claim is
satisfied (assuming, for purposes of such calculation, that such Indemnified
Party neither acquired (other than through exercise of options or warrants held
by him on the Closing Date) nor disposed of any Details Holdings Common Stock
after the Closing Date).
(b) All Claims under Section 6.1(c) shall be satisfied in cash.
(c) For the purposes of subsection (a), when calculating the fully diluted
equity ownership percentage of Details Holdings of any Indemnified Party which
was an equity holder of both Details Holdings and DCI prior to the Closing:
(i) only those shares of Details Common Stock owned by such
Indemnified Party immediately prior to the Closing shall be included when
such Indemnified Party is a Details Indemnitee; and
(ii) only those shares of Details Common Stock issued to such
Indemnified Party under this Agreement (or acquired upon exercise of a
warrant granted to him under this Agreement) shall be included when such
Indemnified Party is a DCI Indemnitee
(d) Any issuance of shares of Class L Stock in satisfaction of a claim
under Section 6.1 shall be treated as a purchase price adjustment by the
recipient thereof.
6.6. NATURE AND SURVIVAL; TIME LIMITS.
--------------------------------
(a) Regardless of any investigation made at any time by or on behalf of
any party hereto or of any information and party may have in respect thereof,
all representations and warranties made herein or pursuant hereto or in
connection with the transactions contemplated by the Documents shall survive the
Closing and continue in effect until the first anniversary of the Closing,
except for (i) representations and warranties contained in the first sentence of
Section 3.2(a), the first three sentences of Section 3.2(b), the first three
sentences of Section 3.3(a) and all of Section 3.3(b), which shall continue in
full force and effect indefinitely, (ii) representations and warranties in
Section 3.1(p) which shall survive the Closing and continue in effect until 30
days after the running of the applicable statute of limitations and (iii)
representations and warranties contained in Section 3.1(r) which shall survive
the Closing and continue in effect until December 31, 1999. Any claim for
indemnification pursuant to this Article VI as a result of any breach of
representation or warranty must be made within the period of time during which
such representation or warranty survives the Closing pursuant to this Section
6.6(a). Any claim described in the preceding sentence made within the applicable
time period (and, to the extent of such claim, any representation or warranty
upon which such claim is based) shall survive thereafter until such
-37-
claim is finally resolved. For purposes of this Article VI (except to the
extent otherwise set forth in Section 6.8), any claim for indemnification shall
be duly made by giving written notice of such claim to the Indemnifying Party.
(b) Except to the extent otherwise set forth herein, the covenants and
agreements of the parties set forth in this Agreement shall survive
indefinitely.
6.7. LIMITATION ON REMEDIES.
----------------------
After the Closing Date, the indemnification provided in this Article VI,
subject to the limitations set forth in this Agreement, shall be the exclusive
remedy available to any Indemnified Party for any breach of any representation,
warranty or covenant to be performed prior to the Closing Date, including
without limitation any remedies under CERCLA.
6.8. THIRD PARTY CLAIMS.
------------------
Promptly after the receipt by any party entitled to indemnification (the
"Indemnified Party") pursuant to this Article VI of notice of the commencement
of any action against such Indemnified Party by a third party, such Indemnified
Party shall, if a claim with respect thereto is to be made against Details
Holdings or any Stockholder hereunder (the "Indemnifying Party") pursuant to
this Article VI, give such Indemnifying Party written notice thereof in
reasonable detail in light of the circumstances then known to such Indemnified
Party. The failure to give such notice shall not relieve any Indemnifying Party
from any obligation hereunder except where, and then solely to the extent that,
such failure actually and materially prejudices the rights of such Indemnifying
Party. Such Indemnifying Party shall have the right to defend such claim, at
such Indemnifying Party's expense and with counsel of its choice reasonably
satisfactory to the Indemnified Party, provided that the Indemnifying Party
conducts the defense of such claim actively and diligently. If the Indemnifying
Party assumes the defense of such claim, the Indemnified Party agrees to
reasonably cooperate in such defense so long as the Indemnified Party is not
materially prejudiced thereby. So long as the Indemnifying Party is conducting
the defense of such claim actively and diligently, the Indemnified Party may
retain separate co-counsel at its sole cost and expense and may participate in
the defense of such claim, and neither any Indemnifying Party nor any
Indemnified Party will consent to the entry of any judgment or enter into any
settlement with respect to such claim without the prior written consent of the
other, which consent will not be unreasonably withheld. In the event the
Indemnifying Party does not or ceases to conduct the defense of such claim
actively and diligently, (x) the Indemnified Party may defend against, and
consent to the entry of any judgement or enter into any settlement with respect
to, such claim in any manner it may reasonably deem to be appropriate, (y) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against such claim, including attorney's
fees and expenses, and (z) the Indemnifying Party will remain responsible for
any Losses the Indemnitee may suffer as a result of such claim to the full
extent provided in this Article VI.
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6.9. NON-CIRCULARITY.
---------------
Each Stockholder hereby agrees that it will not make any claim for
indemnification against Details Holdings or any of its subsidiaries by reason of
the fact that he was a controlling person, director, officer, employee, agent or
other representative of DCI or was serving as such for another Person at the
request of DCI (whether such claim is for Losses of any kind or otherwise and
whether such claim is pursuant to any statute, Charter, By-law, Contractual
Obligation or otherwise) with respect to any claim brought by the Details
Stockholders or Details Holdings relating to this Agreement or any of the
transactions contemplated hereby.
6.10. BENEFICIARIES.
-------------
(a) The provisions of Section 6.1(a) are intended to be for the benefit
of and will be enforced by, each DCI Indemnitee, his or her heirs and his or her
representatives and assigns.
(b) The provisions of Section 6.1(b) and 6.1(c) are intended to be for
the benefit of, and will be enforced by, each Details Indemnitee, his or her
heirs and his or her representatives and assigns.
6.11. RESOLUTION OF CLAIMS.
--------------------
Claims for indemnity by the Details Indemnitees shall be resolved by
agreement between the Stockholders Representative (acting on behalf of all
Stockholders) and such Details Indemnitees or, with respect to claims for
indemnity that affect all holders of Details Holdings Common Stock on the
Closing Date proportionately, the Representative (as defined in the DCI
Transaction Agreement among Details Holdings, such holders and the
Representative), acting on behalf of all holders of Details Holdings Common
Stock on the Closing Date. Claims for indemnity by the DCI Indemnitees shall be
resolved by agreement between the Representative (acting on behalf of all
holders of Details Holdings Common Stock on the Closing Date) and such DCI
Indemnitees or, with respect to claims for indemnity that affect all
Stockholders proportionately, the Stockholders Representative, acting on behalf
of all Stockholders.
ARTICLE VII
TERMINATION
7.1. RIGHT OF TERMINATION.
--------------------
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual written consent of Details Holdings and DCI; or
-39-
(b) by either Details Holdings or DCI in writing, without liability to the
terminating party on account of such termination (except as otherwise provided
in Section 7.2), if the Closing shall not have occurred on or before August 20,
1998 (the "Termination Date"); or
(c) by either Details Holdings or DCI if (i) the conditions to such
party's obligations shall have become impossible to satisfy on or before the
Termination Date (after giving effect to any potential actions the non-
terminating party may propose to take to cure such failure of condition after
reasonable notice form the party proposing to terminate this Agreement),
provided that no party shall be entitled to terminate this Agreement pursuant to
this clause (c) if the reason for such impossibility is due to a breach by the
party proposing to terminate this Agreement or (ii) any permanent injunction or
other order of a Governmental Authority preventing the consummation of the
transactions contemplated hereby shall have become final and non-appealable.
7.2. EFFECT OF TERMINATION.
---------------------
Termination of this Agreement pursuant to Section 7.1 shall terminate all
obligations of the parties hereunder, except for the obligations under Section
8.3, provided that nothing herein shall relieve any party from liability for
breach hereof or of any other Document prior to termination.
ARTICLE VIII
MISCELLANEOUS
8.1. INTERPRETIVE PROVISIONS; CERTAIN DEFINITIONS.
--------------------------------------------
(a) Whenever used in this Agreement, "to the Representing Party's
knowledge" or "to the knowledge of the Representing Party" shall mean the actual
knowledge of Xxxxxxx Xxxxxx, Xxxx Xxxxxxx, Xxxx Xxxxxx, Xxxxxxx Xxxxxxxxx and
Xxx Xxxxxxxx in the case of DCI and Xxxxx XxXxxxxx, Xxx Xxxx, Xxxxx Xxxxxx and
Xxxxxx Xxxxx in the case of Details Holdings. The inclusion of any information
on any Schedule shall not be deemed to be an admission or acknowledgment by, the
Representing Party in and of itself, that such information is required to be
listed on such Schedule or is material to or outside the Ordinary Course of
Business of the Representing Party or any of its Subsidiaries, as applicable.
Nothing contained herein or in any of the Exhibits or Schedules hereto shall
constitute an admission of liability or an admission against the Representing
Party interest.
(b) The use in this Agreement of the term "including" means "including,
without limitation." The words "herein," "hereof," "hereunder," and other words
of similar import refer to this Agreement as a whole, including the schedules
and exhibits, and not to any particular section, subsection, paragraph,
subparagraph or clause contained in this Agreement.
-40-
All references to sections, schedules and exhibits mean that sections of this
Agreement and the schedules and exhibits attached to this Agreement, except
where otherwise stated. The title of and the section and subsection headings in
this Agreement are for convenience of reference only and shall not govern or
affect the interpretation of any of the terms or provisions of this Agreement.
The use herein of the masculine, feminine or neuter forms shall also denote the
other forms and any reference to the singular or plural shall include the other,
in each case unless the context otherwise requires.
(c) Unless expressly provided otherwise, the measure of a period of one
month or year for purposes of this Agreement shall be that date of the following
month or year corresponding to the starting date, provided that if no
corresponding date exists, the measure shall be that date of the following month
or year corresponding to the next day following the starting date. For example,
one month following February 18th is March 18th, and one month following March
31 is May 1.
8.2. STOCKHOLDER REPRESENTATIVE.
--------------------------
Each Stockholder hereby (a) authorizes the Stockholder Representative to
take any and all actions (including the waiver of rights hereunder and the
compromise of claims pursuant to Section 6.1(a) or (b)) permitted to be taken,
or contemplated to be taken, by such Stockholder hereunder (in his capacity as a
Stockholder) on behalf of such Stockholder (except for the approval of any
amendment of this Agreement which would require the consent of such Stockholder
pursuant to Section 8.5(b)) and (b) agrees to indemnify and hold harmless the
members of the Stockholder Representative, from time to time, and each of its
partners, shareholders, affiliates, directors, officers, fiduciaries,
Stockholders and agents (each a "Stockholder Representative Indemnitee") from
and against any and all Losses which any of them incur or suffer as a result of,
arising out of or relating to any and all actions taken or omitted to be taken
by the Stockholder Representative, except any such Losses that arise on account
of such Stockholder Representative Indemnitee's gross negligence or willful
misconduct. For purposes of this Agreement, the "Stockholder Representative"
shall initially be Celerity Circuits, LLC, The KB Mezzanine Fund II, L.P. and
Xxxxxxx X. Xxxxxx. At any time and from time to time following the Closing, a
majority in interest of the Stockholders may select replacements for the members
of the Stockholder Representative. The Stockholder Representative shall only
act, or refrain from acting, with the approval of a majority of its members.
8.3. EXPENSES.
--------
All costs and expenses, including all legal fees and expenses, incurred in
connection with each of the Documents and the transactions contemplated hereby
and thereby shall be paid by the parties as set forth on Schedule 8.3.
8.4. LEGAL COUNSEL.
-------------
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By its execution below, each of the parties hereto hereby acknowledges that
he has been advised that Ropes & Xxxx has acted (and regularly acts) as counsel
to the Bain Funds and their affiliates (including a prospective purchaser of the
Discount Notes). In particular, each party is aware of potential conflicts
involved in the representation by Ropes & Xxxx of the Bain Funds and their
affiliates and confirms that (a) it has been advised to seek the advice of
independent counsel in connection with the negotiation of this Agreement, the
other Documents and the transactions contemplated hereby and thereby and (b) it
has waived and does waive any conflicts which may arise out of the
representation by Ropes & Xxxx of the Bain Funds and their affiliates in
connection with the negotiation of this Agreement, the other Documents and the
transactions contemplated hereby and thereby.
8.5. ENTIRE AGREEMENT; AMENDMENT.
---------------------------
(a) This Agreement, the other Documents and the Exhibits and Schedules
attached hereto and thereto, contain the entire agreement among the parties with
respect to the transactions contemplated hereby and supersede all prior
agreements and understandings among the parties with respect thereto.
(b) This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by Details Holdings, DCI and, in the
case of any such amendment which would have the effect of (i) decreasing the
consideration receivable by any Stockholder or (ii) adversely affecting the
obligations of any Stockholder under Section 6.1(c), each such Stockholder.
8.6. SEVERABILITY.
------------
It is the desire and intent of the parties hereto that the provisions of
this Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invaliding the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not be invalid,
prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
8.7. PUBLIC ANNOUNCEMENT.
-------------------
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The parties will consult with each other before issuing any press release
or otherwise making any public statements with respect to this Agreement and the
transactions contemplated hereby, and no party will issue any such press release
or any such public statement prior to such consultation and the agreement of the
other parties, except as may be required by law.
8.8. NOTICES.
-------
All notices or other communications which are required hereunder or
otherwise delivered in connection herewith shall be in writing and shall be
deemed to have been duly given if delivered personally or if sent by nationally-
recognized overnight courier, by facsimile, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
if to DCI, to:
Dynamic Circuits Inc.
0000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
McCutchen, Doyle, Xxxxx & Xxxxxxx, LLP
0000 Xxxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
if to Details Holdings, to:
Details, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx XxXxxxxx
Facsimile: (000) 000-00000
Telephone: (000) 000-0000
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in each case with a copy to:
Xxxx Capital, Inc.
Two Xxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Xx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
and
Celerity Partners
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
and
Celerity Partners
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
and
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
and, if to any Stockholder, to such Stockholder at the most recent
address set forth for such Stockholder in the stock records of DCI
(or, after the Closing, Details Holdings).
-44-
or to such other address as any party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of delivery, (b) in the case of a nationally-
recognized overnight courier, day after sent, (c) in the case of facsimile
transmission, when received, and (d) in the case of mailing, on the fifth
business day following that on which the piece of mail containing such
communication is posted.
8.9. COUNTERPARTS.
------------
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one and the same agreement.
8.10. GOVERNING LAW.
-------------
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF CALIFORNIA TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA WILL CONTROL THE INTERPRETATION AND CONSTRUCTION
OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT
OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY.
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING ARISING HEREUNDER.
8.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
(a) EACH OF THE PARTIES HEREBY:
(i) FOR THE PURPOSES OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER DOCUMENTS OR THE SUBJECT MATTER
HEREOF OR THEREOF AND BROUGHT BY ANY OTHER PARTY, IRREVOCABLY SUBMITS TO
THE JURISDICTION OF (A) THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF CALIFORNIA (IN THE CASE OF DETAILS HOLDINGS) OR THE UNITED
STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA
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(IN THE CASE OF DCI AND THE STOCKHOLDERS) OR (B) SOLELY TO THE EXTENT
THAT THE ABOVE REFERENCED COURTS LACK SUBJECT MATTER JURISDICTION IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING, THE COURTS OF THE STATE OF
CALIFORNIA LOCATED IN SUCH DISTRICTS;
(ii) WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE, IN ANY SUCH ACTION OR PROCEEDING, ANY CLAIM THAT
(A) TO THE EXTENT SUCH PARTY HAS SUBMITTED TO THE JURISDICTION OF SUCH
COURT PURSUANT TO CLAUSE (i) ABOVE, IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OR SUCH COURTS, (B) THE ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM OR (C) THE VENUE OF THE ACTION OR PROCEEDING IS
IMPROPER; AND
(iii) AGREES THAT, NOTWITHSTANDING ANY RIGHT OR PRIVILEGE IT MAY
POSSESS AT ANY TIME, SUCH PARTY AND ITS PROPERTY ARE AND SHALL BE
GENERALLY SUBJECT TO SUIT ON ACCOUNT OF THE OBLIGATIONS ASSUMED BY IT
HEREUNDER.
(b) EACH PARTY AGREES THAT SERVICES IN PERSON OR BY CERTIFIED OR
REGISTERED U.S. MAIL TO ITS ADDRESS SET FORTH IN SECTION 8.6 SHALL CONSTITUTE
VALID IN PERSONAM SERVICE UPON SUCH PARTY AND ITS SUCCESSORS AND ASSIGNS IN ANY
--------
ACTION OR PROCEEDING WITH RESPECT TO ANY MATTER AS TO WHICH IT HAS SUBMITTED TO
JURISDICTION HEREUNDER.
(c) EACH PARTY HEREBY ACKNOWLEDGES THAT THIS IS A COMMERCIAL
TRANSACTION, THAT THE FOREGOING PROVISIONS FOR CONSENT TO JURISDICTION AND
SERVICE OF PROCESS HAVE BEEN READ, UNDERSTOOD AND VOLUNTARILY AGREED TO BY EACH
PARTY AND THAT BY AGREEING TO SUCH PROVISIONS EACH PARTY IS WAIVING IMPORTANT
LEGAL RIGHTS.
8.12. BENEFITS OF AGREEMENT.
---------------------
All of the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by DCI or the
Stockholders without the consent of Details Holdings or by Details Holdings
without the consent of DCI; provided, however, that Details Holdings and DCI may
-------- -------
transfer part of its rights and obligations hereunder to Persons who provide
financing in connection with the transactions contemplated by this Agreement and
the other Documents;
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provided, further, however, that no such transfer shall relieve Details Holdings
-------- -------
or DCI of any obligations hereunder or thereunder.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the authorized representatives of each of the parties hereto as of the date
first above written.
DETAILS HOLDINGS: Details Holdings Corp.
By /s/ Xxxxx X. XxXxxxxx
-----------------------------
Name: Xxxxx X. XxXxxxxx
Title:
DCI: Dynamic Circuits Inc.
By /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
STOCKHOLDERS: Celerity Circuits, LLC
By:Celerity Dynamo, LLC
its Managing Member
By: Celerity Partners I, L.P.
its Managing Member
By: Celerity Partners, LLC
its General Partner
By /s/ Xxxx X. Xxxxxx
------------------------------
Name: Xxxx X. Xxxxxx
Title:
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Xxxx Capital Fund V, X.X.
Xxxx Capital Fund V-B, L.P.
By: Xxxx Capital Partners V, L.P.,
their general partner
By: Xxxx Capital Investors V, Inc.,
its general partner
By /s/ Xxxxx Xxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxx
Title: Managing Director
BCIP Associates
BCIP Trust Associates, L.P.
By /s/ Xxxxx Xxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxx
Title: a general partner
Xxxxxxxxx ESOP Capital Partners,
A Minnesota Limited Partnership
By: Xxxxxxxxx Capital Investment Partners,
its general partner
By: Xxxxxxxxx Capital, Inc.,
its general partner
By /s/ Xxxxx Xxxxxxxxx
-----------------------------
Name: Xxxxx Xxxxxxxxx
Title:
-00-
Xxx XX Xxxxxxxxx Xxxx, XX, X.X.
By: EIP Capital Partners, L.P.
its general partner
By: Equinox Investment Partners, L.L.C.
its general partner
By /s/ Xxxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Managing Member
Indosuez DCI Partners
By:Indosuez XX XX, Inc.,
its managing general partner
By [SIGNATURE APPEARS HERE]
--------------------------------
Name:
Title:
By /s/ Xxxxxxx Xxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxx
Title:
/s/ Xxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxxx
-----------------------------
[Spouse]
/s/ Xxxx Xxxxxx
-----------------------------
Xxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
-----------------------------
Xxxxxx Xxxxxx
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/s/ Xxxxx Xxxxxx
-----------------------------
Xxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
-----------------------------
Xxxxxxx Xxxxxx
Xxxxx/Seymour 1982 Family Trust
/s/ Xxx Xxxxx
By----------------------------
Name: Xxx Xxxxx
Title:
/s/ Xxxxxx Xxxxxxx
By---------------------------
Name: Xxxxxx Xxxxxxx
Title:
/s/ Xxxx Xxxxxxxx
-----------------------------
Xxxx Xxxxxxxx
/s/ Xxxx Xxxxxxxx
-----------------------------
[Spouse]
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/s/ Xxxxxx X. Xxxxxxxx
_____________________________
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxxxx X. Xxxxxxxx
_____________________________
[Spouse]
/s/ Xxxx Xxxxxxx
_____________________________
Xxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
_____________________________
[Spouse]
/s/ Xxxxxx Xxxx
_____________________________
Xxxxxx Xxxx
/s/ Xxxxxx Xxxx
_____________________________
[Spouse]
/s/ Xxxxxxx Xxxx
_____________________________
Xxxxxxx Xxxx
/s/ Xxxxxxx Xxxx
_____________________________
[Spouse]
/s/ Xxxxxx Xxxxxx
_____________________________
Xxxxxx Xxxxxx
/s/ Xxxx Xxxxxx
_____________________________
[Spouse]
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/s/ Xxxx Xxxxxxxx
-----------------------------
Xxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
-----------------------------
[Spouse]
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SCHEDULE 1.5
------------
Deliveries
----------
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SCHEDULE 4.2
------------
Contracts to be Terminated
--------------------------
1. 1996 Stock Option Plan
2. 1997 Stock Option Plan
3. DCI Stockholders Agreement
4. Management Agreement among DCI, Celerity and Xxxx
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SCHEDULE 5.1
------------
Documents
---------
1. Details Holdings Stockholders Agreement
2. Employment Agreements
3. Option Agreements
4. Non-Compete and Technology Transfer Agreements dated as of July 23, 1998
between Details Holdings and each of Xxxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxx
Xxxxxxxxx and Xxxx Xxxxxxx.
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