Exhibit 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROFESSIONAL COMMUNICATIONS SECURITY & IMAGING INTERNATIONAL HOLDINGS BV,
STHNL ACQUISITION CORP.
TELEX COMMUNICATIONS HOLDINGS, INC.
AND
FS PRIVATE INVESTMENTS III LLC
AS THE REPRESENTATIVE OF THE EQUITY HOLDERS
DATED AS OF JUNE 28, 2006
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TABLE OF CONTENTS
Page
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I. DEFINITIONS........................................................... 2
II. THE MERGER........................................................... 17
2.1 The Merger...................................................... 17
2.2 Effective Time.................................................. 17
2.3 Effects of the Merger........................................... 18
2.4 Directors; Officers; Certificate of Incorporation; Bylaws....... 18
III. EFFECT OF THE MERGER ON THE SHARES AND OTHER SECURITIES
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES;
MERGER CONSIDERATION; CLOSING....................................... 19
3.1 Effect on Capital Stock......................................... 19
3.2 Payment for Common Shares, Stock Options and Warrants........... 19
3.3 Company Stock Options; Company Warrants......................... 22
3.4 Indemnity Escrow Amount......................................... 24
3.5 Adjustment to the Merger Consideration.......................... 25
3.6 Dissenting Shares............................................... 28
3.7 Closing......................................................... 29
IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ 32
4.1 Incorporation; Power and Authority.............................. 32
4.2 Valid and Binding Agreement..................................... 32
4.3 No Breach; Consents............................................. 32
4.4 Capitalization.................................................. 33
4.5 Subsidiaries.................................................... 35
4.6 SEC Filings; Financial Statements............................... 35
4.7 Absence of Undisclosed Liabilities.............................. 37
4.8 Other Indebtedness.............................................. 37
4.9 Books and Records............................................... 38
4.10 Absence of Certain Developments................................. 38
4.11 Real Estate and Personal Property............................... 38
4.12 Tax Matters..................................................... 40
4.13 Governmental Authorization...................................... 42
4.14 Government Contracts............................................ 42
4.15 Relations with Governments...................................... 43
4.16 Intellectual Property Rights.................................... 43
4.17 Material Contracts.............................................. 45
4.18 Litigation...................................................... 47
4.19 Insurance....................................................... 47
4.20 Compliance with Laws............................................ 47
4.21 Environmental Matters........................................... 47
4.22 Warranties...................................................... 50
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4.23 Employees....................................................... 50
4.24 Employee Benefits - U.S......................................... 51
4.25 Foreign Benefit Plans........................................... 54
4.26 Customers....................................................... 54
4.27 Suppliers....................................................... 54
4.28 Affiliate Transactions.......................................... 54
4.29 Brokerage....................................................... 55
4.30 Project Contracts............................................... 55
4.31 Derivative Transactions......................................... 55
V. REPRESENTATIONS AND WARRANTIES OF BUYER............................... 55
5.1 Incorporation; Power and Authority.............................. 55
5.2 Valid and Binding Agreement..................................... 55
5.3 No Breach; Consents............................................. 56
5.4 Brokerage....................................................... 56
VI. AGREEMENTS OF THE COMPANY............................................ 56
6.1 Conduct of the Business......................................... 56
6.2 Environmental Work.............................................. 58
6.3 Redemption of the Notes; Indenture Indebtedness Satisfaction
and Discharge................................................... 59
6.4 Repayment of Other Indebtedness................................. 60
6.5 Notice of Developments.......................................... 60
6.6 Pre-Closing Access to Information; Confidentiality.............. 61
6.7 Commercially Reasonable Efforts................................. 61
6.8 Securityholder Litigation....................................... 61
6.9 Consents and Authorizations; Regulatory Filings................. 61
6.10 No Solicitation................................................. 62
6.11 Checks.......................................................... 63
VII. TAX MATTERS......................................................... 63
7.1 Tax Matters..................................................... 63
VIII. AGREEMENTS OF BUYER................................................ 66
8.1 Indemnification of Officers and Directors....................... 66
8.2 Employment; Employee Benefits................................... 66
8.3 Replacement of Letters of Credit................................ 67
8.4 Commercially Reasonable Efforts................................. 67
8.5 Access to Information........................................... 67
IX. CONDITIONS TO CLOSING................................................ 68
9.1 Conditions to the Obligations of the Company, Buyer and
Merger Sub...................................................... 68
9.2 Conditions to Buyer's Obligations............................... 68
9.3 Conditions to the Company's Obligations......................... 69
X. TERMINATION........................................................... 70
10.1 Termination of Agreement........................................ 70
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10.2 Procedure Upon Termination...................................... 71
10.3 Effect of Termination........................................... 71
XI. INDEMNIFICATION...................................................... 71
11.1 Survival of Representation and Warranties....................... 71
11.2 General Indemnification......................................... 72
11.3 Limits on Indemnification....................................... 73
11.4 Exclusive Remedy................................................ 74
11.5 General Indemnification Procedures.............................. 75
11.6 Tax Treatment of Indemnity Payments............................. 77
XII. THE REPRESENTATIVE.................................................. 77
12.1 Authorization of the Representative............................. 77
12.2 Payments of Expenses; Holdbacks................................. 79
12.3 Percentage Interests, Disbursements............................. 80
12.4 Bank Accounts; Investments...................................... 81
12.5 Compensation; Exculpation; Indemnity; Security.................. 81
12.6 Successor Representative; Termination of Representative......... 83
12.7 No Third Party Rights........................................... 83
XIII. GENERAL............................................................ 83
13.1 Public Statements............................................... 83
13.2 Expenses........................................................ 84
13.3 Amendment and Waiver............................................ 84
13.4 Notices......................................................... 84
13.5 Assignment...................................................... 86
13.6 No Third Party Beneficiaries.................................... 86
13.7 Severability.................................................... 86
13.8 Complete Agreement.............................................. 86
13.9 Disclosure Schedules............................................ 86
13.10 Signatures; Counterparts........................................ 87
13.11 Governing Law................................................... 87
13.12 Specific Performance............................................ 87
13.13 Jurisdiction.................................................... 87
13.14 Construction.................................................... 87
13.15 Time of Essence................................................. 88
SIGNATURES............................................................... 89
Annex I--Persons Constituting the Knowledge of the Company
Annex II--Exclusions from Other Indebtedness
Exhibit A--Stockholder Written Consent
Exhibit B--Closing Date Net Working Capital Template
Exhibit C--Form of Escrow Agreement
Exhibit D--Form of Environmental Escrow Agreement
Exhibit E--Company Prior Period Financial Statements
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AGREEMENT AND PLAN OF MERGER
This MERGER AGREEMENT (this "Agreement") is made as of June 28, 2006, by
Professional Communications Security & Imaging International Holdings BV, a
corporation organized under the laws of the Netherlands ("Buyer"), STHNL
Acquisition Corp., a Delaware corporation ("Merger Sub"), Telex Communications
Holdings, Inc., a Delaware corporation (the "Company"), and FS Private
Investments III LLC, a Delaware limited liability company, as the Representative
(as defined herein) for the benefit of the Equity Holders (as defined herein).
RECITALS
WHEREAS, the Company holds 100% of the issued and outstanding membership
interests in Telex Communications Intermediate Holdings, LLC, a Delaware limited
liability company ("Intermediate LLC").
WHEREAS, Intermediate LLC owns 100% of the issued and outstanding capital
stock of Telex Communications, Inc., a Delaware corporation ("TCI").
WHEREAS, the respective Boards of Directors of Buyer, Merger Sub and the
Company have determined that it is advisable and in the best interests of the
respective corporations and their shareholders that Merger Sub be merged with
and into the Company (the "Merger") in accordance with the Delaware General
Corporation Law (the "DGCL") and the terms of this Agreement, pursuant to which
the Company will be the surviving corporation and will become at the Effective
Time a wholly owned subsidiary of Buyer.
WHEREAS, the Supervisory Board of Directors and Managing Board of Directors
of Xxxxxx Xxxxx XxxX, the ultimate parent of Buyer, have approved the
Transactions on the terms and subject to the conditions of this Agreement.
WHEREAS, simultaneously with the parties' execution of this Agreement,
certain stockholders of the Company holding a majority of the Common Shares have
delivered to the Company a written consent in lieu of a stockholders meeting in
the form attached hereto as Exhibit A in accordance with Section 228 of the DGCL
and the Company's Bylaws (i) approving the Merger and the Transactions, (ii)
adopting this Agreement and (iii) appointing the Representative in connection
with the Merger and the Transactions (the "Stockholder Consent").
WHEREAS, Buyer, Merger Sub and the Company desire to make certain
representations, warranties and agreements in connection with, and establish
various conditions precedent to, the Merger.
WHEREAS, the parties contemplate that the Indenture Indebtedness
Satisfaction and Discharge (as defined herein) shall be completed immediately
prior to or simultaneously with the Effective Time (as defined herein) and that
any and all Indenture Indebtedness (as defined herein) shall be redeemed on the
respective Specified Redemption Dates (as defined herein).
NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
I. DEFINITIONS
"11 1/2% TCI Indenture" means the Indenture dated as of November 19, 2003
among TCI, as Issuer, the Guarantors named therein, and BNY Midwest Trust
Company, as Trustee and Collateral Agent, pursuant to which TCI issued the 11
1/2% TCI Notes.
"11 1/2% TCI Notes" means the 11 1/2% Senior Secured Notes due October 15,
2008 issued by TCI pursuant to the 11 1/2% TCI Indenture.
"13% Company Indenture" means the Indenture dated as of November 21, 2001,
as amended, between the Company, as Issuer, and BNY Midwest Trust Company, as
Trustee, pursuant to which the Company issued the 13% Company Notes.
"13% Company Notes" means 13% Senior Subordinated Discount Notes due
November 15, 2006 issued by the Company pursuant to the 13% Company Indenture.
"13% Intermediate Indenture" means the Indenture dated as of November 19,
2003 between Intermediate LLC, as Issuer, and BNY Midwest Trust Company, as
Trustee, pursuant to which Intermediate LLC issued the 13% Intermediate Notes.
"13% Intermediate Notes" means 13% Senior Subordinated Discount Notes due
January 15, 2009 issued by Intermediate LLC pursuant to the 13% Intermediate
Indenture.
"13% Notes" means the 13% Company Notes and the 13% Intermediate Notes.
"Accounting Arbitrator" has the meaning set forth in Section 3.5(d).
"Active Employee" means any employee employed on the Closing Date by the
Company or any of its Subsidiaries who is a bargaining unit employee currently
covered by a collective bargaining agreement or employed exclusively by the
Company or any of its Subsidiaries, including employees on temporary leave of
absence, family medical leave, military leave, temporary disability or sick
leave, but excluding employees on long-term disability leave.
"Acquisition Proposal" means any offer, proposal, inquiry or indication of
interest (other than an offer, proposal, inquiry or indication of interest by
Buyer) contemplating or otherwise relating to any Acquisition Transaction.
"Acquisition Transaction" means any transaction or series of transactions
involving (a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange offer
or other similar transaction (i) in which the Company or any of its Subsidiaries
is a constituent corporation, (ii) in which a Person or "group" (as defined in
the Exchange Act and the rules promulgated thereunder) of Persons directly or
indirectly acquires beneficial or record ownership of securities representing
more than 15% of the outstanding securities of any class of voting securities of
the Company or any of its
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Subsidiaries or (iii) in which the Company or any of its Subsidiaries issues or
sells securities representing more than 20% of the outstanding securities of any
class of voting securities of the Company or any of its Subsidiaries; or (b) any
sale (other than sales of inventory in the Ordinary Course of Business), lease
(other than in the Ordinary Course of Business), exchange, transfer (other than
sales of inventory in the Ordinary Course of Business), license (other than
nonexclusive licenses in the Ordinary Course of Business), acquisition or
disposition of any business or businesses or assets that constitute or account
for 20% or more of the consolidated net revenues, net income or assets of the
Company.
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange Act.
"Aggregate Fully-Diluted Common Shares" shall be (1) the aggregate number
of Common Shares held by all holders thereof immediately prior to the Effective
Time, plus (2) the aggregate number of Common Shares issuable upon the exercise
in full of all Stock Options (whether or not then vested) held by all holders
thereof immediately prior to the Effective Time, plus (3) the aggregate number
of Common Shares issuable upon the exercise in full of all Warrants held by all
holders thereof immediately prior to the Effective Time.
"Aggregate Stock Option Exercise Price" shall mean the sum of the exercise
prices payable upon exercise in full of all Stock Options (whether or not
vested) held by all holders of Stock Options immediately prior to the Effective
Time.
"Aggregate Warrant Exercise Price" shall mean the sum of the exercise
prices payable upon exercise in full of all Warrants held by all holders of
Warrants immediately prior to the Effective Time.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Ancillary Agreements" means the Escrow Agreement and the Environmental
Escrow Agreement in the form of Exhibits C and D, respectively.
"Antitrust Clearance" has the meaning set forth in Section 4.3.
"Applicable Trustee" means BNY Midwest Trust Company in its several
respective capacities as Trustee under the 13% Company Indenture, as Trustee
under the 13% Intermediate Indenture and as Trustee and Collateral Agent under
the 11 1/2% TCI Indenture, respectively.
"Audited Financial Statements" means, collectively, the Intermediate LLC
Prior Period Financial Statements and the TCI Prior Period Financial Statements.
"Basket Amount" has the meaning set forth in Section 11.3(a).
"Business Day" means any day of the year on which national banking
institutions in New York are open to the public for conducting business and are
not required or authorized to close.
"Buyer" has the meaning set forth in the first paragraph of this Agreement.
"Buyer Indemnified Parties" has the meaning set forth in Section 11.2(a).
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"Capital Lease" means a lease on which the Company or any of its
Subsidiaries is a lessee that is a capital lease as determined in accordance
with GAAP.
"Certificate of Merger" has the meaning set forth in Section 2.2.
"Closing" has the meaning set forth in Section 3.7(a).
"Closing Balance Sheet" has the meaning set forth in Section 3.5(b).
"Closing Date" has the meaning set forth in Section 3.7(a).
"Closing Date Capital Expenditure Amount" means the amount of capital
expenditures, if any, which have been incurred by the Company and its
Subsidiaries during the period from January 1, 2006 up to and through the
Closing Date.
"Closing Date Cash Amount" means all cash of the Company and its
Subsidiaries as at the close of business on the Closing Date (but excluding
payments required to be made by Buyer to the Company in connection with the
Closing) including, (i) all cash balances in the Company's or its Subsidiaries'
bank accounts as at the close of business on the Closing Date, (ii) all checks
received by the Company or any Subsidiary prior to the close of business on the
Closing Date but not deposited into the Company's or its Subsidiaries' bank
accounts prior to the close of business on the Closing Date, (iii) all checks
deposited by the Company or its Subsidiaries into any of their bank accounts
prior to the close of business on the Closing Date and which have not cleared
(and the funds represented thereby which may not be available to the Company or
its Subsidiaries as at the close of business on the Closing Date) and (iv) an
amount equal to the fees paid by the Company pursuant to clause (a) of the last
sentence of Section 13.2.
"Closing Date Net Stockholder Payment" means an amount equal to the Initial
Merger Consideration, minus (A) the Stock Option Consideration, minus (B) the
Warrant Consideration.
"Closing Date Net Working Capital" means, as at the close of business on
the Closing Date, the sum of all consolidated current assets of any and every
nature of the Company and its Subsidiaries, including accounts receivable (less
allowances for doubtful accounts, provisions for cash discounts, rebates,
returns and allowances), inventories calculated at the lower of cost or market
on "first in first out" basis (less provision for obsolescence) and prepaid
expenses, minus the sum of all consolidated current liabilities of the Company
and its Subsidiaries, including accounts payable, accrued expenses, accrued
compensation related expenses, current deferred revenues and customer deposits,
in each case, determined in accordance with GAAP applied on a basis consistent
with that of the Audited Financial Statements (except as more specifically or
otherwise provided in this definition of the Closing Date Net Working Capital).
For purposes of calculating the Closing Date Net Working Capital, (i) all cash
shall be excluded, (ii) the Other Indebtedness and the Indenture Indebtedness
shall be excluded, (iii) all current liabilities arising from outstanding
letters of credit securing obligations of the Company and its Subsidiaries shall
be excluded, (iv) all Tax receivables, Tax refunds and deferred Tax assets shall
be excluded, (v) all promissory notes shall be excluded, (vi) all Taxes payable,
deferred Tax liabilities and accrued Taxes shall be excluded, (vii) all accruals
in respect of Closing Transaction Expenses shall be excluded, (viii) prepaid
insurance expense shall be included, and (ix) any other amounts
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specifically provided in this Agreement or in Exhibit B to be included or
excluded shall be so included or excluded. Exhibit B provides a template for
such calculation and the application of the definition as if calculated based on
the consolidated financial statements of the Company and the Subsidiaries as of
December 31, 2005.
"Closing Date Other Indebtedness" means Other Indebtedness as of the
Closing Date.
"Closing Statements" has the meaning set forth in Section 3.5(b).
"Closing Transaction Expenses" means the following expenses incurred by the
Company with respect to the transactions contemplated by this Agreement: (A)
fees and disbursements payable to Stroock & Stroock & Xxxxx LLP, (B) fees and
disbursements payable to Xxxxxxxxxx & Xxxxx, P.A., (C) fees and disbursements
payable to Xxxxx & Xxxxxxx LLP, (D) fees and disbursements payable by the
Company to non-United States counsel in connection with the consummation of the
transactions contemplated hereby, (E) fees and disbursements payable to Xxxxxx
Xxxxxx & Company, Inc., and (F) any transfer Taxes that the Equity Holders are
required to pay pursuant to the provisions of Section 7.1(h) of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Shares" means the shares of Common Stock, par value $0.01 per
share, of the Company.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Latest Balance Sheet" has the meaning set forth in Section 4.6(c).
"Company Latest Financial Statements" has the meaning set forth in Section
4.6(c).
"Company Prior Period Financial Statements" has the meaning set forth in
Section 4.6(c).
"Company SEC Reports" has the meaning set forth in Section 4.6(a).
"Company Tax Sharing Agreement" has the meaning set forth in Section
4.12(l).
"Confidentiality Agreement" has the meaning set forth in Section 6.6.
"Consent" means any authorization, consent, approval, filing, waiver,
exemption or other action by or notice to any Person.
"Continuing Employee" has the meaning set forth in Section 8.2.
"Contract" means a contract, agreement, lease, commitment or binding
understanding, whether oral or written, that is in effect as of the date of this
Agreement or any time after the date of this Agreement.
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"Credit Agreement" means the Credit Agreement, dated as of November 19,
2003, among TCI, as Borrower, Intermediate LLC, the Company, Telex
Communications International, Ltd., as Credit Parties and General Electric
Capital Corporation, as Agent, L/C Issuer and a Lender and the other financial
institutions party thereto, as Lenders.
"DGCL" has the meaning set forth in the Recitals.
"Disclosure Schedule" means the schedule delivered by the Company to Buyer
on or prior to the date of this Agreement.
"Dissenting Shares" has the meaning set forth in Section 3.6(a).
"Effective Time" has the meaning set forth in Section 2.2.
"Encumbrance" means any charge, claim, community property interest,
easement, covenant, condition, equitable interest, lien, option, pledge,
security interest, right of first refusal or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income or exercise of any
other attribute of ownership.
"Environmental Costs" has the meaning set forth in Section 4.21(a)(i).
"Environmental Escrow Account" has the meaning set forth in Section
3.2(b)(v).
"Environmental Escrow Amount" has the meaning set forth in Section
3.2(b)(v).
"Environmental Escrow Agreement" has the meaning set forth in Section
3.2(b)(v).
"Environmental Law" has the meaning set forth in Section 4.21(a)(ii).
"Environmental Work" has the meaning set forth in Section 6.2.
"Equity Holders" means all holders of Common Shares, all holders of Stock
Options and all holders of Warrants, in each case outstanding immediately prior
to the Effective Time.
"Equity Holders Indemnified Parties" have the meaning set forth in Section
11.2(e).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
"Escrow Agent" means such escrow agent to be mutually agreed upon by the
parties prior to the Closing.
"Escrow Agreement" has the meaning set forth in Section 3.2(b)(iv).
"Estimated Closing Date Capital Expenditure Amount" has the meaning set
forth in Section 3.2(a)(ii).
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"Estimated Closing Date Capital Expenditure Deficit" means, to the extent
that the Estimated Closing Date Capital Expenditure Amount is less than the
Target Closing Date Capital Expenditure Amount, the amount of such deficit
(expressed as a positive number).
"Estimated Closing Date Capital Expenditure Surplus" means, to the extent
that the Estimated Closing Date Capital Expenditure Amount is greater than the
Target Closing Date Capital Expenditure Amount, the amount of such excess
(expressed as a positive number).
"Estimated Closing Date Cash Amount" has the meaning set forth in Section
3.2(a)(ii).
"Estimated Closing Date Net Working Capital" has the meaning set forth in
Section 3.2(a)(ii).
"Estimated Closing Date Other Indebtedness" has the meaning set forth in
Section 3.2(a)(ii).
"Estimated Closing Date Net Working Capital Deficit" means, to the extent
that the Estimated Closing Date Net Working Capital is less than the Target NWC
Amount, the amount of such deficit (expressed as a positive number).
"Estimated Closing Date Net Working Capital Surplus" means, to the extent
that the Estimated Closing Date Net Working Capital is greater than the Target
NWC Amount, the amount of such excess (expressed as a positive number).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Existing Policy" has the meaning set forth in Section 8.1(b).
"Expense Account" has the meaning set forth in Section 3.2(b)(vi).
"Financial Statements" means, collectively, the Latest Financial Statements
and the Audited Financial Statements.
"Foreign Benefit Plans" has the meaning set forth in Section 4.25.
"GAAP" means United States generally accepted accounting principles, as in
effect from time to time.
"GECC Credit Agreement" means that certain Credit Agreement dated as of
November 19, 2003 by and among TCI, as Borrower; the other persons party thereto
designated as Credit Parties; General Electric Capital Corporation, as Agent,
L/C Issuer and a Lender; and the other financial institutions party thereto, as
Lenders, as such agreement may have been amended, restated, supplemented or
otherwise modified from time to time.
"Governmental Authorization" means any approval, consent, license, permit,
waiver, registration or other authorization issued, granted, given, made
available or otherwise required by any Governmental Entity or pursuant to Law.
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"Government Bid" means any quotation, bid or proposal by the Company or any
of its Subsidiaries which if accepted or awarded, would lead to a Government
Contract.
"Government Contracts" means any prime contract, subcontract, teaming
agreement or arrangement, joint venture, basic ordering agreement, blanket
purchase agreement, letter agreement, purchase order, delivery order, task
order, grant, cooperative agreement, Government Bid, change order or other
commitment or funding vehicle between the Company or any Subsidiary of the
Company and (a) a Governmental Entity, (b) any prime contractor to a
Governmental Entity in the prime contractor's capacity as such, or (c) any
subcontractor with respect to any contract described in clause (a) or (b) in the
subcontractor's capacity as such.
"Governmental Entity" means any federal, state, local, foreign,
international or multinational entity or authority exercising executive,
legislative, judicial, regulatory, administrative or taxing functions of or
pertaining to government.
"Governmental Order" means any judgment, injunction, writ, order, ruling,
award or decree by any Governmental Entity or arbitrator.
"Hazardous Materials" has the meaning set forth in Section 4.21(a)(iii).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"Indemnification Period" has the meaning set forth in Section 8.1(a).
"Indemnified Persons" has the meaning set forth in Section 8.1(a).
"Indemnity Cut-Off Date" has the meaning set forth in Section 11.1.
"Indemnity Escrow Account" has the meaning set forth in Section 3.2(b)(iv).
"Indemnity Escrow Amount" has the meaning set forth in Section 3.2(b)(iv).
"Indenture Satisfaction and Discharge Amount" has the meaning set forth in
Section 3.2(b)(iii).
"Indentures" means, collectively, the 11 1/2% TCI Indenture, the 13%
Intermediate Indenture and the 13% Company Indenture.
"Indenture Indebtedness" means, collectively, the 11 1/2% TCI Notes and the
13% Notes.
"Indenture Indebtedness Satisfaction and Discharge" means the satisfaction
and discharge of all outstanding indebtedness and obligations (including
principal, premium, if any, and any interest thereon (whether accrued or not)
and any costs or expenses of the Trustees and legal counsel associated
therewith) under the Indenture Indebtedness and each Indenture, including the
preparation and mailing pursuant to the respective Indentures of irrevocable
notices of redemption of all outstanding Indenture Indebtedness to the Holders
thereof, together with all officers' certificates, opinions of counsel, notices
and other documents required by each
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Indenture or requested by each Trustee, and an instrument of Satisfaction and
Discharge of each Indenture with all such certificates, opinions, notices,
instruments and other documents to be reasonably satisfactory in form and
substance to Buyer.
"Initial Merger Consideration" means an amount equal to (A) four hundred
twenty million dollars ($420,000,000), plus (B) the Estimated Closing Date Cash
Amount, minus (C) the Indenture Satisfaction and Discharge Amount, minus (D) the
Estimated Closing Date Other Indebtedness, minus (E) the Indemnity Escrow
Amount, minus (F) the Purchase Price Adjustment Escrow Amount, minus (G) the
Environmental Escrow Amount, minus (H) the Closing Transaction Expenses, minus
(I) the Seller Expenses, plus (J) the Estimated Closing Date Net Working Capital
Surplus, if any, minus (K) the Estimated Closing Date Net Working Capital
Deficit, if any, plus (L) the Estimated Closing Date Capital Expenditure
Surplus, if any, minus (M) the Estimated Closing Date Capital Expenditure
Deficit, if any.
"Insider" means (i) a Material Shareholder, or an officer or director of
the Company or any Subsidiary of the Company, or (ii) any Member of the
Immediate Family of any Material Shareholder, officer or director of the Company
or any Subsidiary.
"Intellectual Property Rights" means (i) rights in patents, patent
applications and patentable subject matter, whether or not the subject of an
application, (ii) rights in trademarks, service marks, trade names, trade dress,
internet domains and other designators of origin, registered or unregistered,
(iii) rights in copyrightable subject matter or protectable designs and
Software, registered or unregistered, (iv) trade secrets, (v) rights in internet
domain names, uniform resource locators and e-mail addresses, (vi) rights in
semiconductor topographies (mask works), registered or unregistered, (vii)
know-how and (viii) all other intellectual and industrial property rights of
every kind and nature and however designated, whether arising by operation of
Law, Contract, license or otherwise.
"Interim Period" has the meaning set forth in Section 7.1(b)(ii).
"Intermediate LLC" has the meaning set forth in the Recitals.
"Intermediate LLC Latest Balance Sheet" has the meaning set forth in
Section 4.6(d).
"Intermediate LLC Latest Financial Statements" has the meaning set forth in
Section 4.6(d).
"Intermediate LLC Prior Period Financial Statements" has the meaning set
forth in Section 4.6(d).
"IRS" means the United States Internal Revenue Service.
"Knowledge of the Company" means the knowledge, following due inquiry, of
the executive officers listed in Annex I.
"Latest Financial Statements" means, collectively, the Company Latest
Financial Statements, the Intermediate LLC Latest Financial Statements and the
TCI Latest Financial Statements.
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"Law" means any constitution, law, ordinance, principle of common law,
regulation, statute or treaty of any Governmental Entity.
"Legal Proceeding" means any judicial, administrative or arbitration,
action, suit, proceeding (public or private), claim or governmental proceeding.
"Leased Real Property" has the meaning set forth in Section 4.11(c).
"Liability" means any liability or obligation whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due, whether
known or unknown, and regardless of when asserted.
"Licensed-In Intellectual Property Rights" means Third-Party Intellectual
Property Rights used or held for use by the Company or any Subsidiary with the
permission of the owner.
"List" has the meaning set forth in Section 4.21(a)(iv).
"Litigation" means any claim, action, arbitration, mediation, hearing,
proceeding, litigation or suit (whether civil, criminal, administrative or
investigative) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Entity or arbitrator or mediator.
"LLC SEC Reports" has the meaning set forth in Section 4.6(a).
"Losses" means any and all losses, damages, judgments, settlements, debts,
liabilities, penalties, fines, obligations, interest (including, without
limitation, prejudgment interest), costs, and expenses (including, without
limitation, court costs and reasonable attorneys' fees and expenses and costs of
investigation).
"Material Adverse Effect" means any change, effect, event or condition,
individually or in the aggregate, that has had, or, with the passage of time,
could have, a material adverse effect on the business, assets, properties,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole, other than any change, effect, event or
condition relating to (a) the economy or the financial markets in general, (b)
the industry in which the Company and its Subsidiaries operate in general, (c)
war, outbreak of hostilities or terrorist attacks, (d) the execution and
delivery of this Agreement, the announcement of this Agreement or the
transactions contemplated hereby, (e) changes in applicable Laws or regulations
after the date hereof or (f) changes in GAAP or regulatory accounting principles
after the date hereof, except, however, in the case of each of clauses (a) and
(b), to the extent that the Company is disproportionately affected thereby.
"Material Contracts" has the meaning set forth in Section 4.17(a).
"Material Shareholder" means, at any time, a shareholder of the Company
that owns at such time 10% or more of the then outstanding Common Shares
(including, for such calculation Common Shares for which any Stock Options
(whether or not vested) or Warrants are exercisable), calculated on a fully
diluted basis.
10
"Member of the Immediate Family" of a Person means a spouse, parent, child,
sibling, mother- or father-in-law, son- or daughter-in-law, and brother- or
sister-in-law of such Persons.
"Merger" has the meaning set forth in the Recitals and Section 2.1.
"Merger Consideration" has the meaning set forth in Section 3.1(b).
"Merger Sub" has the meaning set forth in the first paragraph of this
Agreement.
"Off-the-Shelf Software" means Software that is widely commercially
available for a price of less than $150,000.00 per year for any number of users
or less than a $1000.00 one time fee per seat, PC, CPU or user.
"Ordinary Course of Business" means the ordinary course of business of the
Company and the Subsidiaries consistent with past custom and practice
(including, if applicable, with respect to quantity and frequency).
"Organizational Documents" means (i) the articles or certificate of
incorporation and the bylaws of a corporation, (ii) the partnership agreement
and any statement of partnership of a general partnership, (iii) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership, (iv) the limited liability company agreement and articles or
certificate of formation of a limited liability company, (v) any charter or
similar document adopted or filed in connection with the creation, formation or
organization of a Person and (vi) any amendment to any of the foregoing.
"Other Indebtedness" means the amount equal to the sum (without any
double-counting) of the following obligations (whether or not then due and
payable), to the extent that they are of the Company or any Subsidiary or
guaranteed by the Company or any Subsidiary: (i) all outstanding indebtedness
for borrowed money owed to third parties or for the deferred purchase price of
property payment for which is deferred six (6) months or more, but excluding
obligations to trade creditors incurred in Ordinary Course of Business that are
unsecured and not overdue by more than six (6) months unless being contested in
good faith (the "Trade Obligations"); (ii) all reimbursement and other
obligations with respect to letters of credit (other than those listed in
Schedule 8.3 to the extent that replacement letters of credit therefor will be
obtained by Buyer), bankers' acceptances and surety bonds, whether or not
matured; (iii) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of seller or lender under such agreement in
the event of default are limited to repossession or sale of such property); (iv)
accrued interest payable with respect to indebtedness referred to in clauses (i)
and (ii); (v) all obligations evidenced by notes, bonds, debentures or other
similar instruments (whether or not convertible), (vi) all obligations under
indentures; and (vii) all obligations as lessee that would be capitalized in
accordance with GAAP. In addition, the Other Indebtedness shall include, without
duplication of other amounts set out above, all amounts owing (whether or not
then due and payable) by the Company or any of its Subsidiaries to any of the
Company's Material Stockholders or their Affiliates, including without
limitation, in respect of any management, advisory or other fees, or obligations
of any kind, other than pursuant to the provisions of this Agreement. Other
Indebtedness includes the Revolving Loan, letters of credit
11
and other obligations under the Credit Agreement. Other Indebtedness shall not
include the Indenture Indebtedness or any of the items set forth on Annex II
hereto.
"Out-of-the-Money Stock Options" means stock options meeting the definition
of "Stock Options" (except for the proviso in such definition) whose exercise
price per share immediately prior to the Effective Time exceeds the Per Share
Initial Merger Consideration, calculated on the assumption that the Common
Shares issuable on the exercise of such stock options were outstanding at that
time.
"Out-of-the-Money Warrants" means warrants meeting the definition of
"Warrants" (except for the proviso in such definition) whose exercise price per
share immediately prior to the Effective Time exceeds the Per Share Initial
Merger Consideration, calculated on the assumption that the Common Shares
issuable on the exercise of such warrants were outstanding at that time.
"Owned Intellectual Property Rights" means Intellectual Property Rights
owned by the Company or any Subsidiary.
"Owned Real Property" has the meaning set forth in Section 4.11(b).
"Payment Fund" means a separate account of the Representative established
for the benefit of the Equity Holders.
"Payoff Amount" has the meaning set forth in Section 6.4.
"Per Share Initial Merger Consideration" means the quotient of (i) the sum
of (A) the Initial Merger Consideration, plus (B) the Aggregate Stock Option
Exercise Price, plus (C) the Aggregate Warrant Exercise Price, divided by (ii)
the Aggregate Fully-Diluted Common Shares.
"Percentage Interest" means, with respect to any holder of Common Shares,
Stock Options and/or Warrants immediately prior to the Effective Time, a decimal
amount, expressed as a percentage, equal to the quotient of (i) the sum of the
number of Common Shares (A) owned of record by such holder and (B) into which
any Stock Options owned of record by such holder are exercisable, and (C) into
which any Warrants owned by such holder are exercisable, in each case,
immediately prior to the Effective Time; divided by (ii) the Aggregate
Fully-Diluted Common Shares immediately prior to the Effective Time.
"Permitted Encumbrances" means (i) Encumbrances for Taxes and other
governmental charges and assessments (except assessments for public improvements
levied, pending or deferred against the Owned Real Property) that are not yet
due and payable or which are being contested in good faith by appropriate
proceedings (provided required payments have been made in connection with any
such contest), (ii) Encumbrances of carriers, warehousemen, mechanics' and
materialmen and other like Encumbrances arising in the Ordinary Course of
Business (provided lien statements have not been filed as of the Closing Date),
(iii) easements, rights of way and restrictions, zoning ordinances and other
similar Encumbrances affecting the Real Property and which do not unreasonably
restrict the use thereof or Buyer's proposed use thereof in the Ordinary Course
of Business, (iv) statutory Encumbrances in favor of lessors arising in
connection with any property leased to the Company or any Subsidiary, (v)
Encumbrances
12
reflected in the Latest Financial Statements or arising under Material
Contracts, (vi) Encumbrances in favor of the Trustees and Collateral Agents
under the 11 1/2% TCI Indenture and the 13% Intermediate Indenture, which shall
be removed concurrently with the consummation of the Indenture Indebtedness
Satisfaction and Discharge, (vii) Encumbrances in favor of the Agent, L/C Issuer
and Lenders under the GECC Credit Agreement which shall be removed upon the
repayment in full of all obligations under the GECC Credit Agreement prior to or
concurrently with the consummation of the Merger, and (viii) other Encumbrances
that will be removed prior to or in connection with the Closing.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental
Entity or other entity.
"Plan" means every benefit and compensation plan, fund, contract, program
and arrangement (whether written or not) (other than those plans, funds,
contracts, programs and arrangements exclusively covering current or former
employees of the Company or its Subsidiaries located in jurisdictions outside of
the United States of America) for the benefit of present or former employees,
including those intended to provide (i) medical, surgical, health care,
hospitalization, dental, vision, workers' compensation, life insurance, death,
disability, legal services, severance, sickness or accident benefits (whether or
not defined in Section 3(1) of ERISA), (ii) pension, profit sharing, stock
bonus, retirement, supplemental retirement or deferred compensation benefits
(whether or not tax qualified and whether or not defined in Section 3(2) of
ERISA) or (iii) salary continuation, unemployment, supplemental unemployment,
severance, termination pay, change-in-control, vacation or holiday benefits
(whether or not defined in Section 3(3) of ERISA), (w) that is maintained or
contributed to by the Company or any Subsidiary, (x) that the Company or any
Subsidiary has committed to implement, establish, adopt or contribute to in the
future, (y) for which the Company or any Subsidiary is or may be financially
liable as a result of the direct sponsor's affiliation with the Company, its
Subsidiaries or the Company's shareholders (whether or not such affiliation
exists at the date of this Agreement and notwithstanding that the Plan is not
maintained by the Company or any Subsidiary for the benefit of its employees or
former employees) or (z) for or with respect to which the Company or any
Subsidiary is or may become liable under any common law successor doctrine,
express successor liability provisions of Law, provisions of a collective
bargaining agreement, labor or employment Law or agreement with a predecessor
employer. Plan does not include any arrangement that has been terminated and
completely wound up prior to the date of this Agreement and for which neither
the Company nor any Subsidiary has any present or potential liability.
"Pre-Closing Taxes" has the meaning set forth in Section 7.1(b)(ii).
"Property" has the meaning set forth in Section 4.21(a)(v).
"Purchase Price Adjustment Escrow Account" has the meaning set forth in
Section 3.2(b)(iv).
"Real Property" has the meaning set forth in Section 4.11(c).
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"Registered Intellectual Property Rights" means Intellectual Property
Rights that are the subject of an issued patent, trademark, copyright, design
right or other similar registration formalizing exclusive rights, or the subject
of a pending application for such a registration.
"Regulatory Action" has the meaning set forth in Section 4.21(a)(vi).
"Release" has the meaning set forth in Section 4.21(a)(vii).
"Release Documents" have the meaning set forth in Section 3.7(b)(i)(H).
"Remedies Exception," when used with respect to any Person, means except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
"Representative" has the meaning set forth in Section 12.1.
"Required Consents" has the meaning set forth in Section 6.9.
"Return" means any return, declaration, report, estimate, information
return and statement pertaining to any Taxes.
"Revolving Loan" means the revolving loans made available to TCI under the
Credit Agreement.
"ROHS Directive" means Directive 2002/95/EC on the restriction of the use
of certain hazardous substances in electrical and electronic equipment.
"SEC" means the United States Securities and Exchange Commission.
"SEC Reports" has the meaning set forth in Section 4.6(a).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Seller Expenses" has the meaning set forth in Section 12.2(a).
"Short Period" means any Tax Period that ends on the Closing Date.
"SOA" means the Xxxxxxxx-Xxxxx Act of 2002, and the rules and regulations
promulgated in connection therewith.
"Software" means computer programs or data, data base and data libraries in
computerized form, whether in object code, source code or other form.
"Specified Redemption Date" means:
For the 11 1/2% TCI Notes: a Redemption Date of the later of (i) 30
days following the Closing Date; (ii) October 15, 2006, or (iii) such date
as is designated by Buyer at least three Business Days prior to the Closing
Date; provided that such date designated by
14
Buyer is within one (1) year of the Closing Date pursuant to Section 8.02
of the 11 1/2% TCI Indenture; and
For the 13% Notes: a Redemption Date that is prior to the stated
maturity thereof and is the later of (i) 30 days following the Closing
Date; (ii) September 15, 2006, or (iii) such other date as is designated by
Buyer at least three Business Days prior to the Closing Date, but on or
after September 16, 2006 in the case of the 13% Intermediate Notes.
"Statement of Closing Date Capital Expenditure Amount" has the meaning set
forth in Section 3.5(b).
"Statement of Closing Date Cash Amount" has the meaning set forth in
Section 3.23.5(b).
"Statement of Closing Date Net Working Capital" has the meaning set forth
in Section 3.5(b).
"Statement of Closing Date Other Indebtedness" has the meaning set forth in
Section 3.5(b).
"Statement of Estimated Closing Date Capital Expenditure Amount" has the
meaning set forth in Section 3.2(a)(ii).
"Statement of Estimated Closing Date Cash Amount" has the meaning set forth
in Section 3.2(a)(ii).
"Statement of Estimated Closing Date Net Working Capital" has the meaning
set forth in Section 3.2(a)(ii).
"Statement of Estimated Closing Date Other Indebtedness" has the meaning
set forth in Section 3.2(a)(ii).
"Stock Options" means all outstanding options to purchase Common Shares,
whether vested or unvested, granted pursuant to the Company's 2004 Stock Option
Plan; provided that Out-of-the-Money Stock Options shall not be deemed to be
Stock Options except for the purpose of Section 4.4(b).
"Stock Option Account" has the meaning set forth in Section 3.2(b)(vii).
"Stock Option Consideration" has the meaning set forth in Section 3.3(a).
"Stockholder Written Consent" has the meaning set froth in the Recitals.
"Straddle Period" means any Tax Period which begins before the Closing Date
and ends after the Closing Date.
"Straddle Tax Returns" has the meaning set forth in Section 7.1(b)(ii).
"Subsequent Merger Consideration" has the meaning set forth in Section
3.1(b).
15
"Subsidiary" means any Person of which a majority of the outstanding voting
securities or other equity interests are owned, directly or indirectly, by
another Person. When used without reference to a particular entity, Subsidiary
means a Subsidiary of the Company.
"Superior Proposal" means any Acquisition Proposal by a third party on
terms which the Company's Board of Directors determines in its good faith
judgment, after consultation with its financial advisors, to be more favorable
from a financial point of view to its shareholders than the Merger and the
Transactions, after taking into account the likelihood of consummation of such
transaction on the terms set forth therein, taking into account all legal,
financial (including the financing terms of any such proposal), regulatory and
other aspects of such proposal, the likelihood of consummation of any such
proposal and any other relevant material factors permitted under applicable Law,
after giving Buyer at least four (4) Business Days to respond to such
third-party Acquisition Proposal once the Board of Directors of the Company has
notified Buyer that in the absence of any further action by Buyer it would
consider such Acquisition Proposal to be a Superior Proposal, and then taking
into account any amendment or modification to this Agreement proposed by Buyer.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Target Closing Date Capital Expenditure Amount" means three million
dollars ($3,000,000).
"Target NWC Amount" means seventy-three million two hundred thousand
dollars ($73,200,000).
"Tax Affiliate" shall mean, with respect to the Company, any corporation or
other entity in which the Company has a direct or indirect equity or other
ownership interest that represents more than fifty percent (50%) of the
aggregate equity or other ownership interests in such entity (measured by value
or by voting power).
"Tax Benefit" means a reduction in the amount of Taxes that would otherwise
be payable, whether resulting from a deduction, reduced gain or increased loss,
including an increased net operating loss carryforward, or otherwise.
"Tax Period" means any taxable year or any other period that is treated as
a taxable year (or other period, in the case of a Tax imposed with respect to
such other period; e.g., a quarter) (including any Short Period or Interim
Period) with respect to which any Tax may be imposed under any applicable Laws.
"Taxes" means all taxes, charges, fees, levies or other assessments,
including all net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment, social
security, unemployment, excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, including all interest and penalties thereon, and additions to
tax or additional amounts imposed by any Governmental Entity upon the Company or
any Tax Affiliate.
"TCI" has the meaning set forth in the Recitals.
16
"TCI Latest Balance Sheet" has the meaning set forth in Section 4.6(e).
"TCI Latest Financial Statements" has the meaning set forth in Section
4.6(e).
"TCI Prior Period Financial Statements" has the meaning set forth in
Section 4.6(e).
"TCI SEC Reports" has the meaning set forth in Section 4.6(a).
"Third-Party" means a Person other than a party to this Agreement.
"Third-Party Claim" has the meaning set forth in Section 11.5(a).
"Third-Party Environmental Claim" has the meaning set forth in Section
4.21(a)(viii).
"Third-Party Intellectual Property Rights" means Intellectual Property
Rights in which a Person other than the Company or a Subsidiary has any
ownership interest.
"Trade Obligations" has the meaning set forth in the definition of the
Other Indebtedness.
"Transactions" means the Indenture Indebtedness Satisfaction and Discharge,
the repayment of Other Indebtedness and the other transactions contemplated by
this Agreement and the Ancillary Agreements.
"Treasury Regulations" means the rules and regulations under the Code.
"WARN Act" means the Worker Adjustment and Retraining Notification Act, or
any comparable Law.
"Warrant" means any warrant to purchase Common Shares outstanding
immediately prior to the Effective Time; provided that Out-of-the-Money Warrants
shall not be deemed to be Warrants except for the purpose of Section 4.4(b).
"Warrant Account" has the meaning set forth in Section 3.2(b)(viii).
"Warrant Consideration" has the meaning set forth in Section 3.3(b).
II. THE MERGER
2.1 The Merger. On the terms and subject to the conditions set forth in
this Agreement, on the Closing Date, Merger Sub will be merged (the "Merger")
with and into the Company, the separate existence of Merger Sub will cease, and
the Company will continue as the surviving corporation under the corporate name
"Telex Communications Holdings, Inc." The Company, in its capacity as the
corporation surviving the Merger, is sometimes referred to as the "Surviving
Corporation."
2.2 Effective Time. Subject to the provisions of this Agreement, on the
Closing Date, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware, and make all other filings or recordings
required by the DGCL to be made in connection with the Merger. The
17
Merger shall become effective upon the filing of the Certificate of Merger or,
if agreed by Buyer and the Company, at such later time as is specified in the
Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
2.3 Effects of the Merger. (a) From and after the Effective Time, the
Merger shall have the effects set forth in Section 259 of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, (i) the Surviving Corporation shall possess all assets and properties, and
every interest therein, of the Company and Merger Sub, (ii) all rights,
privileges, immunities, powers, franchises and authority of the Company and
Merger Sub shall vest in the Surviving Corporation, and (iii) all obligations,
debts, liabilities and duties of the Company and Merger Sub shall become the
obligations, debts, liabilities and duties of the Surviving Corporation.
(b) Buyer, Merger Sub and the Company, respectively, will each take all
such action as may be necessary or appropriate to effectuate the Merger under
the DGCL. If, at any time after the Closing Date, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all
properties, rights, privileges, immunities, powers and franchises of either of
the constituent corporations, the officers of the Surviving Corporation are
authorized in the name of each constituent corporation or otherwise to take all
such lawful and necessary action.
2.4 Directors; Officers; Certificate of Incorporation; Bylaws.
(a) The directors of Merger Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation from and after the Effective
Time until their successors have been duly elected and qualified, or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's certificate of incorporation and bylaws.
(b) Prior to the Effective Time, Buyer shall inform the Company in writing
of the individuals who shall be the officers of the Surviving Corporation from
and after the Effective Time and the offices which each such officer shall hold.
Such officers shall hold such offices until their successors have been duly
appointed and qualified, or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's certificate of incorporation and
bylaws.
(c) At the Effective Time, the certificate of incorporation of the Company,
as in effect immediately prior to the Effective Time, shall be amended and
restated to read in its entirety in the form annexed to the Certificate of
Merger, until thereafter changed or amended as provided therein or by the DGCL.
(d) At the Effective Time, the bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be amended and restated to read
in the same form as the bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, until thereafter changed or amended as provided by the DGCL,
the Surviving Corporation's certificate of incorporation and such bylaws.
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III. EFFECT OF THE MERGER ON THE SHARES AND OTHER SECURITIES OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES; MERGER
CONSIDERATION; CLOSING
3.1 Effect on Capital Stock. Subject to the provisions of this Article III,
at the Effective Time, by virtue of the Merger and without any action on the
part of the Company or any shareholder of the Company or Merger Sub:
(a) Capital Stock of Merger Sub. Each share of Common Stock of Merger Sub
outstanding immediately prior to the Effective Time shall be converted into and
become one (1) fully paid and nonassessable share of Common Stock, par value
$0.01 per share, of the Surviving Corporation.
(b) Conversion of Common Shares. Each holder of Common Shares shall be
entitled to receive (i) a portion of the Initial Merger Consideration promptly
after the Effective Time in cash equal to (A) the Per Share Initial Merger
Consideration, multiplied by (B) the number of Common Shares held by such holder
immediately prior to the Effective Time (but not including any Common Shares
issuable upon the exercise of any Stock Options or Warrants held by such holder
immediately prior to the Effective Time); and (ii) from time to time after the
Effective Time, as and when such amounts, if any, become payable to holders of
Common Shares pursuant to this Agreement, such further amounts distributed out
of the Payment Fund by the Representative in respect of the Common Shares, which
shall be calculated pro rata based on the Percentage Interest represented by
such Common Shares (the aggregate amount thereof together with further amounts
so distributed in respect of the Stock Options and Warrants being the
"Subsequent Merger Consideration" and collectively with the Initial Merger
Consideration, the "Merger Consideration").
3.2 Payment for Common Shares, Stock Options and Warrants.
(a) Certain Calculations.
(i) For the purpose of determining the amount required to be deposited
pursuant to Section 3.2(b)(i) in the Payment Fund, the Representative shall
calculate the Stock Option Consideration and the Warrant Consideration, if
any, and the respective amounts payable to each holder of outstanding Stock
Options or Warrants, as applicable, pursuant to Sections 3.3(a) and 3.3(b),
respectively, and the Representative shall provide, no later than four (4)
Business Days prior to the Closing Date and after providing Buyer with an
opportunity for review and discussion, written notice to Buyer prior to the
Closing of the Stock Option Consideration and the Warrant Consideration, if
any, and the amount required to be deposited in the Payment Fund pursuant
to Section 3.2(b)(i).
(ii) No later than four (4) Business Days prior to the Closing Date,
and after providing Buyer with an opportunity for review and discussion,
the Company shall deliver to Buyer and Merger Sub (1) a statement of
estimated Closing Date Net Working Capital (the "Statement of Estimated
Closing Date Net Working Capital") determined on a basis consistent with
the methodology to be employed in the calculation of the Closing Date Net
Working Capital pursuant to Section 3.5 below (such estimate, the
"Estimated Closing Date Net Working Capital"), (2) a statement (the
"Statement of Estimated
19
Closing Date Cash Amount") of a good faith estimate of the Closing Date
Cash Amount (such estimate, the "Estimated Closing Date Cash Amount"), (3)
a statement (the "Statement of Estimated Closing Date Other Indebtedness")
of a good faith estimate of the Closing Date Other Indebtedness (such
estimate, the "Estimated Closing Date Other Indebtedness"), and (4) a
statement (the "Statement of Estimated Closing Date Capital Expenditure
Amount") of a good faith estimate of the Closing Date Capital Expenditure
Amount (such estimate, the "Estimated Closing Date Capital Expenditure
Amount"). The amounts to be reflected on such statements shall be
calculated as of the final Business Day of the month in which the Closing
is to occur, unless the Closing is to occur during the first five (5)
Business Days of a month, in which event such statements shall be as of the
final Business Day of the preceding month.
(b) Closing Payments. At the Closing, the following deposits and payments
shall be made:
(i) Buyer or Merger Sub shall deposit or shall cause to be deposited
in the Payment Fund, by wire transfer of immediately available funds, an
amount equal to the Closing Date Net Stockholder Payment.
(ii) Buyer or Merger Sub shall pay, or cause to be paid, by wire
transfer of immediately available funds, to each of the lenders of the
Other Indebtedness the Payoff Amount.
(iii) Buyer or Merger Sub shall pay, or cause the Company,
Intermediate LLC and TCI, as the case may be, to pay, by wire transfer of
immediately available funds, to each Applicable Trustee such amount, as
confirmed by such Applicable Trustee, necessary to satisfy and discharge
the Indenture Indebtedness under such Indenture pursuant to the provisions
of the relevant Indenture (collectively for all such Indentures, the
"Indenture Satisfaction and Discharge Amount").
(iv) Buyer or Merger Sub shall deposit, or cause to be deposited with
the Escrow Agent, pursuant to an escrow agreement to be executed at the
Closing, substantially in the form annexed hereto as Exhibit C (the "Escrow
Agreement"), the following amounts: (A) ten million dollars ($10,000,000)
(such amount, as it may be adjusted in accordance with this Agreement and
the Escrow Agreement, the "Indemnity Escrow Amount"), which shall be
deposited in a separate interest-bearing escrow account established under
the Escrow Agreement for the purpose of making funds available to satisfy
claims for Losses with respect to which either or both of Buyer and the
Surviving Corporation is entitled to indemnification under Article XI (the
"Indemnity Escrow Account"); and (B) five million dollars ($5,000,000) (the
"Purchase Price Adjustment Escrow Amount"), which shall be deposited in a
separate interest-bearing escrow account established under the Escrow
Agreement for the purpose of making funds available to satisfy any
reduction in the Subsequent Merger Consideration as a result of any
adjustment thereto pursuant to the provisions of Section 3.5(e) (the
"Purchase Price Adjustment Escrow Account").
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(v) Buyer or Merger Sub shall deposit, or cause to be deposited with
the Escrow Agent, pursuant to an escrow agreement to be executed at the
Closing, substantially in the form annexed hereto as Exhibit D (the
"Environmental Escrow Agreement"), five million dollars ($5,000,000) (such
amount, as it may be adjusted in accordance with this Agreement and the
Environmental Escrow Agreement, the "Environmental Escrow Amount"), which
shall be deposited in a separate interest-bearing escrow account
established under the Escrow Agreement for the purpose of making funds
available to satisfy the costs and expenses of the Environmental Work (the
"Environmental Escrow Account").
(vi) Buyer or Merger Sub shall deposit, or cause to be deposited, an
amount equal to $500,000 as the Seller Expenses into a separate account to
be designated by the Representative (the "Expense Account").
(vii) Buyer or Merger Sub shall deposit, or cause to be deposited, an
amount equal to the Stock Option Consideration into a separate account of
the Company to be established by the Company for the benefit of the holders
of all Stock Options (the "Stock Option Account") for the purpose of
distributing such funds to the holders of all Stock Options pursuant to
Section 3.3(a).
(viii) Buyer or Merger Sub shall deposit, or cause to be deposited, an
amount equal to the Warrant Consideration, if any, into a separate account
of the Company to be established by the Company for the benefit of the
holders of each unexpired Warrant reflected on Schedule 4.4(b) (the
"Warrant Account") for the purpose of distributing such funds to the
holders of Warrants pursuant to Section 3.3(b); provided, however, that no
such deposit or distribution shall occur if prior to the Effective Time all
such Warrants have been converted in their entirety into Common Shares.
(ix) If the Representative so instructs Buyer in writing prior to the
Closing, Buyer or Merger Sub shall deposit, or cause to be deposited, an
amount equal to the Closing Transaction Expenses into an account of the
Company, and the Company shall pay all Closing Transaction Expenses at the
Closing to the recipients thereof as directed by the Representative.
(c) Surrender of Certificates. The Representative shall pay an amount equal
to the Per Share Initial Merger Consideration out of the Payment Fund for each
Common Share that is surrendered in accordance with this Section 3.2(c).
Promptly after the Effective Time, subject to Section 3.6, upon surrender of a
Certificate or Certificates (or affidavit of lost Certificate in form and
substance reasonably satisfactory to the Representative and the Surviving
Corporation) representing Common Shares owned by such stockholder to the
Representative or to such other agent or agents as may be appointed by the
Representative, together with a duly executed letter of transmittal in a form
reasonably acceptable to counsel for the Representative and Buyer, the holder of
such Certificate or Certificates shall be entitled to receive in exchange
therefor an amount in cash, without any interest thereon, equal to the product
of the Per Share Initial Merger Consideration multiplied by the number of Common
Shares represented by such Certificate or Certificates. From time to time after
the Effective Time, as and when any amount of Subsequent Merger Consideration is
distributed out of the Payment Fund by the Representative to the Equity
21
Holders pursuant to this Agreement, any holder of Common Shares that has
surrendered Certificates representing Common Shares to the Representative (or to
any agent appointed by the Representative) shall have the right to receive its
Percentage Interest of the Subsequent Merger Consideration that is distributed
out of the Payment Fund by the Representative to the Equity Holders in respect
of all Certificates representing Common Shares so surrendered by such holder
relative to the aggregate amount of the entire Subsequent Merger Consideration
so distributed. Such right to receive Subsequent Merger Consideration shall not
be transferable except by will or the laws of descent and distribution.
(d) Unregistered Transfers of Capital Stock. In the event of a transfer of
ownership of Common Shares which are not registered in the transfer records of
the Company as of the Effective Time, the appropriate portion of the Merger
Consideration, may be paid by the Representative to a transferee if the
Certificate or Certificates representing such Common Shares are presented to the
Surviving Corporation, accompanied by all documents reasonably required by the
Surviving Corporation, including, without limitation, (i) documents to evidence
and effect such transfer and to evidence that any applicable stock transfer
taxes have been paid and (ii) representations or warranties by the transferee to
the Surviving Corporation with respect to the ownership of such capital stock,
in form reasonably acceptable to the Surviving Corporation.
(e) No Further Ownership Rights in Company. At and after the Effective
Time, each holder of Common Shares of the Company immediately prior to the
Effective Time shall cease to have any rights as a stockholder of the Company,
except for the right to surrender such stockholder's Certificates in exchange
for its portion of the Initial Merger Consideration as set forth herein and the
right to receive its Percentage Interest of the Subsequent Merger Consideration
that is distributed out of the Payment Fund by the Representative to the Equity
Holders, and after the Effective Time no transfer of Common Shares of the
Company shall be made on the stock transfer books of the Company. Any
Certificates presented after the Effective Time for transfer shall be cancelled
and exchanged for the holder's portion of the Merger Consideration in accordance
with Section 3.2(c) above.
(f) Tax Withholding. Each of the Surviving Corporation and the Company
shall be entitled to deduct and withhold from all amounts payable into the
Payment Fund pursuant to this Agreement such amounts as are required to be
deducted and withheld with respect to the making of payment of such amounts
under the Code, or any other provision of state, local or foreign Tax law. To
the extent that amounts are so withheld by the Surviving Corporation or the
Company, it shall so advise the Representative in writing indicating the Person
in respect of which such deduction is being made and the amount withheld, and
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid into the Payment Fund. The Representative shall have the right
to deduct such withheld amounts from any payment contemplated to be made under
Section 3.2(c) to such Person in respect of which such amount was deducted and
withheld by the Company or the Surviving Corporation pursuant to this Section
3.2(f).
3.3 Company Stock Options; Company Warrants.
(a) At the Effective Time, each then outstanding Stock Option that is not
exercised prior to the Closing shall terminate and the holder thereof will have
the right to receive in
22
exchange therefor an amount in cash equal to the difference between (x) the Per
Share Initial Merger Consideration, multiplied by the aggregate number of Common
Shares issuable upon exercise in full of all Stock Options (whether or not then
vested) held by such holder immediately prior to the Effective Time, minus (y)
the aggregate cash exercise price payable upon exercise of all such Stock
Options, net of applicable withholding Taxes. The aggregate amount payable to
the holders of all outstanding Stock Options pursuant to this Section 3.3(a),
before giving effect to any applicable deductions or withholdings for Taxes, is
referred to herein as the "Stock Option Consideration." Promptly after the
Closing, the Surviving Corporation shall pay or cause to be paid to the holders
of all Stock Options all amounts due under this Section 3.3(a) without interest
thereon out of the funds deposited by Buyer or Merger Sub into the Stock Option
Account pursuant to Section 3.2(b)(vii). Additionally, from time to time after
the Effective Time, as and when any amounts of Subsequent Merger Consideration
shall become payable pursuant to this Agreement, holders of Stock Options
outstanding immediately prior to the Effective Time shall be entitled to receive
a pro rata portion of such Subsequent Merger Consideration based on the
Percentage Interest represented by such Stock Options.
(b) At the Effective Time, each unexpired Warrant that is not exercised
prior to the Closing shall terminate and the holder thereof will have the right
to receive in exchange therefor an amount in cash equal to the difference
between (x) the Per Share Initial Merger Consideration, multiplied by the
aggregate number of Common Shares issuable upon exercise in full of all Warrants
held by such holder immediately prior to the Effective Time, minus (y) the
aggregate cash exercise price payable upon exercise of all such Warrants, net of
applicable withholding Taxes. The aggregate amount payable to the holders of all
outstanding Warrants pursuant to this Section 3.3(b), before giving effect to
any applicable deductions or withholdings for Taxes, is referred to herein as
the "Warrant Consideration." Promptly after the Closing, the Surviving
Corporation shall pay or cause to be paid to the holders of all Warrants all
amounts due under this Section 3.3(b) without interest thereon out of the funds
deposited by Buyer or Merger Sub into the Warrant Account pursuant to Section
3.2(b)(viii). Additionally, from time to time after the Effective Time, as and
when any amounts of Subsequent Merger Consideration shall become payable
pursuant to this Agreement, holders of Warrants outstanding immediately prior to
the Effective Time shall be entitled to receive a pro rata portion of such
Subsequent Merger Consideration based on the Percentage Interest represented by
such Warrants.
(c) To the extent there are any changes to Schedule 4.4(b) in order to
reflect the exercise of Stock Options or Warrants prior to the Closing, the
Company shall provide an updated Schedule 4.4(b) to Buyer, Merger Sub and the
Representative at the Closing, and the Surviving Corporation shall be entitled
to rely on such schedule in making payments under Sections 3.3(a) and 3.3(b)
above.
(d) The Surviving Corporation shall be entitled to deduct and withhold from
all amounts payable pursuant to this Agreement to any holder of Stock Options or
Warrants such amounts as are required to be deducted and withheld with respect
to the making of payment of such amounts under the Code, or any provision of
state, local or foreign Tax law. To the extent that amounts are so withheld by
the Surviving Corporation, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Stock Option
or Warrants, as applicable, in respect of which such deduction and withholding
was made by the Surviving Corporation.
23
(e) Effective as of the Effective Time, the Company shall terminate all
stock option plans granting rights in the Company's capital stock.
3.4 Indemnity Escrow Amount.
(a) The Indemnity Escrow Amount shall be held by the Escrow Agent in order
to provide funds for the payment of claims with respect to which any Buyer
Indemnified Party is entitled to indemnification pursuant to Article XI. Buyer
will have a right to make claims against the Indemnity Escrow Account in
accordance with Article XI on behalf of any Buyer Indemnified Party for any and
all amounts of Losses with respect to which such Buyer Indemnified Party is
entitled to indemnification under Article XI. Any interest earned on the
Indemnity Escrow Amount shall be deposited by the Escrow Agent into the
Indemnity Escrow Account, but shall not constitute part of the Indemnity Escrow
Amount. The amount of interest, reduced by any Taxes (as referred to in the next
sentence), brokerage fees and other expenses or losses incurred in connection
with the investment of the Indemnity Escrow Amount, shall be paid to the Buyer
and the Representative in proportion to the respective payments to them of the
Indemnity Escrow Amount. The parties acknowledge that Buyer shall be treated as
the owner of the Indemnity Escrow Account and shall be responsible for any Taxes
attributable to income earned in respect of the Indemnity Escrow Amount until
such Indemnity Escrow Amount is disbursed in accordance with the terms of the
Escrow Agreement (with the Buyer being entitled to reimbursement out of such
interest for any such Taxes paid).
(b) The Escrow Agreement shall provide for releases from the Indemnity
Escrow Account as follows: (i) $2,000,000 on the first anniversary of the
Closing Date, and (ii) $2,000,000 on the second anniversary of the Closing Date,
in each case to the extent that unresolved claims do not exceed the Indemnity
Escrow Amount.
(c) Subject to the provisions of the Escrow Agreement, on the next Business
Day after the Indemnity Cut-Off Date, Buyer and the Representative shall
instruct the Escrow Agent to release from the Indemnity Escrow Account and
deposit into the Payment Fund the remaining balance of funds in the Indemnity
Escrow Account; provided, however, that if, at 5:00 p.m. (New York City time) on
the Business Day immediately preceding the Indemnity Cut-Off Date, any portion
of the Indemnity Escrow Account is subject to one or more pending
indemnification claims that have been timely asserted in accordance with Article
XI and have not been paid in full or otherwise finally settled or adjudicated,
or are subject to appeal or further proceedings, then an amount equal to such
portion of the Indemnity Escrow Amount attributable to such claims (including
accrued interest earned on each such amount in the Indemnity Escrow Account from
the date on which each such claim was made to the Indemnity Cut-Off Date) shall
be retained in the Indemnity Escrow Account until such claims are paid in full
or otherwise finally settled or adjudicated and no longer subject to appeal or
further proceedings. Subject to the right of the Representative to retain funds
to cover the Seller Expenses, the Representative shall distribute to the Equity
Holders all funds released from the Indemnity Escrow Account pursuant to this
Section 3.4 in accordance with their respective Percentage Interests; provided,
however, that the Representative shall pay to the Surviving Corporation all
amounts required pursuant to this Section 3.4 to be distributed from the Payment
Fund to the holders of Stock Options and Warrants, and the Surviving Corporation
shall distribute such amounts, net of applicable
24
withholding Taxes, to such holders in accordance with their respective
Percentage Interests therein in accordance with the Representative's
instructions.
3.5 Adjustment to the Merger Consideration.
(a) The Purchase Price Adjustment Escrow Amount shall be held by the Escrow
Agent until the final determination of the Closing Date Net Working Capital,
Closing Date Cash Amount, Closing Date Other Indebtedness and Closing Date
Capital Expenditure Amount in accordance with this Section 3.5 in order to
provide funds for the payment of all amounts (if any) required to be paid to
Buyer pursuant to this Section 3.5 as a result of a difference between the
Closing Date Net Working Capital, Closing Date Cash Amount, Closing Date Other
Indebtedness and Closing Date Capital Expenditure Amount, each as finally
determined pursuant to this Section 3.5, and the respective corresponding
amounts estimated pursuant to Section 3.2(a)(ii). Any interest earned on the
Purchase Price Adjustment Escrow Amount shall be deposited by the Escrow Agent
into the Purchase Price Adjustment Escrow Account, but shall not constitute part
of the Purchase Price Adjustment Escrow Amount. The amount of interest, reduced
by any Taxes (as referred to in the next sentence), brokerage fees and other
expenses or losses incurred in connection with the investment of the Purchase
Price Adjustment, shall be paid to the Buyer and the Representative in
proportion to the respective payments to them of the Purchase Price Adjustment
Escrow Amount. The parties acknowledge that Buyer shall be treated as the owner
of the Purchase Price Adjustment Escrow Account and shall be responsible for any
Taxes attributable to income earned in respect of the Purchase Price Adjustment
Escrow Amount until such Purchase Price Adjustment Escrow Amount is disbursed in
accordance with the terms of the Escrow Agreement (with the Buyer being entitled
to reimbursement out of such interest for any such Taxes paid). Upon final
determination of each of the Closing Date Net Working Capital, the Closing Date
Cash Amount, the Closing Date Other Indebtedness and the Closing Date Capital
Expenditure Amount, and the payment of all amounts (if any) required to be paid
to Buyer pursuant to this Section 3.5, Buyer and the Representative shall
instruct the Escrow Agent to release from the Purchase Price Adjustment Escrow
Account and deposit into the Payment Fund the balance of funds remaining in the
Purchase Price Adjustment Escrow Account, if any, and (subject to the right of
the Representative to retain funds to cover Seller Expenses) the Representative
shall distribute such funds to the Equity Holders in accordance with their
respective Percentage Interests.
(b) Within sixty (60) days after the Closing Date, Buyer shall prepare and
deliver to the Representative (i) an unaudited consolidated balance sheet of the
Company and the Subsidiaries as of the close of business on the Closing Date
(but without giving effect to the Closing) (the "Closing Balance Sheet"), (ii)
an unaudited statement of the Closing Date Net Working Capital (the "Statement
of Closing Date Net Working Capital"), (iii) an unaudited statement of the
Closing Date Cash Amount (the "Statement of Closing Date Cash Amount"), (iv) an
unaudited statement of the Closing Date Other Indebtedness (the "Statement of
Closing Date Other Indebtedness") and (v) an unaudited statement of the Closing
Date Capital Expenditure Amount (the "Statement of Closing Date Capital
Expenditures") (altogether, the "Closing Statements"). The Closing Statements
shall be prepared based upon the books and records of the Company and its
Subsidiaries. The Closing Balance Sheet and the Closing Statements shall be
prepared in accordance with GAAP, applied on a basis consistent with that of the
Audited Financial Statements (except to the extent that the definitions of
Closing Date Net
25
Working Capital, Closing Date Cash Amount, Closing Date Other Indebtedness and
Closing Date Capital Expenditure Amount specifically provide otherwise); without
limitation of the foregoing, the Closing Statements shall be prepared using the
same accounting methods, policies, practices and procedures, with consistent
classifications, judgments and estimation methodologies as were used in the
preparation of the Audited Financial Statements, to the extent they are, in each
case, consistent with GAAP.
(c) Following the delivery to the Representative of the Closing Statements,
Buyer shall cause the Surviving Corporation to provide the Representative and
its representatives with reasonable access during normal business hours and upon
reasonable notice to books and records and relevant personnel to verify the
accuracy of the Closing Statements referred to in paragraph (b) above and
attempt to resolve any disputes that may arise under this Section 3.5.
(d) The Closing Statements shall be final and binding on the parties unless
the Representative shall, within forty-five (45) days following the delivery of
the Closing Statements deliver to Buyer written notice of disagreement, which
notice shall describe the nature of any such disagreement in reasonable detail,
identify the specific items involved and the dollar amount of each such
disagreement. After the end of the forty-five (45) day period following the
delivery of the Closing Statements, neither Buyer nor the Representative may
introduce additional disagreements with respect to any item in the Closing
Statements, except to the extent they arise out of or are related to then
pending disagreements. If the Representative shall raise any objections within
the aforesaid forty-five (45) day period, then the disputed matters shall be
resolved by the Representative, on behalf of the Equity Holders, and Buyer. If
the Representative and Buyer are unable to resolve all disagreements within
thirty (30) days, or such longer period as may be agreed by Buyer and the
Representative, then, within thirty (30) days thereafter, the Representative and
Buyer jointly shall select an arbiter from KPMG or such other accounting firm of
national standing as may be agreed by the parties. If Buyer and the
Representative are unable to select an arbiter within such time period, the
American Arbitration Association shall make such selection (the person so
selected shall be referred to herein as the "Accounting Arbitrator"). The
Accounting Arbitrator so selected will consider only those items and amounts set
forth in the Closing Statements as to which Buyer and the Representative have
disagreed within the time periods and on the terms specified above (except as
provided above) and must resolve the matter in accordance with the terms and
provisions of this Agreement. The Accounting Arbitrator shall issue a report
that sets forth the resolution of all items in dispute and that contains a final
Closing Balance Sheet and/or a final Statement of Closing Date Net Working
Capital and/or final Statement of Closing Date Cash Amount and/or a final
Statement of Closing Date Other Indebtedness and/or a final Statement of Closing
Date Capital Expenditures, as applicable. Such report shall be final and binding
upon Buyer and the Representative. The fees and expenses hereunder of the
Accounting Arbitrator shall be paid one-half by Buyer and, as Seller Expenses,
one-half by the Representative, on behalf of the Equity Holders. Buyer and the
Representative shall, and Buyer shall cause the Surviving Corporation to,
cooperate fully with the Accounting Arbitrator and respond on a timely basis to
all requests for information or access to documents or personnel made by the
Accounting Arbitrator or by other parties hereto, all with the intent to fairly
resolve all disputes relating to the Closing Balance Sheet and/or the Statement
of Closing Date Net Working Capital and/or Statement of Closing Date Cash Amount
and/or Statement of the Closing Date Other Indebtedness and/or
26
Statement of the Closing Date Capital Expenditures, as applicable, as promptly
as reasonably practicable.
(e) (i) If the Closing Date Net Working Capital as reflected in the
Statement of Closing Date Net Working Capital as finally determined in
accordance with this Section 3.5 is less than the Estimated Closing Date Net
Working Capital, the payments of Subsequent Merger Consideration shall be
decreased by an amount equal to the amount of such shortfall, and if the Closing
Date Net Working Capital as reflected in the Statement of Closing Date Net
Working Capital is greater than the Estimated Closing Date Net Working Capital,
the payments of Subsequent Merger Consideration shall be increased by an amount
equal to the amount of such excess.
(ii) If the Closing Date Cash Amount as reflected in the Statement of
Closing Date Cash Amount as finally determined in accordance with this Section
3.5 is less than the Estimated Closing Date Cash Amount, the payments of
Subsequent Merger Consideration shall be decreased by an amount equal to the
amount of such shortfall, and if the Closing Date Cash Amount as reflected in
the Statement of Closing Date Cash Amount as finally determined in accordance
with this Section 3.5 is greater than the Estimated Closing Date Cash Amount,
the payments of Subsequent Merger Consideration shall be increased by an amount
equal to the amount of such excess.
(iii) If the Closing Date Other Indebtedness as reflected in the
Statement of Closing Date Other Indebtedness as finally determined in accordance
with this Section 3.5 is less than the Estimated Closing Date Other
Indebtedness, the payments of Subsequent Merger Consideration shall be increased
by an amount equal to the amount of such difference, and if the Closing Date
Other Indebtedness as reflected in the Statement of Closing Date Other
Indebtedness as finally determined in accordance with this Section 3.5 is
greater than the Estimated Closing Date Other Indebtedness, the payments of
Subsequent Merger Consideration shall be decreased by an amount equal to the
amount of such excess.
(iv) If the Closing Date Capital Expenditure Amount as reflected in
the Statement of the Closing Date Capital Expenditures as finally determined in
accordance with this Section 3.5 is less than the Estimated Closing Date Capital
Expenditure Amount, the payments of Subsequent Merger Consideration shall be
decreased by an amount equal to the amount of such shortfall, and if the Closing
Date Capital Expenditure Amount as reflected in the Statement of the Closing
Date Capital Expenditures as finally determined in accordance with this Section
3.5 is greater than the Estimated Closing Date Capital Expenditure Amount, the
payments of Subsequent Merger Consideration shall be increased by an amount
equal to the amount of such excess.
(f) If the aggregate adjustments under paragraph (e) of this Section 3.5
result in a reduction in the payments of Subsequent Merger Consideration, the
Representative and Buyer shall instruct the Escrow Agent to pay to Buyer (by
wire transfer to an account designated in writing by Buyer) from the funds held
in the Purchase Price Adjustment Escrow Account the amount of such reduction
plus accrued interest earned on such amount in the Purchase Price Adjustment
Escrow Account from the Closing Date to the payment date within five (5)
Business Days after the final determination of Closing Date Net Working Capital,
Closing Date Cash
27
Amount, Closing Date Other Indebtedness and Closing Date Capital Expenditure
Amount. Conversely, if the aggregate of such adjustments result in an increase
in the payments of Subsequent Merger Consideration, then within five (5)
Business Days after the final determination of Closing Date Net Working Capital,
Closing Date Cash Amount, Closing Date Other Indebtedness and Closing Date
Capital Expenditure Amount, Buyer shall deposit or shall cause to be deposited
into the Payment Fund the amount of such increase plus accrued interest that
would have been earned on such amount had such amount been deposited in the
Purchase Price Adjustment Escrow Account from the Closing Date to the payment
date.
(g) To the extent that any funds remain in the Purchase Price Adjustment
Escrow Account after all payments, if any, required to be made to Buyer pursuant
to Section 3.5(f) above are made, the parties shall instruct the Escrow Agent to
pay into the Payment Fund the balance of funds remaining in the Purchase Price
Adjustment Escrow Account. Notwithstanding any other provision of this Agreement
to the contrary, in the event that the net aggregate amount of the adjustments
in Closing Date Net Working Capital, Closing Date Cash Amount, Closing Date
Other Indebtedness and Closing Date Capital Expenditure Amount exceeds the
Purchase Price Adjustment Escrow Amount, the remaining balance of such net
aggregate amount (plus accrued interest that would have been earned on such
amount had such amount been deposited in the Purchase Price Adjustment Escrow
Account from the Closing Date to the payment date) shall be paid to Buyer out of
the Indemnity Escrow Account.
(h) Judgment upon the award rendered by the accounting firm may be entered
in any court of competent jurisdiction.
(i) Notwithstanding the foregoing provisions of this Section 3.5, the
Representative shall pay to the Surviving Corporation all amounts required
pursuant to this Section 3.5 to be distributed from the Payment Fund to the
holders of Stock Options and the holders of Warrants, and the Surviving
Corporation shall distribute such amounts, net of applicable withholding Taxes,
to such holders in accordance with their respective Percentage Interests in
accordance with the Representative's instructions.
3.6 Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, if Section
262 of the DGCL is applicable to the Merger, Common Shares that are issued and
outstanding immediately prior to the Closing Date and which are held by
stockholders who have not voted such shares in favor of the Merger, who will
have delivered, prior to any vote on the Merger, a written demand for the
appraisal of such Common Shares in the manner provided in Section 262 of the
DGCL and who, as of the Closing Date, will not have effectively withdrawn or
lost such right to dissenters' rights ("Dissenting Shares") will not be
converted into or represent a right to receive any portion of the Merger
Consideration. The holders thereof will be entitled only to such rights as are
granted by Section 262 of the DGCL. Each holder of Dissenting Shares who becomes
entitled to payment for such shares pursuant to Section 262 of the DGCL shall be
entitled to receive payment of the appraised value of such Common Shares held by
them in accordance with the provisions of such Section 262 of the DGCL;
provided, however, that if any such holder of Dissenting Shares will have
effectively withdrawn such holder's demand for appraisal of such shares or lost
such holder's right to appraisal and payment of such shares under Section 262 of
28
the DGCL, such holder will forfeit the right to appraisal of such shares and
each such Common Share will thereupon be deemed to have been canceled,
extinguished and converted, as of the Effective Time, into and represent the
right to receive the portion of the Merger Consideration to which such holder
shall be entitled, without any interest thereon, in accordance with this Article
III, upon surrender in the manner provided in Section 3.2(c), of the Certificate
or Certificates that, immediately prior to the Effective Time, evidenced the
number of shares of Common Shares owned by such stockholder.
(b) The Company will give Buyer (i) prompt notice of any written demand for
appraisal, any withdrawal of a demand for appraisal and any other instrument
served pursuant to Section 262 of the DGCL received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under such Section 262 of the DGCL.
(c) In the event that any stockholder properly demands relief in accordance
with Section 262 of the DGCL and the rights to obtain such relief are not
withdrawn or otherwise lost prior to the Effective Time, the Representative
shall withhold payment out of the Payment Fund of, and pay over to Buyer, such
amounts that would otherwise be paid pursuant to Section 3.2(c) to holders of
Common Shares. The Buyer and the Representative shall instruct the Escrow Agent
to pay over to Buyer the amounts allocable to the Common Shares referred to in
clause (i) of this paragraph and held pursuant to the Escrow Agreement and the
Environmental Escrow Agreement, based on the Percentage Interests attributable
to such Dissenting Shares.
3.7 Closing.
(a) Unless this Agreement shall have been terminated and the Merger and the
Transactions shall have been abandoned pursuant to Section 10.1, the closing of
the Merger (the "Closing") shall take place at 10:00 a.m., New York City time at
the offices of Xxxxxx & Xxxxxxx LLP, located at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, on the final Business Day of the month in which the last of the
conditions set forth in Article IX is satisfied or waived by the party entitled
to waive such condition (other than those conditions that by their terms are to
be satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions at such time), unless the satisfaction and waiver of such conditions
shall have occurred fewer than five (5) Business Days prior to such final
Business Day in which event the Closing shall take place on the fifth (5th)
Business Day after such conditions shall have been waived or satisfied, and
unless another time, date or place is agreed to in writing by Buyer and the
Company (it being understood that the parties hereto will use their commercially
reasonable efforts to hold the Closing on or prior to August 28, 2006). The date
on which the Closing shall be held is referred to in this Agreement as the
"Closing Date."
(b) Subject to the conditions set forth in this Agreement, on the Closing
Date:
(i) the Company will deliver to Buyer:
(A) a certificate of the Company dated the Closing Date stating
that the conditions set forth in Sections 9.2(a) through (g) and
Section 9.2(k) have been satisfied;
29
(B) a copy of the text of the resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery and
performance of this Agreement and declaring its advisability,
certified by an appropriate officer of the Company;
(C) a copy of the Stockholder Consent, certified by an
appropriate officer of the Company;
(D) resignations in writing (effective as of the Closing Date)
from the officers and directors of each of the Company and the
Subsidiaries whose resignations shall have been requested by Buyer at
least five (5) Business Days prior to the Closing;
(E) a copy, duly executed by the Representative, of the Escrow
Agreement;
(F) a copy, duly executed by the Representative, of the
Environmental Escrow Agreement;
(G) duly executed copies of all Required Consents;
(H) evidence of payment or cancellation of the Other Indebtedness
that is to be canceled prior to the Closing Date and termination or
satisfaction and discharge of all related loan agreements and
indentures, as well as duly executed copies of all agreements,
instruments, certificates and other documents necessary or
appropriate, in the reasonable opinion of Buyer's counsel, to release
any and all Encumbrances against the assets of the Company, other than
Permitted Encumbrances of the types set forth in clauses (i) through
(v) and clause (viii) of the definition thereof (the "Release
Documents");
(I) evidence of satisfaction and discharge of all Indenture
Indebtedness and the Indentures and the Release Documents therefor;
(J) an affidavit from the Company and each domestic Tax Affiliate
dated as of the Closing Date, in the form required by Treasury
Regulations Section 1.897-2(h) and signed under penalties of perjury,
stating that the Company or such Tax Affiliate is not and has not been
a United States real property holding corporation during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(K) releases of all Encumbrances on the Real Property, other than
Permitted Encumbrances of the types set forth in clauses (i) through
(v) and clause (viii) of the definition thereof, including releases of
each mortgage of record and reconveyances of each deed of trust with
respect to each parcel of real property included in the Real Property;
(L) certificates dated as of a date not earlier than the tenth
Business Day prior to the Closing as to the good standing of the
Company and each of the
30
domestic Subsidiaries, executed by the appropriate officials of the
State of incorporation or organization thereof and each jurisdiction
in which the Company and each of the Subsidiaries is licensed or
qualified to do business as a foreign corporation as specified in
Schedule 4.1.1;
(M) spreadsheets showing the amounts referred to in Section
3.2(b);
(N) such other certificates, documents and instruments that Buyer
reasonably requests for the purpose of facilitating the consummation
of the Merger and the Transactions;
(ii) Buyer and Merger Sub will deliver to the Company:
(A) a certificate of Buyer dated the Closing Date stating that
the conditions set forth in Section 9.3(a) through 9.3(c) have been
satisfied;
(B) a certificate of an appropriate officer of Xxxxxx Xxxxx XxxX
stating that the execution, delivery and performance of this Agreement
has been duly authorized by all required corporate action of such
company;
(C) a copy of the texts of the resolutions adopted by the Board
of Directors of Buyer authorizing the execution, delivery and
performance of this Agreement, certified by an appropriate officer of
Buyer;
(D) a copy of the text of resolutions adopted by the sole
shareholder of Merger Sub approving the Merger, certified by an
appropriate officer of Merger Sub;
(E) a copy, duly executed by Buyer and the Escrow Agent, of the
Escrow Agreement;
(F) a copy, duly executed by Buyer and the Escrow Agent, of the
Environmental Escrow Agreement;
(G) a list of the officers of the Surviving Corporation as
provided in Section 4.4(b); and
(H) such other certificates, documents and instruments that the
Company reasonably requests for the purpose of facilitating the
consummation of the Merger and the Transactions.
(c) All items delivered by the parties at the Closing will be deemed to
have been delivered simultaneously, and no items will be deemed delivered or
waived until all have been delivered.
(d) The Confidentiality Agreement shall terminate effective as of the
Closing Date.
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IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the SEC Reports and except as disclosed in the
Disclosure Schedule, the Company represents and warrants to Buyer as follows:
4.1 Incorporation; Power and Authority.
(a) Each of the Company and each of its Subsidiaries is a legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has all necessary power and authority
necessary to own, lease and operate its assets and to carry on its business as
conducted. Each of the Company and each of its Subsidiaries is duly qualified to
do business and is in good standing in each jurisdiction in which the nature of
its business or its ownership of property requires it to be so qualified, except
where the failure to be so qualified and in good standing would not, when taken
together with all other such failures, have a Material Adverse Effect. Schedule
4.1.1 lists, for the Company and each of its active Subsidiaries, the
jurisdiction of its organization, its form as a legal entity and each
jurisdiction in which it is so qualified. Schedule 4.1.2 lists each dormant
Subsidiary of the Company. Each such dormant Subsidiary has no material assets
and the aggregate Liabilities of all such dormant Subsidiaries do not exceed
$10,000. The Company has all necessary power and authority to execute, deliver
and perform this Agreement and the Ancillary Agreements to which it will become
a party and to consummate the Transactions.
(b) Each of the Company and its active Subsidiaries is in compliance in all
material respects with all provisions of its Organizational Documents.
4.2 Valid and Binding Agreement. The execution, delivery and performance by
the Company of this Agreement and the Ancillary Agreements to which it will
become a party have been duly and validly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to the Remedies Exception. Each Ancillary
Agreement to which the Company will become a party, when executed and delivered
by the Company, will constitute the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
Remedies Exception. The board of directors of the Company, at a meeting duly
called and held at which a quorum was present throughout, by the requisite vote
of the directors, has determined this Agreement and the Transactions to be
advisable and fair to and in the best interest of the Company and its
stockholders, has approved this Agreement and the Transactions and has resolved
to recommend the approval by the Company's stockholders of this Agreement and
the Transactions, and no such declaration, approval, adoption or recommendation
has been changed, withdrawn or revoked.
4.3 No Breach; Consents.
(a) The execution, delivery and performance of this Agreement and the
Ancillary Agreements to which the Company will become a party will not (i)
contravene any provision of the Organizational Documents of the Company or any
Subsidiary; (ii) violate any Law, Governmental Order or Governmental
Authorization; (iii) result in any breach of any of the
32
provisions of, constitute a default (or any event that would, with the passage
of time or the giving of notice or both, constitute a default) under, result in
the termination, amendment, suspension, modification, abandonment or
acceleration of payment (or any right to terminate) or require a Consent, under
any Contract that is either binding upon or enforceable against the Company or
any Subsidiary (other than the Contracts governing the Other Indebtedness and
the Indenture Indebtedness to be cancelled at the Closing) or any Governmental
Authorization that is held by the Company or any Subsidiary; (iv) result in the
creation of any Encumbrance upon the Company or any Subsidiary or any of the
assets of the Company or any Subsidiary; (v) require any Governmental
Authorization (subject to the making of the filings and the expiration of
waiting periods required under the HSR Act and the EU antitrust Laws and
regulations (the "Antitrust Clearance")); (vi) give any Governmental Entity or
other Person the right to challenge any of the Transactions or to exercise any
remedy or obtain any relief under any Law, Governmental Order or Governmental
Authorization (subject to the Antitrust Clearance); or (vii) cause Buyer to
become subject to, or to become liable for the payment of, any Tax, (x) except
for, in the case of clauses (ii) to (vii) above, any such items, individually or
in the aggregate, which would not have a Material Adverse Effect, and (y)
subject to, in the case of clauses (ii), (iii) and (vi), required Consents, as
described on Schedule 4.3.
(b) The approval of holders of a majority of the outstanding Common Shares
is the only vote or Consent of the holders of any class or series of the
Company's capital stock necessary to approve the Merger and the consummation of
the Transactions.
4.4 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 10,000,000
Common Shares, of which 6,675,708 Common Shares are issued and outstanding and
none of which are held in treasury, (ii) 900 shares of Series A Preferred Stock,
par value $0.01 per share ("Series A Preferred"), none of which are issued and
outstanding, and (iii) 5,000,000 shares of Series B Preferred Stock, par value
$0.01 per share ("Series B Preferred"), none of which are issued and
outstanding. By resolution of the Board of Directors of the Company dated April
16, 2002, each outstanding share of Series A Preferred and Series B Preferred
was converted, effective as of such date, into one Common Share in accordance
with the terms of the Company's Restated Certificate of Incorporation, as
amended, and each outstanding certificate evidencing shares of Series A
Preferred and Series B Preferred was thereafter deemed to represent an equal
number of Common Shares. Schedule 4.4(a) lists any repurchase or redemption
rights in favor of the Company for any Common Shares, the vesting schedule and
forfeiture provisions for any of such Common Shares that are "restricted stock,"
and the extent to which vesting will or may be accelerated by the Transactions
and any limitations on the ability of the holder of such Common Shares to vote
or dispose of such Common Shares. All Common Shares are duly authorized, validly
issued, fully paid and nonassessable, free of preemptive rights or any other
third party rights, liens or Encumbrances created by the Company or any of its
Subsidiaries and are in certificated form, and have been offered, sold and
issued by the Company in compliance with applicable securities and corporate
Laws, Contracts applicable to the Company and the Company's Organizational
Documents and in compliance with any preemptive rights, rights of first refusal
or similar rights.
33
(b) As of the date of this Agreement, Stock Options of the Company with
respect to 195,000 Common Shares are outstanding. Schedule 4.4(b) lists the name
and addresses of each holder of an outstanding Stock Option and whether such
holder is an employee of the Company and, with respect to each Stock Option
held, the date of grant of such Stock Option, the number of Common Shares
subject to such Stock Option, the exercise price of such Stock Option, the
vesting schedule (and any provisions for acceleration or deferral of vesting)
for such Stock Option, the extent vested as of the date of this Agreement, the
extent to which exercisability of such Stock Option will or may be accelerated
by the Merger and Transactions and whether such Stock Option is an "incentive
stock option." As of the date of this Agreement, Warrants with respect to
25,333.64 Common Shares are outstanding. Schedule 4.4(b) lists the name and
addresses of each holder of record of an outstanding Warrant, the number of
Common Shares subject to such Warrant, the exercise price of such Warrant, the
expiration date of such Warrant and any effect of the Merger and Transactions on
such Warrant. All outstanding Stock Options and Warrants have been offered, sold
and delivered in compliance with applicable securities and corporate Laws,
Contracts applicable to the Company and the Company's Organizational Documents.
All Common Shares issuable upon exercise of the Stock Options and Warrants have
been offered in compliance with applicable securities and corporate Laws,
Contracts applicable to the Company and the Company's Organizational Documents
and, upon issuance in accordance with their terms, will be duly authorized,
validly issued, fully paid and nonassessable. Schedule 4.4(b) shall indicate
which, if any, of such Stock Options and Warrants are Out-of-the-Money Stock
Options and Out-of-the-Money Warrants.
(c) Except for the Stock Options and Warrants listed on Schedule 4.4(b),
there is no option, warrant, call, subscription, convertible security, right
(including preemptive right) or Contract of any character to which the Company
is a party or by which it is bound obligating the Company to issue, exchange,
transfer, sell, repurchase, redeem or otherwise acquire any capital stock of the
Company or obligating the Company to grant, extend, accelerate the vesting of or
enter into any such option, warrant, call, subscription, convertible security,
right or Contract. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. Except as
contemplated by this Agreement, there are no registration rights agreements, no
voting trust, proxy or other Contract and no restrictions on transfer with
respect to any capital stock of the Company.
(d) As of the date of this Agreement, there are no bonds, debentures, notes
or other indebtedness of the Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which holders of the Company's capital stock may vote.
(e) The authorized capital of Intermediate LLC consists of Membership
Interests having a 100% Allocation Percentage, all of which are outstanding and
no Membership Interests are held in treasury. All of the outstanding Membership
Interests of Intermediate LLC are duly authorized, validly issued, fully paid
and nonassessable, free of preemptive rights or any other third party rights,
liens or Encumbrances (other than Permitted Encumbrances) and are in
certificated form, and have been issued by Intermediate LLC in compliance with
applicable securities and limited liability company Laws, Contracts applicable
to Intermediate LLC and its Organizational Documents and in compliance with any
preemptive rights, rights of first refusal or similar rights. All of the
outstanding Membership Interests of Intermediate LLC are owned
34
beneficially and of record by the Company, subject only to Permitted
Encumbrances. The authorized capital stock of TCI consists of one thousand
(1,000) shares of Common Stock, of which five hundred (500) shares are issued
and outstanding and none of which are held in treasury. All shares of Common
Stock of TCI are duly authorized, validly issued, fully paid and nonassessable,
free of preemptive rights or any other third party rights, liens or Encumbrances
(other than Permitted Encumbrances) and are in certificated form, and have been
issued by TCI in compliance with applicable securities and corporate Laws,
Contracts applicable to TCI and its Organizational Documents and in compliance
with any preemptive rights, rights of first refusal or similar rights. All of
the outstanding shares of Common Stock of TCI are owned beneficially and of
record by Intermediate LLC, subject only to Permitted Encumbrances.
(f) There are no outstanding contractual obligations of the Company or any
Subsidiary to (i) repurchase, redeem or otherwise acquire any shares of capital
stock of or other equity or voting interest in the Company or any Subsidiary or
(ii) vote or dispose of any shares of the capital stock of, or other equity or
voting interests in any of the Company's Subsidiaries.
4.5 Subsidiaries. Except as listed on Schedules 4.1.1 and 4.1.2, neither
the Company nor any Subsidiary owns any Subsidiary. For each of the Company's
Subsidiaries, Schedules 4.1.1 and 4.1.2 show the equity interests owned by the
Company or any Subsidiary, the names of the other Persons owning such equity
interests and the percentage of the outstanding equity interests so owned. All
issued and outstanding equity interests of each Subsidiary of the Company are
duly authorized, validly issued, fully paid and nonassessable, free of
preemptive rights or any other third-party right created by the Company or any
Subsidiary (other than Permitted Encumbrances), free and clear of all
Encumbrances created by the Company or any Subsidiary (other than Permitted
Encumbrances), and in certificated form and have been offered, sold and issued
by such Subsidiary in compliance with applicable securities and corporate Laws,
Contracts applicable to such Subsidiary's Organizational Documents and in
compliance with any preemptive rights, rights of first refusal or similar
rights. There is no option, warrant, call, subscription, convertible security,
right (including preemptive rights) or Contract of any character to which the
Company or any Subsidiary is a party or by which it is bound obligating any
Subsidiary of the Company or the Company to issue, exchange, transfer, sell,
repurchase, redeem or otherwise acquire any equity interest of such Subsidiary
or obligating the Company or such Subsidiary to grant, extend, accelerate the
vesting of or enter into any such option, warrant, call, subscription,
convertible security, right or Contract.
4.6 SEC Filings; Financial Statements.
(a) During the time it was required to do so, the Company filed all reports
required to be filed by it with the SEC under applicable Law (the "Company SEC
Reports"). The Company is not currently required to file any reports with the
SEC. Intermediate LLC has timely filed all reports required to be filed by it
with the SEC under applicable Law (the "LLC SEC Reports") since its formation.
TCI has timely filed all reports required to be filed by it with the SEC under
applicable Law (the "TCI SEC Reports," and together with the LLC SEC Reports and
the Company SEC Reports, the "SEC Reports") since its incorporation. As of their
respective dates, each of the SEC Reports complied with the requirements of the
Securities Act or the Securities Exchange Act, as the case may be, in all
material respects. Except as set forth on Schedule 4.6, and to the extent
corrected prior to the date hereof by a subsequently filed SEC Report, none of
35
the SEC Reports, as of their respective dates, contained any untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
(b) Each of Intermediate LLC and TCI (to the extent required under the
Exchange Act) has implemented and maintains a system of internal accounting
controls sufficient to provide reasonable assurances regarding the reliability
of financial reporting and the preparation of financial statements in accordance
with GAAP, including such reporting and preparation by each such company. Each
of Intermediate LLC and TCI (to the extent required under the Exchange Act) (i)
has implemented and maintains disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Exchange Act) designed to ensure that material information
relating to each such company, including its consolidated Subsidiaries, is made
known to the principal executive officer and the principal financial officer of
each such company by others within each such company, and (ii) has disclosed to
its outside auditors and the audit committee (if any) of the board of directors
or other governing bodies of each such company, (A) any significant deficiencies
and material weaknesses in the design or operation of internal controls over
financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are
reasonably likely to adversely affect any of such company's ability to record,
process, summarize and report financial information and (B) any fraud, whether
or not material, that involves management or other employees who have a
significant role in each such company's internal controls. For the purpose of
this Section 4.6(b), "principal executive officer" and "principal financial
officer" shall have the same meanings given to such terms in the SOA, as
amended.
(c) The unaudited consolidated balance sheet as of March 31, 2006 of the
Company and its consolidated Subsidiaries (the "Company Latest Balance Sheet")
and the unaudited consolidated statements of income and cash flows of the
Company and its consolidated Subsidiaries for the three-month period then ended
(such statements and the Company Latest Balance Sheet, the "Company Latest
Financial Statements") and the unaudited consolidated balance sheets, as of
December 31, 2005, 2004 and 2003, of the Company and its consolidated
Subsidiaries and the unaudited consolidated statements of income and cash flows
of the Company and its consolidated Subsidiaries for each of the two (2) fiscal
years ended on December 31, 2005 and 2004 and the one month period ended on
December 31, 2003, and the audited consolidated statements of income and cash
flows of the Company and its consolidated Subsidiaries for the eleven-month
period ended on November 30, 2003 (collectively, the "Company Prior Period
Financial Statements") have been made available by the Company to Buyer. The
Company Latest Financial Statements and the Company Prior Period Financial
Statements are based upon the books and records of the Company and its
Subsidiaries, have been prepared in accordance with GAAP consistently applied
during the periods indicated and present fairly in all material respects, the
financial position, results of operations and cash flows of the Company and its
consolidated Subsidiaries on a consolidated basis at the respective dates and
for the respective periods indicated, except that the Company Latest Financial
Statements and the Company Prior Period Financial Statements may not contain all
footnote disclosures and are subject to normal recurring year-end audit
adjustments as applicable to the periods audited, none of which are material.
(d) The (i) unaudited consolidated balance sheet as of March 31, 2006 of
Intermediate LLC and its consolidated Subsidiaries (the "Intermediate LLC Latest
Balance
36
Sheet") and unaudited condensed consolidated statements of operations and cash
flows of Intermediate LLC and its consolidated Subsidiaries for the three-month
period then ended (such statements and the Intermediate LLC Latest Balance
Sheet, the "Intermediate LLC Latest Financial Statements") and (ii) audited
consolidated balance sheets, as of December 31, 2005, 2004 and 2003 of
Intermediate LLC and its consolidated Subsidiaries and audited consolidated
statements of operations, changes in member's deficit and comprehensive income
and cash flows, including the notes, of Intermediate LLC and its consolidated
Subsidiaries for the years ended December 31, 2005 and 2004 and the one month
period ended on December 31, 2003 (collectively, the "Intermediate LLC Prior
Period Financial Statements") have been made available to Buyer. The
Intermediate LLC Latest Financial Statements and the Intermediate LLC Prior
Period Financial Statements are based upon the books and records of Intermediate
LLC and its Subsidiaries, have been prepared in accordance with GAAP
consistently applied during the periods indicated and present fairly, in all
material respects, the financial position, results of operations and cash flows
of Intermediate LLC and its consolidated Subsidiaries on a consolidated basis at
the respective dates and for the respective periods indicated, except that the
Intermediate LLC Latest Financial Statements may not contain all footnote
disclosures and are subject to normal recurring year-end audit adjustments, none
of which are material.
(e) The (i) unaudited consolidated balance sheet as of March 31, 2006 of
TCI and its consolidated Subsidiaries (the "TCI Latest Balance Sheet") and
unaudited condensed consolidated statements of operations and cash flows of TCI
and its consolidated Subsidiaries for the three-month period then ended (such
statements and the TCI Latest Balance Sheet, the "TCI Latest Financial
Statements") and (ii) audited consolidated balance sheets, as of December 31,
2005, 2004 and 2003, of TCI and its consolidated Subsidiaries and the audited
consolidated statements of operations, changes in shareholder's equity (deficit)
and comprehensive income and cash flows, including the notes, of TCI and its
consolidated Subsidiaries for the years ended December 31, 2005 and 2004 and the
one (1) month ended December 31, 2003 (collectively, the "TCI Prior Period
Financial Statements") have been made available to Buyer. The TCI Latest
Financial Statements and the TCI Latest Financial Statements are based upon the
books and records of TCI and the Subsidiaries, have been prepared in accordance
with GAAP consistently applied during the periods indicated and present fairly,
in all material respects, the financial position, results of operations and cash
flows of TCI and its consolidated Subsidiaries on a consolidated basis at the
respective dates and for the respective periods indicated, except that the TCI
Latest Financial Statements may not contain all footnote disclosures and are
subject to normal recurring year-end audit adjustments, none of which are
material.
4.7 Absence of Undisclosed Liabilities. Except as reflected or expressly
reserved against in the Financial Statements or in the notes thereto, and except
for normal or recurring liabilities incurred since December 31, 2005 in the
Ordinary Course of Business, neither the Company nor any Subsidiary has any
Liability of a nature required to be reflected in financial statements in
accordance with GAAP, and whether due or to become due, which individually or in
the aggregate would have a Material Adverse Effect.
4.8 Other Indebtedness. Except (i) as reflected in the Financial Statements
or in the notes thereto, (ii) for the Other Indebtedness that has been incurred
by the Company and its Subsidiaries since December 31, 2005 in the Ordinary
Course of Business, none of the Company
37
or its Subsidiaries has, or is a party to any Contracts relating to,
indebtedness owed to any Person (other than to or among the Company and any of
its Subsidiaries).
4.9 Books and Records. The books of account of the Company and the
Subsidiaries are complete and correct in all material respects and have been
maintained in accordance with the requirements of Section 13(b)(2) of the
Exchange Act (to the extent that the Company or any Subsidiary is subject to
that section). Each transaction is properly and accurately recorded in all
material respects on the books and records of the Company or a Subsidiary, and
each document upon which entries in the Company's or a Subsidiary's books and
records are based, is complete and accurate in all material respects. The minute
books and stock or equity records of each of the Company and its Subsidiaries,
since January 1, 2003, are complete and correct in all material respects. The
minute books of each of the Company and the Subsidiaries since January 1, 2003
contain materially accurate records of all meetings held and actions taken by
the holders of stock or equity interests, the boards of directors and committees
of the boards of directors or other governing body of each of the Company and
the Subsidiaries, and no meeting of any such holders, boards of directors or
other governing body or committees since January 1, 2003 has been held for which
minutes are not contained in such minute books.
4.10 Absence of Certain Developments. Except as set forth on Schedule 4.10,
since December 31, 2005, the Company and each of its Subsidiaries has conducted
their respective businesses in all material respects in the Ordinary Course of
Business. Since December 31, 2005, each of the Company and each of its
Subsidiaries has, in all material respects, preserved their respective business
relationships with employees, suppliers, creditors, customers and others
transacting business with it. Without limiting the generality of the foregoing,
since December 31, 2005:
(a) the Company and its Subsidiaries have not suffered any Material Adverse
Effect and there has not been any change, change in condition, event or
development that would have a Material Adverse Effect;
(b) the Company has not declared, set aside for or paid, any dividend on,
or other distribution (whether in cash, stock or property), in respect of any
capital stock of the Company;
(c) except as required by Financial Accounting Standards Board
pronouncements that become, or have become, effective as to the Company after
December 31, 2005, no material change in accounting methods, principles or
practices employed by the Company or any of its Subsidiaries has been made; or
(d) no action or event has occurred that would have required the Consent of
Buyer pursuant to Section 6.1 of this Agreement had such action or event
occurred after the date of this Agreement.
4.11 Real Estate and Personal Property.
(a) The real properties owned by the Company or any Subsidiary or demised
by the leases listed on Schedule 4.11 constitute all of the real property owned,
leased, used or occupied by the Company or any Subsidiary (other than any real
property of any Third-Party where any
38
consigned inventory or components of the Company or a Subsidiary thereof is
maintained in the Ordinary Course of Business).
(b) The Company or a Subsidiary owns good and marketable title to each
parcel of real property identified on Schedule 4.11 as being owned by the
Company or a Subsidiary (the "Owned Real Property"), free and clear of all
Encumbrances, except for (i) Permitted Encumbrances, (ii) Encumbrances listed on
Schedule 4.11 and (iii) other Encumbrances which would not, individually or in
the aggregate, have a Material Adverse Effect.
(c) The leases of real property listed on Schedule 4.11 as being leased by
the Company or any Subsidiary (the "Leased Real Property" and together with the
Owned Real Property, the "Real Property") are in full force and effect, and the
Company or a Subsidiary holds a valid and existing leasehold interest under each
of the leases for the term listed on Schedule 4.11. To the Company's Knowledge,
the Leased Real Property is subject to no ground lease, master lease, mortgage,
deed of trust or other Encumbrance or interest that would entitle the holder
thereof to interfere with or disturb use or enjoyment of the Leased Real
Property or the exercise by the lessee of its rights under such lease so long as
the lessee is not in default under such lease.
(d) Each parcel of Real Property has access sufficient for the conduct of
the business as conducted or as proposed to be conducted by the Company or any
Subsidiary on such parcel of Real Property to public roads and to all utilities,
including electricity, sanitary and storm sewer, potable water, natural gas,
telephone, fiberoptic, cable television, and other utilities used in the
operation of the business at that location. The zoning for each parcel of Owned
Real Property and, to the Company's Knowledge each parcel of Leased Real
Property, permits the existing improvements and the continuation of the business
being conducted thereon as a conforming use. Neither the Company nor any
Subsidiary is in material violation of any applicable zoning ordinance or other
Law relating to the Real Property, and neither the Company nor any Subsidiary
has received any written notice of any violation of any such ordinance of other
Law or the existence of any condemnation or other proceeding with respect to any
of the Real Property. The buildings and other improvements are located within
the boundary lines of each parcel of Owned Real Property and do not encroach
over applicable setback lines.
(e) Each of the Company and the Subsidiaries has good and marketable title
to, or a valid leasehold interest in, the buildings, machinery, equipment and
other tangible assets and properties used by it, located on its premises or
shown in the Latest Balance Sheets or acquired after the date thereof, free and
clear of all Encumbrances, except for Permitted Encumbrances, Encumbrances
listed on Schedule 4.11 and properties and assets disposed of in the Ordinary
Course of Business since the date of the Latest Balance Sheets.
(f) Except as set forth on Schedule 4.11, (i) the buildings, improvements,
building systems, machinery, equipment and other tangible assets and properties
used in the conduct of the business of each of the Company and the Subsidiaries
are in good condition and repair, ordinary wear and tear excepted, and are
usable in the Ordinary Course of Business, and (ii) each such asset is suitable
for the purposes for which it is used and is proposed to be used, and is free
from material defects. Each of the Company and the Subsidiaries owns, or leases
under valid
39
leases, all buildings, machinery, equipment and other tangible assets and
properties necessary for the conduct of its respective business as currently
conducted.
4.12 Tax Matters.
(a) Except as set forth on Schedule 4.12, each of the Company and any Tax
Affiliate has (i) timely filed (or has had timely filed on its behalf) each
Return required to be filed or sent by it to any Governmental Entity in respect
of any Taxes, each of which was correctly completed and accurately reflected any
Liability for Taxes of the Company and any Tax Affiliate covered by such Return,
(ii) timely and properly paid (or had paid on its behalf) all Taxes due and
payable for all Tax Periods or portions thereof whether or not shown or required
to be shown on such Returns, (iii) established in the books of account of the
Company and the Tax Affiliates and the SEC Reports, in accordance with GAAP and
consistent with past practices, adequate reserves for the payment of any Taxes
not then due and payable and (iv) complied with all applicable Laws relating to
the withholding of Taxes and the payment thereof.
(b) Each of the Company and any Tax Affiliate has made (or caused to be
made on its behalf) all estimated tax payments required to have been made.
(c) There are no Encumbrances for Taxes upon any assets of the Company or
any Tax Affiliate, except Permitted Encumbrances.
(d) Except as set forth on Schedule 4.12, neither the Company nor any Tax
Affiliate has requested any extension of time within which to file any Return,
which Return has not since been filed.
(e) No deficiency for any Taxes has been proposed, asserted or assessed in
writing against the Company or any Tax Affiliate that has not been resolved or
paid in full. No waiver, extension or comparable consent given by the Company or
any Tax Affiliate regarding the application of the statute of limitations with
respect to any Taxes or any Return is outstanding, nor is any request for any
such waiver or consent pending.
(f) Except as set forth on Schedule 4.12, to the Knowledge of the Company
or any Tax Affiliate, no additional Taxes will be assessed against the Company
or any Tax Affiliate for any Tax period or portion thereof ending on or prior to
the Closing Date, and there are no unresolved questions, claims or disputes
concerning the Liability for Taxes of the Company or any Tax Affiliate that
would exceed the estimated reserves established on the books of account of the
Company and the Tax Affiliates or in the SEC Reports.
(g) Schedule 4.12 lists all federal, state, local and foreign Returns filed
with respect to the Company or any Tax Affiliate for Tax Periods ended after
December 31, 1999, indicates those Returns that have been audited and indicates
those Returns that currently are the subject of audit. Except as set forth on
Schedule 4.12, there has been no Tax audit or other administrative proceeding or
court proceeding with regard to any Taxes or any Return for any Tax Period
subsequent to the Tax Period ended December 31, 1999, nor is any such Tax audit
or other proceeding pending, nor has there been any written notice to the
Company or any Tax Affiliate by any Governmental Entity regarding any such Tax
audit or other proceeding, or, to the
40
Knowledge of the Company or any Tax Affiliate, is any such Tax audit or other
proceeding threatened with regard to any Taxes or Returns.
(h) Except as set forth on Schedule 4.12, neither the Company nor any Tax
Affiliate has any Liability for Taxes, or any obligation to file a Return, in a
jurisdiction where it does not file a Return, nor has the Company or any Tax
Affiliate received written notice from a taxing authority in such a jurisdiction
that it is or may be subject to taxation by that jurisdiction.
(i) Neither the Company nor any Tax Affiliate is a party to any Contract
that would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(j) Neither the Company nor any Tax Affiliate is a party to any Tax
allocation or sharing agreement other than (i) the Tax Sharing Agreement dated
as of November 19, 2003 by and among the Company, Intermediate LLC and TCI (the
"Company Tax Sharing Agreement") and (ii) the Profit and Loss Absorption
Agreement effective as of January 1, 2003 between EVI Holding (Deutschland) GmbH
and EVI Audio GmbH.
(k) Since November 19, 2001, neither the Company nor any Tax Affiliate (i)
has been a member of an affiliated group filing a consolidated Return (other
than a group the common parent of which was the Company or any Tax Affiliate) or
(ii) has any Liability for the Taxes of any Person (other than the Company or
any Subsidiary) under Treasury Regulations Section 1.1502-6 (or any similar
provision of Law), as a transferee or successor, by Contract, or otherwise.
(l) Neither the Company nor any Tax Affiliate constitutes either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of shares qualifying for
tax-free treatment under Section 355 of the Code (i) that took place during the
two-year period ending on the date of this Agreement or (ii) that could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
(m) Except as set forth on Schedule 4.12, neither the Company nor any Tax
Affiliate has an "overall foreign loss" within the meaning of Section 904 of the
Code or a "dual consolidated loss" within the meaning of Treasury Regulations
Section 1.1503-2.
(n) Neither the Company nor any Tax Affiliate is or has at any time been a
"passive foreign investment corporation" as defined in Section 1297 of the Code
or a "foreign personal holding company" as defined in Section 552 of the Code..
(o) Neither the Company nor any Tax Affiliate participates in or cooperates
with (or has at any time participated in or cooperated with) an international
boycott within the meaning of Section 999(b)(3) of the Code.
(p) Since their formation, each of the Company and the Tax Affiliates other
than Intermediate LLC has been a corporation or association taxable as a
corporation for United States income tax purposes.
41
(q) Neither the Company nor any domestic Tax Affiliate has been a U.S. real
property holding corporation (within the meaning of Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(r) There is no indebtedness (or other obligation that might be
characterized as debt for U.S. federal income Tax purposes) between the Company
and any Tax Affiliate or between any Tax Affiliates that is characterized as
debt for Tax purposes in one or more jurisdictions and characterized as other
than debt in one or more other jurisdictions.
(s) Neither the Company nor any Tax Affiliate has engaged in any
transaction that is subject to disclosure under present or former Treasury
Regulations Sections 1.6011-4 or 1.6011-4T, as applicable.
(t) The Company and each Tax Affiliate have timely prepared or caused to be
prepared all reports and other documentation necessary to avoid the imposition
of any penalty under the provisions of Section 6662(e) of the Code.
(u) Other than as set forth on Schedule 4.12, no gain recognition agreement
has been entered into and no private letter ruling or other ruling has been
obtained that might affect the Returns, Tax positions or other filings of the
Company or any Tax Affiliate.
(v) The Company has provided the Buyer with copies of all material Tax
opinions relating to the Company or any Tax Affiliate.
4.13 Governmental Authorization. The Company and its Subsidiaries hold all
of the Governmental Authorizations that are necessary for the lawful conduct of
the businesses of the Company and its Subsidiaries as currently conducted in all
material respects, and are in compliance with the terms thereof, except where
the failure to hold any such Governmental Authorization or to be in compliance
with the terms thereof would not have, individually or in the aggregate, a
Material Adverse Effect. None of the Company and any of its Subsidiaries has
received any written notice of any action pending or threatened by any
Governmental Entities to revoke, withdraw or suspend any Governmental
Authorization, except where such revocation, withdrawal or suspension would not
have, individually or in the aggregate, a Material Adverse Effect.
4.14 Government Contracts.
(a) Except as set forth in Schedule 4.14(a) or as, individually or in the
aggregate, would not have a Material Adverse Effect, with respect to any
Government Contracts, there is no (i) civil fraud or criminal act or bribery, or
any other violation of law, by the Company or any of its Subsidiaries or any
director, officer or employee of the Company or its Subsidiaries, or, to the
Company's Knowledge, criminal investigation by any Governmental Entity, (ii) any
irregularity, misstatement or omission by the Company or any of its Subsidiaries
arising under or relating to such Government Contracts, (iii) request by a
Governmental Entity for a contract price adjustment based on a claimed
disallowance by any applicable Governmental Entity or claim of defective
pricing, (iv) dispute between the Company or any of its Subsidiaries and a
Governmental Entity which, since January 1, 2003, has resulted in a final
decision of a
42
contracting officer of such Governmental Entity, or (v) any termination by a
Governmental Entity for default of any Government Contract or claim or request
for equitable adjustment by the Company or any of its Subsidiaries against a
Governmental Entity.
(b) Except as set forth in Schedule 4.14(b), or where the result
individually or in the aggregate would not have a Material Adverse Effect, no
termination for default or convenience, cure notice, or show cause notice has
been issued by the United States Government or by any prime contractor or
subcontractor, in writing, with respect to performance by the Company or any of
its Subsidiaries as a subcontractor of any portion of the obligation of a
Government Contract.
(c) The Company and its Subsidiaries have complied with all material terms
and conditions of any Government Contracts, except where any failure to so
comply, individually or in the aggregate, would not have a Material Adverse
Effect.
(d) Neither the Company nor any of its Subsidiaries is a party to any
Government Contract which is expected to result in a loss in excess of $100,000
to the Company or its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries or any of its or their
respective directors, officers, or employees is or for the last five (5) years
has been debarred or suspended from participation in the award of contracts with
any Governmental Entity or has been declared nonresponsible (it being understood
that debarment and suspension and nonresponsibility does not include
ineligibility to bid for certain Government Contracts due to generally
applicable bidding requirements) which, individually or in the aggregate, would
have a Material Adverse Effect.
4.15 Relations with Governments. Except as set forth in Schedule 4.15, to
the Knowledge of the Company during the last 5 years, neither the Company nor
any of its Subsidiaries, nor, in connection with the business of the Company or
any of its Subsidiaries, any director, officer, agent or employee of the Company
or any of its Subsidiaries, has (a) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(b) made any unlawful payment or offered anything of value to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns, (c) made any other unlawful payment, (d) violated in any
material respect any applicable export control law or regulation, or (e)
violated any applicable money laundering or anti-terrorism law or regulation,
nor has any of them otherwise taken any action which would cause the Company or
any of its Subsidiaries to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any applicable law of similar effect.
4.16 Intellectual Property Rights.
(a) Schedule 4.16(a)(i) lists all Owned Intellectual Property Rights that
are Registered Intellectual Property Rights. Schedule 4.16(a)(ii) lists all
Contracts relating to Licensed-In Intellectual Property Rights other than
Software; to the extent there is no written Contract covering a Licensed-In
Intellectual Property Right. Schedule 4.16(a)(ii) lists the licensor and
describes the Intellectual Property Rights so licensed. Schedule 4.16(a)(iii)
lists all
43
Contracts relating to Licensed-In Intellectual Property Rights that are Software
(other than Off-the-Shelf Software); to the extent there is no written Contract
covering any Software, Schedule 4.16(a)(iii) lists the licensor and describes
the Software so licensed. The Owned Intellectual Property Rights and the
Licensed-In Intellectual Property Rights constitute all Intellectual Property
Rights necessary for the business of the Company and its Subsidiaries as
currently conducted.
(b) The Company and/or the applicable Subsidiary or Subsidiaries own all
right, title and interest in the Owned Intellectual Property Rights free and
clear of all Encumbrances (including royalty or other payments), except for
those licenses of the Owned Intellectual Property Rights to Persons, payments
for use of the Owned Intellectual Property Rights and other Encumbrances listed
on Schedule 4.16(b)(i). The Company and/or the applicable Subsidiary or
Subsidiaries are the sole owner of record of all Registered Intellectual
Property Rights that are Owned Intellectual Property Rights, other than as
listed in Schedule 4.16(b)(ii). To the Knowledge of the Company, no Owned
Intellectual Property Right is currently being infringed by any Person, other
than as listed on Schedule 4.16(b)(iii). To the knowledge, following due inquiry
of any of the persons listed in Schedule 4.16(f)(i), no employee or former
employee or independent contractor of the Company or any Subsidiary has any
claim with respect to any Intellectual Property Right of the Company, other than
as listed in Schedule 4.16(b)(iv).
(c) To the Knowledge of the Company, no Person is currently asserting any
legal claim against the Company alleging that any Owned Intellectual Property
Right is invalid or not enforceable, other than as listed on Schedule
4.16(c)(i). To the Knowledge of the Company, all Owned Intellectual Property
Rights that are Registered Intellectual Property Rights (with the express
exception of pending applications therefore) are in full force and effect, and
all payments of annuities, maintenance fees and filing of renewals that are due
have been made. The Company and each of its Subsidiaries have taken all such
actions required to keep such applications pending and to diligently pursue,
where commercially reasonable, the granting of any Registered Intellectual
Property Right applied for by such pending applications. Neither the Company nor
any of its Subsidiaries have received any written notice with regard to any such
Registered Intellectual Property Right that such Registered Intellectual
Property Right is the subject of any interference, opposition, cancellation,
nullity, re-examination or other proceeding placing in question the validity or
scope of such rights, other than as listed on Schedule 4.16(c)(ii).
(d) All reasonable precautions have been taken to protect the
confidentiality of the trade secrets used by the Company or any Subsidiary. Each
of the Company and its Subsidiaries has an unqualified right to use all trade
secrets currently used in its business, subject to any Contract relating to
Licensed-In Intellectual Property Rights. To the Knowledge of the Company, no
such trade secret is part of the public knowledge or literature, nor has been
used, divulged or appropriated either for the benefit of any Person other than
the Company or a Subsidiary or to the detriment of the Company or any
Subsidiary.
(e) Schedule 4.16(e) sets forth the Licensed-in Intellectual Property
Rights which require consent or approval of the licensor thereof in connection
with the Merger or the Transactions and the name and address of the licensor.
44
(f) To the knowledge, following due inquiry, of any of the persons listed
in Schedule 4.16(f)(i), neither the Company nor any Subsidiary has received any
written notice of any infringement, misappropriation or violation by the Company
or any Subsidiary of any Third-Party Intellectual Property Right, other than as
listed on Schedule 4.16(f)(ii).
(g) All Software that is used by the Company or any Subsidiary or is on any
equipment of the Company or any Subsidiary is owned by the Company or a
Subsidiary or is subject to a current license agreement that covers the use of
the Software in the business of the Company or any Subsidiary, as currently
conducted, or each of the Company or the Subsidiaries has the right to use the
Software used in its business as it is being used, without any infringement of
the rights of others. Neither the Company nor any Subsidiary is in breach of any
license to, or license of, any Software. The Company and its Subsidiaries do not
use, rely on or contract with any Person to provide service bureau, outsourcing
or other computer processing services to the Company or any Subsidiary, in lieu
of or in addition to their respective use of the Software, other than as listed
on Schedule 4.16(g).
(h) The change of control of the Company contemplated in this Agreement
will not affect adversely the ownership interest of the Company or any
Subsidiary in any Owned Intellectual Property Rights, or the right of the
Company or any Subsidiary to continue to use any Licensed-in Intellectual
Property Rights on the same terms as were applicable prior to the Closing, other
than as listed on Schedule 4.16(h).
4.17 Material Contracts.
(a) Schedule 4.17 lists (or, as applicable, provides a cross-reference to
another Schedule that lists) the following Contracts to which the Company or any
Subsidiary is a party or subject or by which it is bound (such Contracts and the
Contracts filed as exhibits to the SEC Reports prior to the date hereof,
collectively, the "Material Contracts"):
(i) each Contract with respect to the employment of, or payment to,
employees, consultants or independent contractors (each an "Employment
Contract"), in each case that provides for annual payments in excess of
$100,000;
(ii) each collective bargaining Contract;
(iii) each Contract with any Insider (other than any Contracts
described in or disclosed pursuant to Sections 4.4(b), 4.4(c), 4.19, 4.23,
4.24, 4.25 and 4.26);
(iv) each distributor, reseller, dealer, manufacturer's representative
or sales agency Contract, pursuant to which the Company or a Subsidiary
thereof grants any exclusive distributor, reseller, dealer, manufacturer's
representative or sales agency rights to any Person in any geographic area;
(v) each OEM, broker, advertising agency, finder's, manufacturing or
assembly Contract, in each case that provides for annual payments in excess
of $100,000;
(vi) each franchise agreement;
45
(vii) each Contract or group of related Contracts with the same party
for the purchase of products or services with a undelivered balance in
excess of $500,000;
(viii) each Contract or group of related Contracts with the same party
for the sale of products or services with an undelivered balance in excess
of $500,000;
(ix) any Governmental Contract or Government Bid, in each case that
provides for annual sales by the Company or a Subsidiary thereof in excess
of $100,000;
(x) each lease of real or personal property with aggregate annual
payments in excess of $150,000;
(xi) each Contract entered into after January 1, 2003 relating to the
sale of any capital assets in excess of $500,000;
(xii) each guaranty or other similar undertaking with respect to
contractual performance extended by the Company or any Subsidiary other
than in the Ordinary Course of Business, and each Contract relating to any
surety bond or letter of credit required to be maintained by the Company or
any Subsidiary;
(xiii) each Contract that contains or provides for the Company's or
any of its Subsidiaries' right to be indemnified against Environmental
Costs or obligation to indemnify third parties against such third parties'
Environmental Costs;
(xiv) each Contract concerning a partnership or joint venture to which
the Company or any Subsidiary is a party;
(xv) each Contract providing for (A) the licensing of any Intellectual
Property Rights to or from any third party, or (B) the development of any
products, Software or Intellectual Property Rights by, for or with any
third party, other than any licenses of Intellectual Property incidental to
the sale of inventory in the Ordinary Course of Business;
(xvi) each Contract containing provisions that would prohibit the
Company or any Subsidiary from freely engaging in business anywhere in the
world or prohibiting the solicitation of the employees or contractors of
any other entity;
(xvii) each Capital Lease; and
(xviii) each Contract terminable by any other party upon a change of
control of the Company or any Subsidiary, in each case that provides for
annual payments in excess of $100,000.
(b) Each Material Contract is valid and binding, currently in force and
enforceable in accordance with its terms, subject to the Remedies Exception.
Neither the Company nor any Subsidiary nor, to the Knowledge of the Company, any
other party is in breach of or in default under any Material Contract except
where such breach or default would not have a Material Adverse Effect. Neither
the Company nor any Subsidiary has received any written notice of any
46
claim of default by it under or termination of any Material Contract. There is
no renegotiation of, attempt to renegotiate or outstanding right to renegotiate
any material terms of any Material Contract and no Person has made written
demand for such renegotiation. Neither the Company nor any Subsidiary has any
obligation to refund payments received for work not yet performed under a
Material Contract where the percentage of work completed is less than the
percentage of revenues received to date.
4.18 Litigation. Schedule 4.18 lists all Litigation pending or, to the
Knowledge of the Company, threatened against the Company or any Subsidiary, all
investigations to the Knowledge of the Company pending or threatened in writing
by any Governmental Entity against the Company or any Subsidiary, and each
Governmental Order to which the Company or any Subsidiary is subject. None of
the items listed on Schedule 4.18 would result in any Material Adverse Effect.
4.19 Insurance. Each of the Company and the Subsidiaries has at all times
maintained material insurance policies relating to its business and covering
property, fire, casualty, liability, workers' compensation and all other forms
of insurance customarily obtained by businesses in the same industry. Such
insurance (i) is in full force and effect, (ii) is sufficient for compliance
with all requirements of applicable Law and of any Contract to which the Company
or any Subsidiary is subject, and (iii) is valid and enforceable. Schedule 4.19
lists each policy of insurance in effect. Neither the Company nor any Subsidiary
is in material breach or default under, and neither the Company nor any
Subsidiary has failed to take any required action under, or permitted any
termination or modification of, any insurance policies.
4.20 Compliance with Laws.
(a) Each of the Company and the Subsidiaries has complied with all Laws and
Governmental Orders applicable to their operations, except for instances of
noncompliance that, individually and in the aggregate, would not have a Material
Adverse Effect. Neither the Company nor any Subsidiary is relying on any
exemption from or deferral of any Law, Governmental Order or Governmental
Authorization that would not be available to it after the Closing. There is and
has been no failure on the part of Intermediate LLC, TCI or any of their
directors or officers, in their capacities as such, to comply in all material
respects with any applicable provision of the SOA, including Section 402 related
to loans and Section 302 and 906 related to certifications.
(b) All products sold by the Company and its Subsidiaries comply in all
material respects with applicable Laws and regulations promulgated by
Governmental Entities thereunder relating to product safety or product
certification in the relevant jurisdictions where such products are sold (other
than the ROHS Directive). Except as set forth in Schedule 4.20(b), there are no
facts or circumstances reasonably likely to prevent or significantly delay the
ability of the Company or any of its Subsidiaries to comply in all material
respects, when and to the extent required in the applicable jurisdictions, with
the ROHS Directive.
4.21 Environmental Matters. The representations and warranties set forth in
paragraphs (b) through (j) and paragraph (l) below are subject to any exceptions
listed in Schedule 4.21.
47
(a) As used in this Section 4.21(a), the following terms have the following
meanings:
(i) "Environmental Costs" means any and all costs and expenditures,
including any fees and expenses of attorneys and of environmental
consultants or engineers incurred in connection with investigating,
defending, remediating or otherwise responding to any Release of Hazardous
Materials, any violation or alleged violation of Environmental Law, any
fees, fines, penalties or charges associated with any Governmental
Authorization, or any actions necessary to comply with any Environmental
Law.
(ii) "Environmental Law" means any Law, Governmental Authorization or
Governmental Order in force at the date of this Agreement relating to
pollution, contamination, Hazardous Materials or protection of the
environment.
(iii) "Hazardous Materials" means any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as defined
in or governed by any Law relating to such substance or otherwise relating
to the environment or human health or safety, including any waste,
material, substance, pollutant or contaminant that might cause any injury
to human health or safety or to the environment or might subject the owner
or operator of the Property to any Environmental Costs or liability under
any Environmental Law.
(iv) "List" means the United States Environmental Protection Agency's
National Priorities List of Hazardous Waste Sites or any other publicly
available list, schedule, log, inventory or record, however defined,
maintained by any Governmental Entity with respect to sites from which
there has been a Release of Hazardous Materials.
(v) "Property" means real property owned, leased, controlled or
occupied by the Company or any Subsidiary at any time.
(vi) "Regulatory Action" means any Litigation with respect to the
Company or any Subsidiary brought or instigated by any Governmental Entity
in connection with any Environmental Costs, Release of Hazardous Materials
or any Environmental Law.
(vii) "Release" means the spilling, leaking, disposing, discharging,
emitting, depositing, ejecting, leaching, escaping or any other release or
threatened release, however defined, whether intentional or unintentional,
of any Hazardous Material.
(viii) "Third-Party Environmental Claim" means any Litigation (other
than a Regulatory Action) based on negligence, trespass, strict liability,
nuisance, toxic tort or any other cause of action or theory relating to any
Environmental Costs, Release of Hazardous Materials or any violation of
Environmental Law.
(b) No Third-Party Environmental Claim or Regulatory Action is pending or,
to the Knowledge of the Company, threatened against the Company or any
Subsidiary.
(c) No Property is listed on a List.
48
(d) All transfer, transportation or disposal of Hazardous Materials by the
Company or any Subsidiary to properties not owned, leased or operated by the
Company or any Subsidiary has been in compliance with applicable Environmental
Law. To the Knowledge of the Company, the Company has not transported or
arranged for the transportation of any Hazardous Materials to any location that
is (i) listed on a List, (ii) listed for possible inclusion on any List or (iii)
the subject of any Regulatory Action or Third-Party Environmental Claim.
(e) To the Knowledge of the Company, at no time during the ownership or
operation of any Property by the Company or a Subsidiary of the Company, has a
Property ever been used as a landfill, dump or other disposal, storage,
transfer, handling or treatment area for Hazardous Materials, or as a gasoline
service station or a facility for selling, dispensing, storing, transferring,
disposing or handling petroleum and/or petroleum products.
(f) To the Knowledge of the Company, there has not been any Release of any
Hazardous Material on, under, about, from or in connection with the Property,
including the presence of any Hazardous Materials that have come to be located
on or under the Property from another location.
(g) The Property has at all times during the ownership and operation
thereof by the Company or a Subsidiary of the Company been used and operated in
compliance in all material respects with all applicable Environmental Law.
(h) Each of the Company and the Subsidiaries has obtained all Governmental
Authorizations relating to the Environmental Law necessary for operation of the
Company. All such Governmental Authorizations will be valid and in full force
and effect upon consummation of the Merger and the Transactions. Each of the
Company and the Subsidiaries has filed all reports and notifications required to
be filed under and pursuant to all applicable Environmental Law.
(i) No Hazardous Materials have been generated, treated, contained,
handled, located, used, manufactured, processed, buried, incinerated, deposited
or stored on, under or about any part of the Property, except in compliance with
Environmental Law. To the Knowledge of the Company, the Property currently owned
or operated by the Company or any of its Subsidiaries contains no asbestos, urea
formaldehyde, radon at levels above natural background or PCBs. No aboveground
or underground storage tanks are located on, under or about the Property
currently owned or operated by the Company or any of its Subsidiaries, or, to
the Knowledge of the Company have been located on, under or about such Property
and then subsequently been removed or filled. If any such storage tanks exist
on, under or about the Property, such storage tanks have been duly registered
with all appropriate Governmental Entities and are otherwise in compliance with
all applicable Environmental Law.
(j) Except as set forth on Schedule 6.2, no expenditure will be required in
order for Buyer, the Company or any Subsidiary to comply with any Environmental
Law in effect at the time of Closing in connection with the operation or
continued operation of the Property in a manner consistent with the present
operation thereof.
49
(k) All environmental audits and investigations in the possession or
control of the Company or any Subsidiary with respect to the Company, any
Subsidiary or the Property are listed on Schedule 4.21.
(l) No Encumbrance has been attached or filed against the Company or any
Subsidiary in favor of any Person for (i) any Liability under or violation of
any applicable Environmental Law, (ii) any Release of Hazardous Materials or
(iii) any imposition of Environmental Costs.
4.22 Warranties. Schedule 4.22 lists all claims pending or, to the
Knowledge of the Company, threatened for product liability or breach of any
warranty relating to any products sold or services performed by the Company or
any Subsidiary. Such claims in the aggregate are not in excess of the reserve
for product warranty claims set forth in the Latest Balance Sheets. Schedule
4.22 describes the warranties for products sold or services performed by each of
the Company and the Subsidiaries, in each case where the term of such warranty
exceeds three (3) years. Except as listed on Schedule 4.22, none of the products
manufactured, sold, leased or delivered by the Company or any Subsidiary has
been the subject of any product recall (whether voluntary or involuntary) or
general service action during the past five years.
4.23 Employees.
(a) To the Knowledge of the Company, no executive employee of the Company
and no group of employees of the Company or any Subsidiary has any plans to
terminate his, her or their employment. Since March 1, 1998, each of the Company
and the Subsidiaries has complied at all times with all applicable Laws relating
to employment and employment practices and those relating to the calculation and
payment of wages, equal employment opportunity, affirmative action and other
hiring practices, occupational safety and health, workers compensation,
unemployment, the payment of social security and other Taxes, and unfair labor
practices under the National Labor Relations Act or applicable state law, except
for instances of noncompliance that, individually and in the aggregate, would
not have a Material Adverse Effect. Neither the Company nor any Subsidiary has
any labor relations problem pending or, to the Knowledge of the Company,
threatened that in either case, individually or in the aggregate would have a
Material Adverse Effect and its labor relations are satisfactory. To the
Knowledge of the Company, no employee of the Company or any Subsidiary is
subject to any secrecy or noncompetition agreement or any other agreement or
restriction of any kind with a third party that would impede in any way the
ability of such employee to carry out fully all activities of such employee in
furtherance of the business of the Company.
(b) Since March 1, 1998, the employment of any terminated former employee
of the Company or any Subsidiary has been terminated in accordance with any
applicable Contract terms and applicable Law, except for instances of
noncompliance that, individually or in the aggregate, would not have a Material
Adverse Effect. Neither the Company nor any Subsidiary has any Liability under
any Contract or applicable Law toward any such terminated employee, except for
instances of noncompliance that, individually or in the aggregate, would not
have a Material Adverse Effect. The Merger and the Transactions will not cause
the Company or any Subsidiary to incur or suffer any Liability relating to, or
obligation to pay, severance, termination
50
or other payment to any Person, except for instances that, individually or in
the aggregate, would not have a Material Adverse Effect.
(c) Since March 1, 1998, neither the Company nor any Subsidiary has made
any loans (except advances for business travel, lodging or other expenses in the
Ordinary Course of Business) to any employee of the Company or any Subsidiary.
(d) Except as disclosed in Schedule 4.23(d), since March 1, 1998, neither
the Company nor any Subsidiary has experienced and, to the Knowledge of the
Company, there has not been threatened, any strike, work stoppage, slowdown,
lockout, picketing, leafleting, boycott, other labor dispute, union organization
attempt, demand for recognition from a labor organization or petition for
representation under the National Labor Relations Act or applicable state law.
Except as disclosed in Schedule 4.23(d), no grievance, demand for arbitration or
arbitration proceeding arising out of or under any collective bargaining
agreement is pending or, to the Knowledge of the Company, threatened. Except as
disclosed in Schedule 4.23(d), no Litigation is pending or, to the Knowledge of
the Company, threatened respecting or involving any applicant for employment,
any current employee or any former employee, or any class of the foregoing.
(e) Except as set forth on Schedule 4.23(e), no employee of the Company or
any Subsidiary is covered by any collective bargaining agreement, and no
collective bargaining agreement is being negotiated.
(f) Since March 1, 1998, each of the Company and the Subsidiaries has paid
in full to all employees all wages, salaries, bonuses and commissions due and
payable to such employees and has fully reserved on its books all amounts for
wages, salaries, bonuses and commissions due but not yet payable to such
employees.
4.24 Employee Benefits - U.S.
(a) Schedule 4.24 lists all Plans (other than Employment Contracts or those
Plans listed on Schedule 4.17) by name and separately identifies each plan that
has received a favorable determination or opinion letter from the IRS.
(b) No corporation, trade or business other than those that are parties to
this Agreement is (or was during the preceding five years) under common control
with the Company within the meaning of Section 414(b) or (c) of the Code. No
corporation, trade or business (i) is (or was during the preceding five years)
in an affiliated service group with the Company within the meaning of Section
414(m) of the Code, or (ii) is (or was during the preceding five years) the
legal employer of Persons providing services to the Company as leased employees
within the meaning of Section 414(n) of the Code. Neither the Company nor any
Subsidiary has become, during the preceding six years, a successor employer for
purposes of group health or other welfare plan continuation rights (including
Section 601 et seq, of ERISA) or the Family and Medical Leave Act.
(c) The Company has made available to Buyer (i) the most recent
determination letter received by the Company from the IRS regarding each Plan
that is intended to be qualified and
51
tax exempt under Sections 401(a) and 501(a) of the Code, or the most recent
pending application therefor, (ii) the most recent determination or opinion
letter ruling from the IRS that each trust established in connection with Plans
that are intended to be tax exempt under Section 501(c) of the Code (if any) are
so tax exempt, (iii) all pending applications for rulings, determinations,
opinions, no action letters and the like filed with any governmental agency
(including the Department of Labor, IRS, Pension Benefit Guaranty Corporation
and the SEC) with respect to any Plan, (iv) the three most recent annual
financial statements for each Plan (in audited form if required by ERISA) and,
where applicable, Annual Report/Return (Form 5500) with disclosure schedules, if
any, and attachments for each Plan, (v) the most recently prepared actuarial
valuation report for each Plan (including reports prepared for funding,
deduction and financial accounting purposes), (vi) plan documents, trust
agreements, insurance contracts, any service agreement or other related contract
that provides for annual payments by the Company or a Subsidiary in excess of
$30,000 and any employee summaries and material employee communications with
respect to each Plan and (vii) collective bargaining agreements (including side
agreements and letter agreements) relating to the establishment, maintenance,
funding and operation of any Plan.
(d) Prior to the Closing Date, the Company will provide Buyer with a list
identifying each employee of the Company or any Subsidiary who is, as of the
date of this Agreement, (i) absent from active employment due to short or long
term disability, (ii) absent from active employment on a leave pursuant to the
Family and Medical Leave Act or a comparable state Law, (iii) absent from active
employment on any other leave or approved absence (together with the reason for
each leave or absence) or (iv) absent from active employment due to military
service (under conditions that give the employee rights to re-employment).
Within 10 Business Days of the Closing Date, the Company will provide Buyer with
an updated version of such list which will be, in all material respects,
accurate as of the Closing Date.
(e) With respect to continuation rights arising under federal or state Law
as applied to Plans that are group health plans (as defined in Section 601 et
seq. of ERISA), the Company will, prior to the Closing Date, provide to Buyer a
list identifying, as of the date of this Agreement, (i) each employee, former
employee or qualifying beneficiary who has elected continuation and as to whom
the continuation period has not ended and (ii) each employee, former employee or
qualifying beneficiary who has not elected continuation coverage but is still
within the period in which such election may be made.
(f) (i) All Plans intended to be Tax qualified under Section 401(a) or
Section 403(a) of the Code have received a favorable determination letter from
the IRS covering all tax law changes prior to the Economic Growth and Tax Relief
Reconciliation Act of 2001 or has applied to the IRS for such favorable
determination letter within the applicable remedial amendment period under
Section 401(b) of the Code, (ii) the Company is not aware of any circumstances
likely to result in the loss of the qualification of such Plan under Section
401(a) of the Code, (iii) to the extent required either as a matter of Law or to
obtain the intended Tax treatment and Tax benefits, all Plans are in substantial
compliance with the requirements of ERISA and the Code. Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) all Plans have been administered in accordance with the
documents and instruments governing the Plans, (ii) all reports and filings with
Governmental Entities (including the Department of Labor, the IRS, Pension
Benefit Guaranty Corporation and the
52
SEC) required in connection with each Plan have been timely made, (iii) all
disclosures and notices required by Law or Plan provisions to be given to
participants and beneficiaries in connection with each Plan have been properly
and timely made and (iv) each of the Company and the Subsidiaries has made a
good faith effort to comply with the reporting and taxation requirements for
FICA taxes with respect to any deferred compensation arrangements under Section
3121(v) of the Code. The Company has not contributed to nor been obligated to
contribute to any multiemployer plan as defined in Section 3(37) of ERISA.
(g) (i) All contributions, premium payments and other payments required to
be made in connection with the Plans as of the date hereof have been made, (ii)
as of the date hereof a proper accrual has been made on the books of account of
the Company or applicable Subsidiaries for all contributions, premium payments
and other payments under or pursuant to the Plans, (iii) no contribution,
premium payment or other payment has been made in support of any Plan in the
current fiscal year that is in excess of the allowable deduction for federal
income Tax purposes for the year with respect to which the contribution was made
(whether under Section 162, Section 280G, Section 404, Section 419, Section 419A
of the Code or otherwise), (iv) with respect to each Plan that is subject to
Section 301 et seq. of ERISA or Section 412 of the Code, as of the date hereof,
none of the Company or any of its Subsidiaries is liable for any "accumulated
funding deficiency" as that term is defined in Section 412 of the Code and (v)
except as set forth on Schedule 4.24, under each "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA ("Pension Plan") that is a
single-employer plan subject to ERISA, as of the last day of the most recent
plan year ended prior to the date hereof, the actuarially determined present
value of all "benefit liabilities," within the meaning of Section 4001(a)(16) of
ERISA (as determined on the basis of the actuarial assumptions contained in the
Pension Plan's most recent actuarial valuation), did not exceed the then current
value of the assets of such Pension Plan.
(h) Except as set forth on Schedule 4.24, the consummation of the
Transactions will not (i) cause any Plan to increase benefits payable to any
participant or beneficiary, (ii) entitle any current or former employee of the
Company or any Subsidiary to severance pay, unemployment compensation or any
other benefit, award or payment except for merger consideration or (iii)
accelerate or modify the time of payment or vesting, or increase the amount of
any benefit, award or compensation due any such employee.
(i) As of the date hereof, (i) no material Litigation is pending with
regard to any Plan other than routine uncontested claims for benefits, (ii)
except as set forth on Schedule 4.24, no Plan is currently under examination or
audit by the Department of Labor, the IRS or the Pension Benefit Guaranty
Corporation, (iii) neither the Company nor any Subsidiary has any actual or
expected Liability arising under Title IV of ERISA as a result of any Plan that
has terminated or is in the process of terminating, (iv) neither the Company nor
any Subsidiary has any actual or expected Liability under Section 4201 et seq.
of ERISA for either a complete withdrawal or a partial withdrawal from a
multiemployer plan and (v) with respect to the Plans, the Company and any
Subsidiaries has not incurred or reasonably expects to incur: (A) any material
excise Taxes under Section 4971 through Section 4980B, Section 4999, Section
5000 or any other Section of the Code, (B) any penalty under Section 502(i),
Section 502(l), Part 6 of Title I or any other provision of ERISA in an amount
that would be material or (C) any excise Taxes, penalties, damages or equitable
relief as a result of any prohibited transaction, breach of fiduciary duty or
53
other violation under ERISA or any other applicable Law in an amount that would
be material; (vi) all accruals required under FAS 106 and FAS 112 have been
properly accrued on the Latest Financial Statements, (vii) except as set forth
in Schedule 4.24, no condition, agreement or Plan provision limits the right of
the Company or any Subsidiary to amend, cut back or terminate any Plan (except
to the extent such limitation arises under ERISA) and (viii) except as set forth
on Schedule 4.24, the Company and any Subsidiaries have no liability with
respect to any current or former employees of the Company or its subsidiaries
located in the United States of America for life insurance, death or medical
benefits after separation from employment other than (A) death benefits under
the Plans and (B) health care continuation benefits described in Section 4980B
of the Code.
4.25 Foreign Benefit Plans. Schedule 4.25 sets forth, as of the date
hereof, a true and complete list of all incentive plans, long term incentive
plans, stock option agreements and pension plans of the Company and its
Subsidiaries (other than plans, agreements or other benefits arising under the
laws of countries other than the United States of America) governed by the
applicable Laws of countries other than the United States of America which have
a material financial impact on the business of the Company or any Subsidiary
(taken as a whole) (all such plans and agreements, "Foreign Benefit Plans").
Except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect (i) to the extent legally required, all Foreign
Benefit Plans have been approved by the competent Governmental Entities, (ii)
neither the Company nor any Subsidiary has received any notice of any material
non-compliance of any Foreign Benefit Plan with the Laws, if any, applicable
thereto, and (iii) all obligations arising under Laws of countries other than
the United States of America to provide or pay for social security or other
insurances, benefits, contributions or funds relating to the employment of
persons employed, hired or used by the Company or any Subsidiary, whether based
on individual or collective agreements, oral promises or legal requirements,
have been fulfilled.
4.26 Customers. Schedule 4.26 lists the five (5) largest customers of the
Company and the Subsidiaries on a consolidated basis for the fiscal year ended
on December 31, 2005 in each of the United States, the United Kingdom, Japan and
Germany and sets forth opposite the name of each such customer the percentage of
net sales by the Company and the Subsidiaries attributable to such customer for
such period. No customer listed on Schedule 4.26 has notified the Company or any
of its Subsidiaries in writing that it will stop or materially decrease the rate
of business done with the Company or any Subsidiary.
4.27 Suppliers. Schedule 4.27 lists the five (5) largest suppliers of the
Company and the Subsidiaries on a consolidated basis for the fiscal year ended
on December 31, 2005 in each of the United States, the United Kingdom and
Germany and sets forth opposite the name of each such supplier the approximate
percentage of purchases by the Company and the Subsidiaries attributable to such
supplier for such period. No supplier listed on Schedule 4.27 has notified the
Company or any of its Subsidiaries in writing that it will stop or materially
decrease its volume of business done with the Company or any Subsidiary or
materially increase the prices of the items supplied to the Company or its
Subsidiaries.
4.28 Affiliate Transactions. Except as set forth on Schedule 4.28 or
otherwise expressly disclosed in the notes to the Financial Statements, no
Insider has any Material Contract
54
with the Company or any Subsidiary (other than employment agreements listed in
Schedule 4.17), not represented by a written Contract and terminable at will);
or any interest in any assets used in or pertaining to the business of the
Company or any Subsidiary (other than ownership of capital stock of the
Company). No officer or director of the Company (other than a director who is a
designee of an investment fund or other institutional shareholder) and no Member
of the Immediate Family of an officer or such a director has any direct or
indirect interest in any competitor, supplier or customer of the Company or any
Subsidiary or in any Person from whom or to whom the Company or any Subsidiary
leases any property, or in any other Person with whom the Company or any
Subsidiary otherwise transacts business of any nature (other than less than one
percent (1%) of the outstanding shares of capital stock of any corporation whose
stock is listed on a national securities exchange or publicly traded on the
Nasdaq National Market). As of the Closing, no Insider will have any
indebtedness owing to or from the Company or any Subsidiary.
4.29 Brokerage. Except as set forth on Schedule 4.29, no Person will be
entitled to receive any brokerage commission, finder's fee, fee for financial
advisory services or similar compensation in connection with the Merger and the
Transactions based on any Contract made by or on behalf of the Company for which
Buyer or the Company is or could become liable or obligated.
4.30 Project Contracts. Except as set forth on Schedule 4.30, neither the
Company nor any Subsidiary in a party to any Contract with a customer pursuant
to which the Company or such Subsidiary has any performance obligation other
than the obligation to deliver products to the customer in a timely manner
pursuant to the terms of the Contract (including, without limitation, any
obligation with regard to planning or consulting on system design,
responsibility for system installation or integration, or responsibility for
system functionality).
4.31 Derivative Transactions. Except for currency hedging transactions in
the Ordinary Course of Business, neither the Company nor any Subsidiary thereof
is party to any financial hedging arrangements or other derivative transactions.
V. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
5.1 Incorporation; Power and Authority. Each of Buyer and Merger Sub is a
corporation duly organized, validly existing and in good standing under the Laws
of its jurisdiction of organization, with all necessary power and authority to
execute, deliver and perform this Agreement and the Ancillary Agreements to
which it will become a party.
5.2 Valid and Binding Agreement. The execution, delivery and performance of
this Agreement and the Ancillary Agreements to which it will become a party by
Buyer and Merger Sub have been duly and validly authorized by all necessary
corporate action on the part of Buyer and Merger Sub and no other corporate
proceedings on the part of Buyer or Merger Sub are necessary to authorize the
execution and delivery of this Agreement or to consummate the Merger and the
other transactions contemplated hereby, subject only to the adoption of this
Agreement by Buyer as the sole stockholder of Merger Sub and the filing of the
Certificate of
55
Merger pursuant to Delaware Law. This Agreement has been duly executed and
delivered by Buyer and Merger Sub and constitutes the valid and binding
obligation of Buyer and Merger Sub, enforceable against them in accordance with
its terms, subject to the Remedies Exception. Each Ancillary Agreement to which
Buyer will become a party, when executed and delivered by Buyer, will constitute
the valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, subject to the Remedies Exception.
5.3 No Breach; Consents. The execution, delivery and performance of this
Agreement and the Ancillary Agreements to which it will become a party by Buyer
and Merger Sub will not (a) contravene any provision of the Organizational
Documents of Buyer or Merger Sub; (b) violate or conflict with any Law,
Governmental Order or Governmental Authority; (c) conflict with, result in any
breach of any of the provisions of, constitute a default (or any event that
would, with the passage of time or the giving of notice or both, constitute a
default) under, result in a violation of, increase the burdens under, result in
the termination, amendment, suspension, modification, abandonment or
acceleration of payment (or any right to terminate) or require a Consent,
including any Consent under any Contract or Governmental Authorization that is
either binding upon or enforceable against Buyer or Merger Sub (subject to the
Antitrust Clearance); or (d) require any Governmental Authorization (subject to
the Antitrust Clearance).
5.4 Brokerage. No Person will be entitled to receive any brokerage
commission, finder's fee, fee for financial advisory services or similar
compensation in connection with the Merger and the Transactions based on any
Contract made by or on behalf of Buyer for which any shareholder of the Company
is or could become liable or obligated.
VI. AGREEMENTS OF THE COMPANY
6.1 Conduct of the Business. From the date of the Agreement to and
including the Closing Date, (1) except with respect to any obligations expressly
set forth in this Agreement and in accordance with applicable Law, (2) with the
prior written consent of the Buyer, which consent shall not be unreasonably
withheld, conditioned or delayed, and (3) except as set forth on Schedule 6.1
hereto:
(a) each of the Company and the Subsidiaries will conduct its business only
in the Ordinary Course of Business;
(b) neither the Company nor any Subsidiary will amend or modify any
Material Contract in any manner materially adverse to the Company or such
Subsidiary;
(c) each of the Company and the Subsidiaries will (i) use commercially
reasonable efforts to preserve its business organization and goodwill, keep
available the services of its officers, employees and consultants and maintain
satisfactory relationships with vendors, customers and others having business
relationships with it, (ii), subject to applicable Laws, confer with
representatives of Buyer relating to the general status of ongoing operations as
reasonably requested by Buyer and (iii) not take any action that would render
any representation or warranty made by the Company in this Agreement untrue at
the Closing as though then made, including any actions referred to in Section
4.10;
56
(d) neither the Company nor any Subsidiary will change in any material
respect any of its methods of accounting in effect on March 31, 2006, other than
changes required by GAAP (or, with reference to non-U.S. Subsidiaries, other
applicable accounting standards);
(e) neither the Company nor any Subsidiary will cancel or terminate its
current insurance policies or allow any of the coverage thereunder to lapse,
unless replaced by a policy providing substantially similar coverage to the
policy being replaced;
(f) neither the Company nor any Subsidiary will (i) amend or propose to
amend its certificate of incorporation or by-laws, (ii) split, combine or
reclassify its outstanding capital stock, (iii) declare, set aside or pay, any
dividend or distribution payable in stock or property, or (iv) repurchase,
redeem or otherwise acquire any of its outstanding shares of capital stock;
(g) neither the Company nor any Subsidiary will issue, sell, pledge or
dispose of, or agree to issue, sell, pledge or dispose of, any additional shares
of, or any options, warrants or rights of any kind to acquire any shares of its
or its Subsidiaries' capital stock, or any debt or equity securities convertible
into, exchangeable for or exercisable for such capital stock, or enter into any
Contract with respect to any of the foregoing, except for issuances of Common
Shares pursuant to the exercise of Stock Options or Warrants outstanding as of
the date of this Agreement;
(h) neither the Company nor any Subsidiary will (i) incur or become
contingently liable with respect to any Other Indebtedness other than the Other
Indebtedness shown in the Disclosure Schedule or otherwise disclosed in the
Financial Statements, (ii) redeem, purchase, acquire or offer to purchase or
acquire any shares of its capital stock, Stock Options or Warrants, (iii) make
any acquisition of any assets or businesses or any other capital expenditures
other than expenditures for fixed or capital assets in the Ordinary Course of
Business, (iv) sell, pledge, dispose of or encumber any assets or businesses
other than sales in the Ordinary Course of Business, (v) loan, advance funds or
make any investment in or capital contribution to any other Person other than to
any Subsidiary, or (vi) enter into any Contract with respect to any of the
foregoing;
(i) neither the Company nor any Subsidiary will enter into any plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Merger and the Transactions);
(j) neither the Company nor any Subsidiary will alter the corporate
structure or ownership of any of the Company's Subsidiaries;
(k) neither the Company nor any Subsidiary will enter into any sale, lease
or license or offer to extend any Encumbrance (except for Permitted
Encumbrances) in respect of any of its assets, other than in the Ordinary Course
of Business;
(l) neither the Company nor any Subsidiary will (i) grant any severance,
retention or termination pay to, or amend any existing severance, retention or
termination arrangement with, any current or former director or officer of the
Company or any of its Subsidiaries (other than
57
pursuant to agreements currently in effect), or except in the Ordinary Course of
Business, any employee of the Company or any of its Subsidiaries, (ii) except as
required by Law or agreements or Plans or policies currently in effect, increase
or accelerate the payment or vesting of, benefits payable under any existing
severance, retention or termination pay policies or employment agreements, (iii)
enter into or amend any employment, consulting, deferred compensation or other
similar agreement with any director, officer, consultant or employee of the
Company or any of its Subsidiaries, (iv) establish, adopt or amend (except as
required by applicable Law) any collective bargaining agreement, bonus,
profit-sharing, thrift, pension, retirement, post-retirement medical or life
insurance, retention, deferred compensation, compensation, stock option,
restricted stock or other benefit plan or arrangement covering any present or
former director, officer or employee, or any beneficiaries thereof, of the
Company or any of its Subsidiaries or (v) increase the compensation, bonus or
other benefits payable to any officer or employee of the Company or any of its
Subsidiaries, other than in the Ordinary Course of Business, or any director;
(m) neither the Company nor any Subsidiary will repay, redeem, repurchase
or make any offer (including any change of control offer provided in the
Indentures) of repayment, redemption or repurchase of any Indenture
Indebtedness, except as required by Section 6.3;
(n) neither the Company nor any Subsidiary will settle or enter into any
settlement agreement with respect to any outstanding Litigation, except that,
notwithstanding the foregoing, the Company may settle or enter into any
settlement agreement with respect to any outstanding Litigation where the amount
of such settlement is less than $500,000; and
(o) neither the Company nor any Subsidiary will enter into or authorize an
agreement with respect to any of the foregoing actions.
6.2 Environmental Work.
(a) The Company currently is performing, or may be obligated to perform,
work in respect of each of the environmental matters identified on Schedule 6.2
attached hereto (the "Environmental Work"). Subject to the terms of the
Environmental Escrow Agreement, from and after the Closing, Buyer shall control
and perform the balance of the Environmental Work, provided that all
Environmental Work shall be performed on a basis consistent with the Company's
past practices; provided, however, that Buyer shall provide periodic updates to
the Representative regarding all Environmental Work performed by Buyer from and
after the Closing no less frequently than once per calendar quarter. Costs and
expenses in respect of any Environmental Work shall be paid out of the
Environmental Escrow Amount upon the joint written instructions of Buyer and the
Representative following the certification by the Company to the Representative
in reasonable detail (together with such supporting documentation as the
Representative may reasonably request) specifying such costs and expenses,
pursuant to the terms and conditions set forth in the Environmental Escrow
Agreement, it being understood that (i) to the extent such costs and expenses
exceed the amount of funds in the Environmental Escrow Account, then Buyer shall
be responsible for any such excess costs and expenses and (ii) if any funds
remain available in the Environmental Escrow Account after completion of the
Environmental Work and payment therefor in full, such remaining funds shall be
released from the Environmental Escrow Account and disbursed in accordance with
the instructions of the
58
Representative. Any interest earned on the Environmental Escrow Amount shall be
deposited by the Escrow Agent into the Environmental Escrow Account, but shall
not constitute part of the Environmental Escrow Amount. The amount of interest,
reduced by any Taxes (as referred to in the next sentence), brokerage fees and
other expenses or losses incurred in connection with the investment of the
Environmental Escrow Amount, shall be paid to the Buyer and the Representative
in proportion to the respective payments to them of the Environmental Escrow
Amount. The parties acknowledge that Buyer shall be treated as the owner of the
Environmental Escrow Account and shall be responsible for any Taxes attributable
to income earned in respect of the Environmental Escrow Amount until such
Environmental Escrow Amount is disbursed in accordance with the terms of the
Environmental Escrow Agreement (with the Buyer being entitled to reimbursement
out of such interest for any such Taxes paid).
(b) The Environmental Escrow Agreement shall provide for the release of
$2,000,000 from the Environmental Escrow Account on the second anniversary of
the Closing Date to the extent that unresolved claims do not exceed the
Environmental Escrow Amount.
(c) Subject to the right of the Representative to retain funds to cover the
Seller Expenses, the Representative shall distribute to the Equity Holders all
funds released from the Environmental Escrow Account pursuant to this Section
6.2 in accordance with their respective Percentage Interests; provided, however,
that the Representative shall direct the Escrow Agent to pay to the Surviving
Corporation all amounts required pursuant to this Section 6.2 to be distributed
from the Payment Fund to the holders of Stock Options and Warrants, and the
Surviving Corporation shall distribute such amounts, net of applicable
withholding Taxes, to such holders in accordance with their respective
Percentage Interests therein in accordance with the Representative's
instructions.
(d) Notwithstanding anything to the contrary set forth in this Agreement,
the conditions giving rise to the conducting of or otherwise being remedied by
the Environmental Work shall not be deemed to be a breach of any representation
or warranty contained in this Agreement.
6.3 Redemption of the Notes; Indenture Indebtedness Satisfaction and
Discharge.
(a) The Company shall, and shall cause Intermediate LLC and TCI to,
effectuate the Indenture Indebtedness Satisfaction and Discharge immediately
prior to or simultaneously with the Effective Time and shall:
(i) notify Buyer, no later than two (2) Business Days prior to the
Closing Date, of the Indenture Satisfaction and Discharge Amount for each
series of Indenture Indebtedness and the wire transfer instructions to the
accounts designated by the Applicable Trustee;
(ii) prepare appropriate notices or instructions to the Applicable
Trustee in form and substance reasonably satisfactory to Buyer directing it
to apply the appropriate portions of the Indenture Satisfaction and
Discharge Amount to full payment of each series of Indenture Indebtedness
on the applicable Specified Redemption Date;
59
(iii) deliver an officers' certificate for each of the 11 1/2% TCI
Notes and the 13% Notes of each series, reasonably satisfactory in form and
substance to Buyer and the Applicable Trustee, stating that all conditions
precedent to the satisfaction and discharge of such Indenture Indebtedness
have been satisfied;
(iv) deliver an opinion of counsel for each of the 11 1/2% TCI Notes,
the 13% Notes of each series, reasonably satisfactory in form and substance
to Buyer and the Applicable Trustee, stating that all conditions precedent
to the satisfaction and discharge of such Indenture Indebtedness have been
satisfied;
(v) obtain and deliver to Buyer on the Closing Date an instrument of
Satisfaction and Discharge of each Indenture resulting in a complete
release of each applicable Issuer and its Subsidiaries from all obligations
under such Indenture and the Indenture Indebtedness and all Encumbrances
relating thereto executed by the Applicable Trustee and the applicable
Issuer and reasonably satisfactory in form and substance to Buyer; and
(vi) take all other actions and prepare all other documents (which
shall be reasonably satisfactory in form and substance to Buyer and the
Applicable Trustee), necessary or appropriate to redeem the Indenture
Indebtedness on the applicable Specified Redemption Dates.
6.4 Repayment of Other Indebtedness. The Company will promptly notify Buyer
of any change in the ordinary course of repayment of Other Indebtedness. The
Company shall deliver (i) at least three Business Days prior to the Closing
Date, executed payoff letters from each lender, creditor, noteholder or other
counterparty (each, a "lender") to whom an Other Indebtedness obligation, except
for the Other Indebtedness obligations described on Schedule 6.4, is owing
(whether or not due and payable) with respect to each item of such Other
Indebtedness, together with any and all prepayment premiums, penalties, breakage
costs, "make whole amounts," costs, expenses and other payment obligations
relating to such items of such Other Indebtedness and owing (whether or not then
due and payable) to such lender (collectively, the "Payoff Amount", in each case
(A) that sets forth the amount to be paid on the Closing Date, together with
wire transfer instructions, (B) evidencing that the payment of such amount shall
result in a complete release of the Company and each of its Subsidiaries from
all obligations and of all Encumbrances relating to such item of the Other
Indebtedness and all related transaction expenses, and (C) authorizing the
Company to file UCC-3 termination statements, mortgage releases and other
Release Documents upon receipt by such lender of the applicable Payoff Amount
and (ii) immediately prior to or concurrently with the Closing, UCC-3
termination statements, mortgage releases and other Release Documents (to be
held by Buyer's counsel in escrow until the Closing or by lender's counsel and
released concurrently with the Closing) that when filed or recorded, as the case
may be, will be sufficient to release any and all Encumbrances relating to such
Other Indebtedness and the Indenture Indebtedness and all related transaction
expenses.
6.5 Notice of Developments. The Company will promptly notify Buyer of (i)
any change in the Ordinary Course of Business of the Company or any Subsidiary
that could reasonably be expected to have a Material Adverse Effect or (ii) to
the Knowledge of the
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Company, the commencement or threat in writing of Litigation naming the Company
or any Subsidiary as a party.
6.6 Pre-Closing Access to Information; Confidentiality. Through the Closing
Date, the Company and each of its Subsidiaries will afford to Buyer and its
authorized representatives reasonable access at all reasonable times and upon
reasonable notice, and subject to exclusion to comply with applicable Laws or
preserve attorney-client privilege, to the facilities, offices, properties,
technology, processes, books, business and financial records, those officers and
executive-level employees named on Schedule 6.6, business plans, budgets and
projections, information in the possession of the Company and its Subsidiaries
with respect to their customers and other information of each of the Company and
the Subsidiaries as Buyer may reasonably request, and the workpapers of Ernst &
Young LLP, the Company's independent accountants. Subject to Law and
preservation of the attorney-client privilege, Buyer will have reasonable access
to the personnel records of the Company and the Subsidiaries. The Company will
provide such Plan documents and summary plan descriptions, employee data or
other information as may be reasonably required by Buyer. The Confidentiality
Agreement, dated September 21, 2005 (the "Confidentiality Agreement"), between
the Company and Buyer will apply with respect to information obtained by Buyer
under this Section 6.6.
6.7 Commercially Reasonable Efforts. Subject to the terms and conditions
herein provided, the Company and its Subsidiaries hereto shall use its
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective the Transactions.
6.8 Securityholder Litigation. The Company and each Subsidiary shall keep
Buyer informed of, and cooperate with Buyer in connection with, any
securityholder Litigation or claim against the Company and/or its directors or
officers relating to the Merger or the Transactions, provided, however, that, no
settlement in connection with such securityholder Litigation shall be agreed to
without Buyer's prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed; provided, further, that all obligations in
this Section shall be subject to the obligations of the Company or such
Subsidiary under applicable Laws relating to attorney-client communication and
privilege.
6.9 Consents and Authorizations; Regulatory Filings. The Company will use
its commercially reasonable efforts to obtain, as soon as reasonably practicable
after the date of this Agreement, all Consents and Governmental Authorizations
(the "Required Consents") listed on Schedule 6.9. The Company and each
Subsidiary will keep Buyer reasonably advised of the status of obtaining the
Required Consents. Without limiting the foregoing, no later than the tenth day
after the date of this Agreement, the Company will make, and will cause each of
the Subsidiaries to make, all filings and submissions required by them or it
under the HSR Act, the EU antitrust Laws and regulations and any other Law
applicable to the Company or any Subsidiary required for the consummation of the
Merger and the Transactions. The Company and each Subsidiary will use its
commercially reasonable efforts to obtain an early termination of the applicable
waiting period under, and will make any additional filings required pursuant to,
the HSR Act and other applicable Laws.
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6.10 No Solicitation.
(a) The Company and each Subsidiary will not, and will cause its
representatives and Affiliates not to, directly or indirectly, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be expected
to lead to an Acquisition Proposal, (ii) furnish any information regarding the
Company or any Subsidiary to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal or that could reasonably be expected to lead to an Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction; provided,
however, that this Section 6.10(a) will not prohibit the Company from furnishing
nonpublic information regarding the Company or any Subsidiary to, or entering
into discussions or negotiations with, any Person in response to a Superior
Proposal that is submitted to the Company or any Subsidiary by such Person (and
not withdrawn) if (1) neither the Company nor any Subsidiary, nor any
representative of the Company or any Subsidiary, will have violated any of the
restrictions set forth in this Section 6.10, (2) the board of directors of the
Company concludes in good faith, after having consulted with and considered the
advice of outside counsel to the Company, that such action is required in order
for the board of directors of the Company to comply with its fiduciary
obligations to the Company's shareholders under applicable Law, (3) at least two
Business Days prior to furnishing any such nonpublic information to, or entering
into discussions with, such Person, the Company gives Buyer written notice of
the identity of such Person and of the Company's intention to furnish nonpublic
information to, or enter into discussions with, such Person, and the Company
receives from such Person an executed confidentiality agreement containing
customary limitations on the use and disclosure of all nonpublic written and
oral information furnished to such Person by or on behalf of the Company and
containing "standstill" provisions and (4) at least two Business Days prior to
furnishing any such nonpublic information to such Person, the Company furnishes
such nonpublic information to Buyer (to the extent such nonpublic information
has not been previously furnished by the Company to Buyer). Without limiting the
generality of the foregoing, the Company acknowledges and agrees that any
violation of or the taking of any action inconsistent with any of the
restrictions set forth in the preceding sentence by any representative of the
Company, whether or not such representative of the Company is purporting to act
on behalf of the Company, will be deemed to constitute a breach of this Section
6.10 by the Company.
(b) The Company will promptly (and in no event later than 24 hours after
receipt of any Acquisition Proposal, any inquiry or indication of interest that
could lead to an Acquisition Proposal or any request for nonpublic information)
advise Buyer orally and in writing of any Acquisition Proposal, any inquiry or
indication of interest that could lead to an Acquisition Proposal or any request
for nonpublic information relating to the Company or Subsidiary (including the
identity of the Person making or submitting such Acquisition Proposal, inquiry,
indication of interest or request, and the terms thereof) that is made or
submitted by any Person prior to the Closing Date. The Company will keep Buyer
fully informed with respect to the status of any such Acquisition Proposal,
inquiry, indication of interest or request and any modification or proposed
modification thereto.
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(c) The Company shall, and shall cause each of its Subsidiaries and the
Representative to, immediately cease and cause to be terminated any existing
discussions with any Person that relate to any Acquisition Proposal subject to
Section 6.10(a).
(d) Neither the Company nor any Subsidiary will release or permit the
release of any Person from, or waive or permit the waiver of any provision of,
any confidentiality, "standstill" or similar agreement to which the Company is a
party, and will enforce or cause to be enforced each such agreement at the
request of Buyer.
6.11 Checks. The Company shall, and shall cause each of its Subsidiaries
to, use its commercially reasonable efforts to cause all checks received by the
Company or any Subsidiary prior to the Closing Date to be deposited into the
Company's or the Subsidiaries' bank accounts prior to the close of business on
the Closing Date.
VII. TAX MATTERS
7.1 Tax Matters.
(a) If the Company or any Tax Affiliate is permitted but not required,
under applicable Tax laws, to treat the Closing Date as the last day of any Tax
Period, the parties shall treat the Tax Period as ending, as the case may be, at
the close of business on the Closing Date.
(b) Tax Returns.
(i) The Company (use of the defined term "Company" in this Section 7.1
shall also include each Tax Affiliate) shall, at the Company's expense,
prepare or cause to be prepared and file or cause to be filed all Returns
for the Company which are due on or before the Closing Date, and the
Company shall pay all Taxes with respect to such Returns. All such Returns
shall be accurate and complete in accordance with applicable Laws and shall
be prepared on a basis consistent with the Returns filed by or on behalf of
the Company for the preceding Tax Period. The Company shall submit copies
of all income Tax Returns to Buyer at least 30 days prior to their extended
due date for Buyer's review and approval.
(ii) Buyer shall prepare or cause to be prepared and file or cause to
be filed all Returns of the Company which are due after the Closing Date,
and Buyer shall cause the Company, at the Surviving Corporation's expense,
to pay all Taxes with respect to such Returns. The Company shall reserve on
the Closing Balance Sheet in a manner that is consistent with past practice
and is in accordance with GAAP an appropriate amount to reflect the
obligation to pay any such Taxes. Buyer shall permit the Representative to
review and comment, prior to filing, on each Return for Tax Periods which
begin before the Closing Date ("Straddle Tax Returns"). Any portion of any
Tax which must be paid in connection with the filing of a Straddle Tax
Return, to the extent attributable to any period or portion of a period
ending on or before the Closing Date (the "Interim Period"), shall be
referred to herein as "Pre-Closing Taxes." The Escrow Agent shall remit to
Buyer, in accordance with the Escrow Agreement, an amount from the Escrow
Amount equal to the Pre-Closing Taxes due with any Straddle Tax Returns (to
the extent such
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Taxes are not reflected on the Closing Balance Sheet) at least ten (10)
Business Days before Buyer is required to cause to be paid the related Tax
liability; it being understood that the Company will accrue on the Closing
Balance Sheet all Pre-Closing Taxes. Where the Pre-Closing Taxes involve a
period which begins before and ends after the Closing Date, such
Pre-Closing Taxes shall be calculated as though the taxable year of the
Company terminated as of the close of business on the Closing Date;
provided, however, that in the case of a Tax not based on income, receipts,
proceeds, profits or similar items, Pre-Closing Taxes shall be equal to the
amount of Tax for the Tax Period multiplied by a fraction, the numerator of
which shall be the number of days from the beginning of the Tax Period
through the Closing Date and the denominator of which shall be the number
of days in the Tax Period. All Straddle Tax Returns shall be prepared, and
all determinations necessary to give effect to the foregoing allocations
shall be made, in a manner consistent with prior practice of the Company.
(c) Audits. Each party shall promptly notify the other in writing upon
receipt by such party (or any of its Tax Affiliates) of any pending or
threatened Tax proceeding with respect to the Company for any (i) Tax Period
ending on or before the Closing Date or (ii) Tax Period which begins before the
Closing Date and ends after the Closing Date. The Representative shall have the
sole right to represent the interests of the Company in any Tax proceedings
relating to Tax Periods ending on or prior to the Closing Date and to employ
counsel of its choice at its expense. Buyer shall have the right to participate
at its expense in any such Tax proceeding which may have the effect of
increasing Buyer's or the Company's Tax Liability for any Tax Period ending
after the Closing Date, and the Representative and the Company shall not settle
or compromise any such proceeding without Buyer's prior written consent, which
consent will not be unreasonably withheld, conditioned or delayed; provided,
however, that Buyer shall consent to any settlement or compromise if the Equity
Holders fully indemnify Buyer for any increase in Buyer's or the Company's Tax
Liability. Buyer shall have the sole right to represent the interest of the
Surviving Corporation in any Tax proceedings relating to Tax Periods which end
after the Closing Date and to employ counsel of its choice at its expense. The
Representative shall have the right to participate at the Equity Holders'
expense in any such Tax proceedings which may have the effect of increasing the
Company's Tax Liability for any Tax period ending before the Closing Date, and
Buyer and the Surviving Corporation shall not settle or compromise any such
proceeding without prior written consent of the Representative, which consent
will not be unreasonably withheld, conditioned or delayed. Notwithstanding any
other provision to the contrary, Buyer in its sole and absolute discretion may
notify the Representative at any time that any defense and settlement of any Tax
proceeding relating to Taxes for which the Equity Holders are required to
indemnify Buyer pursuant to this Agreement must be immediately terminated in
which case any obligation with respect to the Equity Holders to make
indemnification payments to Buyer with respect to such Tax proceeding shall
thereupon terminate.
(d) Cooperation. The Representative and Buyer shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
preparation and filing of Returns pursuant to Section 7.1 and any audit,
Litigation or other proceeding with respect to Taxes. Such cooperation shall
include signing any Returns, amended Returns, claims or other documents
necessary to settle any Tax controversy, the retention and (upon the other
party's request) the provision of records and information (including any prior
years' Returns, workpapers or memoranda, whether prepared internally or by a
third-party) which are reasonably
64
relevant to any such audit, Litigation or other proceeding and making employees
(and, to the extent relevant, outside advisors) available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereby. In addition, each party agrees to (i) furnish to the
other, on a timely basis, copies of all correspondence received from any Tax
authority and (ii) promptly inform the other party of any other communication
from a Tax authority, in connection with any Tax audit, information request, or
other proceeding with respect to any Tax Period which may result in the payment
of, or affect the amount payable of, any Tax by such other party.
Notwithstanding any other provision hereof, each party will bear its own
expenses in complying with the foregoing provisions.
(e) Tax Refunds. Any refund of Taxes (which for purposes of this provision
shall include any entitlement to a credit against Tax) relating to the Company
with respect to Tax Periods (or portions thereof) ending on or before the
Closing Date and received by the Surviving Corporation within three (3) years
following the Closing shall be for the account of the Equity Holders after
payment of any and all applicable Taxes. Buyer shall pay over to the
Representative (after payment of any and all applicable Taxes) for the account
of the Equity Holders any such refunds that Buyer may receive within five (5)
days of such receipt; provided, however, that Buyer shall be entitled to (i) any
refunds and interest arising from the carryback of a Tax item from a Tax Period
that ends after the Closing Date to a Tax Period that begins before the Closing
Date and (ii) any refund of a Tax, regardless of the Tax Period to which it
relates, if Buyer is responsible for and has paid such Tax and has not otherwise
been indemnified for the payments of such Tax.
(f) Pre-Closing Actions. Prior to the Closing, the Company will not (i)
make or rescind any express or deemed election or take any other discretionary
position relating to Taxes, (ii) amend any Return, (iii) settle or compromise
any Litigation relating to Taxes, (iv) make any change in the composition of any
affiliated group of which the Company is a member, or (v) change any of its
methods of reporting income or deductions for federal or state income Tax
purposes from those employed in the preparation of the last filed federal or
state income Tax Returns, which may have the effect of increasing Buyer's or the
Company's Tax Liability for any Tax Period ending after the Closing Date.
(g) Post-Closing Actions. The Surviving Corporation will not amend (i) any
Return attributable to a Tax Period ending on or before the Closing Date or (ii)
any Straddle Tax Return that includes a Tax Period that begins before and ends
after the Closing date if such amendment may have the effect of increasing the
Company's Tax Liability for any Tax Period (or portion thereof) that ends on or
before the Closing Date.
(h) Transfer Taxes. Except as otherwise provided in this Section 7.1(h),
all transfer (including real estate transfer), documentary, sales, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (and the transactions
contemplated hereby) shall be paid by Buyer when due, and Buyer shall, at its
own expense, file all necessary Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable Law, the Representative shall, and
shall on behalf of the Equity Holders, join in the execution of any such Returns
and documentation. Notwithstanding the foregoing, any German real property
transfer Taxes incurred in connection with this Agreement (and the transactions
65
contemplated hereby) shall be borne one-half by Buyer and one-half by the Equity
Holders by (i) including fifty percent (50%) of the estimated German real
property transfer Taxes in the Closing Transaction Expenses and (ii) if the
amount of German real property transfer Taxes actually paid is more than or less
than the amount estimated, by either (A) permitting Buyer to collect fifty
percent (50%) of the excess from the Indemnity Escrow Amount or (B) requiring
Buyer to remit fifty percent (50%) of the shortfall to the Equity Holders by
depositing such amount into the Payment Fund, in either case, promptly following
the actual payment of such Taxes. The parties agree that the total amount of
estimated German real property transfer Taxes to be incurred in connection with
this Agreement (and the transactions contemplated hereby) is Euro 150,000.
(i) Tax Sharing Agreements. All tax sharing agreements, other than the
Company Tax Sharing Agreement, to which the Company is a party shall be
terminated effective as of the Closing Date.
VIII. AGREEMENTS OF BUYER
8.1 Indemnification of Officers and Directors.
(a) All rights to indemnification, whether pursuant to the Organizational
Documents of the Company or a Subsidiary of the Company, by Contract, by Law or
otherwise, existing in favor of those Persons who are, or were, directors,
officers and employees of the Company and its Subsidiaries at or prior to the
date of this Agreement (the "Indemnified Persons") will survive the Merger and
will be observed by the Surviving Corporation and its Subsidiaries to the
fullest extent permitted by Law, including the DGCL, for a period of six years
from the Closing Date (the "Indemnification Period").
(b) During the Indemnification Period, the Surviving Corporation will
maintain in effect, for the benefit of the Indemnified Persons with respect to
acts or omissions occurring prior to the Closing Date, the existing policy of
directors' and officers' liability insurance maintained by the Company as of the
date of this Agreement in the form disclosed by the Company to Buyer prior to
the date of this Agreement (the "Existing Policy"); provided, however, that (i)
the Surviving Corporation may substitute for the Existing Policy a policy or
policies of comparable coverage, (ii) the Surviving Corporation will not be
required to pay annual premiums for the Existing Policy (or for any substitute
policies for which premiums are payable on an annual basis) in excess of 125% of
the per annum rate of premium paid as of the date hereof for the Existing
Policy, and (iii) in the case of any substitute policy such as a "runoff policy"
for which the applicable premium is payable on a one time basis to obtain
coverage for the entire Indemnification Period, the Surviving Corporation will
not be required to pay an aggregate amount in respect of such premium in excess
of 750% of the per annum rate of premium paid as of the date hereof for the
Existing Policy. In the event the future premiums for the Existing Policy (or
any substitute policies) exceed the threshold amounts set forth in clauses (ii)
and (iii) of the preceding sentence, the Surviving Corporation will be entitled
to reduce the amount of coverage of the Existing Policy (or any substitute
policies) to the amount of coverage that can be obtained for premium amounts
that are within threshold amounts set forth in clauses (ii) or (iii), as the
case may be.
8.2 Employment; Employee Benefits.
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(a) Nothing in this Agreement will be construed to create a right in any
employee of the Company or any Subsidiary to employment with Buyer, the
Surviving Corporation or any other Subsidiary of Buyer (including the Company),
and, subject to any agreement between an employee and Buyer, the Surviving
Corporation or any other Subsidiary of Buyer (including the Company), the
employment of each employee of the Company or any Subsidiary who continues
employment with Buyer, the Surviving Corporation or any Subsidiary of the
Surviving Corporation (including the Company) after the Closing Date (a
"Continuing Employee") will be "at will" employment, except as otherwise
provided under applicable Law.
(b) The Parties agree that the Company shall be responsible for any
required notices and other obligations under the WARN Act or any comparable Law
for any terminations by it up to and including the date and time of Closing, and
the Buyer shall be responsible for any required notices and any other
obligations under the WARN Act or any comparable Law for any terminations by it
after the date and time of Closing.
8.3 Replacement of Letters of Credit. Prior to the Closing, Buyer shall (i)
make arrangements to obtain as of the Closing Date one or more letters of credit
to replace each of the existing letters of credit set forth on Schedule 8.3 (and
any replacements thereof obtained by the Company prior to the Closing), such
replacement letters of credit to be in a form and substance acceptable to the
intended beneficiaries thereof and (ii) use its commercially reasonable efforts
to obtain the release of the letters of credit set forth on Schedule 8.3 (or any
replacements thereof obtained by the Company prior to the Closing) from the
beneficiaries thereof, such release to take effect as of the Closing Date or
cash collateralize such letters of credit until such letters of credit shall be
so released by the beneficiaries thereof.
8.4 Commercially Reasonable Efforts. Subject to the terms and conditions
herein provided, Buyer shall use its commercially reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate and make
effective the Transactions. Without limiting the foregoing, no later than the
tenth business day after the date of this Agreement, Buyer and Merger Sub will
make all filings and submissions required by them under any Law applicable to
Buyer or Merger Sub required for the consummation of the Merger and the
Transactions, if any. Buyer and Merger Sub will use their commercially
reasonable efforts to obtain an early termination of any applicable waiting
period under, and will make any additional filings required pursuant to, any
applicable Laws.
8.5 Access to Information. In connection with Buyer's and its authorized
representatives' obtaining access, pursuant to Section 6.6 hereunder, to the
facilities, offices, properties, technology, processes, books, business and
financial records, officers, business plans, budgets and projections,
information in the possession of the Company and its Subsidiaries with respect
to their customers and other information of each of the Company and the
Subsidiaries, and the workpapers of Ernst & Young LLP, the Company's independent
accountants, Buyer agrees to use commercially reasonable efforts to attempt to
minimize the disruption of the ongoing business of the Company and its
Subsidiaries caused by any such access.
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IX. CONDITIONS TO CLOSING
9.1 Conditions to the Obligations of the Company, Buyer and Merger Sub. The
obligation of the Company, Buyer and Merger Sub to take the actions required to
be taken by them at the Closing is subject to the satisfaction or waiver, in
writing, of each of the following conditions at or prior to the Closing:
(a) The applicable waiting periods under the HSR Act, the International
Traffic in Arms Regulations (ITAR), 22 C.F.R. Sections 120-130 promulgated under
the Arms Export Control Act (AECA), 22 U.S.C. 2751 et al, and the applicable EU
antitrust Laws and regulations will have expired or been terminated; and
(b) No Law or Governmental Order will have been enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated by
this Agreement by any Governmental Entity that prohibits the Closing.
9.2 Conditions to Buyer's Obligations. The obligation of Buyer and Merger
Sub to take the actions required to be taken by them at the Closing is subject
to the satisfaction or waiver, in writing, of each of the following conditions
at or prior to the Closing:
(a) The representations and warranties set forth in Article IV that are not
subject to materiality or Material Adverse Effect qualifications shall be true
and correct in all material respects as of the Closing Date as though then made
and as though the Closing Date had been substituted for the date of this
Agreement in such representations and warranties and the representations and
warranties set forth in Article IV that are subject to materiality or Material
Adverse Effect qualifications will be true and correct in all respects at and as
of the Closing Date as though then made and as though the Closing Date had been
substituted for the date of this Agreement in such representations and
warranties, except that any representation or warranty expressly made as of a
specified date will only need to have been true on and as of such date (without
taking into account any supplemental disclosures after the date of this
Agreement by Company or the discovery of information by Buyer);
(b) The Company shall have performed and complied with each of its
agreements contained in this Agreement in all material respects;
(c) The Stockholder Consent shall have been executed and delivered to the
Company, and the Company shall have complied in all material respects with all
requirements under Section 228 of the DGCL;
(d) Each Required Consent shall have been obtained and be in full force and
effect;
(e) Buyer shall have obtained each Governmental Authorization required to
own the Surviving Corporation or operate the business of the Company in the
manner it was operated prior to the Closing Date;
(f) no Litigation instituted by a Governmental Authority shall be pending
or threatened in writing (i) challenging or seeking to prevent or delay
consummation of any of the Transactions, (ii) asserting the illegality of or
seeking to render unenforceable this Agreement,
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(iii) seeking to prohibit direct or indirect ownership, combination or operation
by Buyer of any portion of the business or assets of the Company or any
Subsidiary, or to compel Buyer or any of its Subsidiaries or the Company or any
Subsidiary to dispose of, or to hold separately, or to make any change in any
portion of the business or assets of Buyer or its Subsidiaries or of the Company
or its Subsidiaries, as a result of the Merger and Transactions that would
deprive Buyer of the benefits reasonably expected by it as a result of the
Merger, (iv) seeking to require direct or indirect transfer or sale by Buyer of,
or to impose material limitations on the ability of Buyer to exercise full
rights of ownership of, the Company or (v) imposing or seeking to impose
material damages or sanctions directly arising out of the Merger and the
Transactions on Buyer or the Company or any of their respective officers or
directors;
(g) After the date of this Agreement, no Material Adverse Effect shall have
occurred;
(h) Buyer shall not have discovered any fact or circumstance existing as of
the date of this Agreement not disclosed on the Disclosure Schedule that has a
Material Adverse Effect;
(i) The Company shall have delivered each of the agreements, certificates,
instruments and other documents that it is obligated to deliver pursuant to
Section 3.7(b)(i) and such agreements so delivered will be in full force and
effect;
(j) The Indenture Indebtedness Satisfaction and Discharge shall have
occurred pursuant to the respective Indentures and Indenture Indebtedness shall
have been duly called for redemption as provided in Section 6.3 and Buyer shall
have received an instrument of Satisfaction and Discharge of each Indenture, in
form and substance reasonably satisfactory to Buyer, executed by the Applicable
Trustee and the applicable issuer;
(k) Intermediate LLC and TCI shall have filed SEC Form 15 suspending their
reporting obligations under Section 15(d) of the Exchange Act;
(l) The repayment of the Other Indebtedness shall have occurred and the
Encumbrances securing such Other Indebtedness shall have been released; and
(m) Dissenting Shares shall represent no more than ten percent (10%) of the
Common Shares outstanding on the date of this Agreement.
9.3 Conditions to the Company's Obligations. The obligation of the Company
to take the actions required to be taken by it at the Closing is subject to the
satisfaction or waiver, in whole or in part, in the Company's sole discretion
(but no such waiver will waive any right or remedy otherwise available under
this Agreement), of each of the following conditions at or prior to the Closing:
(a) The representations and warranties set forth in Article V that are not
subject to materiality qualifications will be true and correct in all material
respects at and as of the Closing Date as though then made and as though the
Closing Date had been substituted for the date of this Agreement in such
representations and warranties and the representations and warranties set forth
in Article V that are subject to materiality qualifications will be true and
correct in all respects at and as of the Closing Date as though then made and as
though the Closing Date had been substituted for the date of this Agreement in
such representations and warranties, except
69
that any representation or warranty expressly made as of a specified date will
only need to have been true on and as of such date;
(b) Buyer and Merger Sub will have performed and complied with each of
their agreements contained in this Agreement in all material respects;
(c) Buyer and Merger Sub will have delivered each of the certificates,
instruments and other documents that they are obligated to deliver pursuant to
Section 3.7(b)(ii); and
(d) no Litigation instituted by a Governmental Authority shall be pending
or threatened in writing (i) challenging or seeking to prevent or delay
consummation of any of the Transactions, (ii) asserting the illegality of or
seeking to render unenforceable this Agreement, or (iii) imposing or seeking to
impose material damages or sanctions directly arising out of the Merger and the
Transactions on the Company or any Subsidiary or any of their respective
officers or directors.
X. TERMINATION
10.1 Termination of Agreement. This Agreement may be terminated prior to
the Closing as follows:
(a) by mutual written consent of the Company and Buyer;
(b) at the election of the Company or Buyer on or after December 28, 2006,
if the Closing shall not have occurred by the close of business on such date,
provided that the terminating party is not in default of any of its obligations
hereunder such that there would be a failure of condition under Section 9.2(a)
or (b) or Section 9.3(a) or (b), as the case may be, if the Closing were to
occur on the date of such termination; provided, further, that if a request for
additional information is received from a Governmental Entity pursuant to the
HSR Act or any applicable EU antitrust Laws, such date shall be extended to the
60th day following acknowledgment by such Government Entity that the Company and
Buyer shall have complied with such request, but in any event not later than
December 31, 2006;
(c) by Buyer or the Company, if any Litigation set forth in Section 9.2(f)
is pending or threatened;
(d) by the Company or Buyer, if there shall be in effect a final
non-appealable Governmental Order of a Governmental Entity of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the Merger and the Transactions;
(e) by the Company, if (A) the Company will have delivered to Buyer a
written notice of the Company's intent to enter into a merger, acquisition or
other agreement (including an agreement in principle) to effect a Superior
Proposal based on an Acquisition Proposal received by it, (B) five business days
have elapsed following delivery to Buyer of such written notice by the Company,
(C) during such five business-day period the Company has fully cooperated with
Buyer, including, without limitation, informing Buyer of the terms and
conditions of such Acquisition Proposal and the identity of the Person making
such Acquisition Proposal, with the intent of enabling Buyer to agree to a
modification of the terms and conditions
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of this Agreement so that the transactions contemplated hereby may be effected,
(D) at the end of such five business-day period the Board of Directors of the
Company will have reasonably concluded that such Acquisition Proposal
constitutes a Superior Proposal, (E) the Company pays to Buyer an amount equal
to the aggregate of all out-of-pocket expenses incurred by Buyer in connection
with the Transactions (including, without limitation, travel expenses of Buyer
personnel and fees and disbursements of external advisors to Buyer), and (F) the
Company will have entered into a merger, acquisition or other agreement
(including an agreement in principle) to effect a Superior Proposal or the Board
of Directors of the Company will have resolved to do so; or
(f) if the party seeking to terminate is not then in material breach of
this Agreement, (i) by Buyer, if there has been a material breach by the Company
of its representations, warranties, agreements or obligations under this
Agreement, which breach is not cured within fifteen (15) days following written
notice of such breach by Buyer to the Company, (ii) by the Company, if there has
been a material breach by Buyer or Merger Sub of any of their respective
representations, warranties, agreements or obligations under this Agreement,
which breach is not cured within fifteen (15) days following written notice of
such breach by the Company to Buyer, or (iii) by any party if any of the
conditions to its obligations to consummate the Merger and the Transactions set
forth in Article IX shall have become impossible to satisfy and such
impossibility is not due to its own action or omission.
10.2 Procedure Upon Termination. In the event of termination by Buyer or
the Company, or both, pursuant to Section 10.1, written notice thereof shall
forthwith be given to the other party or parties, and this Agreement shall
terminate, and the Merger and the Transactions shall be abandoned, without
further action by Buyer or the Company. If this Agreement is terminated as
provided herein each party shall return all documents, work papers and other
material of any other party relating to the Merger and the Transactions, whether
obtained before or after the execution hereof, to the party furnishing the same.
10.3 Effect of Termination. In the event that this Agreement is validly
terminated as provided herein, then each of the parties shall be relieved of
their duties and obligations arising under this Agreement after the date of such
termination and such termination shall be without Liability to Buyer, Merger Sub
or the Company; provided, however, that all obligations of the parties under
this Agreement will terminate except that the provisions of (i) Section 6.6
(pre-closing access to information); (ii) Article XIII; (iii) Sections 10.2
(procedure upon termination); and this Section 10.3 (effect of termination) will
survive indefinitely unless sooner terminated or modified by the parties in
writing; provided, further, however, that, to the extent this Agreement is
terminated pursuant to Section 10.1(f)(i) or (ii), nothing in this Section 10.3
shall relieve any party hereto from any Liability for a material breach of this
Agreement which resulted in such termination.
XI. INDEMNIFICATION
11.1 Survival of Representation and Warranties. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties of each of Buyer, Merger Sub and
the Company contained in this Agreement shall survive the
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Closing and the Effective Time and such representations and warranties shall
terminate at 5:00 p.m. (New York City time) on the second anniversary of the
Closing Date; provided, however, (i) the representations and warranties set
forth in Sections 4.12 and 4.21 shall survive the Closing until, and shall
terminate at, 5:00 p.m. (New York City time) on the third anniversary of the
Closing Date (each, an "Indemnity Cut-Off Date"). Any claim for indemnification
made under Section 11.2 which is not asserted by notice in writing given as
herein provided relating thereto within the above-specified period of survival
may not be pursued and is hereby irrevocably waived after the applicable
Indemnity Cut-Off Date. Any claim for indemnification of a Loss asserted within
the period of survival as herein provided will be timely made for purposes
hereof.
11.2 General Indemnification.
(a) As an inducement to Buyer and Merger Sub to enter into this Agreement,
and acknowledging that Buyer and Merger Sub are relying on the indemnification
provided in this Section 11.2 in executing and performing this Agreement, the
Equity Holders, by their acceptance of Merger Consideration pursuant to this
Agreement, shall be deemed to have authorized the Representative to act on
behalf of the Equity Holders in connection with all matters relating to this
Agreement, the Escrow Agreement and the Environmental Escrow Agreement,
including, without limitation, the Indemnity Escrow Account, the Purchase Price
Adjustment Escrow Account, and the Environmental Escrow Account.
(b) Subject to Sections 11.3 and 11.4 below, after the Closing each of
Buyer, the Surviving Corporation and its Subsidiaries and their respective
officers, directors, employees and successors and assigns (collectively, the
"Buyer Indemnified Parties") shall be indemnified and held harmless (in any
event, without duplication) solely out of the Indemnity Escrow Account from and
against:
(i) subject to Section 11.1, any and all Losses resulting from,
arising from, relating to or constituting the failure of any representation
or warranty of the Company set forth in Article IV (other than those
representations and warranties relating to Taxes), to be true and correct
as of the date made; and
(ii) any and all Losses resulting from, arising from, relating to or
constituting the breach of any covenant or other agreement (other than
those covenants or other agreements relating to Taxes) on the part of the
Company under this Agreement.
(c) Subject to Sections 11.3 and 11.4 below, after the Closing each of the
Buyer Indemnified Parties shall be indemnified and held harmless (in any event,
without duplication) solely out of the Indemnity Escrow Account from and against
any and all Losses arising out of or attributable to (i) any misrepresentation,
inaccuracy or breach of any representation, warranty, covenant, agreement or
promise related to Taxes by the Company contained in this Agreement or (ii) any
Liability of the Company or any of its Tax Affiliates with respect to Taxes for
any Tax Period, or portion thereof, ending on or before the Closing Date,
including, without limitation any Interim Period; provided, that the Losses
shall be reduced (but not below zero) to the extent reserved in the Closing
Balance Sheet; and provided, further, that a valuation allowance or reserve with
respect to net operating losses, Tax basis of assets and other similar Tax
attributes shall not be considered a reserve on the Closing Balance Sheet for
this purpose.
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(d) Notwithstanding any provision in this Agreement to the contrary:
(i) the Buyer Indemnified Parties shall not be indemnified under
Section 11.2(c) with respect to any Losses or Taxes for any Taxable Period
that begins after the Closing Date, including without limitation, the
portion of any Straddle Period that begins after the Closing Date; and
(ii) the Buyer Indemnified Parties shall not be indemnified under
Section 11.2(c) with respect to any Losses or Taxes that would not have
been generated but for any election made by the Buyer under Section 338(g)
of the Code with respect to the Company and one or more Tax Affiliates.
(e) Subject to Sections 11.3 and 11.4 below, Buyer and the Surviving
Corporation hereby, jointly and severally, agree to indemnify and hold the
Equity Holders and the Representative and their respective officers, directors,
employees and successors and assigns (collectively, the "Equity Holders
Indemnified Parties") harmless from and against:
(i) subject to Section 11.1, any and all Losses resulting from,
arising from, relating to or constituting the failure of any representation
or warranty of Buyer or Merger Sub set forth in Article V to be true and
correct as of the date made; and
(ii) any and all Losses resulting from, arising from, relating to or
constituting the breach of any covenant or other agreement on the part of
Buyer or Merger Sub under this Agreement.
(f) Notice of all claims made by any Buyer Indemnified Party pursuant to
this Article XI shall be given exclusively to the Representative, not in its
personal capacity, but solely in its capacity as the representative of the
Equity Holders, and the Representative shall have full and exclusive power and
authority to represent the interests of the Equity Holders in respect of such
claims. Notwithstanding anything contained herein to the contrary, no Buyer
Indemnified Party shall be entitled to make any claim for indemnification under
this Article XI against the Representative or any Equity Holder.
(g) To the extent that Buyer, the Surviving Corporation or any Subsidiary
suffers any Losses for which it is entitled to be indemnified under Section
11.2(a), then (without limiting any of the rights of the Surviving Corporation
or such Subsidiary as a Buyer Indemnified Party, but in any event without
duplication) Buyer shall be entitled to make an indemnification claim for such
Losses on behalf of the Surviving Corporation or such Subsidiary.
11.3 Limits on Indemnification. Notwithstanding anything herein to the
contrary:
(a) no indemnified party shall be entitled to indemnification under
Sections 11.2(b)(i), 11.2(c) or 11.2(e)(i) unless the aggregate amount of all
Losses to the Equity Holders Indemnified Parties or the Buyer Indemnified
Parties, as applicable, finally determined to arise thereunder exceeds
$2,500,000 (the "Basket Amount"), and then only to the extent of the aggregate
Losses which exceed that amount; provided that (i) for the purpose of
calculating the Losses to the Buyer Indemnified Parties herein any materiality
or Material Adverse Effect qualifications in the representations and warranties
set forth in Article IV shall be disregarded,
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and (ii) any obligation to pay the Initial Merger Consideration or any
Subsequent Merger Consideration, and indemnification for any breach of the
representations set forth in Sections 4.29 and 5.4 shall not be entitled to the
benefit of the Basket Amount;
(b) no Party shall be indemnified for any Losses under Sections 11.2(b),
11.2(c) or 11.2(e) to the extent (i) that such Party receives or is entitled to
receive any insurance proceeds or other amounts from third parties in respect of
such Losses or (ii) of the Tax Benefits allowable with respect to such Losses;
(c) to avoid double-counting as to any matter, the term "Losses" shall not
include any Loss suffered with respect to any Liability or obligation of the
Company or any Subsidiary, to the extent that such Liability or obligation (or a
reserve therefor (to the extent of such reserve)) is reflected in any of the
Closing Statements, or, in the event of any dispute with respect thereto, in
accordance with the final determination of such dispute, even if the events,
facts or circumstances giving rise to such Loss would also constitute a breach
of any of the Company's representations or warranties hereunder;
(d) claims by Buyer Indemnified Parties against the Indemnity Escrow
Account for indemnification for any Losses shall be made on or prior to the
applicable Indemnity Cut-Off Date. Any claim made for indemnification for Losses
which is not asserted by notice in writing given as herein provided relating
thereto within such time period may not be pursued and is hereby irrevocably
waived after such time;
(e) no Party shall be entitled to indemnification under any Section of this
Agreement in respect of any Loss unless the amount of such Loss exceeds $30,000;
provided that any and all Losses for which indemnification is excluded under
this Section 11.3(e) shall be counted in determining whether the Basket Amount
has been reached.
11.4 Exclusive Remedy.
(a) Notwithstanding anything herein to the contrary, the parties
acknowledge and agree that the sole recourse of the Buyer Indemnified Parties
for any claim under this Article XI that is validly established shall be to make
claims against and to collect amounts solely from the Indemnity Escrow Account
(all as more particularly set forth in the Escrow Agreement and this Article
XI), to the extent of the amounts remaining therein, and the Buyer Indemnified
Parties shall have no other recourse against the Representative or the Equity
Holders or any of their respective assets and properties for any such claim. No
claim against any of the Equity Holders or the Representative in respect of the
Transactions shall be available or be asserted, and none of such Persons shall
have any Liability of any nature whatsoever to any of the Buyer Indemnified
Parties, other than for their respective interests in the Indemnity Escrow
Account.
(b) Prior to or in connection with the Closing, the parties will have
available to them all remedies available under Law, including specific
performance or other equitable remedies. The parties agree that, after the
Closing, their respective remedies under this Article XI are their exclusive
remedies under this Agreement, including without limitation with respect to any
matter based on the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of any party hereto contained herein or based upon
the failure to perform any covenant, agreement
74
or undertaking herein. Notwithstanding anything herein to the contrary, nothing
in this Agreement will prevent any party from bringing an action, other than
under this Article XI, based upon allegations of fraud by any other party in
connection with this Agreement.
11.5 General Indemnification Procedures.
(a) Subject to Section 11.5(e), in the event that any Legal Proceedings
shall be instituted or that any claim or demand shall be asserted by any Third
Party (a "Third Party Claim") in respect of which indemnification may be sought
under Section 11.2, any indemnified party shall reasonably and promptly cause
written notice of the assertion of any Third Party Claim of which it has or
obtains knowledge which is covered by this indemnity to be forwarded to the
indemnifying party. Such notice shall identify specifically the basis under
which indemnification is sought pursuant to Section 11.2 and enclose true and
correct copies of any written document furnished to the indemnified party by the
Person that instituted the Third Party Claim. The indemnifying party shall have
the right to defend against, negotiate or otherwise deal with such Third Party
Claim. The indemnified party may, at its own cost, participate in the
investigation, trial and defense of such claim, any lawsuit or action arising
therefrom and any appeal thereof; provided, however, if the named parties to the
action or proceeding include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the expense of
separate counsel for the indemnified party shall be paid by the indemnifying
party, but the indemnifying party shall not be liable for the reasonable fees
and expenses of more than one separate counsel (and one local counsel in each
applicable jurisdiction other than the jurisdiction in which the primary claim,
lawsuit or action is being conducted). If the indemnifying party fails to assume
the defense of such claim within thirty (30) days after receipt of the notice of
a Third Party Claim (or such earlier date, if the failure to assume the defense
on such earlier date would materially impair the ability of such indemnified
party to defend such claim), or if the indemnifying party fails to diligently
conduct the defense of such claims, the indemnified party against which such
claim has been asserted will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake the defense, compromise or
settlement of such claim (all at the cost and expense of the indemnifying party)
and the indemnifying party shall have the right to participate therein at its
own cost. If the indemnifying party is the Representative, acting on behalf of
the Equity Holders hereunder, and has assumed the obligation to defend,
negotiate, settle or otherwise deal with such Third Party Claim, all expenses
incurred by the Representative in defending against, negotiating, settling or
otherwise dealing with such Third Party Claim shall be paid out of the Indemnity
Escrow Account established therefor under the Escrow Agreement and, to the
extent that there are sufficient funds in the Indemnity Escrow Account, the
Representative and Buyer shall instruct the Escrow Agent to make the required
payment to the indemnifying party out of the Indemnity Escrow Account and, to
the extent that there are insufficient funds in the Indemnity Escrow Account,
such expenses shall be paid by Buyer. The parties hereto agree to cooperate
fully with each other in connection with the defense, negotiation or settlement
of any such Third Party Claim; provided, that such cooperation will not unduly
disrupt the operations of the business of the Buyer Indemnified Party (other
than the Surviving Corporation and its Subsidiaries) or cause the Buyer
Indemnified Party (other than the Surviving Corporation and its Subsidiaries) to
breach any confidentiality obligations owed to third parties. The party
defending such Third Party Claim shall promptly supply to the other party copies
of all correspondence and documents relating to or in connection
75
with such Third Party Claim and keep the other party fully informed of all
developments relating to or in connection with such Third Party Claim
(including, without limitation, providing to the other party on request updates
and summaries as to the status thereof).
(b) Neither the indemnified party nor the indemnifying party may concede,
settle or compromise any Third Party Claim without the consent of the other
party (which consent will not be unreasonably withheld, conditioned or delayed)
unless (A) such concession, settlement or compromise shall constitute a complete
or unconditional discharge and release of all parties indemnified hereunder, (B)
such judgment, discharge, settlement or compromise shall provide for no relief
other than the payment of monetary damages and the Indemnity Escrow Amount shall
be sufficient pay such monetary damages in full, and (C) no indemnified party
shall be required to admit criminal liability. Notwithstanding the foregoing,
(i) if a Third Party Claim seeks the issuance of an injunction, the specific
election of an obligation or similar remedy against a Buyer Indemnified Party or
(ii) if the subject matter of a Third Party Claim relates to the ongoing
business of any Buyer Indemnified Party, which Third Party Claim, if decided
against any Buyer Indemnified Party, would materially adversely affect the
ongoing business or reputation of any Buyer Indemnified Party, the Buyer
Indemnified Party alone will be entitled to settle such Third Party Claim
(provided that no such settlement shall be evidence of Losses incurred by such
party) in the first instance and, if the Buyer Indemnified Party does not settle
such Third Party Claim, the Representative will then have the right to contest
and defend (but not settle) such Claim; provided that if Representative presents
a settlement of such claim to the Buyer Indemnified Party and the Buyer
Indemnified Party refuses to consent to such settlement, subsequent expenses in
respect of such claim and amounts payable with respect thereto in excess of the
amount of such settlement shall not be Losses.
(c) With respect to claims for indemnification pursuant to this Article XI
other than Third Party Claims, the indemnified party shall promptly notify in
writing the indemnifying party of such claims of which it has or obtains
knowledge.
(d) Subject to Section 11.5(e), no later than ten (10) Business Days after
any final judgment or award shall have been rendered by a court, arbitration
board or administrative agency of competent jurisdiction and the expiration of
the time in which to appeal therefrom, or a settlement shall have been
consummated, or the indemnified party and the indemnifying party shall have
arrived at a mutually binding agreement with respect to a claim hereunder, the
indemnifying party shall pay the amounts, if any, due and owing by the
indemnifying party to the indemnified party by wire transfer of immediately
available funds to an account designated in writing by the indemnified party.
(e) All indemnity payments required under this Section 11.5 to be made by
the Representative, acting on behalf of the Equity Holders as indemnifying party
hereunder, to the indemnified party in respect of such claim (including without
limitation any reimbursement of expenses) shall be paid exclusively out of, and
with recourse limited to, the Indemnity Escrow Account, and to the extent that
there are sufficient funds in the Indemnity Escrow Account the Representative
and Buyer shall instruct the Escrow Agent to make such payments to the
indemnified party out of the Indemnity Escrow Account. All cost and expenses
required under this Section 11.5 to be borne by the Representative, acting on
behalf of the Equity Holders as indemnifying party hereunder (including all
reasonable attorneys' fees and expenses of counsel
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to the Representative), which are incurred with respect to any Third Party Claim
which is being defended, negotiated or settled, or otherwise dealt with, by the
Representative at the request of the indemnified party, shall be paid out of the
Indemnity Escrow Account, and (i) to the extent that there are sufficient funds
in the Indemnity Escrow Account, the Representative and Buyer shall instruct the
Escrow Agent to advance all funds required to cover all such costs and expenses
out of the Indemnity Escrow Account to the Representative and (ii) to the extent
that there are insufficient funds in the Indemnity Escrow Account, Buyer shall
advance all funds required to cover the balance of such costs and expenses to
the Representative. The Representative, acting on behalf of the Equity Holders
as indemnifying party hereunder, shall be entitled (i) to decline any request of
any Buyer Indemnified Party to defend against, negotiate, settle or otherwise
deal with any Third Party Claim unless and until all cost and expenses referred
to in the immediately preceding sentence are advanced to the Representative and
(ii) at any time cease to defend against, negotiate, settle or otherwise deal
with any such Third Party Claim if all such cost and expenses are not advanced
by the Escrow Agent or Buyer to the Representative after a request therefor is
made in writing by the Representative.
11.6 Tax Treatment of Indemnity Payments. The parties hereto agree to treat
any indemnity payment made pursuant to this Article XI as an adjustment to the
Merger Consideration for federal, state, local and foreign income Tax purposes
to the extent permitted by Law.
XII. THE REPRESENTATIVE
12.1 Authorization of the Representative. FS Private Investments III LLC, a
Delaware limited liability company (and each successor appointed in accordance
with Section 12.6), is hereby appointed, authorized and empowered to act as the
representative (the "Representative") of and for the benefit of the Equity
Holders in connection with and to facilitate the consummation of the Merger and
the Transactions, and in connection with the performance of the various actions
required or permitted to be performed on behalf of the Equity Holders under this
Agreement and the Ancillary Agreements, for the purposes and with the powers and
exclusive authority hereinafter set forth in this Article XII and in the
Ancillary Agreements, which shall include the sole and exclusive power and
authority:
(a) To execute and deliver each of this Agreement, the Escrow Agreement,
the Environmental Escrow Agreement and other Ancillary Agreements (each with
such modifications or changes therein as to which the Representative shall have
consented) and to agree to such amendments or modifications thereto as the
Representative determines to be desirable;
(b) To execute and deliver such waivers and consents in connection with
this Agreement, the Escrow Agreement, the Environmental Escrow Agreement and
other Ancillary Agreements and the consummation of the Transactions as the
Representative may deem necessary or desirable;
(c) To collect and receive all moneys and other proceeds and property
payable to the Equity Holders pursuant to the terms of this Agreement, the
Escrow Agreement and the Environmental Escrow Agreement, including, without
limitation, the Payment Fund and any
77
portion of or interest accrued on the Indemnity Escrow Account, the Working
Capital Escrow Account and the Environmental Escrow Account that are
distributable to Equity Holders and, subject to (i) the Escrow Agreement, (ii)
the Environmental Escrow Agreement and (iii) the withholding and retention
provisions hereinafter set forth in this Article XII, to disburse and pay the
same to each of the Equity Holders (other than with respect to holders of Stock
Options or Warrants who will be paid by the Surviving Corporation pursuant to
the provisions of this Agreement) to the extent of and in accordance with their
respective Percentage Interests;
(d) As the Representative of the Equity Holders, to enforce and protect the
rights and interests of the Equity Holders and to enforce and protect the rights
and interests of the Representative arising out of or under or in any manner
relating to this Agreement, the Escrow Agreement and the Environmental Escrow
Agreement and other Ancillary Agreements, and each other agreement, document,
instrument or certificate referred to herein or therein or the transactions
provided for herein or therein (including, without limitation, in connection
with any and all claims for indemnification brought by any indemnifying party
under Article XI) and, in connection therewith, to (i) assert any claim or
institute any action, proceeding or investigation in the name of the
Representative or, if the Representative so elects, in the names of one or more
of the Equity Holders; (ii) investigate, defend, contest or litigate any claim,
action, proceeding or investigation initiated by Buyer, the Surviving
Corporation or any person, firm or corporation or by any Governmental Entity
against the Representative and/or any of the Equity Holders and/or the Indemnity
Escrow Account and/or the Working Capital Escrow Account and/or the
Environmental Escrow Account, and receive process on behalf of any or all Equity
Holders in any such claim, action, proceeding or investigation and compromise or
settle on such terms as the Representative shall determine to be appropriate,
and give receipts, releases and discharges with respect to, any such claim,
action, proceeding or investigation; (iii) file any proofs of debt, claims and
petitions as the Representative may deem advisable or necessary; (iv) settle or
compromise any claims asserted under the Escrow Agreement and the Environmental
Escrow Agreement and (v) file and prosecute appeals from any decision, judgment
or award rendered in any such action, proceeding or investigation in the name of
the Representative or, if the Representative so elects, in the names of one or
more of the Equity Holders;
(e) To enforce payment of the Payment Fund and amounts due to Equity
Holders from the Indemnity Escrow Account, the Working Capital Escrow Account
and the Environmental Escrow Account, as applicable, and any other amounts
payable to the Equity Holders, in each case on behalf of the Equity Holders and
each of them to the extent of their respective Percentage Interests therein, in
the name of the Representative or, if the Representative so elects, in the names
of one or more of the Equity Holders;
(f) To cause to be paid out of the Indemnity Escrow Account the full amount
of any judgment or judgments and legal interest and costs awarded in favor of
any Buyer Indemnified Party arising out of the indemnification provisions set
forth in Section 11.2(a) or (b), the reimbursement provisions set forth in
Section 11.6, or any amounts payable to any such Buyer Indemnified Party in
respect of any compromise or settlement of any claim for indemnification under
such Section 11.2(a) or (b) or reimbursement under Section 11.6 as may be agreed
to by the Representative;
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(g) To cause to be paid, pursuant to Section 3.5, out of the Purchase Price
Adjustment Escrow Account, an amount equal to any difference between the Closing
Date Net Working Capital, Closing Date Cash Amount, Closing Date Other
Indebtedness and Closing Date Capital Expenditure Amount and the respective
corresponding amounts estimated pursuant to Section 3.2(a)(ii);
(h) To refrain from enforcing any right of the Equity Holders or any of
them and/or of the Representative arising out of or under or in any manner
relating to this Agreement, the Escrow Agreement, the Environmental Escrow
Agreement or any other agreement, instrument or document in connection with the
foregoing; provided, however, that no such failure to act on the part of the
Representative, shall be deemed a waiver of any such right or interest by the
Representative unless such waiver is in a writing signed by the Representative;
and
(i) To make, execute, acknowledge and deliver all such other agreements,
guarantees, orders, receipts, endorsements, notices, requests, instructions,
certificates, stock powers, letters and other writings, and, in general, to do
any and all things and to take any and all action that the Representative may
consider necessary or proper or convenient in connection with or to carry out
the Transactions, the Escrow Agreement, the Environmental Escrow Agreement and
all other agreements, documents or instruments referred to herein or therein or
executed in connection herewith or therewith.
The grant of authority provided for in this Section 12.1: (i) is coupled with an
interest and shall be irrevocable and survive the death, incompetency,
bankruptcy or liquidation of any Equity Holder; (ii) subject to the provisions
of Section 12.6 below, may be exercised by the Representative either by signing
separately as Representative of each of the Equity Holders or, after listing all
of the Equity Holders executing an instrument, by the signature of the
Representative acting in such capacity for all of them; and (iii) shall survive
the transfer by an Equity Holder of the whole or any fraction of its interest
hereunder, including its Percentage Interest.
12.2 Payments of Expenses; Holdbacks.
(a) The Representative shall withhold and retain from the Payment Fund, and
shall have the right to withhold and retain from the funds distributed by the
Escrow Agent to the Representative from the Indemnity Escrow Account, the
Purchase Price Adjustment Escrow Account and the Environmental Escrow Account,
ratably in accordance with each Equity Holder's Percentage Interest, such amount
or amounts as shall be sufficient to pay all known fees and expenses (the
"Seller Expenses") which are required to be paid or borne by the Representative
or the Equity Holders pursuant to this Agreement (including, without limitation,
the fees and expenses of the Accounting Arbitrator payable by the Representative
pursuant to Section 3.5(d) and pursuant to Section 13.2), the Escrow Agreement
and the Environmental Escrow Agreement, and shall pay all such fees and expenses
out of the amount or amounts so withheld. The Representative shall provide to
the Equity Holders a breakdown of the expenses for which the Equity Holders are
responsible as such expenses are withheld and retained from the Payment Fund,
the Indemnity Escrow Account, the Purchase Price Adjustment Escrow Account and
the Environmental Escrow Account. In the event that the amounts so withheld are
insufficient to pay all expenses required to be paid or borne by the Equity
Holders or incurred for
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the benefit of the Equity Holders, each Equity Holder, upon written notification
from the Representative of any such deficiency, shall promptly deliver to the
Representative full payment of his or her ratable share of the amount of such
deficiency in accordance with such Equity Holder's Percentage Interest or the
Representative, at its election, may deduct from the Expense Account all amounts
required to compensate the Representative for such deficiency.
(b) In connection with the performance of its obligations hereunder and
under the Escrow Agreement and the Environmental Escrow Agreement, the
Representative shall have the right at any time and from time to time to select
and engage, at the cost and expense of the Equity Holders (to the extent
hereinafter set forth), attorneys, accountants, investment bankers, advisors,
consultants (including, without limitation, consultants specializing in
environmental liability and similar matters), paying agents, and clerical
personnel and obtain such other professional and expert assistance, and maintain
such records, as the Representative may deem necessary or desirable and incur
other out-of-pocket expenses. In furtherance of the foregoing and to enable the
Representative to pay all costs and expenses payable pursuant to this Agreement,
the Representative shall be authorized to withdraw funds from the Expense
Account (including such costs and expenses which are required to be paid or
borne by the Equity Holders pursuant to this Agreement, the Escrow Agreement and
the Environmental Escrow Agreement), which Expense Account shall be maintained
by the Representative. To the extent that the balance in the Expense Account
shall decrease to below $100,000, the Representative shall have the right to
replenish the Expense Account by withholding amounts received for the account of
the Equity Holders (including, without limitation, amounts otherwise
distributable to the Equity Holders from the Indemnity Escrow Account, the
Purchase Price Adjustment Escrow Account, the Environmental Escrow Account) and
depositing such amounts into the Expense Account. Any income earned from
investments of funds in the Expense Account shall be deposited in the Expense
Account. In the sole and absolute discretion of the Representative, any amounts
on deposit in the Expense Account, including, without limitation, any income
earned from investments of funds in the Expense Account, may be distributed from
time-to-time by the Representative to the Equity Holders in accordance with
their respective Percentage Interests. Upon the final distribution of any
remaining amounts in the Indemnity Escrow Account and the Environmental Escrow
Account to the Equity Holders and the termination of each of the Escrow
Agreement and the Environmental Escrow Agreement pursuant to its respective
terms, all funds in the Expense Account, after payment of any remaining expenses
incurred by the Representative, shall be distributed to the Equity Holders in
accordance with their respective Percentage Interests.
12.3 Percentage Interests, Disbursements.
(a) All payments to Equity Holders out of the Payment Fund by the
Representative hereunder, and all sums, proceeds and other property held by the
Representative, on behalf of the Equity Holders, and all deductions or other
setoffs from such payments or other proceeds, shall be allocated among them in
accordance with their respective Percentage Interests.
(b) All monies or other proceeds deposited into the Payment Fund or
received by the Representative for distribution to Equity Holders shall be
distributed by the Representative as promptly as practicable to each Equity
Holder in accordance with its Percentage Interest, subject,
80
however, to the right of the Representative to deduct and withhold amounts as
contemplated by the provisions of this Article XII and to withhold amounts under
Section 3.6.
12.4 Bank Accounts; Investments.
(a) The Representative shall have the right to open such account or
accounts in its own name as the Representative in any bank or trust company as
it may select in order to deposit all sums that it may receive and hold
hereunder and to issue checks or draw money upon the signature of any
then-acting Representative (or the signature of one or more persons the
Representative may designate) on each such account.
(b) The Representative shall have the right to invest and reinvest any of
the proceeds held by it under the terms of this Agreement (including sums held
in the Expense Account) in investments only of a type which the Escrow Agent is
permitted to make pursuant to the Escrow Agreement. Any securities or other
property at any time held by the Representative may be held by it in bearer or
registered form or in the name of any other person or persons it may designate,
and the Representative may deal with such securities or other property to the
same extent and with the same powers as an individual owner thereof might do.
Except to the extent provided in Section 12.5(b)(i), the Representative shall
have no responsibility or obligation whatsoever to any Equity Holder or to any
other party for the performance of any investments made in accordance with the
provisions of this Agreement or for any losses realized by any thereof.
12.5 Compensation; Exculpation; Indemnity; Security.
(a) The Representative shall not be entitled to any fee, commission or
other compensation for the performance of its services hereunder, but shall be
entitled to the payment of all its expenses incurred as the Representative
(including, without limitation, a reasonable allocation of the amount of salary
and other employment expenses paid to employees of the Representative actually
engaged in the exercise of any of the powers conferred upon the Representative
hereunder), and in furtherance of the foregoing, may pay or cause to be paid or
reimburse itself for the payment of any and all such expenses, or may draw
advances in respect of anticipated expenses, from the Expense Account. The
Representative shall provide to the Equity Holders a breakdown of expenses
deducted from the Expense Account.
(b) In dealing with this Agreement, the Escrow Agreement, the Environmental
Escrow Agreement and any instruments, agreements or documents relating thereto,
and in exercising or failing to exercise all or any of the powers conferred upon
the Representative hereunder, (i) the Representative assumes and shall incur no
responsibility whatsoever by reason of any error in judgment or other act or
omission performed or omitted hereunder or in connection with the Escrow
Agreement, the Environmental Escrow Agreement or any such other agreement,
instrument or document, excepting only responsibility for any act or failure to
act which constitutes willful misconduct, and (ii) the Representative shall be
entitled to rely on the advice of counsel, public accountants or other
independent experts experienced in the matter at issue, and any error in
judgment or other act or omission of the Representative pursuant to such advice
shall in no event subject the Representative to liability to any Equity Holder,
the Company, Buyer, Merger Sub, the Surviving Corporation or any other Person.
81
(c) Each Equity Holder, severally, shall indemnify the Representative
against all damages, liabilities, claims, obligations, costs and expenses,
including reasonable attorneys', accountants' and other experts' fees and the
amount of any judgment against the Representative, of any nature whatsoever,
arising out of or in connection with any claim, investigation, challenge, action
or proceeding or in connection with any appeal thereof, relating to the acts or
omissions of the Representative hereunder, or under the Escrow Agreement or the
Environmental Escrow Agreement or otherwise; provided, however, that the
aggregate amount which any Equity Holder may be liable to indemnify the
Representative under this Section 12.5(c) shall not exceed the aggregate Merger
Consideration paid or payable to such Equity Holder hereunder, and the
Representative shall be entitled to withhold and retain from amounts otherwise
payable to such Equity Holder hereunder any amount required to satisfy such
Equity Holder's indemnification obligations hereunder. The foregoing
indemnification shall not be deemed exclusive of any other right to which the
Representative may be entitled apart from the provisions hereof. The foregoing
indemnification shall not apply in the event of any action or proceeding which
finally adjudicates the liability of the Representative hereunder for its
willful misconduct. In the event of any indemnification under this Section
12.5(c), the Representative shall first proceed against any amounts then on
deposit in the Expense Account. Thereafter, upon written notice from the
Representative to the Equity Holders as to the existence of a deficiency toward
the payment of any such indemnification amount, each Equity Holder shall
promptly deliver to the Representative full payment of his or her ratable share
of the amount of such deficiency, in accordance with such Equity Holder's
Percentage Interest.
(d) Subject to Section 12.5(c) above, to the extent that the
Representative, in its sole and absolute discretion, shall deem the amount then
on deposit in the Expense Account to be inadequate, the Representative may
require security and indemnity satisfactory to it to be provided by the Equity
Holders against costs, expenses and liabilities to be incurred in connection
with any action or actions proposed to be taken by the Representative, and the
Representative shall be entitled to withhold and retain from amounts otherwise
payable to any Equity Holder hereunder any amount required to satisfy such
Equity Holder's indemnification obligation hereunder. The Representative shall
be under no obligation to proceed with any such proposed action (and shall incur
no liability whatsoever for its failure to so proceed) in the absence of such
security.
(e) All of the indemnities, immunities and powers granted to the
Representative under this Agreement shall survive the Closing and/or any
termination of this Agreement and/or the Escrow Agreement and/or the
Environmental Escrow Agreement.
(f) Notwithstanding anything herein to the contrary, neither Buyer, Merger
Sub, the Surviving Corporation nor the Company shall have any responsibility or
obligation whatsoever to any Equity Holder or to any other party with respect to
or arising out of any actions taken or any inaction by the Representative. Each
of Buyer and the Surviving Corporation may rely entirely on its dealings with,
and notices to and from, the Representative to satisfy any obligations it might
have under this Agreement, the Escrow Agreement, the Environmental Escrow
Agreement or any other agreement referred to in this Agreement or otherwise to
the Equity Holders.
82
12.6 Successor Representative; Termination of Representative.
(a) In the event the original Representative shall be unable or unavailable
to perform its duties hereunder, the Representative shall name a successor
Representative that shall have all of the authority and responsibilities
conferred upon or delegated to the Representative pursuant to this Article XII.
In the event the Representative becomes unwilling to continue in its capacity
hereunder, the Representative may resign at any time and be discharged from its
duties or obligations hereunder by giving a written resignation to Buyer and the
Equity Holders, specifying the date when such resignation shall take effect;
provided, however, that Representative will give not less than thirty (30) days
prior written notice of such resignation and that no such resignation shall
become effective until the Representative appoints its successor Representative
and such successor Representative accepts such appointment.
(b) Upon the later of: (i) the date on which all of the funds in the
Indemnity Escrow Account, the Purchase Price Adjustment Escrow Account and the
Environmental Escrow Account are distributed to the Equity Holders or Buyer, as
applicable, in accordance with the terms hereof and of the Escrow Agreement and
the Environmental Escrow Agreement; and (ii) the date on which all of the Equity
Holders' indemnification obligations under Section 11.1 shall have expired in
accordance with such Section, the Representative shall be entitled to resign at
any time upon giving written notice to Buyer and the Equity Holders not less
than ten (10) Business Days prior to such resignation, and upon the
effectiveness of such resignation, the provisions of this Article XII, and the
corresponding rights and obligations of the Representative under this Agreement,
shall expire automatically; provided, however, that such resignation shall not
have the effect of releasing the Representative from (x) any obligation under
this Agreement existing as of the date of such resignation or (y) any liability
to which the Representative would otherwise be subject for any act or omission
prior to such resignation which constitutes willful misconduct.
12.7 No Third Party Rights. Notwithstanding anything contained in this
Agreement or elsewhere to the contrary, no Person or Persons other than the
Representative (and its successors) shall (i) be entitled to exercise any of the
rights or powers of the Representative hereunder or under the Escrow Agreement
or the Environmental Escrow Agreement, (ii) have any access whatsoever to the
Expense Account, (iii) have any right to make a call or demand upon any of the
Equity Holders (including the Representative) to contribute any amounts to cover
expenses or otherwise, or (iv) as a result of the provisions of this Article XII
have any claims or rights against any of the Equity Holders (including the
Representative) other than any claims or rights that would exist in any event
absent the provisions of this Article XII.
XIII. GENERAL
13.1 Public Statements. The Company and its Subsidiaries, agree that, from
the date hereof through the Closing Date, no public release or announcement
concerning the Merger and the Transactions shall be issued or made by any party
without the prior consent of the other party or parties (which consent shall not
be unreasonably withheld, conditioned or delayed), except (a) as such release or
announcement may be required by Law, in which case the party required to make
the release or announcement shall allow, to the extent reasonably practicable,
the other party or parties reasonable time to comment on such release or
announcement in advance of such
83
issuance, and (b) that each of the Company and its Subsidiaries may make such an
announcement to their respective employees after consultation with the other
parties.
13.2 Expenses. Except as otherwise expressly provided for in this
Agreement, the Company, on the one hand, and Buyer, on the other hand, will each
pay all expenses incurred by each of them in connection with the Transactions,
including legal, accounting, investment banking and consulting fees and expenses
incurred in negotiating, executing and delivering this Agreement and the other
agreements, exhibits, documents and instruments contemplated by this Agreement
(whether the Transactions are consummated or not). Neither the Company nor any
Subsidiary has borne or will bear any of the expenses of its shareholders in
connection with the Transactions. The Company will pay all amounts payable to
the title insurer in respect of the title commitments, copies of exceptions and
title policies, including premiums (including premiums for endorsements), search
fees and closing fees, and amounts payable to surveyors. Buyer will pay one-half
and the Company will pay one-half of (a) the HSR Act filing fee and other filing
fees relating to the Antitrust Clearance and (b) the fees and expenses of the
Escrow Agent under the Escrow Agreement and the Environmental Escrow Agreement.
13.3 Amendment and Waiver. This Agreement may not be amended, a provision
of this Agreement or any default, misrepresentation or breach of warranty or
agreement under this Agreement be waived, and a consent may not be rendered,
except in a writing executed by the party against which such action is sought to
be enforced. Neither the failure nor any delay by any Person in exercising any
right, power or privilege under this Agreement will operate as a waiver of such
right, power or privilege, and no single or partial exercise of any such right,
power or privilege will preclude any other or further exercise of such right,
power or privilege or the exercise of any other right, power or privilege. In
addition, no course of dealing between or among any Persons having any interest
in this Agreement will be deemed effective to modify or amend any part of this
Agreement or any rights or obligations of any Person under or by reason of this
Agreement. The rights and remedies of the parties to this Agreement are
cumulative and not alternative.
13.4 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given (i) when delivered if personally
delivered by hand (with written confirmation of receipt), (ii) when received if
sent by a nationally recognized overnight courier service (receipt requested),
(iii) five (5) business days after being mailed, if sent by first class mail,
return receipt requested, or (iv) when receipt is acknowledged by an affirmative
act of the party receiving notice, if sent by facsimile, telecopy or other
electronic transmission device (provided that such an acknowledgement does not
include an acknowledgment generated automatically by a facsimile or telecopy
machine or other electronic transmission device). Notices, demands and
communications to Buyer, Merger Sub and the Company will, unless another address
is specified in writing, be sent to the address indicated below:
If to Buyer or Merger Sub:
Professional Communications Security & Imaging International
Holdings BV
c/o Bosch Sicherheitssysteme GmbH
84
Xxxxxx Xxxx Xxxxxxx 000
00000 Xxxxxxxxx
Gemany
Attn: Xxxxxxxx Xxxxxxx
Facsimile: x00-00-0000-000000
With a copy to:
Xxxxxx Xxxxx XxxX
Xxxxxx Xxxxx Xxxxx 0
00000 Xxxxxxxxx-Xxxxxxxxxxxxx
Xxxxxxx
Attn: Legal Department (C/LS)
and
Xxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. XxXxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Company:
Telex Communications Holdings, Inc.
00000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx, Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to:
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Representative:
FS Private Investments III LLC
c/x Xxxxxxxxx Capital Partners
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
With a copy to:
00
Xxxxxxx & Xxxxxxx & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
13.5 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any party to this Agreement
without the prior written consent of the other parties to this Agreement;
provided, that in the case of any proposed assignment by Buyer of its rights
under this Agreement to any of its Affiliates, the Company shall not
unreasonably withhold its written consent to such assignment; and provided,
further, that Buyer may assign any of its rights under this Agreement to either
Xxxxxx Xxxxx XxxX or Xxxxxx Xxxxx Corporation without the prior consent of the
Company. Subject to the foregoing, this Agreement and all of the provisions of
this Agreement will be binding upon and inure to the benefit of the parties to
this Agreement and their respective successors and permitted assigns.
13.6 No Third Party Beneficiaries. Nothing expressed or referred to in this
Agreement confers any rights or remedies upon any Person that is not a party or
permitted assign of a party to this Agreement.
13.7 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable Law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable Law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13.8 Complete Agreement. This Agreement, the Confidentiality Agreement and,
when executed and delivered, the Ancillary Agreements, contain the complete
agreement between the parties and supersede any prior understandings, agreements
or representations by or between the parties, written or oral. The Company
acknowledges that Buyer has made no representations, warranties, agreements,
undertakings or promises except for those expressly set forth in this Agreement
or in agreements referred to herein that survive the execution and delivery of
this Agreement. Buyer acknowledges that the Company has made no representations,
warranties, agreements, undertakings or promises except for those expressly set
forth in this Agreement or in agreements referred to herein that survive the
execution and delivery of this Agreement.
13.9 Disclosure Schedules. The Disclosure Schedule contains a series of
schedules corresponding to the Sections contained in Article IV. Reference in
Article IV to "Schedule [ ]" shall mean the portion of the Disclosure Schedule
corresponding to a Section of this Agreement. Information disclosed in a Section
of the Disclosure Schedule shall be deemed to apply to each other Section of
this Agreement to which its relevance is reasonably apparent on its face. The
fact that any item of information is disclosed in any Disclosure Schedule shall
not be construed to mean that such information is required to be disclosed by
this Agreement. Such information and the dollar thresholds set forth herein
shall not be used as a basis for interpreting the terms "material" or "Material
Adverse Effect" or other similar terms in this Agreement, and will not be
86
deemed an admission by any party that such listed matter is material or that
such listed matter has or would have a Material Adverse Effect.
13.10 Signatures; Counterparts. This Agreement may be executed in one or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and the
same instrument. A facsimile signature will be considered an original signature.
13.11 Governing Law. THE DOMESTIC LAW, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, OF THE STATE OF NEW YORK WILL GOVERN ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE PERFORMANCE
OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT.
13.12 Specific Performance. Each of the Company and the Representative
acknowledges and agrees that the subject matter of this Agreement, including the
business, assets and properties of the Company and the Subsidiaries, is unique,
that Buyer would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached, and that the remedies at law would not be adequate to
compensate Buyer not in default or in breach. Accordingly, each of the Company
and the Representative agrees that Buyer will be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions of this
Agreement in addition to any other remedy to which Buyer may be entitled, at law
or in equity (without any requirement that Buyer provides any bond or other
security). The Company and the Representative waive any defense that a remedy at
law is adequate and any requirement to post bond or provide similar security in
connection with actions instituted for injunctive relief or specific performance
of this Agreement.
13.13 Jurisdiction. Subject to the procedures specified in Article III,
each of the parties submits to the exclusive jurisdiction of any state or
federal court sitting in The Borough of Manhattan of The City of New York, New
York, in any action or proceeding arising out of or relating to this Agreement
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other court.
Each of the parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other party with respect to any such
action or proceeding. Any party may make service on any other party by sending
or delivering a copy of the process to the party to be served at the address set
forth in Section 13.4. The parties agree that either or both of them may file a
copy of this paragraph with any court as written evidence of the knowing,
voluntary and bargained agreement between the parties irrevocably to waive any
objections to venue or to convenience of forum. Nothing in this Section 13.13
will affect the right of any party to serve legal process in any other manner
permitted by law or in equity.
13.14 Construction. The parties and their respective counsel have
participated jointly in the negotiation and drafting of this Agreement. In
addition, each of the parties acknowledges that it is sophisticated and has been
advised by experienced counsel and, to the extent it deemed
87
necessary, other advisors in connection with the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the parties and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. The parties intend that each representation, warranty and
agreement contained in this Agreement will have independent significance. If any
party has breached any representation, warranty or agreement in any respect, the
fact that there exists another representation, warranty or agreement relating to
the same subject matter (regardless of the relative levels of specificity) that
the party has not breached will not detract from or mitigate the fact that the
party is in breach of the first representation, warranty or agreement. Any
reference to any Law will be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The headings
preceding the text of Articles and Sections included in this Agreement and the
headings to the schedules and exhibits are for convenience only and are not be
deemed part of this Agreement or given effect in interpreting this Agreement.
References to Sections, articles, schedules or exhibits are to the sections,
articles, schedules and exhibits contained in, referred to or attached to this
Agreement, unless otherwise specified. The word "including" means "including
without limitation." A statement that an action has not occurred in the past
means that it is also not presently occurring. When any party may take any
permissive action, including the granting of a consent, the waiver of any
provision of this Agreement or otherwise, whether to take such action is in its
sole and absolute discretion. The use of the masculine, feminine or neuter
gender or the singular or plural form of words will not limit any provisions of
this Agreement. A statement that an item is listed, set forth disclosed or
described means that it is correctly listed, set forth disclosed or described,
and a statement that a copy of an item has been delivered means a true and
correct copy of the item has been delivered.
13.15 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
[Signature pages follow.]
88
IN WITNESS WHEREOF, Buyer, Merger Sub, the Company and the Representative
have executed this Merger Agreement as of the date first above written.
BUYER: THE COMPANY:
PROFESSIONAL COMMUNICATIONS SECURITY TELEX COMMUNICATIONS HOLDINGS, INC.
& IMAGING INTERNATIONAL HOLDINGS BV
By: /s/ Uwe Glock By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------- ------------------------------------
Name: Uwe Glock Name: Xxxxxxx X. Xxxxxxxxx
Title: Authorized Signatory Title: President and CEO
MERGER SUB: THE REPRESENTATIVE OF THE EQUITY HOLDERS
STHNL ACQUISITION CORP. FS PRIVATE INVESTMENTS III LLC
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxx
--------------------------------- ------------------------------------
Name: Xxxxxx Xxxxxx Name: Xxxxxx X. Xxxx
Title: Vice President Title: Managing Director
89
EXHIBIT A
FORM OF STOCKHOLDER CONSENT
ACTION BY WRITTEN CONSENT OF THE STOCKHOLDERS OF TELEX
COMMUNICATIONS HOLDINGS, INC. PURSUANT TO SECTION 228 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
EFFECTIVE AS OF JUNE 27, 2006
The undersigned, constituting the beneficial holders of outstanding shares
of common stock of Telex Communications Holdings, Inc., a Delaware corporation
(the "Company") having not less than the minimum number of votes that would be
necessary to authorize the Company to take action at a meeting at which all
shares of common stock of the Company entitled to vote thereon were present and
voted, pursuant to Section 228 of the General Corporation Law of the State of
Delaware:
(i) do hereby consent to the adoption of, and do hereby adopt, the
following resolutions which will be effective when the minimum number of shares
required to approve the action are obtained:
WHEREAS, the Board of Directors of the Company has determined that the
Merger Agreement and the transactions contemplated thereby are fair to and in
the best interest of the Company and its stockholders.
WHEREAS, as of June 27, 2006, the record date established by the Board of
Directors, each of the undersigned stockholders is the holder of record of the
number of shares of common stock of the Company set forth underneath his
signature.
WHEREAS, each of the undersigned stockholders of the Company has reviewed
the form of the Agreement and Plan of Merger (the "Merger Agreement") to be
entered into contemporaneously herewith, a copy of which is attached to this
consent as Exhibit A, and other summary and background materials regarding the
merger that have been previously provided to the stockholders.
WHEREAS, each of the undersigned stockholders of the Company has reviewed
the form of director and officer indemnification agreement attached hereto as
Exhibit B (the "Indemnification Agreement"), which has been proposed to be
entered into between the Company and each of the directors of the Company and
each of the officers set forth on Schedule I hereto.
NOW, THEREFORE, BE IT:
RESOLVED, that the terms and provisions of the Merger Agreement,
substantially in the form attached to this consent as Exhibit A and the
transactions contemplated thereby, be, and hereby are, authorized, adopted and
approved in all respects, and any authorized officer of the Company (the
"Officer") is directed to execute and deliver the Merger Agreement, to make such
changes, additions or deletions thereto and to do any and all other things
necessary in connection
with the Merger Agreement as the Officer executing the same or performing such
acts may approve, such approval to be conclusively evidenced by his execution or
performance thereof.
RESOLVED, that the terms and provisions of the Indemnification Agreement to
be entered into between the Company and each of its directors and each of the
officers set forth on Schedule I, substantially in the form attached to this
consent as Exhibit B, be, and hereby are, authorized, adopted and approved in
all respects, and any Officer of the Company is directed to execute and deliver
any such Indemnification Agreement, to make such changes, additions or deletions
thereto and to do any and all other things necessary in connection with any such
Indemnification Agreement as the Officer executing the same or performing such
acts may approve, such approval to be conclusively evidenced by his execution or
performance thereof.
RESOLVED, that the Officers of the Company be and each of them hereby is
authorized and directed to do or to cause to be done all further acts and things
as they or any of them shall deem necessary or advisable or convenient and
proper in connection with or incidental to the consummation and carrying into
effect of the transactions contemplated by the foregoing resolutions, including
the execution, acknowledgment and delivery of any and all agreements,
certificates, instruments or documents which may be reasonably required or which
may be considered supplemental thereto, and that all such actions so taken be
and hereby are ratified, approved, confirmed and adopted; and
(ii) in the case of each of the undersigned that is the beneficial but not
the record holder of the shares of outstanding common stock of the Company set
opposite its name below, does hereby agree that it will cause the record holders
of such shares to execute a written consent on the same terms as set forth in
clause (i) above and to deliver such consent to the Company not later than July
10, 2006.
[Remainder of this page intentionally left blank]
EXHIBIT A
Form of Merger Agreement
EXHIBIT B
Form of Indemnification Agreement
EXHIBIT B - CLOSING DATE NET WORKING CAPITAL TEMPLATE
TELEX COMMUNICATIONS HOLDINGS, INC.
NET WORKING CAPITAL CALCULATION
DEC-05
WORKING
CAPITAL
------------
Cash
Accounts Receivable, Net $ 51,018,000
Inventories, Net $ 51,742,000
Recoverable Income Taxes
Prepaid Expenses $ 3,233,000
Less: Japan VAT $ 0
Less: UK VAT ($517,177)
Deferred Income Taxes
Other Current $ 1,500,000
Less: Germany VAT ($399,269)
Less: France VAT ($8,027)
------------
TOTAL - CURRENT ASSETS $106,568,527
============
Revolving Lines of Credit
Current Portion of LTD
Accounts Payable $ 15,229,000
Accrued Compensation $ 12,848,000
Accrued Expenses $ 7,741,000
Less: UK VAT ($433,169)
Less: Germany VAT ($289,864)
Less: Japan VAT ($88,947)
Less: China VAT ($64,543)
Less: France VAT and other taxes ($60,201)
Accrued Interest
Accrued Taxes, Other Than Income
Income Taxes Payable
------------
TOTAL - CURRENT LIABILITIES $ 34,881,276
============
CLOSING DATE NET WORKING CAPITAL AS
OF DECEMBER 31, 2005 $ 71,687,251
EXHIBIT C
FORM OF ESCROW AGREEMENT
THIS AGREEMENT is entered into as of _______, 2006 (the "Closing Date") by
and among Professional Communications Security & Imaging International Holdings
BV, a corporation organized under the laws of the Netherlands ("Buyer"), [STHNL
Acquisition Corp.], a Delaware corporation ("Merger Sub") and FS Private
Investments III LLC, a Delaware limited liability company (the "Representative")
as the representative on behalf of the Equity Holders, and _____________, as
escrow agent (the "Escrow Agent").
Capitalized terms used but not defined in this Agreement have the meanings
ascribed to them in the Agreement and Plan of Merger dated as of _______, 2006
(the "Merger Agreement") by and among Buyer, Merger Sub, Telex Communications
Holdings, Inc., a Delaware corporation (the "Company"), and the Representative
on behalf of the Equity Holders.
WITNESSETH:
WHEREAS, pursuant to the Merger Agreement, Merger Sub will merge with and
into the Company, with the Company continuing as the Surviving Corporation; and
WHEREAS, the Merger Agreement provides that, at the Closing, Buyer or
Merger Sub shall deposit or cause to be deposited with the Escrow Agent the
following amounts to be held by the Escrow Agent in separate accounts: (i)
$5,000,000 (the "Purchase Price Adjustment Escrow Amount", together with any
interest and other income earned thereon (it being understood that such interest
or other income shall not constitute part of the Purchase Price Adjustment
Escrow Amount), the "Purchase Price Adjustment Escrow Funds") as a source for
satisfaction of any reduction in the Subsequent Merger Consideration as a result
of any adjustment thereto pursuant to Section 3.5 of the Merger Agreement and
(ii) $10,000,000 (such amount, as it may be adjusted in accordance with this
Agreement and the Merger Agreement, the "Indemnity Escrow Amount", together with
any interest and other income earned thereon (it being understood that such
interest or other income shall not constitute part of the Indemnity Escrow
Amount), the "Indemnity Escrow Funds"), as an additional source for satisfaction
of any reduction referred to in (i) above and as the sole source for
satisfaction of the indemnification obligations to the Buyer Indemnified Parties
under Article XI of the Merger Agreement; and
WHEREAS, each of the Purchase Price Adjustment Escrow Amount and the
Indemnity Escrow Amount is referred to herein as an "Escrow Amount," and
collectively, the "Escrow Amounts" and the Purchase Price Adjustment Escrow
Funds and the Indemnity Escrow Funds are collectively referred to herein as the
"Escrow Funds"; and
WHEREAS, the Escrow Funds are to be held and disposed of by the Escrow
Agent as provided herein; and
WHEREAS, the Equity Holders have appointed the Representative to act as
their representative under this Agreement and to exercise all rights, powers and
privileges thereof contemplated herein on behalf of the Equity Holders; and
WHEREAS, Buyer and the Representative wish to appoint the Escrow Agent to
serve as the escrow agent hereunder, and the Escrow Agent is willing to do so
upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual obligations
and covenants set forth herein, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF ESCROW AGENT; DEPOSIT AND INVESTMENT OF ESCROW
FUNDS; ETC.
1.1 Appointment of the Escrow Agent. Buyer and the Representative hereby
appoint the Escrow Agent, and the Escrow Agent hereby agrees to act, as
depository and administrator of the Escrow Funds upon the terms and conditions
set forth below.
1.2 Deposit of Escrow Amounts. At the Closing, Buyer or Merger Sub shall
deposit, or cause to be deposited, with the Escrow Agent, by wire transfer of
immediately available funds: (i) the Purchase Price Adjustment Escrow Amount to
a separate account to be designated by the Escrow Agent (the "Purchase Price
Adjustment Escrow Account") and (ii) the Indemnity Escrow Amount to a separate
account to be designated by the Escrow Agent (the "Indemnity Escrow Account").
All amounts deposited into any of the Escrow Accounts shall be evidenced by one
or more receipts therefor to be issued by the Escrow Agent. The Escrow Accounts
shall be maintained by, and shall be under the exclusive dominion and control
of, the Escrow Agent and the Escrow Funds shall be disbursed by the Escrow Agent
only in accordance with the provisions of this Agreement.
1.3 Investment of Escrow Funds. Each of the Escrow Accounts shall be
segregated by the Escrow Agent and the Escrow Funds therein shall be invested by
the Escrow Agent in ______________. All interest and other income earned on any
Escrow Account shall be added to, and become part of, such Escrow Account (but
not part of the Purchase Price Adjustment Escrow Amount or the Indemnity Escrow
Amount, as the case may be), and the distribution thereof shall be subject to
the terms of this Agreement and the Merger Agreement, as applicable. The Escrow
Agent shall have the right to liquidate any investments held in order to provide
funds necessary to make required payments under this Agreement.
1.4 Instructions. The Escrow Agent in its capacity as escrow agent
hereunder shall not have any liability for any loss sustained as a result of any
investment made pursuant to the instructions of the parties hereto or as a
result of any liquidation of any investment prior to its maturity or for the
failure of the parties to give the Escrow Agent instructions to invest or
reinvest the Escrow Funds or any earnings thereon.
1.5 Obligations. The Escrow Amounts shall be the sole sources for the
satisfaction of any reduction in the Subsequent Merger Consideration as a result
of any adjustment thereto pursuant to Section 3.5 of the Merger Agreement and
the Indemnity Escrow Amount shall be the sole source for the satisfaction of any
indemnification obligations to Buyer Indemnified Parties
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under Article XI of the Merger Agreement, subject to the limitations, and in the
manner provided, in this Agreement and the Merger Agreement.
1.6 Distribution Instructions. Distributions from any of the Escrow
Accounts to Buyer, on behalf of itself or any other Buyer Indemnified Party, in
accordance with this Agreement shall be made by the Escrow Agent to an account
designated in writing by Buyer. Distributions from any of the Escrow Accounts to
the Representative, on behalf of itself and the Equity Holders, in accordance
with the terms of this Agreement shall be made by the Escrow Agent to an account
designated in writing by the Representative. Any distributions from any of the
Escrow Accounts that, pursuant to the terms of this Agreement are to be
deposited by the Escrow Agent into the Payment Fund, shall be deposited into the
account set forth on Exhibit A hereto.
1.7 Tax Reporting and Distributions. For federal income tax purposes and,
to the extent permitted by applicable law, state and local tax purposes, the
parties shall submit any required reports or returns prepared on the basis that
Buyer is the owner of the Escrow Funds and Buyer shall furnish any required tax
forms consistent with the foregoing. The Escrow Agent shall report and, as
required, withhold any taxes as it determines may be required by any law or
regulation in effect at the time of the distribution and, in each case, in
accordance with the first sentence of this Section 1.7.
1.8 Accounting. The Escrow Agent shall provide a written account to Buyer
and the Company at the end of each month ending on or before the last applicable
Indemnity Cut-Off Date (and thereafter to the extent any amounts remain in
escrow pursuant to Section 3.2 hereof) listing all transactions with respect to
each of the Escrow Accounts during the immediately preceding month.
ARTICLE II
DISPOSITION OF THE PURCHASE PRICE ADJUSTMENT ESCROW FUNDS
2.1 Purchase Price Adjustment Escrow Funds. No later than five (5) Business
Days following the final determination of the Closing Date Net Working Capital,
Closing Date Cash Amount, Closing Date Other Indebtedness and Closing Date
Capital Expenditure Amount in accordance with Section 3.5 of the Merger
Agreement, Buyer and the Representative shall deliver to the Escrow Agent a
joint written notice (the "Determination Notice") in substantially the form of
Exhibit B. Within three (3) Business Days of the date of the Determination
Notice, the Escrow Agent shall release the Purchase Price Adjustment Escrow
Amount and pay to Buyer and/or Buyer shall deposit or shall cause to be
deposited into the Payment Fund, as applicable, the amounts, if any, set forth
in the Determination Notice to be paid to Buyer and/or deposited into the
Payment Fund (including accrued interest and other income earned on each such
amount in the Purchase Price Adjustment Escrow Account from the Closing Date to
the payment date).
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ARTICLE III
DISTRIBUTION OF INDEMNITY ESCROW FUNDS
3.1 Indemnity Claims. Subject to Article XI of the Merger Agreement, at any
time prior to 5:00 p.m. (New York City time) on the applicable Indemnity Cut-Off
Date, Buyer may give the Escrow Agent and the Representative written notice in
substantially the form of Exhibit C (an "Indemnity Claim Notice") of a claim for
which a Buyer Indemnified Party is entitled to indemnification pursuant to
Article XI of the Merger Agreement. If the Representative does not give the
Escrow Agent and Buyer a written notice of disagreement (an "Indemnity Claim
Dispute Notice") with any matter or amount set forth in an Indemnity Claim
Notice within thirty (30) Business Days of the date of such Indemnity Claim
Notice, then the Escrow Agent shall, within ten (10) Business Days following the
thirtieth (30th) Business Day after the date of the Indemnity Claim Notice,
release the amount of the Indemnity Escrow Amount set forth in the Indemnity
Claim Notice (together with accrued interest and other income earned thereon
from the Closing Date to the applicable payment date), and pay such amount in
the manner directed by Buyer. In the event that the Representative shall give to
the Escrow Agent an Indemnity Claim Dispute Notice at any time during such
thirty (30) Business Day period, then the provisions of Section 4.4 shall apply
with respect to the amount set forth therein. An indemnification claim as to
which an Indemnity Claim Dispute Notice has been given and which has not been
resolved pursuant to Section 4.4 of this Agreement is referred to hereinafter as
an "Unresolved Indemnity Claim".
3.2 Partial Release of Indemnity Escrow Funds.
(a) Buyer and the Representative shall deliver a joint written notice
instructing the Escrow Agent to immediately release from the Indemnity Escrow
Account and deposit into the Payment Fund: (i) on the first anniversary of the
Closing Date, the lesser of (A) $2,000,000 or (B) the Indemnity Escrow Amount as
of such date minus the aggregate dollar amount of all Unresolved Indemnity
Claims; and (ii) on the second anniversary of the Closing Date, the lesser of
(A) $2,000,000 or (B) the Indemnity Escrow Amount as of such date minus the
aggregate dollar amount of all Unresolved Indemnity Claims, in each case,
together with accrued interest and other income earned thereon.
(b) On the last applicable Indemnity Cut-Off Date, Buyer and the
Representative shall deliver a joint written notice instructing the Escrow Agent
to release from the Indemnity Escrow Account and deposit into the Payment Fund
the remaining balance of funds in the Indemnity Escrow Account; provided,
however, that if, at 5:00 p.m. (New York City time) on the Business Day
immediately preceding the last applicable Indemnity Cut-Off Date, any portion of
the Indemnity Escrow Amount is subject to one or more pending indemnification
claims that have been timely asserted in accordance with Article XI of the
Merger Agreement and have not been paid in full or otherwise finally settled or
adjudicated, or are subject to appeal or further proceedings, then an amount
equal to such portion of the Indemnity Escrow Amount attributable to such claims
(including accrued interest and other income earned on each such amount in the
Indemnity Escrow Account from the Closing Date to the last applicable Indemnity
Cut-Off Date) shall be retained in the Indemnity Escrow Account until Buyer and
the Representative deliver a joint written notice notifying the Escrow Agent
that such claims are paid
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in full or otherwise finally settled or adjudicated and no longer subject to
appeal or further proceedings.
ARTICLE IV
ESCROW AGENT
4.1 Duties. The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement and shall be
limited to the performance of such duties and obligations as are specifically
set forth in this Agreement, as it may be amended from time to time with the
Escrow Agent's written consent as provided in Section 5.8 hereof. The Escrow
Agent shall not have any liability under, nor duty to inquire into the terms and
provisions of any agreement or instruction, other than those set forth in, or
given pursuant to, this Agreement.
4.2 Reliance. In the performance of its duties hereunder, the Escrow Agent
shall be entitled to rely, and shall be protected in acting or refraining from
acting, upon any document or instrument reasonably believed by it to be genuine
and signed by Buyer and/or the Representative, as applicable, and the Escrow
Agent shall be under no duty to inquire into or investigate the validity or
accuracy of any such document. The Escrow Agent may assume that any person
purporting to give any notice in accordance with the provisions hereof has been
duly authorized to do so.
4.3 Liability. The Escrow Agent shall not be liable for any error of
judgment, or any action taken or omitted to be taken hereunder in good faith,
except in the case of its bad faith, gross negligence or willful misconduct. In
the administration of the Escrow Funds, the Escrow Agent shall be entitled to
consult with counsel of its choosing (including internal counsel). The Escrow
Agent shall not be liable for any act suffered or omitted by it in good faith in
accordance with the advice or opinion of such counsel.
4.4 Disputes. In the event that the Escrow Agent shall receive an Indemnity
Claim Dispute Notice, the Escrow Agent shall not release any Escrow Funds with
respect to any matter covered by such notice until there shall have been a final
determination of the rights of the parties with respect to such matter, and then
only in accordance with the terms of such final determination. In the event that
the Escrow Agent shall otherwise be uncertain as to its duties or rights
hereunder, it shall be entitled to refrain from taking any action until such
time as there has been a final determination of the rights of the parties with
respect to the Escrow Funds (or relevant portion thereof). For purposes of this
Section 4.4, there shall be deemed to have been a final determination of the
rights of the parties at such time as (i) any final judgment or award shall have
been rendered by a court, arbitration board or administrative agency of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or (ii) a settlement shall have been consummated, or Buyer and the
Representative shall have arrived at a mutually binding agreement with respect
to a claim thereunder, and the Escrow Agent shall have been notified thereof in
a joint written direction from each of Buyer and the Representative.
4.5 Resignation. The Escrow Agent may resign at any time and be discharged
of the duties imposed hereunder (but without prejudice for any liability in the
case of its bad faith,
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gross negligence or willful misconduct hereunder) by giving notice to the
Representative and Buyer at least thirty (30) Business Days prior to the date
specified for such resignation to take effect, in which case, upon the effective
date of such resignation:
(a) all funds then held by the Escrow Agent hereunder shall be
delivered by it to such Person as may be designated in writing
jointly by Buyer and the Representative, whereupon the Escrow
Agent's obligations hereunder shall cease and terminate;
(b) if no such person has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless,
cease and terminate, subject to clause (c) below; and
(c) the Escrow Agent's sole responsibility thereafter shall be to
keep all funds then held by it (and to make the investments as
hereinbefore provided) and to deliver the same to the successor
escrow agent designated jointly by Buyer and the Representative
in writing or, if no such successor escrow agent shall have been
so designated, in accordance with the directions of a final order
or judgment of a court of competent jurisdiction and the
provisions of Section 4.7 and Section 4.8 shall remain in effect.
Upon their receipt of notice of resignation from the Escrow Agent, Buyer
and the Representative shall use their reasonable best efforts jointly to
designate a successor escrow agent. Notwithstanding anything to the contrary in
the foregoing, the Escrow Agent or any successor escrow agent shall continue to
act as Escrow Agent until a successor is appointed and qualified to act as
escrow agent.
4.6 Removal of Escrow Agent. Buyer and the Representative may, upon at
least thirty (30) Business Day's prior written notice to the Escrow Agent,
dismiss the Escrow Agent hereunder and appoint a successor. In such event, the
Escrow Agent shall promptly account for and deliver to the successor escrow
agent named in such notice the balance of the Escrow Funds. Upon acceptance
thereof and of such accounting by such successor escrow agent, and upon
reimbursement to the Escrow Agent of all expenses due to it hereunder through
the date of such accounting and delivery, the Escrow Agent shall be released and
discharged from all of its duties and obligations hereunder, but without
prejudice to any liability of the Escrow Agent for its bad faith, gross
negligence or willful misconduct hereunder.
4.7 Compensation. On the Closing Date and annually thereafter, Buyer and
the Representative shall each pay one-half of the Escrow Agent's $___________
annual fee (the "Annual Fee") in full satisfaction of its engagement fee and
compensation, without pro-ration for partial years. All amounts payable by the
Representative pursuant to this Section 4.7 shall be paid out of the Expense
Account to be maintained by the Representative under the Merger Agreement.
4.8 Indemnification. The Escrow Agent and its directors, officers, agents
and employees (the "Indemnified Parties") shall be indemnified and held harmless
by each of the Representative and Buyer, severally and not jointly (with each
such indemnifying party liable up
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to a maximum of 50%), against any loss, liability, claim, damage, injury, demand
or expense, including reasonable legal fees and expenses of in-house or outside
counsel arising out of or in connection with the performance of the Escrow
Agent's obligations hereunder or pursuant to any written instructions of Buyer
or the Representative given to the Escrow Agent pursuant to this Agreement,
including the costs and expenses incurred in connection with the collection of
its fees and including the costs and expenses of defending itself against any
claim or liability arising out of or in connection with the performance of its
duties hereunder, except for any loss, liability, claim, damage, injury, demand
or expense resulting from any of the Indemnified Parties' bad faith, gross
negligence or willful misconduct; provided, however, that promptly after the
receipt by any of the Indemnified Parties of notice of any claim or the
commencement of any suit, action or proceeding, such Indemnified Party shall, if
a claim of indemnification in respect thereof is to be made against any of the
other parties hereto, notify such other parties thereof in writing; and
provided, further, however, that the indemnifying party or parties shall be
entitled, at their own expense, to participate in or assume the defense of any
such action, suit or proceeding. If the indemnifying party assumes control of
such defense and the indemnifying party and any of the Indemnified Parties have
a conflict of interest with respect to such suit, action or proceeding, such
Indemnified Party shall be entitled to have separate legal representation in
respect thereof and the reasonable fees and expenses of counsel to the Escrow
Agent shall be considered "damages" for the purposes of this Section 4.8. The
failure of any of the Indemnified Parties to provide written notification to an
indemnifying party shall not affect the rights of any of the Indemnified Parties
under this Section 4.8 except (and only to the extent that) the indemnifying
party incurs additional expenses or the indemnifying party is actually
prejudiced by reason of such failure to give timely notice. The right of any of
the Indemnified Parties (or any successor escrow agent appointed hereunder) to
indemnification under this Section 4.8 shall survive the termination of this
Agreement or the earlier removal or resignation of the Escrow Agent or the
termination of this Agreement. Notwithstanding anything in this Agreement to the
contrary, in no event shall any of the Indemnified Parties be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if such Indemnified Party has
been advised of the likelihood of such loss or damage and regardless of the form
of action. All amounts payable by the Representative pursuant to this Section
4.8 shall be paid out of the Indemnity Escrow Fund pursuant to a joint
instruction signed by the Representative and Buyer. The parties hereby grant the
Escrow Agent a lien on, right of set-off against and security interest in the
Escrow Fund for the payment of any claim for indemnification, compensation,
expenses and amounts due hereunder and payable by the Representative.
4.9 Merger. Any corporation into which the Escrow Agent in its individual
capacity may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Escrow Agent in its individual capacity shall be a party, or any corporation to
which substantially all the corporate trust business of the Escrow Agent in its
individual capacity may be transferred, shall be the successor escrow agent
under this Agreement without further action, and the provisions of this
Agreement shall continue to apply to such successor escrow agent as if such
successor escrow agent was an original party hereto.
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ARTICLE V
TAXES
5.1 The Escrow Agent shall timely report to the Buyer and the
Representative the aggregate amount of income earned, interest received and
gains recognized (collectively, the "Escrow Interest") from the investment of
the Escrow Funds on which taxes imposed on any such income, interest or gains
(such taxes, the "Escrow Taxes") are then due and payable and the Buyer shall
report the amount of such Escrow Interest to the appropriate taxing authorities
and shall pay the Escrow Taxes, in which event it may direct the Escrow Agent,
by a reasonably detailed written notice to it with a copy to the Representative,
to reimburse the Buyer in the amount of the Escrow Taxes out of the Escrow
Interest. In the event any portion of an Escrow Fund is to be paid to the Buyer
or deposited into the Payment Fund pursuant to Section 2.1, Section 3.1 or
Section 3.2, such amount shall be reduced (and the amount of such reduction
shall be paid over to the Buyer, but only to the extent not reimbursed to it
pursuant to the preceding sentence) by an amount equal to the product of (i) the
Escrow Taxes that are then due and payable and that the Buyer estimates (in a
reasonably detailed written notice to the Escrow Agent with a copy to the
Representative) will be due and payable with respect to the taxable period in
which such payment or deposit is made multiplied by (ii) a fraction, the
numerator of which is the amount otherwise to be paid to the Buyer or deposited
into the Payment Fund under this sentence, as the case may be, and the
denominator of which is the applicable Escrow Fund. The amount determined
pursuant to the preceding sentence shall be adjusted to the extent reasonably
practical to account for any duplication in payment and any timing differences
in payments into and disbursements from the Escrow Account. The provisions of
this Section 5.1 shall be interpreted and applied in a manner that is consistent
with the provisions of Section 3.4(a) of the Merger Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Term. This Agreement shall continue in force until the final
distribution of all amounts held by the Escrow Agent in escrow in accordance
with this Agreement.
6.2 Notices. All notices and other communications hereunder shall be given
in writing and shall be deemed given if delivered personally, by registered or
certified mail (postage prepaid, return receipt requested), by overnight courier
(providing proof of delivery), by facsimile (which is confirmed), to the party
to receive such notices or communications at the address set forth below (or
such other address as shall from time to time be designated by such party to the
other parties in accordance with this Section 6.2):
If to Buyer and/or Merger Sub, to:
Professional Communications Security & Imaging International Holdings
BV
Address: ______________________
Attn: _________________________
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Facsimile: ____________________
With a copy to:
Xxxxxx Xxxxx XxxX
Xxxxxx Xxxxx Xxxxx 0
00000 Xxxxxxxxx-Xxxxxxxxxxxxx
Xxxxxxx
Attn: _________________________
and
Xxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. XxXxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Representative, to:
FS Private Investments III LLC
c/x Xxxxxxxxx Capital Partners
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
With a copy to:
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Escrow Agent, to:
Address _______________________
Attn: _________________________
Facsimile: ____________________
6.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any party to this Agreement
without the prior written consent of the other parties to this Agreement, except
that Buyer may assign any of its rights under this Agreement to one or more
Subsidiaries of Buyer, so long as Buyer remains responsible for the performance
of all of its obligations under this Agreement. Subject to the foregoing, this
Agreement and all of the provisions of this Agreement will be binding upon and
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inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns.
6.4 GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS AGREEMENT, AND THE
RESPECTIVE RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
6.5 Jurisdiction; Waiver of Jury Trial.
(a) Each of the parties hereto hereby agrees that all actions and
proceedings arising out of or relating to this Agreement or any of the
transactions contemplated hereby shall be heard and determined in the Supreme
Court of the State of New York, New York County, or the United States District
Court for the Southern District of New York, and the parties hereto hereby
irrevocably submit to the exclusive jurisdiction of each such court in any such
action or proceeding and irrevocably waive the defense of an inconvenient forum
to the maintenance of any such action or proceeding. The parties hereto agree
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by applicable law.
(b) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF AGREEMENTS
DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv)
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.5(b).
6.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
6.7 Headings. The Section headings in this Agreement are for convenience
only and do not constitute part of this Agreement.
6.8 Amendment. This Agreement may be amended only by a writing signed by
Buyer, the Escrow Agent and the Representative. The Escrow Agent shall not be
required to enter into any amendment to this Agreement which affects its rights,
duties or liabilities hereunder.
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6.9 Facsimile Signatures. All signatures of the parties to this Agreement
may be transmitted by facsimile, and such facsimile will, for all purposes, be
deemed to be the original signature of such party whose signature it reproduces
and will be binding upon such party.
6.10 Third Party Beneficiaries. Except as expressly contemplated in Section
4.8 hereof, this Agreement is not intended to confer any rights or remedies upon
any person other than the parties hereto or thereto.
6.11 Confirmation of Instructions. In the event funds transfer instructions
are given (other than in writing at the time of execution of the Agreement),
whether in writing, by telecopier or otherwise, the Escrow Agent is authorized
to seek confirmation of such instructions by telephone call-back to the person
or persons designated on Schedule 1 hereto, and the Escrow Agent may rely upon
the confirmations of anyone purporting to be the person or persons so
designated. The persons and telephone numbers for individuals authorized to give
or confirm payment instructions may be changed only in a writing executed by the
relevant party and actually received and acknowledged by the Escrow Agent. The
Escrow Agent and the beneficiary's bank in any funds transfer may rely solely
upon any account numbers or similar identifying numbers provided by Buyer,
Merger Sub or the Representative, as applicable, to identify (i) the
beneficiary, (ii) the beneficiary's bank, or (iii) an intermediary bank. The
Escrow Agent may apply any of the escrowed funds for any payment order it
executes using any such identifying number, even when its use may result in a
person other than the beneficiary being paid, or the transfer of funds to a bank
other than the beneficiary's bank or an intermediary bank designated. The
parties to this Escrow Agreement acknowledge that these security procedures are
commercially reasonable. All funds transfer instructions must include the
signature of the person(s) authorizing said funds transfer. The parties to this
Agreement acknowledge that such security procedure is commercially reasonable.
6.12 No Liability for Instructions. The Escrow Agent shall not incur any
liability for following the instructions herein contained or expressly provided
for, or written instructions given by the parties hereto.
6.13 Force Majeure. In the event that the Escrow Agent is unable to perform
its obligations under the terms of this Agreement because of acts of God,
terrorism, strikes, equipment or transmission failure or damage reasonably
beyond its control, or other cause reasonably beyond its control, the Escrow
Agent shall not be liable for damages to the other parties for any unforeseeable
damages resulting from such failure to perform or otherwise from such causes.
Performance under this Agreement shall resume when the Escrow Agent is able to
perform substantially its duties.
6.14 Compliance with Court Orders. In the event that any escrow property
shall be attached, garnished or levied upon by any court order, or the delivery
thereof shall be stayed or enjoined by an order of a court, or any order,
judgment or decree shall be made or entered by any court order affecting the
property deposited under this Escrow Agreement, the Escrow Agent is hereby
expressly authorized, in its sole discretion, to obey and comply with all writs,
orders or decrees so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without jurisdiction, and
in the event that the Escrow Agent obeys or complies with any such writ, order
or decree it shall not be liable to any of the parties hereto or
11
to any other person, firm or corporation, by reason of such compliance
notwithstanding such writ, order or decree be subsequently reversed, modified,
annulled, set aside or vacated.
6.15 Entire Agreement. This Agreement, and with respect to Buyer, Merger
Sub and the Representative, the Merger Agreement, embody the entire agreement
and understanding of the parties concerning the Escrow Funds, and, in the event
of any inconsistency between this Agreement and the Merger Agreement, this
Agreement shall control.
[Signature page follows.]
12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
PROFESSIONAL COMMUNICATIONS SECURITY &
IMAGING INTERNATIONAL HOLDINGS BV
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[STHNL ACQUISITION CORP.]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
REPRESENTATIVE OF THE EQUITY HOLDERS:
FS PRIVATE INVESTMENTS III LLC
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ESCROW AGENT:
[________________________________]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EXHIBIT A
[PAYMENT FUND ACCOUNT INFORMATION]
A-1
EXHIBIT B
(Insert Date and Address)
Re: Determination Notice
Dear ____________:
This notice is being delivered in accordance with Section 2.1 of the Escrow
Agreement dated as of ____________, 2006 (the "Agreement") by and among by and
among Professional Communications Security & Imaging International ---------
Holdings BV, [STHNL Acquisition Corp.] and ___________ and _____________.
We hereby inform you of the following:
(a) that the Closing Date Net Working Capital, Closing Date Cash
Amount, Closing Date Other Indebtedness and Closing Date Capital Expenditure
Amount have been finally determined in accordance with Section 3.5(e) of the
Merger Agreement;
(b) the amount of Purchase Price Adjustment Escrow Amount (together
with accrued interest and other income earned thereon from the Closing Date to
the date of this payment), if any, to be paid by the Escrow Agent to Buyer is $
(insert amount). Payment should be remitted using the following wire transfer
instructions:
ABA: ______________________________
Name of Bank ______________________
Account Name ______________________
Account Number: ___________________
(c) that the balance, if any, of remaining Purchase Price Adjustment
Escrow Funds shall be deposited by the Escrow Agent into the Payment Fund by
wire transfer of immediately available funds to the account indicated on Exhibit
A to the Agreement.
Sincerely,
PROFESSIONAL COMMUNICATIONS SECURITY &
IMAGING INTERNATIONAL HOLDINGS BV
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
B-1
[STHNL ACQUISITION CORP.]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
REPRESENTATIVE OF THE EQUITY HOLDERS:
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
B-2
EXHIBIT C
(Insert Date and Addresses)
Re: Indemnity Claim Notice
Dear Sir/Madam:
This notice is being delivered in accordance with Section 3.1 of the Escrow
Agreement dated as of ___________, 2006 (the "Agreement") by and among by and
among Professional Communications Security & Imaging International Holdings BV,
[STHNL Acquisition Corp.] and ___________ and _____________.
We hereby inform you of a claim for which an Indemnified Party is entitled to
indemnification pursuant to Article XI of the Merger Agreement. The details are
as follows:
(a) the name of the [_____] Indemnified Party(ies) making such claim
is (insert name);
(b) the description of the claim and the basis for such claim is as
follows:
(c) the total amount of such claim (or a good faith estimate of the
amount of such claim, if such claim is not at that time liquidated) is (insert
dollar amount).
Sincerely,
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
C-1
SCHEDULE 1
Telephone Number(s) for Call-Backs and
Person(s) Designated to Give or Confirm Funds Transfer Instructions
If to Buyer, to:
Name Telephone Number Signature Specimen
---- -----------------------------------
If to the Representative, to:
Name Telephone Number Signature Specimen
---- -----------------------------------
Telephone call backs shall be made to both the Buyer and Representative if joint
instructions are required pursuant to the agreement. All funds transfer
instructions must include the signature of the person(s) authorizing said funds
transfer.
Periodically, the parties may issue payment orders to the Escrow Agent to
transfer funds by federal funds wire. The Escrow Agent will review the orders to
determine compliance with the governing documentation and to confirm signature
by the appropriate party, in accordance with the incumbency list previously
supplied to the Escrow Agent. Bank policy requires that, where practicable, the
Escrow Agent undertake callbacks to a party other than the individual who signed
the payment order to verify the authenticity of the payment order.
Inasmuch as the Person(s) designated on this schedule are the only employees in
such Person's office who can confirm wire transfers, the Escrow Agent will call
such Person to confirm any federal funds wire transfer payment order purportedly
issued by such Person. A party's continued issuance of payment orders to the
Escrow Agent and confirmation in accordance with this procedure will constitute
such party's agreement (1) to the callback security procedure outlined in the
Agreement and (2) that the security procedure outlined therein constitutes a
commercially reasonable method of verifying the authenticity of payment orders.
Moreover, each party agrees to accept any risk associated with a deviation from
this bank policy.
S-1
EXHIBIT D
FORM OF ENVIRONMENTAL ESCROW AGREEMENT
THIS AGREEMENT is entered into as of _______, 2006 (the "Closing Date"), by
and among Professional Communications Security & Imaging International Holdings
BV, a corporation organized under the laws of the Netherlands ("Buyer"), [STHNL
Acquisition Corp.], a Delaware corporation ("Merger Sub") and FS Private
Investments III LLC, a Delaware limited liability company (the
"Representative"), as the representative on behalf of the Equity Holders, and
______________, as escrow agent (the "Escrow Agent").
Capitalized terms used but not defined in this Agreement have the meanings
ascribed to them in the Agreement and Plan of Merger (the "Merger Agreement")
dated as of _______, 2006 by and among Buyer, Merger Sub, Telex Communications
Holdings, a Delaware corporation (the "Company") and the Representative on
behalf of the Equity Holders.
WITNESSETH:
WHEREAS, pursuant to the Merger Agreement, Merger Sub will merge with and
into the Company, with the Company continuing as the Surviving Corporation; and
WHEREAS, the Merger Agreement provides that, at the Closing, Buyer or
Merger Sub shall deposit or cause to be deposited with the Escrow Agent
$5,000,000 (such amount, as it may be adjusted in accordance with this Agreement
and the Merger Agreement, the "Environmental Escrow Amount", and together with
any interest and other income earned thereon (it being understood that such
interest or other income shall not constitute part of the Environmental Escrow
Amount), the "Environmental Escrow Funds"), for costs and expenses relating to
the Environmental Work to be performed pursuant to Section 6.2 of the Merger
Agreement; and
WHEREAS, the Environmental Escrow Funds are to be held and disposed of by
the Escrow Agent as provided herein; and
WHEREAS, the Equity Holders have appointed the Representative to act as
their representative under this Agreement and to exercise all rights, powers and
privileges thereof contemplated herein on behalf of the Equity Holders; and
WHEREAS, Buyer and the Representative wish to appoint the Escrow Agent to
serve as the escrow agent hereunder, and the Escrow Agent is willing to do so
upon the terms and conditions hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the mutual obligations
and covenants set forth herein, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF ESCROW AGENT; DEPOSIT AND INVESTMENT OF
ENVIRONMENTAL ESCROW FUNDS; ETC.
1.1 Appointment of the Escrow Agent. Buyer and the Representative hereby
appoint the Escrow Agent, and the Escrow Agent hereby agrees to act, as
depository and administrator of the Environmental Escrow Funds upon the terms
and conditions set forth below.
1.2 Deposit of Environmental Escrow Amounts. At the Closing, Buyer or
Merger Sub shall deposit, or cause to be deposited, with the Escrow Agent, by
wire transfer of immediately available funds the Environmental Escrow Amount to
a separate account to be designated by the Escrow Agent (the "Environmental
Escrow Account"). All amounts deposited into the Environmental Escrow Account
shall be evidenced by a receipt therefor to be issued by the Escrow Agent. The
Environmental Escrow Account shall be maintained by, and shall be under the
exclusive dominion and control of, the Escrow Agent and the Environmental Escrow
Funds shall be disbursed by the Escrow Agent only in accordance with the
provisions of this Agreement.
1.3 Investment of Environmental Escrow Funds. The Environmental Escrow
Account shall be segregated by the Escrow Agent and the Environmental Escrow
Funds therein shall be invested in ___________. All interest and other income
earned on the Environmental Escrow Account shall be added to, and become part
of, the Environmental Escrow Account (but not part of the Environmental Escrow
Amount), and the distribution thereof shall be subject to the terms of this
Agreement. The Escrow Agent shall have the right to liquidate any investments
held in order to provide funds necessary to make required payments under this
Agreement.
1.4 Instructions. The Escrow Agent in its capacity as escrow agent
hereunder shall not have any liability for any loss sustained as a result of any
investment made pursuant to the instructions of the parties hereto or as a
result of any liquidation of any investment prior to its maturity or for the
failure of the parties to give the Escrow Agent instructions to invest or
reinvest the Environmental Escrow Funds or any earnings thereon.
1.5 Obligations. The Environmental Escrow Amount shall be paid and
disbursed in accordance with this Agreement solely to Buyer with respect to
costs and expenses related to Environmental Work to be performed pursuant to
Section 6.2 of the Merger Agreement, and if any portion of the Environmental
Escrow Fund remains in the Environmental Escrow Account on the third anniversary
of the Closing Date, such remaining amount shall be disbursed to the
Representative in accordance with the instructions of the Representative
pursuant to Section 2.2 hereof.
1.6 Distribution Instructions. Distributions from the Environmental Escrow
Account to Buyer in accordance with this Agreement shall be made by the Escrow
Agent to an account designated in writing by Buyer. Distributions from the
Environmental Escrow Account to the Representative, if any, in accordance with
this Agreement, shall be made by the Escrow Agent to the Payment Fund.
2
1.7 Tax Reporting and Distributions. For federal income tax purposes and,
to the extent permitted by applicable law, state and local tax purposes, the
parties shall submit any required reports or returns prepared on the basis that
Buyer is the owner of the Environmental Escrow Funds and Buyer shall furnish any
required tax forms consistent with the foregoing. The Escrow Agent shall report
and, as required, withhold any taxes as it determines may be required by any law
or regulation in effect at the time of distribution and, in each case, in
accordance with the first sentence in this Section 1.7.
1.8 Accounting. The Escrow Agent shall provide a written account to Buyer
and the Representative at the end of each month of the relevant calendar year
listing all transactions with respect to the Environmental Escrow Account during
the immediately preceding month.
ARTICLE II
DISPOSITION OF THE ENVIRONMENTAL ESCROW FUNDS
2.1 Claims for Environmental Escrow Funds.
(a) At any time during the term of this Agreement, Buyer and the
Representative may deliver a joint written notice substantially in the form of
Exhibit A to the Escrow Agent instructing the Escrow Agent to release from the
Environmental Escrow Account the payments with respect to any Environmental Work
completed in accordance with Section 6.2 of the Merger Agreement ("Joint
Notice"). Except as may otherwise be provided in this Agreement or in the Merger
Agreement, within three (3) Business Days after the delivery by Buyer and the
Representative to the Escrow Agent of a Joint Notice, the Escrow Agent shall
release to Buyer the amount of Environmental Escrow Amount set forth in such
notice to (together with accrued interest and other income earned thereon from
the Closing Date to the applicable payment date).
(b) At any time prior to 5:00 p.m. (New York City time) on the third
anniversary of the Closing Date, Buyer may give the Escrow Agent and the
Representative written notice in substantially the form of Exhibit ___ (a "Funds
Disbursement Notice") requesting the Escrow Agent to disburse funds for the
performance of Environmental Work (including Environmental Work which is
required under Schedule 6.2 but which will occur and/or be completed after the
third anniversary of the Closing Date; provided, however, that no funds will be
disbursed for matters which Xxxx XX has, as of the date of disbursement of the
funds, continued to honor and perform the indemnity obligations set forth in
Schedule 6.2) pursuant to the Merger Agreement. If the Representative does not
give the Escrow Agent and Buyer a written notice of disagreement (a
"Disbursement Dispute Notice") with any matter or amount set forth in the Funds
Disbursement Notice within thirty (30) Business Days of the date of the Funds
Disbursement Notice, then the Escrow Agent shall, within ten (10) Business Days
following the thirtieth (30th) Business Day after the date of the Funds
Disbursement Notice, release to Buyer the amount of the Environmental Escrow
Amount set forth in the Funds Disbursement Notice. If the Representative shall
give a Disbursement Dispute Notice to the Escrow Agent and Buyer within such
thirty (30) Business Day period, the provisions of Section 3.4 shall apply with
respect to the amount set forth therein. A funds disbursement request as to
which a Disbursement Dispute Notice has been given and which has not been
3
resolved pursuant to Section 3.4 of this Agreement is referred to hereinafter as
an "Unresolved Disbursement Claim".
(c) Notwithstanding anything herein to the contrary, the amount of any
disbursement hereunder (i) shall be net of Tax Benefits (as defined in the
Merger Agreement) and (ii) to the extent that it relates to remediation costs to
be incurred over a period in excess of one year, shall be discounted to present
value using customary financial practices and a discount rate equal to 8.5%.
2.2 Partial Release of Environmental Escrow Funds. Buyer and the
Representative shall deliver a joint written notice instructing the Escrow Agent
to immediately release from the Environmental Escrow Account and deposit into
the Payment Fund on the second anniversary of the Closing Date the lesser of:
(i) $2,000,000 or (ii) $5,000,000 minus the aggregate dollar amount of all
Unresolved Disbursement Claims. Within three (3) Business Days after the third
anniversary of the Closing Date, the Escrow Agent shall release such portion of
the Environmental Escrow Amount as may be remaining in the Environmental Escrow
Account as of such date (other than an amount equal to the aggregate dollar
amount of all Unresolved Disbursement Claims), and shall pay such amount to the
Representative in the manner directed by the Representative, together with
accrued interest and other income earned thereon from the Closing Date to the
applicable payment date. In the event that there are Unresolved Disbursement
Claims remaining at the third anniversary of the Closing Date, the parties shall
proceed to resolve such claims pursuant to the dispute resolution mechanism in
Section 3.4 hereof within 30 days of the third anniversary date and payment or
retention of funds related to such resolved claims shall be made in accordance
with this Agreement.
ARTICLE III
ESCROW AGENT
3.1 Duties. The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement and shall be
limited to the performance of such duties and obligations as are specifically
set forth in this Agreement, as it may be amended from time to time with the
Escrow Agent's written consent as provided in Section 4.8 hereof. The Escrow
Agent shall not have any liability under, nor duty to inquire into the terms and
provisions of any agreement (including the Merger Agreement) or instruction,
other than those set forth in, or given pursuant to, this Agreement.
3.2 Reliance. In the performance of its duties hereunder, the Escrow Agent
shall be entitled to rely, and shall be protected in acting or refraining from
acting, upon any document or instrument reasonably believed by it to be genuine
and signed by Buyer and/or the Representative, as applicable, and the Escrow
Agent shall be under no duty to inquire into or investigate the validity or
accuracy of any such document. The Escrow Agent may assume that any person
purporting to give any notice in accordance with the provisions hereof has been
duly authorized to do so.
3.3 Liability. The Escrow Agent shall not be liable for any error of
judgment, or any action taken or omitted to be taken hereunder in good faith,
except in the case of its bad faith,
4
gross negligence or willful misconduct. In the administration of the
Environmental Escrow Funds, the Escrow Agent shall be entitled to consult with
counsel of its choosing (including internal counsel). The Escrow Agent shall not
be liable for any act suffered or omitted by it in good faith in accordance with
the advice or opinion of such counsel.
3.4 Disputes. In the event that the Escrow Agent shall receive a
Disbursement Dispute Notice, the Escrow Agent shall not release any
Environmental Escrow Funds with respect to any matter covered by such notice
until there shall have been a final determination of the rights of the parties
with respect to such matter, and then only in accordance with the terms of such
final determination. In the event that the Escrow Agent shall be otherwise
uncertain as to its duties or rights hereunder, it shall be entitled to refrain
from taking any action until such time as there has been a final determination
of the rights of the parties with respect to the Escrow Funds (or relevant
portion thereof). For purposes of this Section 3.4, there shall be deemed to
have been a final determination of the rights of the parties at such time as (i)
an agreement shall have been reached between the Buyer and the Representative
regarding the amount to be disbursed pursuant to that particular Funds
Disbursement Notice; or (ii) in the event that the Buyer and the Representative
are not able to reach an agreement, then the respective parties' environmental
consultants shall meet to attempt to reach agreement, or (iii) failing that, the
environmental consultants shall jointly select a third environmental consultant
who shall review the available information and make a final determination as to
the reasonable costs which shall be reflected as the disbursement and the Escrow
Agent shall have been notified thereof in a joint written direction from each of
Buyer and the Representative. Buyer and Representative agree to proceed
diligently upon notice by one party to the other that the dispute resolution
mechanism in this Section 3.4 are to be implemented.
3.5 Resignation. The Escrow Agent may resign at any time and be discharged
of the duties imposed hereunder (but without prejudice for any liability in the
case of its bad faith, gross negligence or willful misconduct hereunder) by
giving notice to Buyer and the Representative at least thirty (30) Business Days
prior to the date specified for such resignation to take effect, in which case,
upon the effective date of such resignation:
(a) all funds then held by the Escrow Agent hereunder shall be
delivered by it to such Person as may be designated in writing by
Buyer and the Representative, whereupon the Escrow Agent's
obligations hereunder shall cease and terminate;
(b) if no such person has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless,
cease and terminate, subject to clause (c) below; and
(c) the Escrow Agent's sole responsibility thereafter shall be to
keep all funds then held by it (and to make the investments as
hereinbefore provided) and to deliver the same to the successor
escrow agent designated jointly by Buyer and the Representative
in writing or, if no such successor escrow agent shall have been
so designated, in accordance with the directions of a final order
or judgment of a court of competent jurisdiction and the
provisions of Section 3.7 and Section 3.8 shall remain in effect.
5
Upon their receipt of notice of resignation from the Escrow Agent, Buyer
and the Representative shall use their reasonable best efforts jointly to
designate a successor escrow agent. Notwithstanding anything to the contrary in
the foregoing, the Escrow Agent or any successor escrow agent shall continue to
act as Escrow Agent until a successor is appointed and qualified to act as
escrow agent.
3.6 Removal of Escrow Agent. Buyer and the Representative may, upon at
least thirty (30) Business Day's prior written notice to the Escrow Agent,
jointly dismiss the Escrow Agent hereunder and appoint a successor. In such
event, the Escrow Agent shall promptly account for and deliver to the successor
escrow agent named in such notice the balance of the Environmental Escrow Funds.
Upon acceptance thereof and of such accounting by such successor escrow agent,
and upon reimbursement to the Escrow Agent of all expenses due to it hereunder
through the date of such accounting and delivery, the Escrow Agent shall be
released and discharged from all of its duties and obligations hereunder, but
without prejudice to any liability of the Escrow Agent for its bad faith, gross
negligence or willful misconduct hereunder.
3.7 Compensation. On the Closing Date and annually thereafter, Buyer and
the Representative shall each pay one-half of the Escrow Agent's $_______ annual
fee (the "Annual Fee") in full satisfaction of its engagement fee and
compensation, without pro-ration for partial years. All amounts payable by the
Representative pursuant to this Section 3.7 shall be paid out of the Expense
Account to be maintained by the Representative under the Merger Agreement.
3.8 Indemnification. The Escrow Agent and its directors, officers, agents
and employees (the "Indemnified Parties") shall be indemnified and held harmless
by each of Buyer and the Representative, severally and not jointly (with each
such indemnifying party liable up to a maximum of 50%), against any loss,
liability, claim, damage, injury, demand or expense, including reasonable legal
fees and expenses of in-house or outside counsel arising out of or in connection
with the performance of the Escrow Agent's obligations hereunder or pursuant to
any written instructions of Buyer or the Representative given to the Escrow
Agent pursuant to this Agreement, including the costs and expenses incurred in
connection with the collection of its fees and including the costs and expenses
of defending itself against any claim or liability arising out of or in
connection with the performance of its duties hereunder, except for any loss,
liability, claim, damage, injury, demand or expense resulting from any of the
Indemnified Parties' bad faith, gross negligence or willful misconduct;
provided, however, that promptly after the receipt by any of the Indemnified
Parties of notice of any claim or the commencement of any suit, action or
proceeding, such Indemnified Party shall, if a claim of indemnification in
respect thereof is to be made against any of the other parties hereto, notify
such other parties thereof in writing; and provided, further, however, that the
indemnifying party or parties shall be entitled, at their own expense, to
participate in or assume the defense of any such action, suit or proceeding. If
the indemnifying party assumes control of such defense and the indemnifying
party and any of the Indemnified Parties have a conflict of interest with
respect to such suit, action or proceeding, such Indemnified Party shall be
entitled to have separate legal representation in respect thereof and the
reasonable fees and expenses of counsel to the Escrow Agent shall be considered
"damages" for the purposes of this Section 3.8. The failure of any of the
Indemnified Parties to provide written notification to an indemnifying party
shall not affect the rights of any of the Indemnified Parties under this Section
3.8 except (and only to the extent that) the indemnifying
6
party incurs additional expenses or the indemnifying party is actually
prejudiced by reason of such failure to give timely notice. The right of any of
the Indemnified Parties (or any successor escrow agent appointed hereunder) to
indemnification under this Section 3.8 shall survive the termination of this
Agreement or the earlier removal or resignation of the Escrow Agent or the
termination of this Agreement. Notwithstanding anything in this Agreement to the
contrary, in no event shall any of the Indemnified Parties be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if such Indemnified Party has
been advised of the likelihood of such loss or damage and regardless of the form
of action. All amounts payable by the Representative pursuant to this Section
3.8 shall be paid out of the Environmental Escrow Fund pursuant to a joint
instruction signed by the Representative and the Buyer. The parties hereby grant
the Escrow Agent a lien on, right of set-off against and security interest in
the Environmental Escrow Fund for the payment of any claim of indemnification,
compensation, expenses and amounts due hereunder and payable by the
Representative.
3.9 Merger. Any corporation into which the Escrow Agent in its individual
capacity may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Escrow Agent in its individual capacity shall be a party, or any corporation to
which substantially all the corporate trust business of the Escrow Agent in its
individual capacity may be transferred, shall be the successor escrow agent
under this Agreement without further action, and the provisions of this
Agreement shall continue to apply to such successor escrow agent as if such
successor escrow agent was an original party hereto.
ARTICLE IV
TAXES
4.1 The Escrow Agent shall timely report to the Buyer and the
Representative the aggregate amount of income earned, interest received and
gains recognized (collectively, the "Escrow Interest") from the investment of
the Escrow Funds on which taxes imposed on any such income, interest or gains
(such taxes, the "Escrow Taxes") are then due and payable and the Buyer shall
report the amount of such Escrow Interest to the appropriate taxing authorities
and shall pay the Escrow Taxes, in which event it may direct the Escrow Agent,
by a reasonably detailed written notice to it with a copy to the Representative,
to reimburse the Buyer in the amount of the Escrow Taxes out of the Escrow
Interest. In the event any portion of the Environmental Escrow Fund is to be
paid to Buyer or deposited into the Payment Fund pursuant to Section 2.2, such
amount shall be reduced (and the amount of such reduction shall be paid over to
the Buyer, but only to the extent not reimbursed to it pursuant to the preceding
sentence) by an amount equal to the product of (i) the Escrow Taxes that are
then due and payable and that the Buyer estimates (in a reasonably detailed
written notice to the Escrow Agent with a copy to the Representative) will be
due and payable with respect to the taxable period in which such payment or
deposit is made multiplied by (ii) a fraction, the numerator of which is the
amount otherwise to be paid to the Buyer or deposited into the Payment Fund
under this sentence, as the case may be, and the denominator of which is the
Environmental Escrow Fund. The amount determined pursuant to the preceding
sentence shall be adjusted to the extent reasonably practical to account for any
duplication in payment and any timing differences in payments into and
7
disbursements from the Environmental Escrow Account. The provisions of this
Section 4.1 shall be interpreted and applied in a manner that is consistent with
the provisions of Section 3.4(a) of the Merger Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Term. This Agreement shall continue in force until the final
distribution of all amounts held by the Escrow Agent in the Environmental Escrow
Account in accordance with this Agreement.
5.2 Notices. All notices and other communications hereunder shall be given
in writing and shall be deemed given if delivered personally, by registered or
certified mail (postage prepaid, return receipt requested), by overnight courier
(providing proof of delivery), by facsimile (which is confirmed), to the party
to receive such notices or communications at the address set forth below (or
such other address as shall from time to time be designated by such party to the
other parties in accordance with this Section 5.2):
If to Buyer and/or Merger Sub, to:
Professional Communications Security & Imaging International Holdings BV
Address: ____________________
Attn: _______________________
Facsimile:___________________
With a copy to:
Xxxxxx Xxxxx XxxX
Xxxxxx Xxxxx Xxxxx 0
00000 Xxxxxxxxx-Xxxxxxxxxxxxx
Xxxxxxx
Attn: _______________________
and
Xxxxxx & Whitney LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. XxXxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Representative, to:
FS Private Investments III LLC
c/x Xxxxxxxxx Capital Partners
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
8
Attn: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
With a copy to:
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Escrow Agent, to:
Address _____________________
Attn: _______________________
Facsimile: __________________
5.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any party to this Agreement
without the prior written consent of the other parties to this Agreement, except
that Buyer may assign any of its rights under this Agreement to one or more
Subsidiaries of Buyer, so long as Buyer remains responsible for the performance
of all of its obligations under this Agreement. Subject to the foregoing, this
Agreement and all of the provisions of this Agreement will be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns.
5.4 GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS AGREEMENT, AND THE
RESPECTIVE RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
5.5 Jurisdiction; Waiver of Jury Trial.
(a) Each of the parties hereto hereby agrees that all actions and
proceedings arising out of or relating to this Agreement or any of the
transactions contemplated hereby shall be heard and determined in the Supreme
Court of the State of New York, New York County, or the United States District
Court for the Southern District of New York, and the parties hereto hereby
irrevocably submit to the exclusive jurisdiction of each such court in any such
action or proceeding and irrevocably waive the defense of an inconvenient forum
to the maintenance of any such action or proceeding. The parties hereto agree
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by applicable law.
(b) EACH PARTY IS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF AGREEMENTS
DELIVERED IN
9
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER
OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 5.5(b).
5.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
5.7 Headings. The Section headings in this Agreement are for convenience
only and do not constitute part of this Agreement.
5.8 Amendment. This Agreement may be amended only by a writing signed by
each of the parties hereto. The Escrow Agent shall not be required to enter into
any amendment to this Agreement which affects its rights, duties or liabilities
hereunder.
5.9 Facsimile Signatures. All signatures of the parties to this Agreement
may be transmitted by facsimile, and such facsimile will, for all purposes, be
deemed to be the original signature of such party whose signature it reproduces
and will be binding upon such party.
5.10 Third Party Beneficiaries. Except as expressly contemplated by Section
3.8 hereof, this Agreement is not intended to confer any rights or remedies upon
any person other than the parties hereto or thereto.
5.11 Confirmation of Instructions. In the event funds transfer instructions
are given (other than in writing at the time of execution of the Agreement),
whether in writing, by telecopier or otherwise, the Escrow Agent is authorized
to seek confirmation of such instructions by telephone call-back to the person
or persons designated on Schedule 1 hereto, and the Escrow Agent may rely upon
the confirmations of anyone purporting to be the person or persons so
designated. The persons and telephone numbers for individuals authorized to give
or confirm funds transfer instructions may be changed only in a writing executed
by the relevant party and actually received and acknowledged by the Escrow
Agent. The parties to this Agreement acknowledge that such security procedure is
commercially reasonable. The Escrow Agent and the beneficiary's bank in any
funds transfer may rely solely upon any account numbers or similar identifying
numbers provided by Buyer or the Representative, as applicable, to identify (i)
the beneficiary, (ii) the beneficiary's bank, or (iii) an intermediary bank. The
Escrow Agent may apply any of the escrowed funds for any payment order it
executes using any such identifying number, even when its use may result in a
person other than the beneficiary being paid, or the transfer of funds to a bank
other than the beneficiary's bank or an intermediary bank designated. The
parties to this Escrow Agreement acknowledge that these security procedures are
commercially reasonable. All funds transfer instructions must include the
signature of the person(s) authorizing said funds transfer.
10
5.12 No Liability for Instructions. The Escrow Agent shall not incur any
liability for following the instructions herein contained or expressly provided
for, or written instructions given by the parties hereto.
5.13 Force Majeure. In the event that the Escrow Agent is unable to perform
its obligations under the terms of this Agreement because of acts of God,
terrorism, strikes, equipment or transmission failure or damage reasonably
beyond its control, or other cause reasonably beyond its control, the Escrow
Agent shall not be liable for damages to the other parties for any unforeseeable
damages resulting from such failure to perform or otherwise from such causes.
Performance under this Agreement shall resume when the Escrow Agent is able to
perform substantially its duties.
5.14 Compliance with Court Orders. In the event that any escrow property
shall be attached, garnished or levied upon by any court order, or the delivery
thereof shall be stayed or enjoined by an order of a court, or any order,
judgment or decree shall be made or entered by any court order affecting the
property deposited under this Escrow Agreement, the Escrow Agent is hereby
expressly authorized, in its sole discretion, to obey and comply with all writs,
orders or decrees so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without jurisdiction, and
in the event that the Escrow Agent obeys or complies with any such writ, order
or decree it shall not be liable to any of the parties hereto or to any other
person, firm or corporation, by reason of such compliance notwithstanding such
writ, order or decree be subsequently reversed, modified, annulled, set aside or
vacated.
5.15 Entire Agreement. This Agreement, and with respect to Buyer, Merger
Sub and the Representative, the Merger Agreement, embody the entire agreement
and understanding of the parties concerning the Environmental Escrow Funds, and,
in the event of any inconsistency between this Agreement and the Merger
Agreement, this Agreement shall control.
[Signature page follows.]
11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
PROFESSIONAL COMMUNICATIONS SECURITY &
IMAGING INTERNATIONAL HOLDINGS BV
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
STHNL ACQUISITION CORP.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
REPRESENTATIVE OF THE EQUITY HOLDERS:
FS PRIVATE INVESTMENTS III LLC
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ESCROW AGENT:
[______________________________________]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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SCHEDULE 1
Telephone Number(s) for Call-Backs and
Person(s) Designated to Give or Confirm Funds Transfer Instructions
If to Buyer and/or Merger Sub, to:
Name Telephone Number Signature Specimen
If to Representative to:
Name Telephone Number Signature Specimen
Telephone call backs shall be made to both the
Buyer and the Representative if joint
instructions are required pursuant to the
agreement. All funds transfer instructions must
include the signature of the person(s)
authorizing said funds transfer.
Periodically, the parties may issue payment
orders to the Escrow Agent to transfer funds by
federal funds wire. The Escrow Agent will
review the orders to determine compliance with
the governing documentation and to confirm
signature by the appropriate party, in
accordance with the incumbency list previously
supplied to the Escrow Agent. Bank policy
requires that, where practicable, the Escrow
Agent undertake callbacks to a party other than
the individual who signed the payment order to
verify the authenticity of the payment order.
Inasmuch as the Person(s) designated on this
schedule are the only employee in such Person's
office who can confirm wire transfers, the
Escrow Agent will call such Person to confirm
any federal funds wire transfer payment order
purportedly issued by such Person. A party's
continued
E2-1
issuance of payment orders to the Escrow Agent
and confirmation in accordance with this
procedure will constitute such party's
agreement (1) to the callback security
procedure outlined in the Agreement and (2)
that the security procedure outlined therein
constitutes a commercially reasonable method of
verifying the authenticity of payment orders.
Moreover, each party agrees to accept any risk
associated with a deviation from this bank
policy.
E2-2
EXHIBIT A
(insert Date and Address)
Re: Approval of Funds Requisition Notice
Dear __________,
This notice is being delivered in accordance with Section 2.1 of the
Environmental Escrow Agreement dated __________, 2006 by and among Professional
Communications Security & Imaging International Holdings BV, [STHNL Acquisition
Corp.] and ___________ and _____________.
The Representative hereby approves of the payments described in the Funds
Requisition Notice, dated (insert date) with respect to Environmental Work to be
completed in accordance with Section 6.2 of the Merger Agreement.
The Escrow Agent is hereby directed to remit $ (insert amount) to Buyer using
the following wire payment instructions:
ABA: ______________________________
Name of Bank: _____________________
Account Number: ___________________
Account Name: _____________________
Ref: ______________________________
The Escrow Agent is hereby instructed to remit such amount within three Business
Days after receipt of this notice.
Sincerely,
PROFESSIONAL COMMUNICATIONS
SECURITY & IMAGING INTERNATIONAL
HOLDINGS BV
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[STHNL ACQUISITION CORP.]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
A-1
REPRESENTATIVE OF THE EQUITY HOLDERS:
[______________________________________]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
A-2
