EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SPECTAGUARD ACQUISITION LLC,
BPS LLC,
XXXXXX PROTECTIVE SERVICES INCORPORATED,
AND
THE SHAREHOLDERS LISTED ON THE SIGNATURE PAGE HERETO
DATED AS OF MAY 12, 2004
TABLE OF CONTENTS
PAGE
ARTICLE 1 THE MERGER..............................................................................................1
1.1 Merger Agreement................................................................................1
1.2 Closing of the Merger...........................................................................1
1.3 The Merger......................................................................................2
1.4 Effect of the Merger............................................................................2
1.5 Charter Documents...............................................................................2
ARTICLE 2 CONVERSION; MERGER CONSIDERATION........................................................................2
2.1 Merger and Conversion of the Company Common Stock...............................................2
2.2 Consideration; Cash Distribution................................................................3
2.3 Working Capital Adjustment and Cash.............................................................4
2.4 Debt Adjustment.................................................................................6
2.5 Options.........................................................................................6
2.6 Escrow..........................................................................................7
2.7 Good Faith Deposit..............................................................................7
2.8 Shareholder Loans...............................................................................8
2.9 Closing Deliveries and Transactions.............................................................8
2.10 Taking of Necessary Action; Further Action......................................................9
2.11 Waiver of Dissenting Rights.....................................................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS..............................................9
3.1 Organization and Qualification..................................................................9
3.2 Capital Stock; Title to Shares.................................................................10
3.3 Subsidiaries...................................................................................10
3.4 Authority; No Conflict.........................................................................11
3.5 Governmental Approvals and Filings.............................................................12
3.6 Permits........................................................................................12
3.7 Financial Statements...........................................................................12
3.8 No Other Liabilities or Contingencies..........................................................13
3.9 Taxes..........................................................................................13
3.10 Legal Proceedings..............................................................................15
3.11 Compliance With Laws...........................................................................15
3.12 Benefit Plans; ERISA...........................................................................15
3.13 Business Assets................................................................................17
3.14 Title to Properties; Liens.....................................................................17
3.15 Intellectual Property Rights...................................................................18
3.16 Contracts......................................................................................19
3.17 Affiliate Transactions.........................................................................21
3.18 Labor Relations................................................................................21
3.19 Environmental Matters..........................................................................23
3.20 Insurance......................................................................................23
3.21 No Material Adverse Change.....................................................................24
3.22 Stock Ledgers; Full Disclosure.................................................................24
3.23 Brokers........................................................................................24
3.24 Accounts Receivable............................................................................24
3.25 Disclosure Schedules...........................................................................25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................................25
4.1 Corporate Existence............................................................................25
4.2 Authority......................................................................................25
4.3 Noncontravention...............................................................................25
4.4 Governmental Approvals and Filings.............................................................26
4.5 Legal Proceedings..............................................................................26
4.6 Brokers........................................................................................26
4.7 Financing......................................................................................27
ARTICLE 5 COVENANTS OF SHAREHOLDERS AND COMPANY..................................................................27
5.1 Regulatory and Other Approvals.................................................................27
5.2 Conduct of Business............................................................................27
5.3 Affiliate Transactions.........................................................................29
5.4 Fulfillment of Conditions......................................................................30
5.5 No Solicitation................................................................................30
5.6 Change in Control Payments; Bank Debt; Transaction Expenses....................................30
5.7 Due Diligence; Access..........................................................................31
5.8 Programs and Practices.........................................................................32
5.9 Bank Accounts..................................................................................32
5.10 Letters of Credit..............................................................................32
ARTICLE 6 COVENANTS OF PARENT AND THE MERGER SUB.................................................................32
6.1 Regulatory and Other Approvals.................................................................33
6.2 Fulfillment of Conditions......................................................................33
ARTICLE 7 COVENANTS OF ALL PARTIES...............................................................................33
7.1 Advice of Changes..............................................................................33
7.2 Transition.....................................................................................33
ARTICLE 8 ANTITRUST FILINGS......................................................................................34
ARTICLE 9 CONDITIONS TO OBLIGATIONS OF PARENT AND THE MERGER SUB.................................................35
9.1 Representations and Warranties.................................................................35
9.2 Performance....................................................................................35
9.3 Shareholders' Certificates.....................................................................35
9.4 Orders and Laws................................................................................36
9.5 Regulatory Consents and Approvals..............................................................36
9.6 Third Party Consents...........................................................................36
9.7 Additional Documents...........................................................................36
9.8 Conversion of Subsidiaries.....................................................................36
9.9 Xxxxxx Protective Services, Inc. Execuflex Plan................................................36
9.10 Shareholder Agreement..........................................................................36
9.11 Credit Agreement...............................................................................37
ARTICLE 10 CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS AND COMPANY.................................................37
10.1 Representations and Warranties.................................................................37
10.2 Performance....................................................................................37
10.3 Parent and Merger Sub Certificates.............................................................37
10.4 Orders and Laws................................................................................37
10.5 Regulatory Consents and Approvals..............................................................37
10.6 Additional Documents...........................................................................38
ARTICLE 11 NO OTHER REPRESENTATIONS..............................................................................38
ARTICLE 12 SURVIVAL; INDEMNIFICATION.............................................................................38
12.1 Survival of Representations and Warranties.....................................................38
12.2 Indemnification of Parent and Merger Sub.......................................................39
12.3 Indemnification of Shareholders and the Company................................................39
12.4 Indemnification Procedure for Third-Party Claims...............................................40
12.5 Indemnification Procedure for Other Claims.....................................................41
12.6 Limitations on Indemnification.................................................................41
12.7 Insurance Offset...............................................................................42
12.8 Exclusivity....................................................................................42
ARTICLE 13 TAXES.................................................................................................43
13.1 Taxes..........................................................................................43
13.2 Indemnification Procedure for Tax Matters......................................................44
ARTICLE 14 TERMINATION...........................................................................................45
14.1 Termination....................................................................................45
14.2 Effect of Termination..........................................................................46
ARTICLE 15 APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE...........................................................47
15.1 Appointment....................................................................................47
15.2 Successor......................................................................................48
15.3 No Liability...................................................................................48
15.4 Genuineness of Documents.......................................................................48
15.5 Acceptance of Appointment......................................................................48
ARTICLE 16 MISCELLANEOUS.........................................................................................48
16.1 Notices........................................................................................48
16.2 Entire Agreement...............................................................................49
16.3 Expenses.......................................................................................50
16.4 Public Announcements...........................................................................50
16.5 Confidentiality................................................................................50
16.6 Waiver.........................................................................................51
16.7 Amendment......................................................................................51
16.8 No Third Party Beneficiary.....................................................................51
16.9 No Assignment; Binding Effect..................................................................51
16.10 Headings and Section References................................................................51
16.11 Consent to Jurisdiction........................................................................51
16.12 Interpretation.................................................................................52
16.13 Invalid Provisions.............................................................................52
16.14 Governing Law..................................................................................52
16.15 Counterparts...................................................................................52
16.16 Forwarding Mail................................................................................52
ANNEXES
ANNEX 1 Definitions
ANNEX 2 Excluded Assets
EXHIBITS
EXHIBIT A Form of Escrow Agreement
EXHIBIT B Form of Non-Competition Agreement
SCHEDULES
Schedule 3.2 -- Capital Stock; Title to Shares
Schedule 3.3 -- Subsidiaries
Schedule 3.4(c)iii -- Authority; No Conflict
Schedule 3.5 -- Government Approvals
Schedule 3.6 -- Permits
Schedule 3.9(e) -- Taxes
Schedule 3.9(f) -- Taxes
Schedule 3.10 -- Legal Proceedings
Schedule 3.11 -- Compliance With Laws
Schedule 3.12 -- Benefit Plans; ERISA
Schedule 3.12(n) -- Benefit Plans; ERISA
Schedule 3.12(o) -- 280G Payments
Schedule 3.13 -- Tangible Assets
Schedule 3.14(a) -- Title to Properties; Liens
Schedule 3.14(b) -- Leases
Schedule 3.14(c) -- Title to Properties; Liens
Schedule 3.14(d) -- Title to Properties; Liens
Schedule 3.15(a) -- Intellectual Property; Rights
Schedule 3.15(b) -- Intellectual Property; Rights
Schedule 3.16(a) -- Contracts
Schedule 3.18(b) -- Labor Relations
Schedule 3.18(c) -- Labor Relations
Schedule 3.18(f) -- Labor Relations
Schedule 3.19 -- Environmental Matters
Schedule 3.20(a) -- Insurance
Schedule 3.20(b) -- Insurance
Schedule 3.21 -- No Material Adverse Charge
Schedule 3.22 -- Stock Ledgers; Full Disclosure
Schedule 5.3 -- Affiliate Transactions
Schedule 5.6 -- Change in Control Payments
Schedule 9.6 -- Third Party Consents
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May
12, 2004, by and among SPECTAGUARD ACQUISITION LLC, a Delaware limited liability
company ("Parent"), BPS LLC, a Delaware limited liability company ("Merger
Sub"), XXXXXX PROTECTIVE SERVICES INCORPORATED, a Georgia corporation (the
"Company"), and XXXXXXX XXXXXX RICE, SR., an individual resident of the State of
Georgia ("Rice") and the other undersigned shareholders of the Company
(collectively, with Rice, the "Shareholders").
RECITALS
The Company is engaged in the Business. The Shareholders are the
holders of all of the issued and outstanding shares of capital stock of the
Company. This Agreement provides for the acquisition of the Company by the
Parent pursuant to the merger of the Company with and into the Merger Sub (the
"Merger"), with Merger Sub being the surviving limited liability company.
Capitalized terms used but not defined herein shall have the meanings set forth
in Annex 1 hereto.
Prior to the Closing, the parties hereto anticipate that the assets of
the Company set forth in Xxxxx 0 xxxxxx, xxxx of which are material to the
Business, will be transferred from the Company to certain parties (the "Excluded
Assets").
At the Effective Time, the Shares (other than Shares owned by the
Company or any of its Subsidiaries) shall be converted into and exchanged for
the right to receive the merger consideration specified herein. The parties
hereto wish to cause the Merger to be effected on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 MERGER AGREEMENT.
The parties shall merge the Company with and into the Merger
Sub in accordance with the terms of this Agreement.
1.2 CLOSING OF THE MERGER.
The closing hereunder of the Merger (the "Closing") shall take
place at the office of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, Xxxx Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 11:00 a.m. local time, on any Monday
following a Friday that is not a pay day of the Company (such Friday, the "Prior
Friday") (such Monday, the "Closing Date") after all the conditions precedent to
the Closing set forth herein (other than those conditions that by their nature
are to be satisfied at the Closing, but subject to the satisfaction or waiver of
such
conditions) shall have been satisfied or waived in writing, unless otherwise
mutually agreed to in writing by Parent, Merger Sub, the Company and the
Shareholders; provided, that Parent and Merger Sub shall not be obligated to
close the Merger prior to July 30, 2004.
1.3 THE MERGER.
On the Closing Date, the Parties shall cause the Merger to be
consummated by filing with the Secretaries of State of the States of Georgia and
Delaware articles of merger and a certificate of merger complying with the GBCC
and DLLCA (collectively, the "Articles of Merger"). The Merger shall become
effective upon the later of the time of filing of the Articles of Merger as
specified by the Secretary of State of Georgia and the Secretary of State of
Delaware, or at such time thereafter as is provided in the Articles of Merger
(the "Effective Time"). At the Effective Time, in accordance with this Agreement
and the laws of the States of Georgia and Delaware: (a) the Company shall be
merged with and into Merger Sub; (b) the separate existence of the Company shall
cease; and (c) Merger Sub shall continue as the surviving limited liability
company renamed as "Xxxxxx Protective Services LLC" (and the Shareholders will
consent to such) ("Surviving Company").
1.4 EFFECT OF THE MERGER.
The Merger shall have the effect set forth in the applicable
provisions of the GBCC and DLLCA. Without limiting the generality of the
foregoing, all the property, rights, privileges, powers and franchises of the
Company and the Merger Sub shall vest in the Surviving Company, and all debts,
liabilities, obligations, restrictions and duties of the Company and the Merger
Sub shall become the debts, liabilities, obligations, restrictions and duties of
the Surviving Company.
1.5 CHARTER DOCUMENTS.
At the Effective Time, the certificate of formation of Merger
Sub and the operating agreement (if any) of Merger Sub as in effect immediately
prior to the Effective Time shall be the certificate of formation and operating
agreement of the Surviving Company, until thereafter amended as provided therein
and under applicable Law. At the Effective Time the managers and officers (if
any) of Merger Sub immediately prior to the Effective Time shall become the
managers and officers of the Surviving Company, until their successors are
elected and qualified.
ARTICLE 2
CONVERSION; MERGER CONSIDERATION
2.1 MERGER AND CONVERSION OF THE COMPANY COMMON STOCK.
At the Effective Time, by virtue of the Merger and without any
action on the part of any of the parties hereto:
(a) Membership Interests of Merger Sub. Each limited
liability company interest of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully paid
and nonassessable limited liability company membership interest of the Surviving
Company.
(b) Common Stock of the Company. Each Share issued and
outstanding at the Effective Time (other than Shares owned by the Company or any
of its Subsidiaries) shall be converted into and exchanged for the right to
receive the Per Share Amount, without interest, payable upon surrender to Parent
of the certificate which immediately prior to the Effective Time evidenced such
Share. All of the Shares shall cease to be outstanding, shall automatically be
cancelled and shall cease to exist, and each holder of a certificate previously
evidencing any such Shares shall cease to have any rights with respect thereto,
except the right to receive, in accordance with the provisions of this Article
2, the Per Share Amount for each of such Shares. Each Share owned by the Company
or any of its Subsidiaries shall automatically be cancelled and shall cease to
exist, and no consideration shall be delivered or deliverable in exchange
therefor. Following the Effective Time, there shall be no further registration
of transfers on the records of the Company of Shares that were outstanding
immediately prior to the Effective Time. The "Per Share Amount" shall mean (A)
the sum of the Merger Consideration and the aggregate of all of the exercise
prices payable under all of the Company Stock Options, divided by (B) the sum
of: (i) the number of Shares, (ii) the number of shares of Company Common Stock
subject to the Company Stock Options and (iii) the number of phantom stock units
issued under the Phantom Stock Award Agreement. The "Estimated Per Share Amount"
shall be determined in the same manner as the Per Share Amount except that the
Estimated Merger Consideration shall be used instead of the Merger
Consideration. The payment of the Estimated Merger Consideration and the funding
of the Escrow Payment shall be made as set forth in Section 2.9(a) of this
Agreement.
2.2 CONSIDERATION; CASH DISTRIBUTION.
(a) The consideration for the Merger shall be equal to One
Hundred Eighty Million Dollars ($180,000,000), minus the Working Capital
Adjustment (based on the Initial Statement of Working Capital), if any, and the
Debt Adjustment, if any (the "Merger Consideration"). The Merger Consideration
will be estimated prior to the Closing and as of the Saturday payroll period end
date immediately following the Prior Friday (the "Payroll Period End Date")
pursuant to Sections 2.3(c) and 2.4 hereof ("Estimated Merger Consideration")
and the Estimated Merger Consideration will be paid at Closing pursuant to
Section 2.9(a) hereof. The Merger Consideration, and any assumed liabilities to
which the Assets are subject, will be allocated among the Assets, and any
assumed liabilities to which the Assets are subject, as set forth on a schedule
to be delivered by Parent to Shareholders' Representative within ninety (90)
Business Days after the Closing Date. Such allocation will be in accordance with
IRC ss. 1060 and the regulations promulgated thereunder and will be reasonably
acceptable to Shareholders' Representative. The Parties will file Tax Returns
(and any other filings with the IRS and any state, local or foreign taxing
authorities) consistent with such allocation and shall not take any position
which is inconsistent with such allocation.
(b) All Cash of the Company as of the close of business on
the Prior Friday shall be distributed to the Shareholders, pro rata, based upon
each Shareholders' relative
ownership of Shares, without regard as to class of the Company Common Stock and
without taking into account any shares issuable upon exercise of a Company Stock
Option or otherwise ("Pro Rata").
2.3 WORKING CAPITAL ADJUSTMENT AND CASH.
(a) To the extent that the Working Capital as of the Payroll
Period End Date set forth on the Closing Date Balance Sheet, as finally
determined pursuant to Section 2.3(d) and (e), is less than the Target Working
Capital, the Merger Consideration shall be reduced by a dollar amount equal to
the difference. The foregoing adjustment shall be referred to herein as the
"Working Capital Adjustment."
(b) If Cash on the closing cash and debt statement, to be
prepared as of the Prior Friday (the "Closing Cash and Debt Statement"), as
finally determined pursuant to Section 2.3(d) and (e), is either positive or
negative, then the Merger Consideration shall be adjusted dollar for dollar up
or down, respectively (the "Cash Adjustment") and payment made under
subparagraph (f) of this Section 2.3; provided, that no reclassification of
negative Cash to debt shall be made in determining the amount of the Cash
Adjustment.
(c) The Working Capital Adjustment, shall be estimated by
Shareholders based on an estimated Closing Date Balance Sheet and estimated
statement of Working Capital ("Initial Statement of Working Capital") prepared
by the Company's certified public accountants in accordance with the terms of
this Agreement and in accordance with past practice and provided by Shareholders
to the Parent at least three (3) Business Days before Closing. The Cash
Adjustment and the Debt Adjustment shall be estimated by Shareholders based upon
an estimated Closing Cash and Debt Statement.
(d) Parent will prepare (at Parent's expense) a Closing Date
Balance Sheet and a Closing Cash and Debt Statement, each in accordance with
GAAP, consistently applied and in accordance with the past practice of the
Company, which (i) Closing Date Balance Sheet shall include all normal year end
adjustments made in the preparation of the Company's audited financial
statements including a computation, in accordance with the terms of this
Agreement, of Working Capital ("Statement of Working Capital") as of the Payroll
Period End Date and the Working Capital Adjustment, and (ii) Closing Cash and
Debt Statement shall include the Cash Adjustment. Parent will deliver the
Closing Date Balance Sheet, Closing Cash and Debt Statement and Statement of
Working Capital to Shareholders' Representative within ninety (90) Business Days
after the Closing Date. During the thirty (30) Business Days following the
Parent's delivery of the Statement of Working Capital, the Shareholders'
Representative and his representatives shall have, upon reasonable request,
during normal business hours (i) the right to examine the books, records and
documentation used in the preparation of the Closing Date Balance Sheet, the
Closing Cash and Debt Statement and the Statement of Working Capital and the
related adjustments, as well as (ii) access to such employees, accountants and
other representatives of Parent and Surviving Company as the Shareholders'
Representative may reasonably request in order to allow Shareholders and their
representatives to examine the accuracy of the Closing Date Balance Sheet,
Closing Cash and Debt Statement, Statement of Working Capital and Parent's
calculation of the Working Capital Adjustment and the Cash Adjustment. If within
thirty (30) Business Days following Parent's delivery of the Closing Date
Balance Sheet, Closing Cash and Debt Statement and Statement of Working Capital,
Shareholders' Representative has not given Parent notice of its objection to the
Closing Date Balance Sheet, Closing Cash and Debt Statement and Statement of
Working Capital (such notice must contain a statement of the basis of the
objection of the Shareholders' Representative), then the Closing Date Balance
Sheet, Closing Cash and Debt Statement and Statement of Working Capital shall be
deemed conclusive and will be used in computing the adjustment, if any, to the
Merger Consideration, and the Merger Consideration, if so adjusted, shall be
referred to herein as the "Final Merger Consideration." If Shareholders'
Representative gives such notice of objection, the Shareholders' Representative
and the Parent shall, during the fifteen (15) Business Days following such
notice (the "Working Capital/Cash Resolution Period"), attempt to resolve their
differences and any resolution by them as to any disputed amounts shall be
final, binding and conclusive.
(e) If at the conclusion of the Working Capital/Cash
Resolution Period, the Working Capital Adjustment or the Cash Adjustment shall
remain in dispute, then the issues in dispute shall be submitted to KPMG LLP,
certified public accountants (the "Accounting Arbitrator"), for resolution. If
such accounting firm is then unable to serve, then another accounting firm,
selected by mutual agreement of the Shareholders' Representative and the Parent,
shall be the Accounting Arbitrator. If KPMG LLP cannot serve and the
Shareholders' Representative and Parent are then unable to agree on the
Accounting Arbitrator, then, within ten (10) Business Days after the expiration
of the Working Capital/Cash Resolution Period, the Shareholders' Representative
and Parent shall each have the right to request the American Arbitration
Association to appoint the Accounting Arbitrator, who shall be a practicing
certified public accountant with experience preparing financial statements for
companies engaged in the same field of business as the Company and shall not
have had a business relationship with any of the Shareholders, the Company or
Parent, or any of their Affiliates, within the past two years. The Parties
hereto shall execute, if requested by the Accounting Arbitrator, a reasonable
engagement letter. The submission to the Accounting Arbitrator shall occur no
later than ten (10) Business Days after the Accounting Arbitrator is determined
(whether it is KPMG LLP or as otherwise determined as set forth herein) and
shall be accompanied by a statement (the "Brief") from Parent (with a copy to
the Shareholder Representative) and the Shareholders' Representative (with a
copy to Parent) setting forth in reasonable detail the proposed calculation by
each such party of the items in dispute (each, a "Last Offer"). The Parent and
the Shareholders agree that (i) each will furnish to the Accounting Arbitrator
such work papers and other documents and information relating to the disputed
issues as the Accounting Arbitrator may reasonably request and are available to
that Party (or its independent public accountants), (ii) each will be afforded
the opportunity to present to the Accounting Arbitrator any material relating to
the disputed issues and to discuss the disputed issues with the Accounting
Arbitrator, (iii) the determination by the Accounting Arbitrator of the Working
Capital Adjustment or the Cash Adjustment (as the case may be), as set forth in
a notice delivered to both the Shareholders' Representative and the Parent by
the Accounting Arbitrator, will be binding and conclusive on the Parties
(provided that in no event shall the Accounting Arbitrator's determination be
outside of the range of Last Offers of the respective parties with respect to
those issues in dispute) and (iv) Parent and Shareholders will each bear 50% of
the fees of the Accounting Arbitrator for such determination. The Shareholders'
Representative and the Parent shall otherwise bear his or its own costs and
expenses associated with the resolution of such dispute, including the fees and
expenses of their respective accountants and attorneys. The Accounting
Arbitrator shall use its
best efforts to make a final determination of any matters before it within
thirty (30) days after the day that the Briefs are to be delivered to the
Accounting Arbitrator.
(f) On or before the tenth (10th) Business Day following the
later of the final determination of the Working Capital Adjustment or the Cash
Adjustment (as the case may be) (by agreement or as determined by the Accounting
Arbitrator), the following payments, if any, will be made. If (i) the Final
Merger Consideration is greater than the Estimated Merger Consideration, Parent
or Surviving Company shall pay the difference to the Shareholders'
Representative by wire transfer of immediately available funds and the
Shareholders' Representative shall distribute such amount to the Shareholders
Pro Rata, or (ii) the Final Merger Consideration is less than the Estimated
Merger Consideration, Parent and the Shareholders' Representative shall direct
the Escrow Agent to pay the deficit to the Parent by wire transfer of
immediately available funds (without interest thereon) out of the Escrow
Account; and, provided, that if the funds held in the Escrow Account are
insufficient to pay such deficit, then each Shareholder shall reimburse Parent
for such Shareholder's Pro Rata portion of such deficiency by wire transfer of
immediately available funds.
2.4 DEBT ADJUSTMENT.
The Parties acknowledge that the Merger Consideration
calculation assumes that on or prior to the Closing, the Shareholders shall have
paid or cause to be paid (i) all outstanding Indebtedness (including Bank Debt)
of the Company and its Subsidiaries, including all accrued and unpaid interest
thereon and all fees and expenses (the "Prepayment Expenses"), if any, incurred
by the Company and its Subsidiaries in connection with the termination thereof,
(ii) all Transaction Expenses and (iii) all Change in Control Payments;
provided, however, that Xxxxxxx and Xxxxxxxx Xxxxxx may at his or her option
elect to receive these payments in installments according to the payment
schedule set forth in the applicable employment agreement giving rise to such
obligations. To the extent that such Indebtedness and Prepayment Expenses have
not been paid on or before Closing, the Merger Consideration shall be reduced by
the amount required to pay such Indebtedness and Prepayment Expenses in full and
such Indebtedness shall be paid by Parent for the Company at Closing. To the
extent the Transaction Expenses have not been paid on or before Closing by the
Shareholders, the Merger Consideration shall be reduced by the amount required
to satisfy such obligations, and the Transaction Expenses shall be paid by
Parent for the Company at Closing. To the extent the Change in Control Payments
have not been paid on or before Closing by the Shareholders, the Merger
Consideration shall be reduced by the amount required to satisfy such
obligations, and the Change in Control Payment shall be paid by Parent for the
Company at Closing. The sum of the foregoing three adjustments shall
collectively be referred to herein as the "Debt Adjustment."
2.5 OPTIONS.
(a) The Company shall take all actions necessary to provide
that at the Effective Time, (i) each option outstanding at the Effective Time to
purchase shares of Common Stock granted under the 2000 Stock Option Plan of the
Company (each a "Company Stock Option") shall be cancelled and (ii) in
consideration of the cancellation of each fully-vested, exercisable Company
Stock Option (including Company Stock Options that are subject to accelerated
vesting as a result of the Merger), the holder of such fully-vested, exercisable
Company Stock Option (including Company Stock Options that are subject to
accelerated vesting as a result of the Merger) shall receive, upon surrender and
cancellation of the option agreement representing such Company Stock Options, an
amount in cash equal to the product of (x) the excess of the Estimated Per Share
Amount over the per share exercise price of such fully-vested, exercisable
Company Stock Options, times (y) the number of shares of Common Stock subject to
such fully-vested, exercisable Company Stock Option (the aggregate amount of
such payments, the "Aggregate Option Consideration"). Company Stock Options not
fully-vested or not otherwise exercisable (other than those that are subject to
accelerated vesting as a result of the Merger) shall be cancelled without
consideration. All shares of Common Stock underlying the vested, exercisable
Company Stock Options shall not be deemed outstanding for purposes of this
Article 2.
(b) The Company shall, as of the Effective Time, pay in cash
the entire amount payable under the Phantom Stock Award Agreement to Xxxx, being
an amount equal to the Estimated Per Share Amount times the number of phantom
stock units issued to Xxxx ("Phantom Stock Consideration") under such agreement
and cancel such agreement.
(c) All payments of the Aggregate Option Consideration and
the Phantom Stock Consideration shall be paid from the Estimated Merger
Consideration and shall be subject to applicable withholding Taxes.
2.6 ESCROW.
At Closing, the Parent, the Shareholders, the Shareholders'
Representative and the Escrow Agent shall enter into that certain escrow
agreement in the form of Exhibit A (the "Escrow Agreement"). Parent shall cause
$9,000,000 (the "Escrow Payment") to be deducted from the portion of the
Estimated Merger Consideration payable to Shareholders and deposited into escrow
to provide funds for Shareholders' indemnification and Working Capital
Adjustment obligations hereunder. Any funds remaining in escrow upon the
termination of the Escrow Agreement shall be distributed to the Shareholders in
accordance with the terms of the Escrow Agreement.
2.7 GOOD FAITH DEPOSIT.
Concurrently with the execution of this Agreement, the Parent
and its designated Affiliate shall deposit with the Escrow Agent $10,000,000 in
cash (the "Good Faith Deposit") that will be held in a separate escrow account
(the "Good Faith Deposit Escrow Account") pending the Closing in accordance with
the terms of the Good Faith Deposit Escrow Agreement. In the event that this
Agreement is terminated or the Merger fails to close, in either case, as a
result of a breach, default, or abandonment hereof by Parent or Merger Sub in
violation of this Agreement, the Good Faith Deposit (and any interest thereon)
shall be released from the Good Faith Deposit Escrow Account and delivered to
the Company. In the event that this Agreement is terminated, or the Merger fails
to close for any other reason or under any other circumstance in which the
conditions set forth in the preceding sentence do not exist, the Good Faith
Deposit (and any interest thereon) will be released from the Good Faith Deposit
Escrow Account and refunded to Parent and its designated Affiliate in accordance
with the terms of the Good Faith Escrow Agreement.
2.8 SHAREHOLDER LOANS.
On or before the Closing, Shareholders shall, and shall cause
Xxxx, Xxxxxxx and Xxxxxxx Xxxxxx to, pay or cause to be paid (other than by the
Company, and including through any cancellation or reduction of such amounts)
all amounts owed by them to the Company.
2.9 CLOSING DELIVERIES AND TRANSACTIONS.
At the Closing:
(a) Parent shall pay the Estimated Merger Consideration
in cash, by wire transfer or other immediately available funds, as follows:
(i) an amount equal to the Aggregate Option
Consideration, less applicable withholding Taxes, to the holders of
the Company Stock Options, in accordance with Section 2.5(a) hereof,
subject to surrender and cancellation of the option agreement
representing such Company Stock Options;
(ii) an amount equal to the Phantom Stock
Consideration, less applicable withholding Taxes, to Xxxx, subject to
surrender and cancellation of the Phantom Stock Award Agreement (to
the extent not paid by the Company on or prior to the Closing by the
Company pursuant to Section 2.5(b));
(iii) the Escrow Payment to the Escrow Agent; and
(iv) the Estimated Merger Consideration minus the
amounts set forth in subsections (i), (ii) and (iii) above, to the
Shareholders, Pro Rata.
(b) The Company and the Shareholders will deliver to
Parent and Merger Sub duly executed by the Company, the Shareholders or
Shareholders' Representative, as appropriate:
(i) the stock certificates for all of the Shares
for cancellation;
(ii) the Articles of Merger;
(iii) the Escrow Agreement;
(iv) a Noncompetition Agreement substantially in the
form of Exhibit B, executed by each of Xxxx, Xxxx and Xxxxxxx Xxxxxx
Rice, Jr. (collectively, the "Noncompetition Agreements");
(v) a certificate executed by Shareholders as
described in Section 9.3 hereof; and
(vi) such other documents as Parent or Merger Sub
may reasonably request to facilitate the consummation of the
Contemplated Transactions.
(c) Parent and Merger Sub will deliver to the
Shareholders' Representative, or as otherwise set out below, duly executed by
Parent or Merger Sub:
(i) the Escrow Agreement;
(ii) counterparts of the Noncompetition Agreements;
(iii) a certificate executed by Parent and Merger Sub
as described in Section 10.3 hereof; and
(iv) such other documents as the Company or
Shareholders may reasonably request to facilitate the consummation of
the Contemplated Transactions.
(d) The Shareholder Representative and the Parent shall
direct Good Faith Deposit Escrow Agent to deliver the Good Faith Deposit to
Parent and its designated Affiliate.
2.10 TAKING OF NECESSARY ACTION; FURTHER ACTION.
Each of the Parties will take all reasonable and lawful action
as may be necessary or appropriate in order to effectuate the Merger in
accordance with this Agreement as promptly as practicable. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Company with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and managers and officers of Merger Sub immediately prior to the
Effective Time are fully authorized in the name of their respective companies or
otherwise to take, and will take, all such lawful and necessary reasonable
action.
2.11 WAIVER OF DISSENTING RIGHTS.
Each Shareholder irrevocably waives all rights such
Shareholder may have under Article 13 of the GBCC to dissent to the Merger and
receive payment with respect to its shares of Common Stock in connection with
the Contemplated Transactions. Parent, Merger Sub and the Company shall be the
beneficiaries of this Section 2.11.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF COMPANY AND SHAREHOLDERS
Except as set forth in the Disclosure Schedule previously delivered by
the Shareholders and the Company to Parent, the Company and each Shareholder
hereby represent and warrant to Parent and Merger Sub that the following
statements are true and correct as of the date of this Agreement and will be
true and correct as of the Closing Date:
3.1 ORGANIZATION AND QUALIFICATION.
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of Georgia,
and has full corporate power and authority to conduct the Business and to own,
use and lease its assets and properties and to perform all of
its obligations under each agreement to which it is a party or by which it is
bound. The Company is duly qualified to do business as a foreign corporation and
in good standing in those jurisdictions where such qualification is necessary,
except for those jurisdictions in which the adverse effects of all such failures
by Company to be qualified and in good standing would not in the aggregate
reasonably be expected to have a Material Adverse Effect.
(b) The Shareholders which are trusts have been duly
organized and are validly existing under the laws of the State of Georgia, and
each trustee of such trusts has all power and authority to conduct the business
of the trust, including, without limitation, all power and authority to cause
the trust to enter into and perform the obligations of the trust under this
Agreement.
3.2 CAPITAL STOCK; TITLE TO SHARES.
(a) The authorized capital stock of the Company consists
solely of Two Million Four Hundred Fifty-Thousand (2,450,000) shares of Voting
Common Stock and Four Million Nine Hundred Thousand (4,900,000) shares of
Non-Voting Common Stock, of which Two Million Three Hundred Thousand (2,300,000)
shares of Voting Common Stock and Four Million Nine Hundred Thousand shares
(4,900,000) of Non-Voting Common Stock (collectively, the "Shares") are issued
and outstanding. The Shares are duly authorized, validly issued, fully paid and
nonassessable and issued in compliance with applicable Law. The Shareholders own
the Shares, beneficially and of record, free and clear of all Liens. Disclosure
Schedule 3.2 sets forth a description of the ownership of the Shares.
(b) Except for this Agreement and as disclosed in
Disclosure Schedule 3.2, there are no (i) outstanding Shares or Options with
respect to the Company, (ii) securities of the Company reserved for issuance for
any purpose, (iii) agreements pursuant to which registration rights in the
securities of the Company have been granted, (iv) agreements, whether written or
verbal, among any current and former shareholders of the Company regarding the
issuance of Company Common Stock or (v) statutory or contractual preemptive
rights or rights of first refusal with respect to the shares of capital stock of
the Company.
3.3 SUBSIDIARIES.
Except as set forth on Disclosure Schedule 3.3, the Company
does not have any Subsidiaries, nor does it own an interest in any other Person
except as provided on such Schedule. Each Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the Laws of its
jurisdiction of incorporation identified in Disclosure Schedule 3.3, and has
full corporate power and authority to conduct its Business, to own, use and
lease its assets and properties and to perform all of its obligations under each
agreement to which it is a party or by which it is bound. Each Subsidiary is
duly qualified to do business as a foreign corporation and is in good standing
in those jurisdictions where such qualification is necessary. Disclosure
Schedule 3.3 lists for each Subsidiary the amount of its authorized capital
stock, the amount of its outstanding capital stock and the record and beneficial
owners of such outstanding capital stock. All of the outstanding shares of
capital stock or ownership interests of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are owned,
beneficially and of record, by the Company or a Subsidiary wholly-owned by the
Company free
and clear of all Liens (except for the Lien set forth in Disclosure Schedule
3.3, which shall be satisfied in full at or prior to the Closing) and issued in
compliance with applicable Law. There are no (i) outstanding Options with
respect to any Subsidiary, (ii) securities of any Subsidiary reserved for
issuance for any purpose, (iii) agreements pursuant to which registration rights
in the securities of any Subsidiary have been granted, (iv) agreements, whether
written or verbal, among any current and former shareholders of any Subsidiary
regarding the issuance of the Subsidiary's securities or (v) statutory or
contractual preemptive rights or rights of first refusal with respect to the
shares of capital stock of any Subsidiary.
3.4 AUTHORITY; NO CONFLICT.
(a) The execution and delivery by the Company and the
Shareholders which are trusts of this Agreement and the Transaction Documents,
and the performance by the Company and the Shareholders which are trusts of
their respective obligations hereunder and thereunder, have been duly and
validly authorized with no other action on the part of the Company or such
Shareholders being necessary. The Company has the corporate power and authority
to execute and deliver this Agreement and the Transaction Documents and to
perform its obligations under this Agreement and the Transaction Documents. Each
Shareholder which is a trust has the power and authority to execute and deliver
this Agreement and the Transaction Documents to be executed by it and to perform
its obligations under this Agreement and the Transaction Documents to be
executed by it. Each Shareholder who is an individual has the capacity, and has
taken all action necessary, to execute and deliver this Agreement and the
Transaction Documents to be executed by him or her and to perform his or her
obligations under this Agreement and the Transaction Documents to which he or
she is a Party.
(b) This Agreement has been duly and validly executed and
delivered by the Company and the Shareholders and constitutes a legal, valid,
and binding obligation of the Company and each Shareholder, enforceable against
the Company and each Shareholder in accordance with its terms, subject to the
Enforceability Exceptions. Upon the execution and delivery by the Company and
each Shareholder, as appropriate, of the Transaction Documents, the Transaction
Documents will constitute the legal, valid, and binding obligations of the
Company and the Shareholders, enforceable against the Company and the
Shareholders in accordance with their respective terms, subject to the
Enforceability Exceptions.
(c) The execution, performance and delivery by
Shareholders and the Company of this Agreement and the other Transaction
Documents do not, and the consummation of the Contemplated Transactions will
not:
(i) conflict with or result in the breach of any of
the provisions of the Organizational Documents of the Company or the
Subsidiaries or the Shareholders that are trusts;
(ii) subject to the expiration of the HSR waiting
period, violate in any material respect any provision of any Law or
Order applicable to the Company or any Subsidiary or the Shareholders
or any of their respective assets and properties; or
(iii) except as set forth in Disclosure
Schedule 3.4(c)(iii) or as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect,
(A) breach or constitute (with or without notice or lapse of time or
both) a default under, (B) require the Company or the Subsidiaries to
obtain any consent or take any action under the terms of, (C) result
in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (D) result in
the creation or imposition of any Lien upon the Company, any
Subsidiary or any Shareholder or any of their respective assets and
properties under, any note, bond, mortgage, indenture, lease, license,
Contract, agreement or other instrument or obligation to which the
Company, any of the Subsidiaries or any Shareholder is a party or by
which the Company, any of the Subsidiaries or any Shareholder or their
assets may be bound.
3.5 GOVERNMENTAL APPROVALS AND FILINGS.
Except as set forth on Disclosure Schedule 3.5, no consent,
approval or authorization of, declaration or notice to, or filing or
registration with any Governmental Authority on the part of Shareholders, the
Company or any Subsidiary is required in connection with the execution, delivery
and performance of this Agreement or the consummation of the Contemplated
Transactions, except where the failure to obtain any such consent to make any
such filing or to give any such notice, individually or in the aggregate, would
not reasonably be expected to adversely affect the ability of the Company and
Shareholders to consummate the Contemplated Transactions or to perform their
obligations hereunder.
3.6 PERMITS.
Disclosure Schedule 3.6 sets forth a complete list of all
material Permits used in the Business or otherwise held by the Company or its
Subsidiaries in connection therewith, all of which are in full force and effect,
unless otherwise noted. Except as set forth in Disclosure Schedule 3.6, (i)
neither the Company nor any Subsidiary is in default, nor has the Company or any
Subsidiary received any written or, to Shareholders' Knowledge, oral notice of
any claim of material default, with respect to any such Permit and (ii) such
Permits constitute all of the material licenses, franchises and other permits
necessary for the Company and its Subsidiaries to own, operate, use and maintain
the Business in the manner in which it is now operated and maintained and to
conduct the Business as currently conducted.
3.7 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent true and complete
copies of the following financial statements (collectively, the "Financial
Statements"):
(i) the audited balance sheets of the Company and
its consolidated Subsidiaries as of October 25, 2003, October 26,
2002, October 27, 2001, and October 28, 2000 and the related audited
consolidated statements of operations, stockholders' equity and cash
flows for each of the fiscal years then ended; and
(ii) the unaudited balance sheet of the Company and
its consolidated Subsidiaries as of March 13, 2004 ("Interim Balance
Sheet") and the related unaudited consolidated statements of
operations for the portion of the fiscal year then ended.
(b) Except as set forth in the notes thereto and as
disclosed in Disclosure Schedule 3.7, all such Financial Statements (i) were
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby (unless specified otherwise), (ii) fairly present in all
material respects the consolidated financial condition and results of operations
of the Company and its consolidated Subsidiaries as of the respective dates
thereof and for the respective periods covered thereby, subject to, in the case
of interim financial statements, normal year-end adjustments consistent with the
past practice of the Company and the lack of footnotes consistent with the past
practice of the Company and (iii) contain and reflect all necessary adjustments,
accruals, provisions and allowances required by GAAP. The financial condition
and results of operations of each Subsidiary are, and for all periods referred
to in this Section 3.7 have been, consolidated with those of the Company.
3.8 NO OTHER LIABILITIES OR CONTINGENCIES.
Neither the Company nor any of the Subsidiaries has any
liabilities of a nature required by GAAP to be disclosed on a balance sheet of
such company except for (a) liabilities stated or adequately reserved against on
the Financial Statements or the notes thereto, (b) liabilities incurred after
the date of the Interim Balance Sheet in the Ordinary Course of Business, (c)
liabilities for Taxes incurred after the date of the Interim Balance Sheet in
the Ordinary Course of Business or (d) liabilities disclosed in the Disclosure
Schedules hereto. Neither the Company nor any of its Subsidiaries has or will
have as of the Closing any obligation or liability for earn-outs or other
contingent payments payable to former owners of assets, stock or other interests
acquired by the Company or otherwise arising out of previous acquisitions by the
Company or its Subsidiaries.
3.9 TAXES.
(a) The Company has validly elected to be taxed in
accordance with the provisions of Subchapter S of the IRC. Such election was
effective on November 1, 1987, and shall remain in effect until the Closing
Date. Since the effective date of its election to be taxed in accordance with
these provisions, none of the Company or the Shareholders has taken any action
or failed to take any action that would result in the Company failing to be so
qualified. For purposes of IRC ss. 1361 and the regulations promulgated
thereunder, the Company and the Subsidiaries have only one class of stock
outstanding.
(b) The Company also has had in effect at all times since
the formation of the domestic Subsidiaries a valid election to treat each such
Subsidiary as a "qualified S corporation subsidiary" within the meaning of IRC
ss. 1361(b)(3)(B). Except as provided in Section 9.8, such elections shall
remain in effect until the Closing Date. Since the effective date of its
elections to be taxed in accordance with these provisions, none of the Company,
the domestic Subsidiaries or the Shareholders has taken any action or failed to
take any action that would result in such Subsidiaries failing to be so
qualified.
(c) The Shareholders, including the Shareholders which
are trusts, are and have been since the later of November 1, 1987 and the date
they became Shareholders, qualified S corporation shareholders within the
meaning of IRC ss. 1361. Each of the Shareholders consented to the elections set
forth in Sections 3.9(a) and 3.9(b). Any former shareholders of the
Company were qualified S corporation shareholders within the meaning of IRC ss.
1361 at all times during the period in which they were shareholders of the
Company.
(d) Neither the Company nor the Subsidiaries is subject
to Tax under IRC ss. 1374 or IRC ss. 1375.
(e) Except as set forth in Disclosure Schedule 3.9(e),
the Company and the Subsidiaries have (i) timely filed all income Tax and other
material Tax Returns required to be filed by the Company and the Subsidiaries on
or before the date hereof (taking into account applicable extensions) and all
such Tax Returns were true, correct and complete in all material respects when
filed and (ii) paid or accrued (in accordance with GAAP) all Taxes that are due
and payable on or before the date hereof. As of the date of this Agreement,
there are no disputed Taxes.
(f) Except as set forth in Disclosure Schedule 3.9(f),
there are no ongoing federal, state, local or foreign audits or examinations of
any Taxes or Tax Return of the Company or any of the Subsidiaries, and neither
the Company nor any of the Subsidiaries has received any written notice that any
Governmental Authority intends to commence any such audit or examination.
(g) There are no outstanding written requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment of any Taxes against, or payment of any Taxes by,
the Company or any of the Subsidiaries.
(h) None of the Company or any of the Subsidiaries (i) is
a party to any agreement providing for the allocation or sharing of Taxes and
(ii) has any contractual obligation to indemnify any other Person with respect
to Taxes.
(i) The charges, accruals and reserves with respect to
Taxes on the books of the Company are adequate to satisfy any Taxes due up
through the Closing Date. There exists no proposed Tax assessment against the
Company except as disclosed in the Interim Balance Sheet, no issue has been
raised by a Governmental Authority in any current or prior examination which
would reasonably be expected to result in a proposed deficiency, and no claim
has been made to the Company or the Subsidiaries by a Governmental Authority in
a jurisdiction where the Company and the Subsidiaries do not file reports and
Tax Returns that the Company or the Subsidiaries are or may be subject to
taxation by that jurisdiction. All Taxes that the Company is or was required by
Law to withhold or collect have been duly withheld or collected in all material
respects and, to the extent required, have been timely paid to the proper
Governmental Authority or other Person.
(j) At all times since the formation of Xxxxxx Protective
Services (Europe) Limited ("Xxxxxx Europe") on November 17, 1999, it has been a
U.K. private limited company for United Kingdom tax purposes. From November 17,
1999 through November 29, 2000, Rice owned 100 percent of Xxxxxx Europe's stock.
On November 30, 2000, Rice sold 100 percent of Xxxxxx Europe's stock to the
Company. At all times since November 30, 2000, Xxxxxx Europe has been
disregarded as an entity separate from the Company for United States federal
income tax purposes.
3.10 LEGAL PROCEEDINGS.
Except as set forth in Disclosure Schedule 3.10:
(a) there are no Proceedings pending or, to the Knowledge
of Shareholders, threatened against the Company, any Subsidiary or any of their
Assets which have had or could reasonably be expected to, individually or in the
aggregate with other such Proceedings, have a Material Adverse Effect or would
reasonably be expected to prevent or delay the consummation of the Contemplated
Transactions; and
(b) there are no material Orders outstanding against the
Company or any Subsidiary.
3.11 COMPLIANCE WITH LAWS.
Except as set forth in Disclosure Schedule 3.11 (provided that
none of the items set forth in Disclosure Schedule 3.11, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect), each of the Company and the Subsidiaries has complied in all respects
with and is not in violation of, and has not received any written notice
alleging any violation with respect to, or otherwise been advised that it is not
in compliance with, any provision or any Law or Order applicable to it or the
conduct of the Business or the ownership or operation of its Assets, except for
such failures to comply, violations and notices that, individually or in the
aggregate, have not had, and would not be reasonably expected to have, a
Material Adverse Effect. To the Knowledge of Shareholders, no circumstances
exist that are likely to result in violations of any of the foregoing.
3.12 BENEFIT PLANS; ERISA.
(a) Disclosure Schedule 3.12(a) contains a true and
complete list and description of each of the Benefit Plans, and identifies each
of the Benefit Plans that is a Qualified Plan.
(b) Neither the Company nor any Subsidiary maintains or
is obligated to provide benefits under any life, medical or health plan (other
than as an incidental benefit under a Qualified Plan) which provides benefits to
retirees or other terminated employees other than benefit continuation rights
under the Consolidated Omnibus Budget Reconciliation of 1985, as amended.
(c) No Benefit Plan is a Defined Benefit Plan.
(d) With respect to any Benefit Plan that is a
"multiemployer pension plan," as such term is defined in section 3(37) of ERISA,
covering employees of the Company, any Subsidiary or any ERISA Affiliate, (i)
none of the Company, any Subsidiary nor any ERISA Affiliate has made or suffered
a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in sections 4203 and 4205 of ERISA, (ii) to the Knowledge
of the Shareholders, the aggregate withdrawal liability of the Company, each
Subsidiary and each ERISA Affiliate, computed as if a complete withdrawal by the
Company, each Subsidiary and each ERISA Affiliate had occurred under each such
Benefit Plan on the date hereof, would not
exceed $3 million, (iii) no event has occurred caused by the Company that
presents a material risk of a partial withdrawal nor, to the Knowledge of the
Shareholders, has any client or customer precipitated an event that presents a
material risk of a partial withdrawal, (iv) neither the Company nor any ERISA
Affiliate has any contingent liability under Section 4204 of ERISA and (v) to
the Knowledge of the Shareholders, no circumstances exist that present a
material risk that any such plan will go into reorganization.
(e) Each of the Benefit Plans is, and its administration
is and has been since inception, in compliance with ERISA and the IRC in all
material respects.
(f) All contributions and other payments required to be
made by the Company or any ERISA Affiliate to any Benefit Plan with respect to
any period ending on or before the Closing Date have been made or reserves
adequate for such contributions or other payments have been or will be set aside
therefor and have been or will be reflected in Financial Statements in
accordance with GAAP.
(g) No liability under Title IV or section 302 of ERISA
has been incurred by the Company or any ERISA Affiliate that has not been
satisfied in full. No transaction contemplated by this Agreement will result in
material liability to the PBGC under Section 4062, 4063, 4064 or 4069 of ERISA
with respect to the Company or any ERISA Affiliate.
(h) Each Benefit Plan intended to be "qualified" within
the meaning of Section 401(a) of the IRC is so qualified and the trusts
maintained thereunder are exempt from taxation under section 501(a) of the IRC,
and no condition exists that would reasonably be expected to adversely affect
such qualification and/or exemption.
(i) None of the Company or any Subsidiary, any Benefit
Plan, any trust created thereunder, or any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any Subsidiary,
any Benefit Plan, any such trust, or any trustee or administrator thereof, or,
to the Shareholders' Knowledge, any party dealing with any Benefit Plan or any
such trust could be subject to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a Tax imposed pursuant to section 4975 or 4976
of the IRC.
(j) There has been no material failure of a Benefit Plan
that is a group health plan (as defined in Section 5000(b)(1) of the IRC) to
meet the requirements of Section 4980B(f) of the IRC with respect to a qualified
beneficiary (as defined in section 4980B(g) of the IRC).
(k) There are no pending or, to the Knowledge of
Shareholders, threatened claims by or on behalf of any Benefit Plan, by any
Person covered thereby, or otherwise, which allege violations of Law which,
individually or in the aggregate, could reasonably be expected to result in
material liability on the part of Parent, the Company, any Subsidiary or any
fiduciary of any such Benefit Plan material to the Business.
(l) Except as set forth in Disclosure Schedule 3.12(a),
no employer security or employer real property (within the meaning of Section
407 of ERISA) is included in the assets of any Benefit Plan.
(m) Complete and correct copies of the following
documents have been furnished to Parent prior to the execution of this
Agreement:
(i) the Benefit Plans and any related trust
agreements and insurance Contracts;
(ii) current summary Plan descriptions of each
Benefit Plan subject to ERISA;
(iii) the most recent Form 5500 and Schedules thereto
for each Benefit Plan subject to ERISA reporting requirements;
(iv) the most recent determination of the IRS with
respect to the qualified status of each Qualified Plan; and
(v) the most recent accountings with respect to any
Benefit Plan funded through a trust.
(n) Except as set forth in Disclosure Schedule 3.12(n),
neither the execution of the Agreement nor the consummation of the Contemplated
Transactions will solely, or in connection with any other event, (i) result in
any payment (including severance, unemployment, compensation, golden parachute
or otherwise) becoming due to any director, officer or employee of the Company
or the Subsidiaries, or of the Shareholders, for which the Company or any
Subsidiary would have any liability, (ii) increase any benefits otherwise
payable under any Benefit Plan or (iii) result in the acceleration of the time
of payment or vesting of any such payments or benefits.
(o) Except as set forth in Disclosure Schedule 3.12(o),
no payment required to be made to any person associated with the Company or any
Subsidiary as a result of the Contemplated Transactions (under any Contract or
otherwise) will, if made, constitute a "parachute payment" within the meaning of
Section 280G of the IRC.
(p) The Company has provided to Parent complete and
correct copies of all material documents that describe (and will use its
reasonable best efforts to provide all documents related to) any and all of the
"Recognition Programs" described in the Company's employee handbook
(collectively, the "Programs and Practices").
3.13 BUSINESS ASSETS.
Except for the Excluded Assets and as set forth in Disclosure
Schedule 3.13, the tangible Assets are free from material defects, have been
maintained in all material respects in accordance with normal industry practice,
are in all material respects in good operating condition and repair (subject to
normal wear and tear) and are suitable for the purpose for which they are
presently used. The Assets (not including the Excluded Assets) are sufficient
and adequate to conduct the Business as currently conducted.
3.14 TITLE TO PROPERTIES; LIENS.
(a) The Company or a Subsidiary owns or has a legal and
valid interest in all the material Assets (other than the Excluded Assets) that
are reflected as owned or leased in the Books and Records of the Company and the
Subsidiaries, including all of the Assets reflected in the Interim Balance Sheet
(except for personal property sold since the date of the Interim Balance Sheet
in the Ordinary Course of Business). Except as set forth in Disclosure Schedule
3.14(a), all Assets reflected in the Interim Balance Sheet (other than the
Excluded Assets) are free and clear of all Liens other than Permitted Liens,
mortgages or security interests shown on the Interim Balance Sheet as securing
specified liabilities or obligations or incurred in connection with the purchase
of property or assets after the date of such balance sheet.
(b) The Company and the Subsidiaries do not own any
parcels of real property. Disclosure Schedule 3.14(b) contains a list of all
Leased Real Property, which includes the address of each Leased Real Property
and identifies the applicable lease (each, a "Lease" and collectively, the
"Leases"). Each of the Leases (i) grants the Company the right to use and occupy
the applicable premises demised thereunder, subject to the terms of the
applicable Lease, and no other Person has the right to use any material portion
of the premises demised under any Lease, (ii) is the legal, valid and binding
obligation of the Company and (iii) is enforceable, in full force and effect and
grants in all material respects the leasehold estate or right of use or
occupancy therein purported to be granted. No Lease has been assigned,
mortgaged, hypothecated or otherwise encumbered. All material covenants to be
performed by the Company, and, to the Knowledge of Shareholders, all material
covenants to be performed by the lessor or sublessor under each Lease, have been
performed in all material respects, and no event has occurred or circumstance
exists which, with the delivery of notice or the passage of time or both, would
constitute such a breach or default by the Company or, to the Shareholders'
Knowledge, the lessor or sublessor thereunder, or which would permit the
termination, modification or acceleration of performance of the obligations of
the Company or, to the Shareholders' Knowledge, the lessor or sublessor under
any Lease.
(c) Except as set forth in Disclosure Schedule 3.14(c),
(i) the Company has not received notice of any condemnation, expropriation or
other proceedings in eminent domain pending, proposed or threatened with respect
to any of the Leased Real Property by any Governmental Authority which would
reasonably be expected to have a Material Adverse Effect and (ii) neither the
Company nor any of the Shareholders has received written notice, or to
Shareholders' Knowledge, oral notice, that there is any Order outstanding, nor
any Proceeding pending or threatened, relating to the lease, use, occupancy or
operation by the Company or any of the Subsidiaries, of any of the Leased Real
Property.
(d) Disclosure Schedule 3.14(d) separately identifies
all Leases for which consents, waivers or approval must be obtained on or prior
to the Closing Date in order for such Lease to continue in effect according to
its terms, as in effect immediately prior to and on the date hereof, after the
Closing Date.
(e) The Leased Real Property constitutes all the
interests in real property operated, used or held for use by the Company in
connection with the operation of the Business.
3.15 INTELLECTUAL PROPERTY RIGHTS.
(a) Disclosure Schedule 3.15(a) discloses all
Intellectual Property material to the Business ("Material Intellectual
Property"), each of which the Company or a Subsidiary either owns or has the
right to use. All registrations with and applications to Governmental
Authorities in respect of Intellectual Property owned by the Company or a
Subsidiary and used or held for use in the Business are also set forth on
Disclosure Schedule 3.15(a) (including for each such item of applied for or
registered intellectual property, the record owner, the jurisdiction and the
registration and application numbers) and are valid and in full force and
effect.
(b) (i) To the Knowledge of Shareholders, neither the
Company nor any Subsidiary is in default (or with the giving of notice or lapse
of time or both, would be in default) under any Contract to use the Material
Intellectual Property; (ii) to the Knowledge of Shareholders, except as set
forth in Disclosure Schedule 3.15(b), the Material Intellectual Property is not
being infringed by any other Person; (iii) there is no pending or, to the
Knowledge of Shareholders, threatened Proceeding against Shareholders, the
Company or any Subsidiary involving Intellectual Property used or held for use
in the Business (A) alleging infringement or violation of intellectual property
or other rights of any Person or (B) challenging the Company's ownership or use
of, or the validity, enforceability or registrability of any such Material
Intellectual Property; and (iv) the Material Intellectual Property is sufficient
for the operation of the Business as currently conducted.
3.16 CONTRACTS.
(a) Disclosure Schedule 3.16(a) contains a true and
complete list of each of the following Contracts, to which the Company or any
Subsidiary is a party, except for those relating to the Excluded Assets:
(i) all Contracts with any Person containing any
provision or covenant prohibiting or materially limiting the ability
of the Company or any Subsidiary to engage in any business activity or
compete with any Person or prohibiting or materially limiting the
ability of any Person to compete with the Company or any Subsidiary;
(ii) all partnership, joint venture, profit-sharing
or shareholders' Contracts with any Person;
(iii) all Contracts relating to Indebtedness of the
Company or any Subsidiary in excess of $50,000 (other than
Indebtedness owing to the Company or any wholly-owned Subsidiary),
including any agreement or commitment for future loans, credit or
financing entered into by the Company;
(iv) all Contracts with representatives, sales
agencies or franchisees which in any case involve the payment or
potential payment, pursuant to the terms of any such Contract, by or
to the Company or any Subsidiary of more than $50,000 annually or on a
one-time basis;
(v) all Contracts with any customer where such
customer paid more than $750,000 during the fiscal year ended October
25, 2003 to the Company or the Subsidiaries;
(vi) each agreement that commits capital
expenditures after the date hereof in an amount in excess of $50,000
individually or $100,000 in the aggregate;
(vii) confidentiality agreements other than with
respect to confidentiality agreements entered into in the Ordinary
Course of Business (A) with employees, consultants and independent
contractors or (B) for the benefit of the Company's vendors or
customers;
(viii) any Contract relating to the making of any
loan, advance or investment by the Company or the Subsidiaries, other
than travel, relocation and similar advances to employees in the
Ordinary Course of Business and in an amount less than $20,000 for any
employee;
(ix) any Contract or subcontract pursuant to which
the Company or any Subsidiary outsources to, or subcontracts with,
another business or Person for goods or services in excess of
$100,000;
(x) all Contracts relating to the future
disposition or acquisition of any assets and properties individually
or in the aggregate material to the Business;
(xi) any fidelity or surety bond or completion
bond;
(xii) any Contracts or arrangements that contain any
severance pay or post-employment liabilities or obligations or provide
for payments to be made in the event of a change in control of the
Company or its Affiliates;
(xiii) all Contracts between or among the Company or
any Subsidiary, on the one hand, and any Shareholder, officer,
director or Affiliate (other than the Company or any Subsidiary) of
Shareholders, on the other hand;
(xiv) all collective bargaining or similar labor
Contracts;
(xv) any employment or consulting agreement,
Contract or commitment with an employee or individual consultant or
salesperson or consulting or sales agreement, Contract or commitment
with a firm or other organization relating to sales or consulting
services;
(xvi) all Contracts by which Shareholders, the
Company or any Subsidiary grants or is granted any rights to any
Material Intellectual Property; and
(xvii) all other Contracts (other than Benefit Plans)
that (A) require the payment pursuant to the terms of any such
Contract by or to the Company or any Subsidiary of more than $100,000
annually or on a one-time basis and (B) cannot be terminated within
thirty (30) days after giving notice of termination without resulting
in any material cost or penalty to the Company or any Subsidiary.
The Contracts required to be disclosed on Disclosure Schedule 3.16(a) are
referred to collectively herein as "Material Contracts."
(b) Except where such failure could not reasonably be
expected to have a Material Adverse Effect, each Material Contract is in full
force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of the Company or any Subsidiary and,
to the Knowledge of Shareholders, of each other Party thereto other than
Contracts that have expired or terminated in the Ordinary Course of Business;
and except as set forth in Disclosure Schedule 3.16(b) neither the Company, any
Subsidiary nor, to the Knowledge of Shareholders, any other party to such
Material Contract is in violation or breach of or default under any such
Material Contract (or with notice or lapse of time or both, would be in
violation or breach of or default under any such Material Contract). As of the
date of this Agreement, to the Knowledge of Shareholders, no notice of default,
termination or non-renewal under any such Material Contract has been received by
the Company or any Subsidiary and no action has been taken or omitted to be
taken by the Company, or to the Shareholders' Knowledge, by other parties
thereto which, with the giving of notice on or the lapse of time or both, would
result in or become a breach of, or give the Company or any other Person the
right to declare a default under, or to accelerate the maturity or performance
of, or to cancel terminate or modify, any Material Contract.
3.17 AFFILIATE TRANSACTIONS.
Except as set forth in Disclosure Schedule 3.17 and for the
transfer of the Excluded Assets contemplated herein, (a) there is no
Indebtedness or Contract between the Company or any Subsidiary, on the one hand,
and any Shareholder, trustee or Affiliate (other than the Company or any
Subsidiary) of Shareholders, on the other, (b) neither Shareholders nor any such
trustee or Affiliate provides or causes to be provided, or has a material equity
or financial interest in any Person that provides, any assets, services or
facilities to the Company or any Subsidiary and (c) neither the Company nor any
Subsidiary provides or causes to be provided any assets, services or facilities
to Shareholders or any such trustee or Affiliate which are individually or in
the aggregate material to the Business.
3.18 LABOR RELATIONS.
(a) From January 1, 2001 to the date of this Agreement,
there have been no actual or, to the Knowledge of Shareholders, threatened
strikes, lockouts, slowdowns, work stoppages or picketing against or affecting
the Company or its Subsidiaries;
(b) Except as set forth in Disclosure Schedule 3.18(b),
neither the Company nor any Subsidiary is a party to or has any obligations
under any agreement, labor or collective bargaining or otherwise, with any labor
union, labor organization or works council or any other party regarding the
rates of pay or working conditions of any of their employees, nor are any of
them obligated under any agreement to recognize or bargain with any labor
organization or union;
(c) Except as set forth on Disclosure Schedule 3.18(c),
no employees of the Company or its Subsidiaries are represented by any labor
union, labor organization or works council with respect to their employment with
the Company or its Subsidiaries. No labor union, labor organization, works
council, or group of employees of the Company or its Subsidiaries has made a
pending demand for recognition or certification, and there are no representation
or certification proceedings or petitions seeking a representation proceeding
presently pending or
threatened in writing to be brought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority. Except as set forth in
Disclosure Schedule 3.18(c), to the Knowledge of Shareholders, there is no
organization activity among any of the Company's or the Subsidiaries' employees,
and none of the Company, the Subsidiaries or any of their officers or directors
or employees have been charged or, to Shareholders' Knowledge, threatened with a
charge of any unfair labor practice;
(d) The Company and its Subsidiaries are in compliance
with all applicable Laws respecting employment and employment practices,
including, without limitation, all Laws respecting terms and conditions of
employment, health and safety, wages and hours, child labor, immigration,
employment discrimination, disability rights or benefits, equal opportunity,
plant closures and layoffs, affirmative action, workers' compensation, labor
relations, employee leave issues and unemployment insurance, except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect;
(e) The Company and its Subsidiaries are not delinquent
in any material respect in payments to employees or former employees, or on
behalf of any employees or former employees, of the Company or any of the
Subsidiaries for services or amounts required to be reimbursed or otherwise
paid;
(f) Except as set forth in Disclosure Schedule 3.18(f),
the Company and its Subsidiaries have not received written (i) notice of any
unfair labor practice charge or complaint pending or, to the Knowledge of
Shareholders, threatened before the National Labor Relations Board or any other
Governmental Authority against them, (ii) notice of any complaints, grievances
or arbitrations arising out of any collective bargaining agreement or any other
complaints, grievances or arbitration procedures against them, (iii) as of the
date hereof, notice of any charge or complaint with respect to or relating to
them pending before the Equal Employment Opportunity Commission or any other
Governmental Authority responsible for the prevention of unlawful employment
practices, (iv) notice of the intent of any Governmental Authority responsible
for the enforcement of labor, employment, wages and hours of work, child labor,
immigration or occupational safety and health laws to conduct an investigation
with respect to or relating to them or notice that such investigation is in
progress or (v) notice of any Proceeding pending in any forum by or on behalf of
any present or former employee of such entities, any applicant for employment or
classes of the foregoing alleging breach of any express or implied Contract of
employment, any applicable Law governing employment or the termination thereof
or other discriminatory, wrongful or tortious conduct in connection with the
employment relationship;
(g) The Company and its Subsidiaries are and have been in
material compliance with all notice and other requirements under the Workers'
Adjustment and Retraining Notification Act and any similar foreign, state or
local law relating to plant closings and layoffs;
(h) To the Knowledge of Shareholders, no employee of the
Company or its Subsidiaries is in any material respect in violation of any term
of any employment agreement, nondisclosure agreement, common law nondisclosure
obligation, fiduciary duty, noncompetition agreement, restrictive covenant or
other obligation to a former employer of any such employee
relating (i) to the right of any such employee to be employed by the Company or
its Subsidiaries or (ii) to the knowledge or use of trade secrets or proprietary
information;
(i) Except as set forth in Disclosure Schedule 3.18(i),
no current employee of the Company or its Subsidiaries holding the title of Vice
President or above has informed any Shareholder that he or she will terminate
his or her employment; and
(j) Except as set forth in Disclosure Schedule 3.18(j),
the execution of this Agreement and the consummation of the Contemplated
Transactions will not result in any breach or other violation of, or require any
payments or benefits under, any collective bargaining agreement, employment
agreement, consulting agreement or any other labor-related agreement to which
the Company or its Subsidiaries is a party.
3.19 ENVIRONMENTAL MATTERS.
Except as set forth in Disclosure Schedule 3.19, (i) to the
Knowledge of Shareholders, neither the conduct nor operation of the Business,
nor any condition of any real property presently owned, leased or operated by
the Company or any of the Subsidiaries, violates any Environmental Laws, (ii)
neither the Shareholders nor the Company nor any Subsidiary has received or been
subject to any notice, Proceeding, Order or written information request from any
Person stating or alleging, or in the case of a written information request,
raising the possibility, that the Company or the Subsidiaries are currently in
violation of any applicable Environmental Law or are otherwise liable pursuant
to any applicable Environmental Law and (iii) to the Knowledge of Shareholders
there have been no spills, disposals or releases of Hazardous Materials on, at,
under, or from any real property currently or previously owned, leased or
operated by the Company or the Subsidiaries.
3.20 INSURANCE.
(a) Disclosure Schedule 3.20(a) lists all insurance
policies which are in effect covering the Company and the Subsidiaries, the
rights and Assets of the Company and the Subsidiaries, and the employees of the
Company and the Subsidiaries. Copies of such policies have been provided or made
available to Parent. All such policies are in full force and effect and all
premiums due thereon have been paid. Neither the Company nor any Subsidiary has
received any written notice from or on behalf of any insurance carrier issuing
such policies that there will be a cancellation or non-renewal of such policies
or a default under such policies. To the Knowledge of Shareholders, the
insurance policies and arrangements identified in Disclosure Schedule 3.20(a)
are in adequate amounts and cover risks customarily insured against by
businesses of the type operated by the Company and its Subsidiaries.
(b) Except as set forth in Disclosure Schedule 3.20(b),
no notice has been received by the Company or any of its Subsidiaries of any
Proceeding, and, to the Knowledge of Shareholders, there is no Proceeding
threatened, which is reasonably likely to give rise to a claim under any such
insurance policies or arrangements, including under the Company's directors' and
officers' liability policy. In the event that any such notice has been received
by the Company or any of its Subsidiaries, the Company has given (or caused to
be given) necessary notice to the appropriate insurance provider. There is no
claim pending under any such
insurance policies or arrangements as to which the Company has received any
written, or to the Shareholders' Knowledge, oral, notice, from any of the
Company's insurers that coverage has been finally denied (subject to the
insured's right to appeal) by the underwriters of such policies or arrangements.
Except as set forth in Disclosure Schedule 3.20(b), neither the Company nor any
Subsidiary has been notified that it has been refused any insurance with respect
to its operations, and the Company's and its Subsidiaries' insurance coverage
have not been limited in any material respect by any insurance carrier (except
as such coverage may be limited by the terms of such insurance) within two years
prior to the date of this Agreement. All workers' compensation and other similar
statutory claims asserted by or with respect to any employees of the Company or
its Subsidiaries prior to 2004 have been fully paid or settled or accrued for in
accordance with actuarial advice and past practice of Company.
3.21 NO MATERIAL ADVERSE CHANGE.
Except as set forth in Disclosure Schedule 3.21, since
February 14, 2004: (a) there has been no Material Adverse Change, (b) there has
been no physical damage, destruction or loss regarding the Assets that have had,
or could, after taking into account any insurance recoveries payable in respect
thereof, reasonably be expected to have, a Material Adverse Effect, and (c) the
Company has conducted the Business in the Ordinary Course of Business.
3.22 STOCK LEDGERS; FULL DISCLOSURE.
The minute books of the Company and the Subsidiaries contain
true and accurate records in all material respects of meetings and other
material corporate actions of the Shareholders, the boards of directors of the
Company and the Subsidiaries and all committees, if any, appointed by such
boards of directors. Except as set forth in Disclosure Schedule 3.22, the
Company's stock ledger and the stock ledgers (or similar documents) of the
Subsidiaries are complete and reflect all issuances, transfers, repurchases and
cancellations of shares of capital stock of the Company and its Subsidiaries.
The Books and Records of the Company and the Subsidiaries accurately reflect in
all material respects all material information relating to their Business,
Assets, obligations and accounts receivable.
3.23 BROKERS.
Except for the services of Xxxxxx Brothers, whose fees shall
be paid by Shareholders, none of the Company, the Subsidiaries or any of their
officers, directors, employees or the Shareholders have entered into, nor will
enter into, any Contract with any broker, finder or similar agent or any Person
which will result in the obligation of Parent, the Company or any of their
respective Affiliates to pay any finder's fee, brokerage fees or commission or
similar payment in connection with the Contemplated Transactions.
3.24 ACCOUNTS RECEIVABLE.
The Company's and the Subsidiaries' receivables are reflected
in the Financial Statements, have arisen only from bona fide transactions
entered into and, to the Knowledge of Shareholders, are, except to the extent of
the reserves therefor, if any, set forth in the Financial Statements,
collectible in the Ordinary Course of Business. To the Knowledge of
Shareholders,
there has not been any adverse change in the collectability of such receivables
since the date of the Interim Balance Sheet that has not been adequately
reserved for in the Interim Balance Sheet.
3.25 Disclosure Schedules.
Matters disclosed for the purpose of any section of the
Disclosure Schedule hereof shall constitute disclosure of such matters for the
purpose of that section; provided, however, that such information shall be
deemed to be included on any other schedule on which such information is
required to the extent such additional inclusion is reasonably apparent on its
face to be applicable to such other schedule.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to Shareholders and
the Company that the following statements are true and correct as of the date of
this Agreement and will be true and correct as of the Closing Date:
4.1 CORPORATE EXISTENCE.
Each of Parent and Merger Sub is a limited liability company
duly organized, validly existing and in good standing under the Laws of the
State of Delaware. Each of Parent and Merger Sub has full limited liability
company power and authority, and has taken all action necessary, to execute and
deliver this Agreement and the Transaction Documents to be executed by it, to
perform its obligations hereunder and thereunder.
4.2 AUTHORITY.
(a) The execution and delivery by Parent and Merger Sub
of this Agreement and the Transaction Documents, and the performance by Parent
and Merger Sub of its respective obligations hereunder, have been duly and
validly authorized with no other action on the part of Parent and Merger Sub or
its members being necessary. Each of Parent and Merger Sub has the power, and
authority, and has taken all action necessary, to execute and deliver this
Agreement and the Transaction Documents to be executed by it and to perform its
obligations under this Agreement and the Transaction Documents to be executed by
it.
(b) This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and constitutes a legal, valid and binding
obligation of Parent and Merger Sub enforceable against Parent and Merger Sub in
accordance with their respective terms. Upon the execution and delivery by
Parent and Merger Sub of the Transaction Documents to be executed by them, such
Transaction Documents will constitute the legal, valid, and binding obligations
of Parent and Merger Sub, enforceable against Parent and Merger Sub in
accordance with their respective terms.
4.3 NONCONTRAVENTION.
The execution, performance and delivery by Parent and Merger
Sub of this Agreement and the Transaction Documents to be executed by them do
not, and the consummation by them of the Contemplated Transactions will not:
(a) conflict with or result in the breach of any of the
terms, conditions or provisions of the Organizational Documents of Parent or
Merger Sub;
(b) subject to the expiration of the waiting period under
the HSR Act, violate in any material respect any provision of any Law or Order
applicable to Parent or Merger Sub or any of their assets and properties; or
(c) except as set forth in Disclosure Schedule 4.3 or as
would not, individually or in the aggregate, reasonably be expected to adversely
affect the ability of Parent or Merger Sub to consummate the Contemplated
Transactions or to perform their obligations hereunder, (i) breach or constitute
(with or without notice or lapse of time or both) a default under, (ii) require
Parent or Merger Sub to obtain any consent or take any action under the terms
of, (iii) result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to or (iv) result
in the creation or imposition of any Lien (other than Permitted Liens) upon
Parent or Merger Sub or any of its assets or properties under, any note, bond,
mortgage, indenture, lease, license, Contract, agreement or other instrument or
obligation to which Parent or Merger Sub is a party or by which the Parent or
Merger Sub or their assets may be bound.
4.4 GOVERNMENTAL APPROVALS AND FILINGS.
Except as set forth on Disclosure Schedule 4.4, no consent,
approval or authorization of, declaration or notice to, or filing or
registration with, any Governmental Authority on the part of Parent or Merger
Sub is required in connection with the execution, delivery and performance of
this Agreement or the consummation of the Contemplated Transactions, except
where the failure to obtain any such consent to make any such filing or to give
any such notice, individually or in the aggregate, would not reasonably be
expected to adversely affect the ability of Parent or Merger Sub to consummate
the Contemplated Transactions or to perform its obligations hereunder.
4.5 LEGAL PROCEEDINGS.
(a) There are no Proceedings pending or, to the knowledge
of Parent or Merger Sub, threatened against Parent or Merger Sub or any of their
assets and properties which could reasonably be expected to, individually or in
the aggregate, with other such Proceedings, materially and adversely affect or
prevent or materially delay the consummation of any of the Contemplated
Transactions; and
(b) there are no material Orders outstanding against the
Parent or Merger Sub.
4.6 BROKERS.
None of Parent, Merger Sub or any of their officers, managers,
employees or members have entered into nor will enter into any Contract,
agreement, arrangement or understanding with any broker, finder or similar agent
or any Person which will result in the
obligation of the Shareholders, the Company, the Subsidiaries or any of their
respective Affiliates to pay any finder's fee, brokerage fees or commission or
similar payment in connection with the Contemplated Transactions.
4.7 FINANCING.
Parent and Merger Sub have, or will have at the Closing,
sufficient cash and/or available credit facilities to pay the Merger
Consideration and to make all other necessary payments of fees and expenses in
connection with the Contemplated Transactions.
ARTICLE 5
COVENANTS OF SHAREHOLDERS AND COMPANY
Shareholders and the Company covenant and agree with Parent and Merger
Sub that, at all times from and after the date hereof until the Closing, they
will comply with all covenants and provisions of this Article 5, except to the
extent Parent may otherwise consent in writing.
5.1 REGULATORY AND OTHER APPROVALS.
Shareholders and the Company will, as promptly as practicable,
take all commercially reasonable steps necessary or desirable to obtain all
consents, approvals or actions of, make all filings with and give all notices to
Governmental Authorities or any other Person required of Shareholders, the
Company or any Subsidiary to consummate the Contemplated Transactions, including
without limitation those described in Disclosure Schedule 3.5.
5.2 CONDUCT OF BUSINESS.
Until the Closing, the Company shall and shall cause its
Subsidiaries to conduct business only in the Ordinary Course of Business, except
as expressly provided for in this Agreement (including, without limitation, for
the transfer of the Excluded Assets, the distribution of Cash to Shareholders,
and the repayment of the Company's outstanding Indebtedness). Without limiting
the generality of the foregoing, the Company shall and shall cause its
Subsidiaries to use reasonable best efforts to preserve intact their present
business organization, and retain (subject to dismissals and retirements in the
Ordinary Course of Business) the services of the key officers and employees and
preserve their relationships with customers, suppliers and others having
business dealings with the Company and its Subsidiaries, all with the intent of
preserving unimpaired their goodwill and ongoing businesses at the Effective
Time. In addition, Shareholders will cause the Company and the Subsidiaries to
refrain from, and the Company shall refrain from:
(a) amending their Organizational Documents or taking any
action with respect to any such amendment;
(b) authorizing, issuing, selling or otherwise disposing
of, or committing to sell or deliver any shares of capital stock of or any
Option with respect to the Company or any
Subsidiary, or modifying or amending any right of any holder of outstanding
shares of capital stock of or Option with respect to the Company or any of its
Subsidiaries;
(c) splitting, combining or reclassifying any shares of
the Company's or any of the Subsidiaries' capital stock, declaring, setting
aside or paying any dividend or other distribution (whether in cash, shares or
property or any combination thereof) in respect of the capital stock of the
Company or any of the Subsidiaries, or directly or indirectly redeeming,
purchasing or otherwise acquiring any capital stock of or any Option with
respect to the Company or any Subsidiaries;
(d) except pursuant to existing written arrangements or
in the Ordinary Course of Business, increasing or otherwise changing the rate or
nature of employee compensation (including wages, salaries and bonuses);
(e) adopting any new employee benefit plan, policy,
program or arrangement, or amending any Benefit Plan in a way that would serve
to increase the benefits payable thereunder;
(f) adopting a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (except in connection
with a merger of any Subsidiary into the Company);
(g) except as may be required as a result of a change in
Law or in GAAP, changing any of the accounting principles or practices (whether
for financial accounting or tax purposes) used by it;
(h) revaluing any of its assets, including, without
limitation, writing-off notes or accounts receivable other than in the Ordinary
Course of Business or as required by GAAP;
(i) making or revoking any material Tax election or
settling or compromising any Tax liability;
(j) paying, discharging or satisfying any claims or
Liabilities, other than the payment, discharge or satisfaction in the Ordinary
Course of Business of Liabilities reflected or reserved against in the
consolidated financial statements as of October 25, 2003 (or the notes thereto)
of the Company and Subsidiaries or incurred in the Ordinary Course of Business;
(k) (i) incurring or assuming any long-term or short-term
Indebtedness or issuing any debt securities; (ii) assuming, guaranteeing,
endorsing or otherwise becoming liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person; (iii) making
any loans, advances or capital contributions to any other Person (other than to
the Subsidiaries, or customary loans or advances to employees in the Ordinary
Course of Business and in amounts not to exceed $25,000 individually or $50,000
in the aggregate); (iv) pledging or otherwise encumbering shares of capital
stock of the Company or the Subsidiaries; or (v) mortgaging or pledging any of
the assets, tangible or intangible, of the Company or the Subsidiaries, or
creating or, except for Permitted Liens, suffering to exist any Lien thereupon;
(l) selling, leasing or disposing of any assets outside
the Ordinary Course of Business, other than the transfer of the Excluded Assets;
(m) acquiring (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other business organization
or division thereof or any equity interest therein, or any assets;
(n) authorizing or making any capital expenditures which
individually is in excess of the $50,000 or in the aggregate are in excess of
$100,000, except for those capital expenditures made pursuant to existing
agreements of the Company;
(o) (i) entering into any Contract or arrangement
providing for the taking of any action that would be prohibited hereunder or
(ii) amending, modifying or waiving any material term of any Contract or
arrangement in a way that (A) could reasonably be expected to hinder the
Contemplated Transactions or (B) would result in a material increase of the
Company's obligations or Liabilities thereunder or a material decrease in the
rights or benefits to the Company thereunder;
(p) entering into or amending, extending or otherwise
altering any collective bargaining agreement;
(q) settling or compromising any pending or threatened
Proceedings (i) which relate to the Contemplated Transactions or (ii) that are
material;
(r) requesting or requiring any Person to accelerate the
payment of the accounts receivable of the Company or any of the Subsidiaries
except in the Ordinary Course of Business, or factoring any accounts receivable
of the Company or any of the Subsidiaries;
(s) deferring the payment of the accounts payable of the
Company or any of the Subsidiaries beyond the Company's payment practices in the
Ordinary Course of Business;
(t) taking any other action not in the Ordinary Course of
Business resulting in a decrease in Working Capital or an increase in cash; or
(u) taking or agreeing in writing or otherwise to take
any of the actions described in Sections 5.2(a) through 5.2(t) or any action
which would make any of the representations or warranties of the Company or the
Shareholders contained in this Agreement untrue or incorrect.
5.3 AFFILIATE TRANSACTIONS.
Immediately prior to the Closing, amounts owing under
Contracts between Shareholders (other than those relating to Indebtedness, which
is covered by Section 2.8 hereof), those individuals listed on Disclosure
Schedule 5.3 or any Affiliate (other than the Company or Subsidiaries) of
Shareholders, on the one hand, and the Company or any of the Subsidiaries, on
the other, will be paid in full, and Shareholders will terminate and will cause
any such individual or Affiliate to terminate each Contract with the Company or
any Subsidiary. Prior to the Closing, neither the Company nor any Subsidiary
will enter into any Contract or amend or modify any
existing Contract, and will not engage in any transaction (other than pursuant
to Contracts disclosed in Disclosure Schedule 3.16(a) or not required to be
disclosed therein in accordance with Section 3.16(a)(xiii)) with Shareholders or
any individual or Affiliate thereof.
5.4 FULFILLMENT OF CONDITIONS.
The Company and Shareholders will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of Parent and Merger Sub contained
in this Agreement and will not, and will not permit the Company or any
Subsidiary to, take or fail to take any action that could reasonably be expected
to result in the nonfulfillment of any such condition.
5.5 NO SOLICITATION.
(a) The Company and each Shareholder shall, and shall
instruct its officers, directors, shareholders, employees or agents (if any) to,
immediately terminate all discussions or negotiations existing on the date
hereof, if any, with any third party with respect to, or any that could
reasonably be expected to lead to or contemplate the possibility of, a Sale
Transaction. For purposes of this Agreement, the term "Sale Transaction" means
any offer or proposal concerning any (i) merger, consolidation or business
combination transaction involving the Company or any Subsidiary, (ii) sale or
other disposition of assets of the Company or any of its Subsidiaries not in the
Ordinary Course of Business, (iii) issuance, sale, or other disposition of
securities (or options, rights or warrants to purchase, or securities
convertible into or exchangeable for, such securities) of the Company or any of
its Subsidiaries or (iv) the initial public offering of the capital stock of the
Company.
(b) Until the Effective Time (or earlier termination of
this Agreement), the Company and the Shareholders shall not, and the Company and
the Shareholders shall instruct their respective Affiliates, officers,
directors, shareholders, employees and agents (if any) not to, (i) solicit,
facilitate or encourage any proposal with respect to a Sale Transaction, (ii)
enter into any discussions with any Person, or provide to any Person any
information, with respect to any proposal with respect to a Sale Transaction or
(iii) discuss or negotiate, or enter into any sale or other agreement with
respect to a Sale Transaction. The Company will promptly notify Parent in
writing when it becomes aware of any proposal described in clauses (i) through
(iii) above, the principal terms of the same and the identity of the party
making the same. Each of the Shareholders and the Company acknowledges and
agrees that Parent and Merger Sub will expend considerable amounts in connection
with consummating the Merger, and, as a consequence thereof, each of the
Shareholders and the Company agrees that the provisions of this Section 5.5 are
reasonable and shall be binding upon the Shareholders and the Company in
accordance with its terms.
5.6 CHANGE IN CONTROL PAYMENTS; BANK DEBT; TRANSACTION EXPENSES.
The Shareholders shall pay or cause to be paid in full on or
before Closing: (i) the amounts due to the individuals listed on Schedule 5.6
pursuant to agreements with the Company as a result of the change in control of
the Company effected by the Merger ("Change in Control Payments"); (ii) all of
the consolidated Indebtedness of the Company and its Subsidiaries
outstanding (including Bank Debt) immediately prior to Closing, and all accrued
but unpaid interest thereon and all fees and expenses, if any, incurred or to be
incurred by the Company and its Subsidiaries in connection with the repayment
thereof; and (iii) all Transaction Expenses. To the extent not so paid, such
amounts shall be deducted from the Merger Consideration pursuant to Section 2.4
hereof.
5.7 DUE DILIGENCE; ACCESS.
(a) The Parties acknowledge that because of
confidentiality concerns, Parent and Merger Sub have not been provided with full
access to certain information concerning the Business. Within five (5) days
after Parent notifies the Company in writing that it has waived its right to
terminate this Agreement pursuant to Section 14.1(h), Shareholders and the
Company shall provide to Parent and Merger Sub copies of (1) the Company's
Contracts with the top thirty (30) customers of the Company (based on annualized
revenue payable by such customer to the Company, determined as of October 25,
2003), which Contracts remain in full force and effect, (2) the Company's
Contracts entered into since October 25, 2003 with a customer of the Company
that the Company projects will account for annualized revenue payable to the
Company in excess of $750,000 and (3) employment Contracts of the Company
(collectively, the "Contract Information") and such information relating thereto
as may be reasonably requested by Parent; provided, that, if any such Contract
is an oral Contract, Shareholders and the Company shall cause a written summary
of the material terms and conditions of such oral Contract to be provided to
Parent and Merger Sub within such five-day period. Parent and Merger Sub shall
have ten (10) days after the receipt of such information (the "Review Period")
to review and audit such information and inquire about such information. To
assist in Parent and Merger Sub's review as it relates to the Contractual
Services Standard Agreement by and between the State of Florida Department of
Transportation (the "Florida DOT") and Xxxxxx Protective Services, Inc., dated
December 1, 2000 (the "Florida DOT Contract"), the Company shall also use best
efforts to arrange a meeting between representatives of the Parent and the
Florida DOT to take place during the Review Period, and the Review Period,
insofar as it relates to the Florida DOT Contract, shall be extended until such
meeting shall occur. During the Review Period, if (i) the results of the review
of the Contract Information are not satisfactory to Parent in its sole
discretion, Parent and Merger Sub may terminate this Agreement pursuant to
Section 14.1(g) hereof without any further liability on the part of Parent or
Merger Sub, provided, that, the Chief Executive Officer of Parent shall have
reasonably and in good faith determined, following consultation with the
Company, any item or combination of items delivered are reasonably likely to
result in liability to or adverse financial performance of the Company, taken as
a whole, which is materially different from the Liabilities or financial
performance known by Parent prior to the date hereof or (ii) after the meeting
between Parent and the Florida DOT, Parent is not reasonably satisfied that the
Florida DOT Contract will continue in full force and effect after the Closing on
substantially the same terms as in effect as of the date hereof, Parent may
terminate this Agreement pursuant to Section 14.1(g) hereof without any further
liability on the part of Parent, provided, that, if, as a result of the meeting,
Parent reasonably determines that the consent of the Florida DOT (the "Florida
DOT Consent") is required to assign the Florida DOT Contract to the Surviving
Entity at the Closing, the Review Period, in so far as it relates to the Florida
DOT Consent, shall be extended to twenty (20) days after the date of the meeting
(the "Extended Review Period"), provided, further, that if the Florida DOT
Consent is not obtained
within the Extended Review Period, Parent may terminate this Agreement pursuant
to Section 14.1(g) hereof without any further liability on the part of Parent or
Merger Sub.
(b) After the expiration of the Review Period and
provided Parent and Merger Sub have not terminated this Agreement, Shareholders
and the Company shall provide Parent and Merger Sub and their authorized
representatives with such financial, operating and other data and information
and access to the facilities of the Company and its Subsidiaries, their
personnel and representatives as Parent and Merger Sub may from time to time
reasonably request with respect to the Company and the Subsidiaries and the
Contemplated Transactions.
(c) After the expiration of the Review Period (or
Extended Review Period, as the case may be), there shall be no conditions to the
Closing of the Merger except as set forth in Article 9 or Article 10.
5.8 PROGRAMS AND PRACTICES
Shareholders and the Company will, as promptly as practicable
but not later than the Closing Date, as directed by Parent, revise, amend,
supplement, terminate or replace, and, if directed by Parent, discontinue all
payments from the Company or any Subsidiary in respect of, any and all of the
Programs and Practices. All notices and communications to employees of the
Company or any Subsidiary regarding any such revision, amendment, supplement,
termination, replacement or discontinuance shall be subject to Parent's prior
approval.
5.9 BANK ACCOUNTS.
Shareholders and the Company will, as promptly as practicable
but not later than ten (10) days prior to the Closing Date, provide Parent with
a schedule setting forth the name of each bank or similar entity in which any of
the Company or the Subsidiaries has an account, lock box or safe deposit box and
the names of the persons authorized to draw thereon or have access thereto.
5.10 LETTERS OF CREDIT.
At the Closing, Parent shall deliver replacement (or, if the
beneficiary thereof will not permit replacement, back-up) letters of credit,
performance bonds, payment bonds, bid bonds, guarantees and similar instruments,
in an aggregate principal amount and with terms and from banks, financial
institutions or surety companies in each case reasonably satisfactory to
Shareholders and the beneficiaries, to replace (or, to the extent required as
described above, to collateralize and if necessary, Parent shall cash
collateralize) any letters of credit, performance bonds, payment bonds, bid
bonds, guarantees and similar instruments of the Company or of any of the
Subsidiaries remaining outstanding on the Closing Date which would otherwise be
required to be replaced or collateralized in connection with the payment of all
of the Company's Indebtedness.
ARTICLE 6
COVENANTS OF PARENT AND THE MERGER SUB
Parent and Merger Sub covenant and agree with Shareholders and the
Company that, at all times from and after the date hereof until the Closing,
Parent and Merger Sub will comply with all covenants and provisions of this
Article 6, except to the extent Shareholders may otherwise consent in writing.
6.1 REGULATORY AND OTHER APPROVALS.
Parent and Merger Sub will as promptly as practicable take all
commercially reasonable steps necessary or desirable to obtain all consents,
approvals or actions of, make all filings with and give all notices to
Governmental Authorities or any other Person required of Parent to consummate
the Contemplated Transactions, including without limitation those described in
Disclosure Schedule 4.4 hereto.
6.2 FULFILLMENT OF CONDITIONS.
Parent and Merger Sub will take all commercially reasonable
steps necessary or desirable and proceed diligently and in good faith to satisfy
each condition to the obligations of Shareholders and the Company contained in
this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
ARTICLE 7
COVENANTS OF ALL PARTIES
7.1 ADVICE OF CHANGES.
Except to the extent prohibited by applicable Law, the
Company, the Shareholders, Parent and Merger Sub shall promptly advise the other
Parties orally and in writing to the extent it has or they have actual knowledge
(or, in the case of the Shareholders, to extent of the Shareholders' Knowledge)
of (a) any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate in any material respect, (b) the failure by it or
them to comply with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement and (c)
any change or event having, or which, insofar as can reasonably be foreseen,
could have a material adverse effect on such party (or, in the case of the
Company, a Material Adverse Effect) or on the accuracy of their respective
representations and warranties or the ability of the conditions set forth in
Articles 9 and 10 to be satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties (or remedies with respect thereto) or the conditions to the obligations
of the parties under this Agreement or relieve any liability for any breach
thereof.
7.2 TRANSITION.
Commencing following the date hereof and continuing until the
Closing, Parent and the Company shall, and shall cause their respective
Subsidiaries to, use their reasonable best efforts to facilitate the planning
for the integration of the Company and its Subsidiaries with the businesses of
Parent and its Subsidiaries after the Closing. Without limiting the generality
of the
foregoing, Parent and the Company shall, and shall cause their respective
Subsidiaries to, use their reasonable best efforts to: (a) with respect to
Parent and the Company, cause the senior officers of Parent and the Company to
meet on a weekly basis to review the financial and operational affairs of the
Company and its Subsidiaries, in accordance with applicable Law, (b) with
respect to the Company, consistent with the performance of day-to-day operations
and the continuous operation of the Company and its Subsidiaries in the Ordinary
Course of Business, cause the employees and officers of the Company and its
Subsidiaries to use their reasonable best efforts to assist Parent in planning
for a successful integration after the Closing, (c) with respect to the Company
(prior to the Closing) and the Shareholders (prior to and following the
Closing), assist Parent or Merger Sub in obtaining any Permits, including
executing such documents as may be reasonably required in connection therewith
and (d) with respect to the Company, provide and cause each of its Subsidiaries
to provide Parent and its authorized representatives with reasonable access
during normal business hours to the facilities of the Company and its
Subsidiaries, their personnel and representatives, and the Books and Records
(including all interim financial statements).
ARTICLE 8
ANTITRUST FILINGS
In addition to and without limiting the covenants and agreements of the
parties contained elsewhere in this Agreement:
(a) The Parties shall use their best efforts to (i) as
soon as practicable, take all actions necessary to make the filings and
notifications required of such Parties or any of their Affiliates under the HSR
Act or any Antitrust Law and (ii) comply at the earliest practicable date with
any request for additional information or documentary material received by
Parent, Merger Sub, Shareholders or the Company or any of their Affiliates from
the Antitrust Division, the Federal Trade Commission or any state antitrust
enforcement agency. The Parties shall take all action necessary, proper and
advisable under applicable Law with respect to the following: (A) to cause the
expiration or termination of the applicable waiting periods under the HSR Act as
soon as practicable, including, without limitation, by responding as promptly as
practicable to any inquiries received from the Antitrust Division or the Federal
Trade Commission or any Governmental Authority for additional information or
documentation and (B) to cause the expiration or termination of applicable
waiting periods, the satisfaction of such other filing requirements, or the
issuance of such approvals, consents or authorizations as may be required with
respect to the Antitrust Laws of any Governmental Authority, including but not
limited to, committing to or effecting, by consent decree, hold separate orders,
or otherwise, the sale or disposition of such of its assets or business or of
the Business to be acquired by it pursuant to this Agreement that are required
to be divested in order to avoid the entry of any decree, judgment, injunction
or other Order, whether temporary, preliminary or permanent, under any Antitrust
Law, that would have the effect of prohibiting, preventing or restricting
consummation of the Contemplated Transactions; provided, however, that for
purposes of this Article 8(a), the Company and Parent shall not be required to
sell or dispose of assets if such sales or dispositions would have, with respect
to the Company, a Material Adverse Effect, or with respect to Parent, a material
adverse effect on the Parent's business.
(b) The Parties shall, in connection with the efforts
referenced in the foregoing paragraph to obtain all requisite approvals and
authorizations for the Contemplated Transactions under Antitrust Laws (i)
cooperate in all respects with each other in connection with any filing or
submission and in connection with any investigation or other inquiry; (ii)
promptly inform the other party of any communication to it from any Governmental
Authority and permit the other Party to review in advance any proposed
communication from it to any Governmental Authority or third party; and (iii)
not arrange for or participate in any meeting with any Governmental Authority in
respect of any filings, investigation or other inquiry without consulting with
each other in advance, and, to the extent permitted by such Governmental
Authority, giving the other Party the opportunity to attend and participate
thereat.
(c) Parent shall pay the filing fee(s) required in
connection with any filings under the HSR Act required in connection with the
transactions contemplated by this Agreement.
ARTICLE 9
CONDITIONS TO OBLIGATIONS
OF PARENT AND THE MERGER SUB
The obligations of Parent and Merger Sub hereunder to consummate the
Merger are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Parent in its sole discretion to the extent legally permissible):
9.1 REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties of the Company and
the Shareholders contained in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though such representations
and warranties were made at and as of the Closing Date (except to the extent
that such representations and warranties are made as of a specified date, in
which case such representations and warranties shall be so true and correct as
of such date) except for inaccuracies that, individually or in the aggregate,
would not have a Material Adverse Effect; provided, that, to the extent any such
representation or warranty is qualified by materiality or "Material Adverse
Effect" such qualifications shall be ignored for purposes of this Section 9.1.
9.2 PERFORMANCE.
Shareholders and the Company shall have performed and complied
with, in all material respects, each of the agreements, covenants and
obligations required by this Agreement to be so performed or complied with by
Shareholders and the Company at or before the Closing.
9.3 SHAREHOLDERS' CERTIFICATES.
Shareholders shall have delivered to Parent a certificate of
each of the Shareholders and the Company, dated the Closing Date, certifying
Shareholders' and the Company's compliance with Sections 9.1 and 9.2 hereof.
9.4 ORDERS AND LAWS.
There shall not be in effect on the Closing Date any Order or
Law restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the Contemplated Transactions.
9.5 REGULATORY CONSENTS AND APPROVALS.
All consents, approvals and actions of, filings with and
notices to any Governmental Authority necessary to permit the Parties hereto to
perform their obligations under this Agreement and to consummate the
Contemplated Transactions shall have been duly obtained, made or given and shall
be in full force and effect and all terminations or expirations of waiting
periods under the HSR Act shall have occurred.
9.6 THIRD PARTY CONSENTS.
The consents (or in lieu thereof, waivers) listed in Schedule
9.6 shall have been obtained and shall be in full force and effect.
9.7 ADDITIONAL DOCUMENTS.
The Company and the Shareholders shall have made the
deliveries set forth in Section 2.9(b).
9.8 CONVERSION OF SUBSIDIARIES.
The Company shall have merged the Subsidiaries, excluding
Xxxxxx Europe, into the Company or merged or converted the Subsidiaries into
single member limited liability companies of the Company, as directed by Parent,
on or prior to the Closing Date and each such Subsidiary (to the extent not
merged into the Company) will be a limited liability company duly organized,
validly existing and in good standing under the Laws of their jurisdiction of
incorporation.
9.9 XXXXXX PROTECTIVE SERVICES, INC. EXECUFLEX PLAN.
The Xxxxxx Protective Services, Inc. Execuflex Plan (the
"Execuflex Plan") shall have been terminated, all assets held within the
Execuflex Plan shall have been distributed in accordance with applicable Law and
neither the Company nor any Subsidiary shall have any further payment
obligations thereunder.
9.10 SHAREHOLDER AGREEMENT.
The Shareholder Agreement, dated as of January 1993, by and
among Xxxxxxx X. Xxxx, Xxxxxxxxx X. Xxxx, and Xxxxxxx X. Xxxx, Xx., as
co-trustees for Xxxxxxx X. Xxxx, Xx. (pursuant to that certain Trust Agreement
dated December 27, 1984, as amended and restated July 5, 1991, between Xxxxxxx
X. Xxxx and Xxxxxxxxx X. Xxxx), and Xxxxxxx X. Xxxxxx and the Company shall have
been terminated and none of the parties thereto shall have any further rights or
obligations thereunder.
9.11 CREDIT AGREEMENT
The Second Amended and Restated Security Agreement, dated as
of August 26, 2002, between the Company and Wachovia Bank, N.A., as amended
April 15, 2003 and January 21, 2004, and all related agreements, shall have been
terminated and none of the parties thereto shall have any further rights or
obligations thereunder, except as provided therein.
ARTICLE 10
CONDITIONS TO OBLIGATIONS
OF SHAREHOLDERS AND COMPANY
The obligations of Shareholders and the Company to consummate the
Merger are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Shareholders and the Company in their sole discretion to the extent legally
permissible):
10.1 REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties of Parent and
Merger Sub contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date (except for
such representations and warranties that are qualified by their terms as to
materiality, which representations and warranties as so qualified shall be true
in all respects) as though such representations and warranties were made at and
as of the Closing Date (except to the extent that such representations and
warranties are made as of a specified date, in which case such representations
and warranties shall be so true and correct as of such date).
10.2 PERFORMANCE.
Parent and Merger Sub shall have performed and complied with,
in all material respects, each of the agreements, covenants and obligations
required by this Agreement to be so performed or complied with by Parent and
Merger Sub at or before the Closing.
10.3 PARENT AND MERGER SUB CERTIFICATES.
Parent and Merger Sub shall have delivered to Shareholders a
certificate of Parent and Merger Sub, dated the Closing Date, certifying
Parent's and Merger Sub's compliance with Sections 10.1 and 10.2 hereof.
10.4 ORDERS AND LAWS.
There shall not be in effect on the Closing Date any Order or
Law restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the Contemplated Transactions.
10.5 REGULATORY CONSENTS AND APPROVALS.
All consents, approvals and actions of, filings with and
notices to any Governmental Authority necessary to permit the Parties hereto to
perform their obligations under this Agreement and to consummate the
Contemplated Transactions shall have been duly obtained, made or given and shall
be in full force and effect, and all terminations or expirations of waiting
periods under the HSR Act shall have occurred.
10.6 ADDITIONAL DOCUMENTS.
Parent and Merger Sub shall have made the deliveries set forth
in Sections 2.9(a) and 2.9(c) hereof.
ARTICLE 11
NO OTHER REPRESENTATIONS
(a) Parent and Merger Sub have conducted due diligence
activities and investigations in connection with the transactions contemplated
hereby and, in connection with such activities and investigations, Parent and
Merger Sub have relied on their own financial, legal and other experts and
advisors in arriving at Parent's and Merger Sub's decision to execute, deliver
and consummate this Agreement and the transactions contemplated hereby.
(b) Notwithstanding anything to the contrary contained in
this Agreement, it is the explicit intent of each Party hereto that none of the
Parties are making, or relying upon, any representation or warranty whatsoever,
express or implied, except those representations and warranties contained in
this Agreement and in any certificate delivered pursuant to Section 9.3. In
particular, Shareholders and the Company make no representation or warranty to
Parent and Merger Sub with respect to (i) the information set forth in the
summary materials for the Management Presentation on March 12, 2004 or (ii) any
financial projection or forecast relating to the Business. With respect to any
projection or forecast delivered by or on behalf of Shareholders or Company to
Parent or Merger Sub, Parent and Merger Sub acknowledge that (i) there are
uncertainties inherent in attempting to make such projections and forecasts,
(ii) they are familiar with such uncertainties, (iii) they are taking full
responsibility for making their own evaluation of the adequacy and accuracy of
all such projections and forecasts furnished to it and (iv) they shall have no
claim against Shareholders or Company with respect thereto absent fraud or
intentional misrepresentation on the part of the Company or the Shareholders.
ARTICLE 12
SURVIVAL; INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations, and warranties of the Parties contained
in this Agreement will survive the Closing until the completion of the audit for
the first full fiscal year of the Surviving Company following the Closing, but
in no event later than March 31, 2006; provided, that, (i) the representations
and warranties contained in Sections 3.1, 3.2, 3.4(a), 3.4(b), 4.1 and 4.2 shall
survive indefinitely, (ii) the representations and warranties contained in
Sections 3.12 and 3.19 shall survive for three (3) years after Closing and (iii)
the representations and warranties in Section 3.9 shall survive until the
expiration of the statute of limitation for the applicable representation and
warranty. The covenants set forth in Article 5, 6 and 7 shall expire as of the
Effective Time; provided, that claims for breaches of such covenants prior to
the Effective Time shall survive the Closing until the completion of the audit
for the first full fiscal year of the Surviving Company following the Closing,
but in no event later than March 31, 2006. Any representation or warranty that
would otherwise terminate in accordance with this Section 12.1 will continue to
survive if a Claim Notice shall have been given under this Article 12 on or
prior to such termination date until the related claim for indemnification has
been satisfied or otherwise resolved as provided in this Article 12.
12.2 INDEMNIFICATION OF PARENT AND MERGER SUB.
Subject to the limitations contained in this Article 12, the
Company (prior to Closing) and the Shareholders each shall jointly and severally
indemnify, defend and hold harmless Parent, Merger Sub and their Affiliates, and
their respective officers, members, managers, directors, employees and
shareholders, and their respective successors and assigns (the "Parent
Indemnified Parties") from and against any and all Damages which arise out of,
result from or relate to:
(a) any breach of any representation or warranty made by
the Company or Shareholders in this Agreement or in any certificate or document
delivered at Closing by the Company or Shareholders pursuant to this Agreement,
provided, that to the extent that any such representation or warranty is
qualified by materiality or whether there is or could result a "Material Adverse
Effect," such qualifications shall be ignored for purposes of indemnification
under this Section 12.2(a);
(b) any and all Taxes imposed on or assessed against the
Company, the Subsidiaries and the Shareholders with respect to all Pre-Closing
Periods, whether or not set forth on any Tax Return (but excluding payroll and
withholding Taxes to the extent reserved for on the Closing Date Balance Sheet
but only to the extent reflected as a Current Liability on the Statement of
Working Capital); without limiting the generality of the foregoing, such Taxes
shall include (i) all Taxes shown on the Final Returns, (ii) all sales, use,
transfer or other similar Taxes that arise or are due as a result of the Merger
or any Contemplated Transactions and (iii) all Taxes that arise or are due as a
result of the transfer of the Excluded Assets to the Shareholders;
(c) any and all amounts due to any Governmental Authority
with respect to unclaimed property for all Pre-Closing Periods in excess of the
amount accrued therefor on the Closing Date Balance Sheet; and
(d) any breach by the Company or Shareholders of any
agreement, covenant or obligation of Shareholders or the Company contained in
this Agreement.
12.3 INDEMNIFICATION OF SHAREHOLDERS AND THE COMPANY.
Subject to the limitations contained in this Article 12,
Parent and Merger Sub shall indemnify, defend and hold harmless the Company
(prior to Closing) and Shareholders and
their Affiliates, and their respective trustees, officers, directors, employees
and shareholders, and their respective successors and assigns from and against
any and all Damages which, arise out of, result from or relate to:
(a) any breach of any representation or warranty made by
Parent or Merger Sub in this Agreement or in any certificate or document
delivered at Closing by Parent or Merger Sub pursuant to this Agreement,
provided, that, to the extent that any such representation or warranty is
qualified by materiality, such qualifications shall be ignored for purposes of
indemnification under this Section 12.3(a); and
(b) any breach by Parent or Merger Sub of any covenant or
obligation of Parent or Merger Sub contained in this Agreement.
12.4 INDEMNIFICATION PROCEDURE FOR THIRD-PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Party of
notice from any third party of a claim or demand in respect of which indemnity
may be sought under Section 12.2 or 12.3 which is asserted against or sought to
be collected from the Indemnified Party, including the commencement of any
Proceeding against it ("Third Party Claim"), the Indemnified Party shall, if a
claim is to be made against an Indemnifying Party under such Section 12.2 or
12.3, as applicable, give notice to the Indemnifying Party of the Third Party
Claim, but the failure to notify the Indemnifying Party will not relieve the
Indemnifying Party of any Liability that it may have to any Indemnified Party,
except to the extent that the Indemnifying Party demonstrates that the defense
of such Third Party Claim is materially prejudiced by the Indemnifying Party's
failure to receive such notice.
(b) If any Third Party Claim referred to in
Section 12.4(a) is brought against an Indemnified Party and it gives notice to
the Indemnifying Party of such claim, the Indemnifying Party will be entitled to
participate in any Proceeding underlying the claim and, to the extent that it
wishes (unless the Indemnifying Party is also a party to such Proceeding and the
Indemnified Party determines in good faith that joint representation would be
inappropriate, in which event such Indemnified Party shall have the right to
retain, at the Indemnifying Party's expense, one separate counsel, reasonably
satisfactory to the Indemnifying Party, to defend such claim on behalf of such
Indemnified Party), assume the defense of such claim with counsel reasonably
satisfactory to the Indemnified Party and, after notice from the Indemnifying
Party to the Indemnified Party of its election to assume the defense of such
Proceeding, except in the circumstances described in the parenthetical above,
the Indemnifying Party will not, as long as it diligently conducts such defense,
be liable to the Indemnified Party under this Section 12.4 for any fees of other
counsel or any other expenses with respect to the defense of such claim, in each
case subsequently incurred by the Indemnified Party in connection with the
defense of such claim, other than reasonable costs of investigation. If the
Indemnifying Party assumes the defense of the Third Party Claim: (i) no
compromise or settlement of such claim may be effected by the Indemnifying Party
without the Indemnified Party's written consent unless (A) there is no finding
or admission of any violation of Law or Order or any violation of the rights of
any Person, (B) such settlement or compromise releases the Indemnified Party in
connection with such Third Party Claim, (C) the sole relief provided is monetary
damages that are paid in full by the Indemnifying Party and (D) such settlement
or compromise does not require any
payment or other action by, or limitation on, the Indemnified Party; (ii) the
Indemnified Party will have no Liability with respect to any compromise or
settlement of such claim effected without its written consent; and (iii) the
Indemnified Party shall have the right to participate in such defense and to
employ counsel, in each case, at its own expense. Subject to Section 12.4(c), if
notice is given to an Indemnifying Party of any Third Party Claim and the
Indemnifying Party does not, within ten (10) days after the Indemnified Party's
notice is given, give notice to the Indemnified Party of its election to assume
the defense of such Proceeding, the Indemnifying Party will be bound by any
determination made in such Proceeding or any compromise or settlement effected
by the Indemnified Party.
(c) Notwithstanding the foregoing, if an Indemnified
Party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its Affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Party may, by notice to the Indemnifying Party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the Indemnifying Party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) The Parties shall cooperate in the defense of any
Third-Party Claim and shall furnish such records, information and testimony, and
attend such conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested in connection with the provisions of this Article
12.
12.5 INDEMNIFICATION PROCEDURE FOR OTHER CLAIMS.
In the event any Indemnified Party should have a claim against
any Indemnifying Party under Article 12 that does not involve a Third-Party
Claim, the Indemnified Party shall deliver a Claim Notice to the Indemnifying
Party promptly following the Indemnified Party becoming aware of the same. The
failure by any Indemnified Party to so notify the Indemnifying Party shall not
relieve the Indemnifying Party from any liability that it may have to such
Indemnified Party under Article 12, except to the extent that the Indemnifying
Party has been materially prejudiced by such failure. If the Indemnifying Party
does not deliver written notice of its objection to all or any part of such
claim or demand to the Indemnified Party within 20 days of its receipt of notice
of such claim or demand from the Indemnified Party, then the Indemnifying Party
shall be deemed to have accepted such claim or demand and shall promptly pay or
cause to be paid the amount claimed or demanded by the Indemnified Party.
12.6 LIMITATIONS ON INDEMNIFICATION.
(a) The Company and Shareholders will have no liability
for indemnification until the total of all Damages that are incurred by Parent
and Merger Sub exceeds $1.85 million, and then only for the amount by which such
Damages exceed $1.85 million. The Company's and Shareholders' maximum liability
for Damages with respect to a claim for indemnification shall be limited to and
shall not exceed $30 million in the aggregate.
(b) Parent and Merger Sub will have no liability for
indemnification until the total of all Damages that are incurred by the Company
and the Shareholders exceeds $1.85 million, and then only for the amount by
which such Damages exceed $1.85 million. Parent's and Merger Sub's maximum
liability for Damages with respect to a claim for indemnification shall be
limited to and shall not exceed $30 million in the aggregate.
(c) The limitations contained in this Section 12.6 shall
not apply to (i) any Damages resulting from any breaches by Shareholders of any
representations and warranties related to Taxes, the Company or Shareholders'
authority to enter into this Agreement and the Transaction Documents or
Shareholders' title to the Shares, (ii) any breaches by any of the Company or
the Shareholders of any of their agreements or covenants contained in this
Agreement, (iii) Damages relating to or arising from any intentional breach of
this Agreement or fraudulent misrepresentations or action by the Parties hereto,
(iv) Taxes described in Section 12.2(b) or (v) Damages relating to or arising
from amounts due to any Governmental Authority with respect to unclaimed
property referred to in Section 12.2(c).
(d) All Damages payable to any Parent Indemnified Party
pursuant to Article 12 shall be paid first from the funds held in the Escrow
Account, pursuant to the terms of the Escrow Agreement (provided, that, whether
there is any remaining balance in the Escrow Account shall not affect the
indemnification obligations hereunder).
(e) If the funds held in the Escrow Account are
insufficient to satisfy the Shareholders' obligations to pay the Damages of
Parent, Merger Sub and their Affiliates, then the Shareholders shall reimburse
such Indemnified Parties the amount of such deficiency in accordance with the
terms and provisions of this Article 12.
(f) All indemnification payments paid pursuant to this
Agreement shall be treated as adjustments to the Merger Consideration received
by the Shareholders for all Tax purposes.
12.7 INSURANCE OFFSET.
If the amount of any indemnifiable Damages, at any time
following the payment of an indemnification obligation, is offset or reduced by
the payment of any insurance proceeds, the amount of such insurance proceeds,
less any costs, expenses, premiums or taxes incurred in connection therewith
(including but not limited to any future increase in insurance premiums,
retroactive premiums, costs associated with any loss of insurance and
replacement thereof or self-insured component of such insurance coverage) will
promptly be repaid to the Indemnifying Party.
12.8 EXCLUSIVITY.
After the Closing, to the extent permitted by Law, the
indemnities set forth in this Article 12 shall be the exclusive remedies of
Parent, Merger Sub, and Shareholders and their respective managers, trustees,
officers, directors, employees, agents and Affiliates for any misrepresentation,
breach of warranty or nonfulfillment or failure to be performed of any covenant
or agreement contained in this Agreement, and the Parties shall not be entitled
to a rescission of this Agreement or to any further indemnification rights or
claims of any nature
whatsoever in respect thereof, all of which the Parties hereto hereby waive;
provided, however, that the foregoing shall not apply to claims of actual fraud
or intentional breach of this Agreement.
ARTICLE 13
TAXES
13.1 TAXES.
(a) The Shareholders will have, in accordance with
applicable Law, duly and timely prepared and filed all income and other material
Tax Returns required to be filed by the Company and the Subsidiaries on or prior
to the Closing Date (taking into account applicable extensions) with respect to
any Pre-Closing Period, and all such Tax Returns shall correctly and accurately
set forth the amount of any Taxes relating to the applicable period. Without
limiting the generality of the foregoing, the Shareholders shall be responsible
for preparing the final Tax Returns of the Company for the year commencing
October 26, 2003 (the "Final Returns") and ending on the Closing Date, which
shall include all income and gain(s) reported as a result of the deemed sale of
the Company assets that occurs as a result of the Merger. Shareholders, Parent
and the Surviving Company shall provide each other with such information and
cooperation as may reasonably be required to complete such Final Returns.
Shareholders shall provide Parent and the Surviving Company with a copy of any
such Final Returns, for their review and comment, no later than thirty (30) days
prior to the due date for filing such Final Returns.
(b) The Shareholders will timely pay or cause to be paid
all Taxes imposed on or assessed against the Company, the Subsidiaries and the
Shareholders with respect to all Pre-Closing Periods, whether or not set forth
on any Tax Return (but excluding payroll and withholding Taxes to the extent
reserved for on the Closing Date Balance Sheet but only to the extent reflected
as a Current Liability on the Statement of Working Capital). Without limiting
the generality of the foregoing, Shareholders shall be liable for (i) all Taxes
shown on the Final Returns, (ii) all sales, use, transfer or other Taxes that
arise or are due as a result of the Merger or any Contemplated Transactions and
(iii) all Taxes that arise or are due as a result of the transfer of the
Excluded Assets to the Shareholders.
(c) If, for any state, local or foreign Tax purpose, a
Taxable Year of the Company or the Subsidiaries does not terminate on the
Closing Date, the Parties hereto will, to the extent permitted by applicable Tax
Law, elect with the relevant Governmental Authority to treat such Taxable Year
for all purposes as a short taxable year or period ending as of the close of the
Closing Date and such short taxable year or period shall be treated as a
Pre-Closing Period. In any case where applicable Tax Law does not permit such an
election to be made, then the portion of any Tax that is allocated to a
Pre-Closing Period shall be the Tax that would be due (computed using an
interim-closing-of-the-books method) assuming that such Taxable Year ended at
the close of the Closing Date, except that (i) exemptions, allowances or
deductions that are calculated on an annual basis (such as the deduction for
depreciation) shall be apportioned on a per-diem basis and (ii) real property
Taxes shall be allocated in accordance with IRC Section 164(d).
(d) Except to the extent recognized as an Asset in the
Closing Date Balance Sheet, Parent or Merger Sub shall pay to the Shareholders'
Representative on behalf of the Shareholders (i) all refunds or credits of Taxes
received by Parent or Merger Sub after the Closing Date and attributable to
Taxes paid by the Company or the Subsidiaries with respect to a Pre-Closing
Period and (ii) a portion of all refunds or credits of Taxes received by Parent
or Merger Sub after the Closing Date and attributable to Taxes paid by the
Company or the Subsidiaries with respect to any Straddle Period (such portion to
be allocated consistent with the principles set forth in Section 13.1(c)). In
each case, such refunds or credits shall be paid to the Shareholders'
Representative net of (i) any Taxes imposed on such refund or credit amount and
(ii) any expenses incurred by Parent or Merger Sub in obtaining such refund or
credit. Notwithstanding the foregoing, Shareholders shall not be entitled to any
refund or credit of the Companies or the Subsidiaries relating to a carryback of
a Tax attribute relating to any period ending after the Closing Date.
13.2 INDEMNIFICATION PROCEDURE FOR TAX MATTERS.
With respect to any indemnification claim for Tax matters
under this Agreement, the following procedures and limitations shall apply:
(a) Parent or the Surviving Company shall give
Shareholders' Representative written notice that a Tax Return of the Company is
subject to audit ("Audit Notice") within ten (10) days after receipt of any
notification that a Governmental Authority intends to audit any such Tax Return
for which an assessment of Taxes with respect to such Tax Return could result in
a right of Parent or the Surviving Company to indemnification hereunder from
Shareholders with respect to such Taxes ("Indemnified Taxes"); provided however,
that if the audit relates to a Tax Return or Tax Returns that involve not only
Pre-Closing Period Taxes, then such Audit Notice need not be given to
Shareholders until within ten (10) days after receipt from the Governmental
Authority by Parent or the Surviving Company of a proposed adjustment to such
Tax Return(s) that could result in an assessment of Taxes that are Indemnified
Taxes; provided further, the failure to notify the Shareholders' Representative
will not relieve the Shareholders of any Liability that they may have to Parent
and the Surviving Company, except to the extent that the Shareholders'
Representative demonstrates that the Shareholders have been materially
prejudiced by the Shareholders' Representative's failure to receive such notice.
Notwithstanding the foregoing, with respect to any audit involving Pre-Closing
Period Taxes, Parent and Surviving Company shall provide Shareholders with
copies of all written correspondence relating to such audit received from, and a
written summary of any oral communication regarding such audit with, any
Governmental Authority within fifteen (15) days of such correspondence or
communication, and Shareholders shall have the right to provide Parent and
Surviving Company with input as to the resolution of any issues raised by the
Governmental Authority with respect to items that, if adjusted on the applicable
Tax Return(s), would result in a right of Parent and the Surviving Company to
indemnification for Taxes by Shareholders.
(b) Shareholders shall have the right, exercised by
written notice to Parent and Surviving Company given within ten (10) days after
receipt of the Audit Notice, to assume the defense of the proposed audit or
review insofar as it relates to a matter for which Shareholders have agreed to
indemnify Parent and Surviving Company ("Assumed Audit"). Delivery of such
notice shall constitute Shareholders' agreement to consent, defend, litigate or
settle any claim
resulting from the Assumed Audit, and to pay any assessment or adjustment
resulting from the Assumed Audit and all expenses incurred by Shareholders in
connection therewith. Parent and Surviving Company shall have the right to
participate at their own expense in any such contest, defense, litigation or
settlement. Shareholders shall have the exclusive right, in their discretion
exercised in good faith and upon the advice of counsel, to settle any such
assessment, either before or after the initiation of litigation, at such times
and upon such terms as they deem fair and reasonable, provided that at least ten
(10) days prior to any such settlement, written notice of their intention to
settle such assessment, and a copy of the proposed settlement shall be given to
Parent and Surviving Company. After Shareholders assume defense of an Assumed
Audit, neither Parent nor Surviving Company shall execute any agreement, form or
document in connection with or with respect to the Assumed Audit or related
proposed adjustment, assessment, or request for extension of the statute of
limitations unless instructed in writing by Shareholders to execute such
agreement, form or document, and, upon request by Shareholders, Parent and
Surviving Company shall execute a power of attorney authorizing Shareholders or
their representative(s) to represent Surviving Company before the Governmental
Authority in connection with the Assumed Audit, any proposed adjustment, or any
appeal, protest, contest, or defense of any assessment, and shall execute such
other documents and agreements reasonably required or necessary in connection
with such Assumed Audit by a Governmental Authority, or in connection with any
contest or litigation of any related assessment or any settlement of such
contest or litigation.
(c) If Shareholders fail to notify Parent and Surviving
Company of their assumption of such defense within ten (10) days after receipt
of the Audit Notice, Parent and Surviving Company shall have the responsibility
of contesting, defending, litigating, or settling any assessment made by a
Governmental Authority relating to the noticed audit or review. Shareholders
shall have the right to participate at their own expense in any such contest,
defense, litigation or settlement. Parent or Surviving Company shall have the
exclusive right, in its discretion exercised in good faith and upon the advice
of counsel, to settle any such assessment, either before or after the initiation
of litigation, at such times and upon such terms as it deems fair and
reasonable; provided, that, at least fifteen (15) days prior to any such
settlement written notice of its intention to settle such assessment and a copy
of the proposed settlement shall be given to Shareholders.
ARTICLE 14
TERMINATION
14.1 TERMINATION.
This Agreement may be terminated, and the Contemplated
Transactions may be abandoned:
(a) at any time before the Closing by mutual written
agreement of Parent, Merger Sub, the Company and the Shareholders'
Representative;
(b) by Parent if (i) Parent and Merger Sub have not
materially breached any of their representations, warranties, covenants or
agreements under this Agreement and (ii) there has been (A) a breach on the part
of the Company or the Shareholders in their representations or warranties set
forth herein that, individually or in the aggregate, would have a Material
Adverse Effect; provided, that, to the extent any representation or warranty is
qualified by materiality or "Material Adverse Effect" such qualifications will
be ignored for purposes of this Section 14.1, or (B) a material breach of the
covenants or agreements of the Company or Shareholders set forth herein, in
either case that has not been waived or cured within ten (10) Business Days
after receipt of notice by the Company and the Shareholders from Parent and
Merger Sub of an intention to terminate pursuant to this Section 14.1(b) if such
breach continues;
(c) by the Company if (i) the Company and Shareholders
have not materially breached any of their representations, warranties, covenants
or agreements under this Agreement, and (ii) there has been a material breach on
the part of Parent or Merger Sub in their representations, warranties, covenants
or agreements set forth herein, in either case that has not been waived or cured
within ten (10) Business Days after receipt of notice by the Parent and Merger
Sub from the Company and the Shareholders of an intention to terminate pursuant
to this Section 14.1(c) if such breach continues;
(d) by Parent, by written notice to the Company and
Shareholders, at any time after September 30, 2004 (or such later date as shall
have been agreed to in writing by the parties) if any of the conditions provided
for in Article 9 of this Agreement have not been met (other than through the
failure of Parent or Merger Sub to comply with its obligations under this
Agreement);
(e) by the Company, by written notice to Parent and
Merger Sub, at any time after September 30, 2004 (or such later date as shall
have been agreed to in writing by the parties) if any of the conditions provided
for in Article 10 of this Agreement have not been met (other than through the
failure of the Company or Shareholders to comply with their respective
obligations under this Agreement);
(f) by Parent or the Company if an Order preventing the
consummation of the Merger shall have become final and non-appealable;
(g) by Parent, by written notice to the Company, at any
time prior to the expiration of the Review Period, or Extended Review Period (if
applicable) in accordance with Section 5.7(a) hereof; or
(h) by Parent, by written notice to the Company, at any
time prior to 11:59 p.m. on the tenth day from the date hereof, if Parent shall
have reasonably determined that debt financing for the Merger is not available
on commercially reasonable terms.
14.2 EFFECT OF TERMINATION.
If this Agreement is validly terminated pursuant to Section
14.1, this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of the Parties (or any of their respective
officers, directors, employees, agents or other representatives or Affiliates),
except that the provisions with respect to the Good Faith Deposit in Section
2.7, fees and expenses in Article 8 and Section 16.3, public announcement in
Section 16.4,
confidentiality in Section 16.5 and this Section 14.2, will continue to apply
following any such termination. Notwithstanding the previous sentence, no party
to this Agreement shall be released from any liability for any intentional
breach of this Agreement or fraudulent misrepresentations or action by the
Parties.
ARTICLE 15
APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE
15.1 APPOINTMENT.
(a) Each Shareholder hereby constitutes and appoints
Xxxxxxx Xxxxxx Xxxx, Sr. such Shareholder's true and lawful attorney-in-fact,
with full power and authority to act on behalf of such Shareholder and in such
Shareholder's name, place, and stead for all matters arising in connection with
this Agreement (including, without limitation, any termination in connection
with this Agreement), the Escrow Agreement and the escrow fund created thereby
("Escrow Fund") and the compromise or resolution of any dispute between Parent
and Shareholders which dispute relates to (i) any adjustment to the Merger
Consideration, (ii) the Escrow Fund or (iii) the indemnity obligations of the
Shareholders under this Agreement or any other Transaction Document, and as the
authorized representative of the Shareholders to give and accept notices on
behalf of all Shareholders with respect to all the foregoing (the "Shareholders'
Representative"). Any such actions taken, exercises of rights, power or
authority, and any decision or determination made by the Shareholders'
Representative consistent therewith, shall be absolutely and irrevocably binding
on each Shareholder as if such Shareholder personally had taken such action,
exercised such rights, power or authority or made such decision or determination
in such Shareholder's individual capacity.
(b) If Xxxxxxx Xxxxxx Xxxx, Sr. shall resign or refuse to
or become unable to serve as Shareholders' Representative, the Shareholders
shall appoint a successor Shareholders' Representative with the same power and
authority herein granted to Xxxxxxx Xxxxxx Rice, Sr. Shareholders may at any
time and from time to time also change the Shareholders' Representative upon
written notice executed by all Shareholders to Parent prior to the Closing, and
to Parent and the Escrow Agent from and after the Closing. From and after any
such appointment of a successor, all references herein to the Shareholders'
Representative shall be deemed to include such successor. Each Shareholder
agrees to indemnify and to save and hold harmless the Shareholders'
Representative of, from, against and in respect of any claim, action, cause of
action, cost, liability or expense suffered or incurred by or asserted against
the Shareholders' Representative based upon or arising out of the performance by
the Shareholders' Representative of any act, matter or thing pursuant to the
appointment herein made, except that no indemnification shall be required in the
event of Shareholders' Representative's gross negligence or willful misconduct.
15.2 SUCCESSOR.
If the Shareholders' Representative (or any successor
Shareholders' Representative) ceases to function in his or her capacity as
Shareholders' Representative for any reason whatsoever, and if for any reason no
successor has been appointed within thirty (30) days by the Shareholders or if
Parent or, from and after the Closing, the Escrow Agent are not adequately
assured of the proposed appointment of such successor, then any of them shall
have the right to petition a court of competent jurisdiction for the appointment
of or the confirmation of a successor; provided, further, that each successor
Shareholders' Representative at the time of appointment must agree in writing to
be bound by those provisions of this Agreement that govern the Shareholders'
Representative.
15.3 NO LIABILITY.
In no event shall Parent, Merger Sub, the Surviving Company,
the Escrow Agent or any Affiliate of any of them have any liability to the
Shareholders' Representative or to any other entity relating to any action or
failure to act by the Shareholders' Representative.
15.4 GENUINENESS OF DOCUMENTS.
Parent, Merger Sub, the Surviving Company, the Escrow Agent
and any Affiliate of any of them shall be under no duty to examine, inquire into
or pass upon the validity, effectiveness or genuineness of any certificate,
documentation, or communication furnished to it by the Shareholders'
Representative and shall be entitled to assume that they are valid, authorized,
effective and genuine and are what they purport to be.
15.5 ACCEPTANCE OF APPOINTMENT.
By signing below, Xxxxxxx Xxxxxx Xxxx, Sr. hereby accepts the
appointment of Shareholders' Representative on the terms and conditions set
forth herein.
ARTICLE 16
MISCELLANEOUS
16.1 NOTICES.
Unless otherwise specified herein, all notices, requests,
demands, consents and other communications hereunder shall be transmitted in
writing and shall be deemed to have been duly given when hand delivered, upon
delivery when sent by express mail, courier, overnight mail or other recognized
overnight or next day delivery service, charges prepaid, or three (3) days
following the date mailed when sent by registered or certified United States
mail, postage prepaid, return receipt requested, or when sent by telecopier,
with a confirmation copy sent by recognized overnight courier, next day
delivery, charges prepaid, addressed as follows:
If to Parent, to:
SpectaGuard Acquisition LLC
0000 Xxxxxxx Xxxxx
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Xxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
If to the Company, to:
Xxxxxxx Xxxxxx Rice, Sr.
Xxxxxx Protective Services Incorporated
Xxxxx 000
00 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
If to Shareholders or Shareholders' Representative, to:
Xxxxxxx Xxxxxx Rice, Sr.
000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx, LLP
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Facsimile: (000) 000-0000
or to such other address, facsimile number or person as either party shall have
last designated by such notice to the other party.
16.2 ENTIRE AGREEMENT.
This Agreement supersedes all prior discussions and agreements
between the Parties with respect to the subject matter hereof, and contains the
sole and entire agreement between the Parties hereto with respect to the subject
matter hereof.
16.3 EXPENSES.
Except as otherwise expressly provided in this Agreement,
whether or not the Contemplated Transactions are consummated, each Party will
pay its own costs and expenses incurred in connection with the negotiation,
execution and closing of this Agreement and the Contemplated Transactions.
16.4 PUBLIC ANNOUNCEMENTS.
At all times at or before the Closing, Shareholder Parties and
Parent Parties will not issue or make any reports, statements or releases to the
public or generally to the employees, customers, suppliers or other Persons to
whom the Company and the Subsidiaries sell goods or provide services or with
whom the Company and the Subsidiaries otherwise have significant business
relationships with respect to this Agreement or the Contemplated Transactions
without the consent of the other. Shareholder Parties and Parent Parties will
also obtain the other Parties' prior approval of any press release to be issued
immediately following the Closing announcing the consummation of the
Contemplated Transactions.
16.5 CONFIDENTIALITY.
Each of the Parent Parties and the Shareholder Parties hereto
will hold, and will use its reasonable best efforts to cause its Affiliates and
their respective Representatives to hold, in strict confidence from any Person
(other than any such Affiliate or Representative), unless (i) compelled to
disclose by judicial or administrative process (including without limitation in
connection with obtaining the necessary approvals of this Agreement and the
Contemplated Transactions of Governmental Authorities) or by other requirements
of Law or (ii) disclosed in a Proceeding brought by a Party hereto in pursuit of
its rights or in the exercise of its remedies hereunder, all documents and
information concerning the other Parties or any of their Affiliates furnished to
it by the other Parties or such other Parties' Representatives in connection
with this Agreement or the Contemplated Transactions, except to the extent that
such documents or information can be shown to have been (a) previously known by
the Party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving Party or (c) later acquired by the
receiving Party from another source if the receiving Party is not aware that
such source is under an obligation to another Party hereto to keep such
documents and information confidential; provided, that, following the Closing
the foregoing restrictions will not apply to the Parent Parties' use of
documents and information concerning the Company and the Subsidiaries furnished
by Shareholders hereunder. In the event the Contemplated Transactions are not
consummated, upon the request of the other Party, each Party hereto will, and
will cause its Affiliates and their respective Representatives to, promptly
redeliver or cause to be redelivered all copies of confidential documents and
information furnished by the other Party in connection with this Agreement or
the Contemplated Transactions and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the Party that furnished such documents and
information or its Representatives.
16.6 WAIVER.
Any term or condition of this Agreement may be waived at any
time by the Party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the Party waiving such term or condition. No waiver by any Party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
16.7 AMENDMENT.
This Agreement may be amended, supplemented or modified only
by a written instrument duly executed by or on behalf of each Party hereto.
16.8 NO THIRD PARTY BENEFICIARY.
The terms and provisions of this Agreement are intended solely
for the benefit of each Party hereto and their respective successors or
permitted assigns, and it is not the intention of the parties to confer
third-party beneficiary rights upon any other Person other than any Person
entitled to indemnity under Article 12.
16.9 NO ASSIGNMENT; BINDING EFFECT.
Neither this Agreement nor any right, interest or obligation
hereunder may be assigned by any of the Parties hereto (whether by operation of
Law or otherwise) without the prior written consent of the other parties;
provided, however, that Parent may assign Merger Sub's rights and obligations,
in whole or in part, under this Agreement to Parent or any other wholly owned
subsidiary of Parent. Any assignment in violation of the preceding sentence
shall be void. Subject to the two preceding sentences, this Agreement is binding
upon, inures to the benefit of and is enforceable by the Parties hereto and
their respective successors and assigns.
16.10 HEADINGS AND SECTION REFERENCES.
The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
All section references contained in this Agreement are to sections of this
Agreement, except where the context requires otherwise.
16.11 CONSENT TO JURISDICTION.
Each Party hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Northern District of
Georgia or any court of the State of Georgia located in the City of Atlanta in
any Proceeding arising out of or relating to this Agreement or any of the
Contemplated Transactions; provided, however, that such consent to jurisdiction
is solely for the purpose referred to in this Section 16.11 and shall not be
deemed to be a general submission to the jurisdiction of said courts in the
State of Georgia other than for such purpose. Each Party hereby irrevocably
waives, to the fullest extent permitted by Law, any objection that it may now or
hereafter have to the laying of the venue of any such Proceeding brought in such
a
court and any claim that any such Proceeding brought in such a court has been
brought in an inconvenient forum.
16.12 INTERPRETATION.
This Agreement shall be deemed to have been drafted by all of
the Parties, and no presumption or burden of proof shall be construed against
any Party as the drafter of this Agreement.
16.13 INVALID PROVISIONS.
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if the rights or
obligations of any Party hereto under this Agreement will not be materially and
adversely affected thereby, (a) such provision will be fully severable, (b) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof and (c) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom.
16.14 GOVERNING LAW.
Except to the extent that the laws of any jurisdiction or
organization of any Party hereto, or any other jurisdiction, are mandatorily
applicable to the Merger and to matters arising under or in connection with this
Agreement, this Agreement shall be governed by and construed in accordance with
the Laws of the State of Georgia; provided, that, Article I shall be governed by
the Laws of the States of Delaware and Georgia, as appropriate.
16.15 COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
16.16 FORWARDING MAIL.
For a period of two years following the Closing, the Surviving
Company shall, as promptly as reasonably practicable, forward to the
Shareholders' Representative all mail, calls, correspondence and deliveries that
are addressed to, or are intended to be received by, the Shareholders.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each Party as of the date first
above written.
SPECTAGUARD ACQUISITION LLC
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Xx.
Title: President and Chief Executive Officer
BPS LLC
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Xx.
Title: President and Chief Executive Officer
XXXXXX PROTECTIVE SERVICES INCORPORATED
By: /s/ Xxxxxxx Xxxxxx Rice, Sr.
------------------------------------------
Name: Xxxxxxx Xxxxxx Xxxx, Sr.
Title: ______________________________
SHAREHOLDERS
/s/ Xxxxxxx Xxxxxx Rice, Sr.
----------------------------------------------
Xxxxxxx Xxxxxx Xxxx, Sr.
/s/ Xxxxxxx Xxxxxx.
----------------------------------------------
Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx Rice, Jr. Trust
By: /s/ Xxxxxxxxx Xxxxxx Xxxx
------------------------------------------
Name: Xxxxxxxxx Xxxxxx Rice
Title: ______________________________
Xxxxxxxx Xxx Xxxxxx Trust
By: /s/ Xxxxxxx Xxxxxx Rice, Sr.
------------------------------------------
Name: Xxxxxxx Xxxxxx Xxxx, Sr.
Title: ______________________________
SHAREHOLDERS' REPRESENTATIVE
/s/ Xxxxxxx Xxxxxx Rice, Sr.
----------------------------------------------
Xxxxxxx Xxxxxx Xxxx, Sr.
ANNEX 1
DEFINITIONS
(a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:
"Accounting Arbitrator" has the meaning ascribed to it in
Section 2.3(e).
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning ten percent (10%) or more of the voting securities of another
Person shall be deemed to control that Person.
"Aggregate Option Consideration" has the meaning ascribed to
it in Section 2.5(a).
"Agreement" means this Merger Agreement and the Exhibits, the
Disclosure Schedule and the Schedules hereto and the certificates delivered in
accordance with Sections 9.3 and 10.3, as the same shall be amended from time to
time.
"Antitrust Law" means the Xxxxxxx Act, as amended, the Xxxxxxx
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and
all other Laws, decrees, administrative and judicial doctrines that are designed
or intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization, restraint of trade or lessening of competition through
merger or acquisition.
"Articles of Merger" has the meaning ascribed to it in
Section 1.3.
"Assets" means all of the Company's and its Subsidiaries'
right, title and interest in and to the properties, assets and rights of any
kind, whether tangible or intangible, real or personal (or mixed), and
constituting, or used in connection with, or related to, the Business.
"Assumed Audit" has the meaning ascribed to it in
Section 13.2(b).
"Audit Notice" has the meaning ascribed to it in
Section 13.2(a).
"Bank Debt" means the Indebtedness of the Company and its
Subsidiaries to Wachovia Bank, N.A., pursuant to Second Amended and Restated
Credit Agreement and Security Agreement as of August 26, 2002, as amended.
"Xxxxxx Europe" has the meaning ascribed to it in
Section 3.9(j).
"Benefit Plan" means any Plan maintained by the Company or any
ERISA Affiliate, existing at the Closing Date or at any time within the six (6)
year period prior thereto, to which the Company or any ERISA Affiliate
contributes or has contributed, or under which
any employee, former employee or director of the Company or any ERISA Affiliate
or any beneficiary thereof is covered, is eligible for coverage or has benefit
rights. For the avoidance of doubt, the term "Benefit Plan" shall not include
any of the Programs and Practices.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business, including, without
limitation, financial statements, Tax Returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title policies, minute books, stock certificates and books, stock transfer
ledgers, Contracts, licenses, customer lists, computer files and programs,
retrieval programs, operating data and plans, environmental studies and plans
and payroll and benefits information pertaining to employees of the Company and
the Subsidiaries.
"Xxxxxxx" means Xxxxx Xxxxxxx.
"Brief" has the meaning ascribed to it in Section 2.3(e).
"Business" means the Company's business of providing contract
security officer and investigator services and toll-operator services to third
parties, including the business of all Affiliates of the Company as conducted as
of the date of this Agreement.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of Georgia or New York are authorized or
obligated to close.
"Cash" means book cash of the Company and the consolidated
Subsidiaries as prepared in accordance with GAAP, calculated in a manner
consistent with that used in the preparation of the Financial Statements.
"Cash Adjustment" has the meaning ascribed to it in Section
2.3(b).
"Change in Control Payments" has the meaning ascribed to it in
Section 5.6.
"Claim Notice" means written notification pursuant to Article
12 of a claim as to which indemnity under Article 12 is sought by an Indemnified
Party, enclosing a copy of all papers served, if any, and specifying the nature
of and basis for such claim and for the Indemnified Party's claim against the
Indemnifying Party under Article 12, together with the amount or, if not then
reasonably determinable, the estimated amount, determined in good faith, of the
Damages arising from such claim.
"Closing" means the closing of the transactions contemplated
by Section 1.2.
"Closing Cash and Debt Statement" has the meaning ascribed to
it in Section 2.3(b).
"Closing Date" has the meaning ascribed to it in Section 1.2.
"Closing Date Balance Sheet" means a consolidated balance
sheet of the Company and the Subsidiaries as of the Payroll Period End Date,
prepared in accordance with GAAP consistent with past practice.
"Company" has the meaning ascribed to it in the forepart of
this Agreement.
"Company Common Stock" means the Non-Voting Common Stock and
the Voting Common Stock of the Company.
"Company Stock Option" has the meaning ascribed to it in
Section 2.5(a).
"Contemplated Transactions" means all of the transactions
contemplated by this Agreement, including (a) the Merger; (b) the execution,
delivery and performance of the Noncompetition Agreements and the Escrow
Agreement; and (c) the performance by Parent, Merger Sub, the Company and the
Shareholders of their respective covenants and obligations under this Agreement.
"Contract" means any agreement, contract, understanding,
license, obligation, promise, commitment or undertaking that is legally binding.
"Contract Information" has the meaning ascribed to it in
Section 5.7(a).
"Current Assets" means the categories of assets included in
"Current Assets" according to GAAP and consistent with the Company's past
practice as reflected in the October 25, 2003 audited financial statements.
"Current Liabilities" means the categories of liabilities
included in "Current Liabilities" according to GAAP and consistent with the
Company's past practice as reflected in the October 25, 2003 audited financial
statements.
"Damages" means the amount of any loss, liability, claim,
damage (excluding incidental and consequential damages), expense (including
reasonable costs of investigation and defense and reasonable attorneys' fees),
whether or not involving a Third Party Claim.
"Debt Adjustment" has the meaning ascribed to it in Section
2.4.
"Defined Benefit Plan" means any employee pension benefit plan
(within the meaning of Section 3(2) of ERISA) which is subject to Section 302 or
Title IV of ERISA or Section 412 of the IRC.
"Disclosure Schedule" means the disclosure schedules delivered
to Parent by the Company and Shareholders concurrently with the execution and
delivery of this Agreement.
"DLLCA" means the Delaware Limited Liability Company Act.
"Effective Time" has the meaning set forth in Section 1.3.
"Enforceability Exceptions" means limitations on
enforceability arising from applicable bankruptcy, insolvency, reorganization,
receivership or similar applicable Laws affecting the enforcement of creditors'
rights generally or the availability of equitable remedies of specific
performance or injunctive relief being subject to the discretion of the court
before which any proceeding may be brought.
"Environmental Law" means any Law or Order relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes. As used in this Agreement,
Environmental Law shall mean any of such laws applicable to the Company and its
Subsidiaries prior to the Closing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is in the same
controlled group of corporations or who is under common control with
Shareholders or, before the Closing, the Company (within the meaning of Section
414 of the IRC).
"Escrow Agent" means The Bank of New York Company, N.A.
"Escrow Agreement" means that certain Escrow Agreement among
Parent, the Shareholders, the Shareholders' Representative and the Escrow Agent,
dated as of the Closing Date, substantially in the form of Exhibit A attached
hereto.
"Escrow Fund" has the meaning ascribed to it in
Section 15.1(a).
"Escrow Payment" has the meaning ascribed to it in Section
2.6.
"Estimated Merger Consideration" has the meaning ascribed to
it in Section 2.2(a).
"Estimated Per Share Amount" has the meaning ascribed to it in
Section 2.1(b).
"Excluded Assets" has the meaning ascribed to it in the
Recitals of this Agreement.
"Execuflex Plan" has the meaning ascribed to it in
Section 9.9.
"Extended Review Period" has the meaning ascribed to it in
Section 5.7(a).
"Final Merger Consideration" has the meaning ascribed to it in
Section 2.3(d).
"Final Returns" has the meaning ascribed to it in Section
13.1(a).
"Financial Statements" means the consolidated financial
statements of the Company and its consolidated Subsidiaries delivered to Parent
pursuant to Section 3.7.
"Florida DOT" has the meaning ascribed to it in
Section 5.7(a).
"Florida DOT Consent" has the meaning ascribed to it in
Section 5.7(a).
"Florida DOT Contract" has the meaning ascribed to it in
Section 5.7(a).
"GAAP" means generally accepted accounting principles of the
United States.
"GBCC" means Georgia Business Corporation Code.
"Good Faith Deposit" has the meaning set forth in Section 2.7.
"Good Faith Deposit Escrow Account" has the meaning set forth
in Section 2.7.
"Good Faith Deposit Escrow Agreement" shall mean the Escrow
Agreement among the Parent, the Company and Escrow Agent dated the date hereof.
"Governmental Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any foreign country or any state, county, city or other
political subdivision thereof.
"Hazardous Material" means (a) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation and transformers
or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law and
(c) any other chemical or other material or substance, exposure to which is now
or hereafter prohibited, limited or regulated by any Governmental Authority
under any Environmental Law.
"HSR Act" means Section 7A of the Xxxxxxx Act (Title II of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder.
"Indebtedness" means, as to any Person (which, in the case of
the Company, includes the Subsidiaries for purposes of this definition), without
duplication, any and all obligations of such Person for borrowed money or with
respect to deposits or advances of any kind to such Person, any and all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, including any and all obligations of such Person upon which
interest charges are customarily paid, any and all obligations of such Person
under conditional sales or other title retention agreements relating to property
purchased by such Person, any and all obligations of such Person issued or
assumed as the deferred purchase price of property or services (but not
including any and all trade accounts payable), any and all capitalized lease
obligations of such Person, any and all obligations secured by any Lien (other
than Permitted Liens) on property or assets owned or acquired by such Person,
whether or not the obligations secured thereby are obligations of, or have been
assumed by, such Person, any and all obligations of such Person under interest
rate or currency swap transactions (valued at the termination value thereof),
any and all amounts drawn on letters of credit issued on behalf of such Person,
any and all obligations of such Person to purchase securities (or other
property) which arise out of or in connection with the sale of the same or
substantially similar securities or property, and any and
all guarantees and arrangements having the economic effect of a guarantee of
such Person of any indebtedness of any other Person, and any interest accrued
relating to debt. Notwithstanding the immediately preceding sentence to the
contrary, "Indebtedness" shall not include any trade payables, expenses, or
accruals incurred in the Ordinary Course of Business.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article 12.
"Indemnified Taxes" has the meaning ascribed to it in
Section 13.2(a).
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article 12.
"Interim Balance Sheet" has the meaning ascribed to it in
Section 3.7(a)(ii).
"Initial Statement of Working Capital" has the meaning
ascribed to it in Section 2.3(c).
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service xxxx rights, service names and service name rights, brand
names, inventions (whether patentable or unpatentable and whether or not reduced
to practice), works of authorship, trade secrets, software (other than
commercially available software subject to "click through" or "shrink wrap"
licenses and which have license fees that do not exceed $20,000 in any annual
period), domain names, rights of publicity and privacy, copyrights and copyright
rights, know-how and all pending applications for and registrations of patents,
trademarks, service marks and copyrights.
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the United States Internal Revenue Service.
"Knowledge of Shareholders" or "Shareholders' Knowledge"
means the actual knowledge of the following persons: Xxxx, Xxxxxxx X. Xxxx, Xx.,
Xxxx or Xxxxxxx.
"Last Offer" has the meaning ascribed to tit in
Section 2.3(e).
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States or any foreign country or any state, county, city or other political
subdivision thereof or of any Governmental Authority.
"Lease" or "Leases" has the meaning ascribed to it in
Section 3.14(b).
"Leased Real Property" means each parcel of real property
leased by the Company or Subsidiary (as lessor or lessee).
"Liability" or "Liabilities" means all Indebtedness,
obligations and other liabilities of a Person (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due).
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind.
"Material Adverse Change" means a change that has caused or is
reasonably likely to cause a Material Adverse Effect.
"Material Adverse Effect" means any event, circumstance,
development, change or effect that is material and adverse to the Business,
Assets, Liabilities, financial condition or results of operations of the Company
and its Subsidiaries, taken as a whole, other than any event, change, fact,
condition, circumstance or effect resulting from conditions affecting the United
States economy or the industry as a whole, to the extent that such conditions do
not, individually or in the aggregate, have a materially disproportionate impact
on the Business.
"Material Contract" has the meaning ascribed to it in
Section 3.16(a).
"Material Intellectual Property" has the meaning ascribed to
it in Section 3.15(a).
"Merger" has the meaning ascribed to it in the Recitals of
this Agreement.
"Merger Consideration" has the meaning ascribed to it in
Section 2.2(a).
"Merger Sub" has the meaning ascribed to it in the forepart of
this Agreement.
"Noncompetition Agreements" has the meaning ascribed to it in
Section 2.9(b)(iv).
"Non-Voting Common Stock" means the non-voting common stock,
no par value, of the Company.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive or exercise any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock of such Person, including
any rights to participate in the equity or income of such Person or to
participate in or direct the election of any directors or officers of such
Person or the manner in which any shares of capital stock of such Person are
voted.
"Order" means any writ, judgment, decree, injunction,
stipulation, award or similar order of any Governmental Authority (in each such
case whether preliminary or final).
"Ordinary Course of Business" means, with respect to a Person,
an action or failure to act generally consistent with the past custom and
practices of such Person and is taken or not taken in the ordinary course of the
normal day-to-day operations of such Person.
"Organizational Documents" means (a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership
of a general partnership; (c) the limited partnership agreement and the
certificate of limited partnership of a limited partnership; (d) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person, including any trust; and (e) any amendment to any of
the foregoing.
"Parent" has the meaning ascribed to it in the forepart of
this Agreement.
"Parent Indemnified Parties" has the meaning ascribed to it in
Section 12.2.
"Parent Parties" means the Parent, Merger Sub and after
Closing, the Surviving Company.
"Payroll Period End Date" has the meaning ascribed to it in
Section 2.2(a).
"Party" means any of the Parent, the Merger Sub, the Company,
the Shareholders or the Shareholders' Representative, as the case may be.
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
"Permits" mean any licenses, permits, certificates,
authorizations, consents or orders of, or filings with, or any waiver of the
foregoing, issued by any Governmental Authority necessary for the conduct of, or
relating to the operation of the Business, including any detective/security
licenses.
"Permitted Lien" means (a) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (b) any
statutory Lien arising in the Ordinary Course of Business by operation of Law
with respect to a Liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien and with respect to real property
zoning laws and other land use restrictions which individually or in the
aggregate with other such Liens could not reasonably be expected to have a
Material Adverse Effect.
"Per Share Amount" has the meaning ascribed to it in
Section 2.1(b).
"Person" means any natural person, corporation, limited
liability company, general partnership, limited partnership, proprietorship,
other business organization, trust, union, association, joint venture, joint
stock company, any other entity, a "group" of such persons, as that term is
defined in Rule 13d-5(b) under the Securities Exchange Act of 1934, as amended,
or a Governmental Authority.
"Phantom Stock Award Agreement" means that certain Phantom
Stock Award Agreement between the Company and Xxxx dated as of November 16,
1997, as amended.
"Phantom Stock Consideration" has the meaning ascribed to it
in Section 2.5(b).
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock
appreciation rights, phantom stock, leave of absence, layoff, vacation, day or
dependent care, legal services, cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, including, but not limited to, any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
"Pre-Closing Period" shall mean a Taxable Year that ends on or
before the Closing Date and the portion of a Straddle Period beginning on the
first day of the Straddle Period and ending on (and including) the Closing Date.
"Prepayment Expenses" has the meaning ascribed to it in
Section 2.4.
"Prior Friday" has the meaning ascribed to it in Section 1.2.
"Proceedings" means any action, claim, complaint, suit,
proceeding, arbitration, investigation, audit, inquiry, hearing, or litigation
(whether civil, criminal or administrative) brought, commenced, conducted or
heard by or otherwise involving any Governmental Authority.
"Programs and Practices" has the meaning ascribed to it in
Section 3.12(p), with respect to which the Company or the Shareholders make no
representations or warranties in this Agreement, other than as set forth in
Section 3.12(p) and Section 5.8. Except as set forth in such sections, no
representation, warranty or covenant shall be deemed to be breached as a direct
or indirect consequence of any responsiblity, obligation or liability resulting
from the existence and operation of the Programs and Practices.
"Pro Rata" has the meaning ascribed to it in Section 2.2(b).
"Qualified Plan" means each Benefit Plan which is intended to
qualify under Section 401(a) of the IRC.
"Representatives" means any Person's managers, trustees,
officers, employees, counsel, accountants, financial advisors, consultants and
other representatives.
"Review Period" has the meaning ascribed to it in Section
5.7(a).
"Rice" has the meaning ascribed to it in the forepart of this
Agreement.
"Sale Transaction" has the meaning ascribed to it in
Section 5.5(a).
"Share" or "Shares" means the issued and outstanding shares of
the Company Common Stock.
"Shareholder Parties" means the Shareholders and, prior to
Closing, the Company.
"Shareholders" has the meaning ascribed to it in the forepart
of this Agreement.
"Shareholders' Representative" has the meaning ascribed to it
in Section 15.1(a).
"Statement of Working Capital" has the meaning ascribed to it
in Section 2.3(d).
"Straddle Period" shall mean any Taxable Year beginning on or
before and ending after the Closing Date.
"Subsidiary" means any Person in which the Company, directly
or indirectly through Subsidiaries or otherwise, beneficially owns more than
fifty percent (50%) of either the equity interests in, or the voting control of,
such Person.
"Surviving Company" has the meaning ascribed to it in
Section 1.3.
"Target Working Capital" means Twenty-One Million Dollars
($21,000,000).
"Taxable Year" means a taxable year (including a short taxable
year), year of assessment or similar period with respect to which any Tax may be
imposed under any applicable Law.
"Taxes" shall mean any and all taxes, fees, levies or other
assessments, including, without limitation, federal, state, local, or foreign
income, gross receipts, excise, real or personal property, sales, withholding,
social security, occupation, use, service, service use, value added, license,
net worth, payroll, franchise or similar taxes, imposed by any Governmental
Authority, together with any interest, penalties or additions to tax and
additional amounts imposed with respect thereto.
"Tax Return" shall mean any report, return, document,
declaration or other information or filing required to be supplied to any
Governmental Authority or jurisdiction (foreign or domestic) with respect to
Taxes.
"Third Party Claim" has the meaning ascribed to it in
Section 12.4(a).
"Transaction Documents" mean the Articles of Merger, the
Escrow Agreement, Good Faith Deposit Escrow Agreement and the Noncompetition
Agreements.
"Transaction Expenses" means the fees and expenses incurred by
the Company, the Shareholders or their respective Affiliates in connection with
the negotiation, execution and performance of this Agreement and any other
agreements entered into in connection with this Agreement.
"Voting Common Stock" means the voting common stock, no par
value per share, of the Company.
"Xxxx" means Xxxxxx X. Xxxx.
"Working Capital" means the excess of Current Assets over
Current Liabilities of the Company and its Subsidiaries, calculated on a
consolidated basis. Current Assets and Current Liabilities shall be determined
in accordance with GAAP, consistent with past practice, provided, that (i)
Current Assets shall exclude Cash, Shareholders Loans and Excluded Assets
(including the split dollar agreements and any life insurance policies on the
lives of Rice or Xxxxxxxxx Xxxx) and (ii) Current Liabilities shall exclude
Indebtedness, Transaction Expenses, Change in Control Payments and any
Liabilities related to Excluded Assets (including the
withholding liability account of the Execuflex Plan) or the cancellation of the
Company Stock Options and the Phantom Stock Award Agreement.
"Working Capital Adjustment" has the meaning ascribed to it in
Section 2.3(a).
"Working Capital/Cash Resolution Period" has the meaning
ascribed to it in Section 2.3(d).
(b) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any gender include
each other gender; (ii) words using the singular or plural number also include
the plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; and
(iv) the terms "Article" or "Section" refer to the specified Article or Section
of this Agreement. Whenever this Agreement refers to a number of days, such
number shall refer to calendar days unless Business Days are specified. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
ANNEX 2
EXCLUDED ASSETS
1. Office furniture, artwork, and personal effects of Xxxxxxx X. Xxxx, Xx.
at the Corporate Office
2. Office furniture, artwork, and personal effects of Xxx Xxxx at the
Corporate Office
3. Office furniture, artwork, and personal effects of Xxxxx Xxxxxxx at the
Corporate Office
4. Office furniture, artwork, and personal effects of Xxxxxxx X. Xxxx, Xx.
at the Corporate Office
5. Company owned artwork at the Corporate office not included in the
personal effects of Xxxxxxx X. Xxxx, Xx., Xxxxxxx X. Xxxx, Xx., Xxx
Xxxx, or Xxxxx Xxxxxxx*
6. Conference table and chairs located in Corporate board room*
7. Furniture and accessories located in lobby of Corporate office*
8. Company memorabilia and archival material (other than Books and
Records) not related to operation of the Business
9. Golf Club of Georgia and Kiawah Island Club memberships for Xxxxxxx and
Xxxxxxxxx Xxxx
10. SEC Championship tickets for December 2004
11. Split-dollar agreements and cash surrender value of life insurance on
the lives of Xxxxxxx and Xxxxxxxxx Xxxx
12. Transfer of three automobile leases for Xxxxxxx X. Xxxx, Xx., Xxxxxxxxx
Xxxx, Xxxxxxx X. Xxxx, Xx., Xxx Xxxx and Xxxxx Xxxxxxx
--------
* Items 5, 6 and 7 would not be removed until Parent moves offices or closes the
Atlanta Xxxxxx office.
