1
STOCK PURCHASE AND RECAPITALIZATION AGREEMENT
dated as of February 8, 2000
among
PAXAR CORPORATION,
PAXAR CAPITAL CORPORATION,
INTERNATIONAL IMAGING MATERIALS, INC.,
CENTRE CAPITAL INVESTORS III, L.P.
and
RELATED PARTNERSHIPS
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TABLE OF CONTENTS
ARTICLE I REDEMPTION; PURCHASE AND SALE OF SHARES; CERTAIN
DEFINITIONS............................................................. -2-
SECTION 1.01 Redemption of the Redeemed Shares..................... -2-
SECTION 1.02 Purchase and Sale of Purchased Shares................. -2-
SECTION 1.03 Purchase Price for Purchased Shares purchased by Buyer -2-
SECTION 1.04 Cash Redemption Payment Adjustment.................... -2-
SECTION 1.05 Payment under Section 9.05............................ -5-
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT, SELLER AND
THE COMPANY............................................................. -5-
SECTION 2.01 Organization and Qualification; Subsidiaries.......... -5-
SECTION 2.02 Certificate of Incorporation, By-Laws and Other
Organizational Documents.............................. -6-
SECTION 2.03 Capitalization........................................ -6-
SECTION 2.04 Authority Relative to this Agreement.................. -7-
SECTION 2.05 No Conflict; Required Filings and Consents............ -7-
SECTION 2.06 Compliance; Permits................................... -10-
SECTION 2.07 Financial Statements.................................. -10-
SECTION 2.08 Absence of Certain Changes or Events.................. -11-
SECTION 2.09 No Undisclosed Liabilities............................ -12-
SECTION 2.10 Absence of Litigation................................. -12-
SECTION 2.11 Employment Agreements; Change in Control Payments..... -12-
SECTION 2.12 Employee Benefit Plans................................ -13-
SECTION 2.13 Labor Matters......................................... -14-
SECTION 2.14 Title to Property..................................... -15-
SECTION 2.15 Taxes................................................. -16-
SECTION 2.16 Environmental Protection.............................. -17-
SECTION 2.17 Intellectual Property................................. -20-
SECTION 2.18 Certain Distribution Agreements....................... -21-
SECTION 2.19 Insurance............................................. -21-
SECTION 2.20 Brokers............................................... -21-
SECTION 2.21 Customers and Suppliers............................... -22-
SECTION 2.22 Accounts and Notes Receivable......................... -22-
SECTION 2.23 Inventory............................................. -22-
SECTION 2.24 Product Warranties; Returns........................... -22-
SECTION 2.25 Transactions with Affiliates.......................... -23-
SECTION 2.26 Investment............................................ -24-
SECTION 2.27 Full Disclosure....................................... -24-
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER........................... -24-
SECTION 3.01 Organization and Qualification........................ -24-
SECTION 3.02 Authority Relative to this Agreement.................. -25-
SECTION 3.03 No Conflict, Required Filings and Consents............ -25-
SECTION 3.04 Financing............................................. -26-
SECTION 3.05 Absence of Litigation................................. -26-
SECTION 3.07 Brokers............................................... -26-
SECTION 3.08 Investment............................................ -26-
ARTICLE IV COVENANTS OF PARENT, SELLER AND THE COMPANY........................ -26-
SECTION 4.01 Conduct of Business by the Company Pending the Closing -26-
SECTION 4.02 Access to Information; Buyer Confidentiality.......... -29-
ARTICLE V MUTUAL COVENANTS.................................................... -29-
SECTION 5.01 HSR Act; Etc.......................................... -29-
SECTION 5.02 Consents; Approvals................................... -30-
SECTION 5.03 Notification of Certain Matters....................... -30-
SECTION 5.04 Further Action........................................ -30-
SECTION 5.05 Public Announcements.................................. -30-
SECTION 5.06 Conveyance Taxes...................................... -31-
SECTION 5.07 Restrictions on Seller and the Company................ -31-
ARTICLE VI BUYER'S CLOSING CONDITIONS......................................... -33-
SECTION 6.01 HSR Act, Etc.......................................... -33-
SECTION 6.02 Consents; Approvals................................... -33-
SECTION 6.03 No Injunctions or Restraints; Illegality.............. -33-
SECTION 6.04 Blue Sky Laws......................................... -34-
SECTION 6.05 Representations and Warranties........................ -34-
SECTION 6.06 Agreements and Covenants.............................. -34-
SECTION 6.07 Opinion of Counsel.................................... -34-
SECTION 6.08 Receipt of Closing Documents.......................... -34-
SECTION 6.09 Restated Certificate.................................. -34-
SECTION 6.10 Proceedings and Documents............................. -34-
SECTION 6.11 Supply Agreement...................................... -35-
SECTION 6.12 Title Searches........................................ -35-
SECTION 6.13 FIRPTA Certificate.................................... -35-
SECTION 6.14 Stockholders Agreement................................ -35-
SECTION 6.15 Financing............................................. -35-
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SECTION 6.16 Solvency Opinions..................................... -35-
SECTION 6.17 Release from Seller................................... -35-
SECTION 6.18 Zebra................................................. -35-
SECTION 6.19 Certain Agreements.................................... -36-
SECTION 6.20 Redemption............................................ -36-
SECTION 6.21 1999 Financials....................................... -36-
SECTION 6.22 Termination........................................... -36-
SECTION 6.23 Debt at Closing....................................... -36-
ARTICLE VII SELLER'S CLOSING CONDITIONS....................................... -36-
SECTION 7.01 HSR Act, Etc.......................................... -36-
SECTION 7.02 Consents; Approvals................................... -37-
SECTION 7.03 No Injunctions or Restraints; Illegality.............. -37-
SECTION 7.04 Blue Sky Laws......................................... -37-
SECTION 7.05 Representations and Warranties........................ -37-
SECTION 7.06 Agreements and Covenants.............................. -37-
SECTION 7.07 Receipt of Closing Documents.......................... -37-
SECTION 7.08 Stockholders Agreement................................ -37-
SECTION 7.09 Redemption; Preferred Shares.......................... -37-
SECTION 7.10 Non-Compete Payment................................... -37-
SECTION 7.11 Proceedings and Documents............................. -37-
SECTION 7.12 Supply Agreement...................................... -38-
SECTION 7.13 Release from the Company.............................. -38-
SECTION 7.14 Solvency Opinions..................................... -38-
ARTICLE VIII THE CLOSING...................................................... -38-
SECTION 8.01 Closing............................................... -38-
SECTION 8.02 Obligations and Closing Deliveries of Parent, Seller
and the Company....................................... -38-
SECTION 8.03 Buyer's Obligations and Closing Deliveries............ -39-
SECTION 8.04 Company's Obligations and Closing Deliveries to Seller -40-
ARTICLE IX POST-CLOSING AND CERTAIN OTHER OBLIGATIONS......................... -40-
SECTION 9.01 Indemnification and Insurance......................... -40-
SECTION 9.02 Employment and Benefit Matters........................ -41-
SECTION 9.03 Transition............................................ -41-
SECTION 9.04 Confidentiality....................................... -42-
SECTION 9.05 Covenant Not to Compete............................... -43-
SECTION 9.06 Tax Matters........................................... -44-
SECTION 9.07 Insurance Matters..................................... -45-
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SECTION 9.08 Certain Workers Compensation Matters.................. -45-
SECTION 9.09 Limited Access to Financial Information............... -49-
SECTION 9.10 Transition Services Agreement......................... -49-
ARTICLE X TERMINATION......................................................... -49-
SECTION 10.01 Termination........................................... -49-
SECTION 10.02 Effect of Termination................................. -51-
SECTION 10.03 Fees and Expenses..................................... -51-
ARTICLE XI INDEMNIFICATION.................................................... -52-
SECTION 11.01 Indemnity............................................. -52-
SECTION 11.02 Indemnification Procedure............................. -54-
ARTICLE XII GENERAL PROVISIONS................................................ -55-
SECTION 12.01 Effectiveness of Representations, Warranties and
Agreements, Etc................................................... -55-
SECTION 12.02 Notices............................................... -56-
SECTION 12.03 Certain Definitions................................... -58-
SECTION 12.04 Amendment............................................. -59-
SECTION 12.05 Waiver................................................ -59-
SECTION 12.06 Headings.............................................. -60-
SECTION 12.07 Severability.......................................... -60-
SECTION 12.08 Entire Agreement...................................... -60-
SECTION 12.09 Assignment............................................ -60-
SECTION 12.10 Parties in Interest................................... -60-
SECTION 12.11 Failure or Indulgence Not Waiver; Remedies Cumulative. -60-
SECTION 12.12 Governing Law......................................... -61-
SECTION 12.13 Counterparts.......................................... -61-
SECTION 12.14 Consent to Jurisdiction; Specific Performance......... -61-
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Schedules:
1.04(a) - Illustrative Computation of Working Capital
3.04 - Commitments
6.19 - Certain Agreements
9.01 - Indemnification Agreements
9.08 - Workers Compensation Matters
Seller Disclosure Schedule
Exhibits:
A - Form of Restated Certificate
B - Stockholder Agreement Material Terms
C - Form of Supply Agreement
D - Form of Release from Parent and Seller
E - Form of Release from the Company
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STOCK PURCHASE AND RECAPITALIZATION AGREEMENT
STOCK PURCHASE AND RECAPITALIZATION AGREEMENT, dated as of February 8,
2000 (this "AGREEMENT"), by and among PAXAR CORPORATION, a New York corporation
("PARENT"), PAXAR CAPITAL CORPORATION, a New York corporation and a wholly-owned
subsidiary of Parent ("SELLER"), INTERNATIONAL IMAGING MATERIALS, INC., a
Delaware corporation and a wholly-owned subsidiary of Seller (the "COMPANY"),
and CENTRE CAPITAL INVESTORS III, L.P., a Delaware limited partnership, and
related partnerships listed on the signature page (collectively, including such
related partnerships and funds and other entities and other assignees under
Section 12.09, "BUYER").
RECITALS
Seller owns 100 shares (the "SELLER SHARES") of the common stock, $.01 par
value, of the Company (the "COMPANY COMMON STOCK"), representing one hundred
percent (100%) of the Company's issued and outstanding shares of capital stock.
The Company manufactures thermal transfer ribbons for numerous diverse
applications.
(i) The Company desires to sell to Buyer, and Buyer desires to purchase
from the Company, 925 shares (the "PURCHASED SHARES") of Common Stock for an
aggregate purchase price of $30,000,000.00; (ii) the Company desires to enter
into a credit facility and other debt financings with senior debt and
subordinated debt financing sources to obtain financing (the "FINANCING") which
will be sufficient (together with the proceeds from the sale of the Purchased
Shares) to effect the Redemption (as defined herein); (iii) immediately after
the transactions in clauses (i) and (ii), the Company desires to purchase and
redeem from Seller, and Seller desires to sell to the Company, 25 of the Seller
Shares (the "REDEEMED SHARES") for consideration consisting of (x) an aggregate
of $105,000,000.00 in cash (subject to adjustment), and (y) 7,500 shares (the
"PREFERRED SHARES") of Series A Redeemable Preferred Stock of the Company having
the rights, preferences, privileges and restrictions set forth in the Restated
Certificate (as defined in Section 1.02 below) (the "REDEMPTION"); and (iv) the
Company desires to receive, and Parent and Seller desire to agree to, the
non-competition and other covenants in Section 9.05 hereof, in consideration for
which the Company desires to pay $15,000,000.00 to Parent and Seller.
Immediately following the consummation of all of the transactions contemplated
hereby (including the transactions contemplated by the Stockholders Agreement
(as defined in Section 2.01), the "TRANSACTIONS"), Seller will own 75 shares of
Company Common Stock in the aggregate, representing 7.5% of all then issued and
outstanding shares of Company Common Stock.
Certain capitalized terms used herein have the definitions set forth in
Section 12.03.
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
REDEMPTION; PURCHASE AND SALE OF SHARES;
CERTAIN DEFINITIONS
SECTION 1.01 Redemption of the Redeemed Shares. On the terms and subject
to conditions of this Agreement, Seller agrees to sell and transfer to the
Company at the Closing provided for in Section 8.01 hereof (the "CLOSING") the
Redeemed Shares, and in exchange therefor, the Company hereby agrees to (i) pay
to Seller $105,000,000.00 (subject to adjustment in accordance with Section
1.04) (such amount, prior to adjustment pursuant to Section 1.04, the "INITIAL
CASH REDEMPTION PAYMENT" and, after adjustment pursuant to Section 1.04, the
"CASH REDEMPTION PAYMENT") and (ii) issue the Preferred Shares to Seller. The
Initial Cash Redemption Payment shall be payable in cash by wire transfer or
delivery of other immediately available funds to an account at a bank identified
by Seller to the Company and Buyer at least two (2) business days prior to the
Closing in an amount equal to the Initial Cash Redemption Payment.
SECTION 1.02 Purchase and Sale of Purchased Shares. The Company will have
authorized before the Closing the sale and issuance to Buyer of the Purchased
Shares (representing 92.5% of the outstanding Common Stock of the Company,
immediately after giving effect to the Transactions). The Common Stock from and
after the Closing will have the rights, preferences, privileges, and
restrictions as set forth in the Company's Amended and Restated Certificate of
Incorporation (the "RESTATED CERTIFICATE") substantially in the form attached
hereto as Exhibit A. Upon the terms and subject to the conditions of this
Agreement, Buyer shall purchase and acquire from the Company, and the Company
shall issue and sell to Buyer, the Purchased Shares, free and clear of all
liens, pledges, security interests, at the Closing.
SECTION 1.03 Purchase Price for Purchased Shares purchased by Buyer. The
aggregate purchase price for the Purchased Shares shall be $30,000,000.00 (the
"PURCHASE PRICE"). Buyer shall pay the Purchase Price in full, without any
adjustment, deduction or setoff, at the Closing to the Company in United States
dollars by wire transfer of immediately available funds to such account as the
Company shall designate.
SECTION 1.04 Cash Redemption Payment Adjustment.
(a) Not more than twelve (12) business days after the Closing Date,
the Company shall deliver to Seller and Buyer a written statement (the "CLOSING
STATEMENT") setting forth the Estimated Closing Working Capital (as defined in
Section 1.04(f)(ii)) of the
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Company and its Subsidiaries at Closing prior to giving effect to the
Transactions, and setting forth in reasonable detail the Company's calculation
of such amounts, together with a representation by the Chief Financial Officer
of the Company that the balance sheet of the Company upon which the Company's
management relied in preparing the Closing Statement was prepared in accordance
with GAAP using the same procedures and principles used in preparing the 1999
Balance Sheet (as such term is defined in Section 2.07(b)). An illustrative
computation of Estimated Closing Working Capital, utilizing hypothetical values,
is attached hereto as Schedule 1.04(a).
(i) If the Estimated Closing Working Capital is less than
the Target Working Capital (as defined in Section 1.04(f)(iii)), then
Parent, within 3 business days after receipt of the Closing Statement,
shall pay to the Company by wire transfer of immediately available funds
an amount equal to the difference between the Target Working Capital and
the Estimated Closing Working Capital.
(ii) If the Estimated Closing Working Capital is greater
than the Target Working Capital, then the Company, within 3 days after
receipt of the Closing Statement, shall pay to Seller by wire transfer of
immediately available funds an amount equal to the difference between the
Target Working Capital and the Estimated Closing Working Capital.
Any payment under clause (i) or (ii) shall include interest on the amount paid
from the Closing Date to, but not including, the date of payment, at the prime
rate as published in The Wall Street Journal on the Closing Date.
(b) Each of Seller, on the one hand, and Buyer, on the other hand
and their respective representatives and agents shall have sixty (60) days after
the Closing to review the Closing Statement. During such sixty (60) day period,
the Company shall provide to Seller and/or Buyer such information as Seller
and/or Buyer may reasonably request from the Company in connection with Seller's
and/or Buyer's review of the Closing Statement. Prior to the end of such sixty
(60) day period, each of Buyer and Seller shall give to each other either
written notice accepting the Closing Statement, or written notice of its
disagreement with the Closing Statement (the "NOTICE OF DISAGREEMENT"). Any
Notice of Disagreement shall specify the nature of any disagreement so asserted.
If both parties give written notice accepting the Closing Statement or if both
parties fail to give a Notice of Disagreement prior to the end of such sixty
(60) day period, the Closing Statement shall at such time become final, binding
and conclusive upon the parties and there shall be no further adjustments under
this Section 1.04.
(c) In the event Buyer or Seller gives a Notice of Disagreement
within the period set forth in Section 1.04(b), then, for a period ending no
later than the ninetieth (90th) day after the Closing, Seller and Buyer shall
seek in good faith to resolve in writing any disagreements set forth in the
Notice of Disagreement. If during such period, Seller and Buyer agree in writing
upon all of the amounts to be set forth in a closing statement, such closing
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statement as agreed upon shall be the "FINAL CLOSING STATEMENT" and shall be
final, binding and conclusive upon the parties, and Section 1.04(e) shall apply.
(d) If Seller and Buyer are not able to resolve all of the
disagreements in respect of matters set forth in the Notice of Disagreement
during the period set forth in Section 1.04(c), then within ten (10) days after
the expiration of such period, Seller and Buyer shall jointly select a
nationally recognized, independent public accounting firm (the "ARBITRATOR") and
shall submit to the Arbitrator the Closing Statement and the Notice of
Disagreement for review and evaluation. If Seller and Buyer cannot agree on the
selection of the independent public accounting firm to act as Arbitrator during
such ten (10) day period, they shall immediately jointly request the American
Arbitration Association to appoint such a firm and such appointment shall be
final, binding and conclusive on the parties. Within thirty (30) days after the
selection of the Arbitrator, the Arbitrator shall make a written determination
of only the matters set forth in the Notice of Disagreement which are in
dispute, which determination shall (i) apply the provisions of Section 1.04(a)
hereof to such matters, (ii) be based solely on the presentations by Seller and
Buyer, and not by independent review, of those issues in dispute and (iii)
include the resulting computation of the Company's Closing Working Capital. The
fees and expenses of the Arbitrator incurred in connection with services
rendered pursuant to this Section 1.04 shall be borne equally by the Company and
Seller. The closing statement as determined in accordance with the report of the
Arbitrator shall be the "FINAL CLOSING STATEMENT" and shall be final, binding
and conclusive upon the parties, and Section 1.04(e) shall apply. Any award made
pursuant to this Section 1.04 may be entered in and enforced by any court of
competent jurisdiction. Nothing herein shall be construed to require the
Arbitrator to follow the rules or procedures of any arbitration association.
(e) If either Section 1.04(c) or Section 1.04(d) is applicable, then
within three (3) business days after the Final Closing Statement is determined
under Section 1.04(c) or 1.04(d), as applicable:
(i) if the Closing Working Capital is less than the Estimated
Closing Working Capital, then Parent shall pay to the Company, by wire transfer
of immediately available funds, an amount equal to such difference between the
Closing Working Capital and the Estimated Closing Working Capital (the
"OVERPAYMENT"), plus (B) interest accrued on the Overpayment from the Closing
Date to, but not including, the date on which the amount of the Overpayment is
paid, at the prime rate as published in The Wall Street Journal on the Closing
Date, and
(ii) if the Closing Working Capital is greater than the
Estimated Closing Working Capital, then the Company shall pay to Seller, by wire
transfer of immediately available funds, an amount equal to the difference
between the Closing Working Capital and the Estimated Closing Working Capital
(the "UNDERPAYMENT"), plus (B) interest accrued on the Underpayment from the
Closing Date to, but not including, the date on
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which the amount of the Underpayment is paid, at the prime rate as published in
The Wall Street Journal on the Closing Date.
All adjustments under this Section 1.04(e), together with
adjustments under Section 1.04(a), shall be treated as adjustments to the
Initial Cash Redemption Payment payable hereunder.
(f) Certain Definitions.
(i) "Closing Working Capital" means the difference, as of the
Closing Date, between (a) the sum of the cash, accounts receivable, inventory,
deferred income Taxes and other prepaid expenses of the Company (in each case in
this clause (a), so long as each is a current asset) less (b) the accounts
payable, accrued expenses and other current liabilities of the Company, in each
case, determined in accordance with GAAP, and in a manner consistent with the
preparation of the 1999 Balance Sheet (including the procedures and principles
used in preparing the 1999 Balance Sheet).
(ii) "Estimated Closing Working Capital" means the Closing
Working Capital, as set forth on the Closing Statement delivered pursuant to
Section 1.04(a).
(iii) "Target Working Capital" means $21,000,000, provided,
however, that if, at or prior to Closing, insurance in respect of W/C Matters
(as defined in Section 9.08) is obtained as contemplated by Section 9.08, then
Target Working Capital means $21,000,000 plus the W/C Reserve (as defined in
Section 9.08).
SECTION 1.05 Payment under Section 9.05. At the Closing, the Company shall
pay, by wire transfer or other delivery of immediately available funds to an
account at a bank identified by Parent to the Company, the amount of
$15,000,000.00 (the "NON-COMPETE PAYMENT") to Parent and Seller collectively as
consideration for the covenants of Parent and Seller contained in Section 9.05
hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
PARENT, SELLER AND THE COMPANY
Each of Parent, Seller and the Company, jointly and severally, hereby
represents and warrants to Buyer (and, in the case of the Seller's
representation in Section 2.26 only, Seller represents and warrants to the
Company) as follows:
SECTION 2.01 Organization and Qualification; Subsidiaries.
(a) Each of Parent and Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has the requisite
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corporate power and authority to own the Seller Shares (in the case of Seller)
and to enter into and perform this Agreement, the Stockholders Agreement, to be
dated as of the Closing, in form and substance reasonably satisfactory to Buyer
and Seller and containing terms substantially consistent with those set forth on
Exhibit B attached hereto and such other terms as are reasonably consistent with
the Commitments (as defined in Section 3.04) attached as Schedule 3.04 hereto
(the "STOCKHOLDERS AGREEMENT") and the transactions contemplated hereby and
thereby.
(b) Each of the Company and each of its Subsidiaries is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has the
requisite corporate or other power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("APPROVALS") necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted. Each of the Company and each of its
Subsidiaries is duly qualified or licensed as a foreign corporation or other
entity to do business, and is in good standing, in each jurisdiction where the
character of its properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not reasonably be expected to
result in a material Liability (as defined below) or otherwise impair the
ability of the Company or its Subsidiaries to operate in the ordinary course.
Except as set forth in Section 2.01 of the written disclosure schedule delivered
on or prior to the date hereof by Seller to Buyer that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II (the "SELLER DISCLOSURE SCHEDULE"), all of the business and operations of the
Company and its Subsidiaries are conducted through, and all of the properties
and assets of the Company and its Subsidiaries are owned by, the Company and its
Subsidiaries.
(c) The Company's Subsidiaries consist of IIMAK DRM, Inc., a
Delaware corporation, and IIMAK Brasil Ltda, a limited liability quota company
(the "BRAZILIAN SUBSIDIARY"). The entire authorized and outstanding capital
stock of or other equity interests in each of the Company's Subsidiaries is as
specified in Section 2.01(c) of the Seller Disclosure Schedule hereto. Other
than the Company's Subsidiaries, the Company does not, directly or indirectly,
own any equity interest in any business, corporation, partnership, limited
liability company, joint venture or other business association or entity.
SECTION 2.02 Certificate of Incorporation, By-Laws and Other
Organizational Documents. Seller has heretofore furnished to Buyer complete and
correct copies of the Certificate of Incorporation and By-Laws, or similar
organizational documents, of the Company and of each of its Subsidiaries, as
most recently restated and subsequently amended to date.
SECTION 2.03 Capitalization. The authorized capital stock of the Company
consists of 1,000 shares of Company Common Stock, 100 shares of which are issued
and outstanding. There are no options, warrants or other rights, agreements,
arrangements or commitments of any
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character relating to the issued or unissued capital stock of the Company or any
of its Subsidiaries or obligating the Company or any of its Subsidiaries to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any of its Subsidiaries. Except as set forth in Section 2.03 of the
Seller Disclosure Schedule, there are no outstanding or authorized shares of
restricted stock, stock appreciation rights, phantom equity rights, equity
participation rights, stock depreciation rights, contingent value rights or
similar rights with respect to the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries is a party or bound. Except as
specifically set forth in Section 2.03 of the Seller Disclosure Schedule, there
are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or the capital stock of, or other equity interests in, any
Subsidiary or Affiliate or to provide funds to or make any investment (in the
form of a loan, capital contribution, guaranty or otherwise) in any such
Subsidiary or Affiliate or any other entity. All of the outstanding shares of
capital stock of, or other equity interests in, the Company and each of the
Company's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and not issued in violation of any preemptive rights, and except
as set forth in Section 2.03 of the Seller Disclosure Schedule, Seller, the
Company or a Subsidiary of the Company, as the case may be, own all such shares
or other equity interests free and clear of all security interests, liens,
claims, pledges, agreements, limitations in voting rights, easements, charges or
other encumbrances of any nature whatsoever (collectively, "LIENS"). The
Purchased Shares, when issued and sold hereunder, will be duly authorized, fully
paid and nonassessable and free of all Liens (other than Liens arising out of
acts or omissions of Buyer, including Liens arising under Financing).
SECTION 2.04 Authority Relative to this Agreement. Each of Parent, Seller
and the Company has the requisite corporate power and authority to execute and
deliver this Agreement and the Stockholders Agreement (to the extent that it is
or will be a party thereto) and to perform its respective obligations hereunder
and thereunder and to consummate the Transactions. The execution and delivery of
this Agreement and the Stockholders Agreement by each of Parent, Seller and the
Company and the consummation by each of Parent, Seller and the Company of the
Transactions have been duly and validly authorized by all requisite corporate
action, and no other corporate proceedings on the part of Parent, Seller or the
Company are necessary to authorize this Agreement and the Stockholders Agreement
or to consummate the Transactions. This Agreement has been duly and validly
executed and delivered by each of Parent, Seller and the Company (and the
Stockholders Agreement will be duly and validly executed and delivered by
Seller) and, assuming the due authorization, execution and delivery by Buyer,
constitutes (and, in the case of the Stockholders Agreement, will constitute) a
legal, valid and binding obligation of each of Parent, Seller and the Company
enforceable against each of Parent, Seller and the Company in accordance with
its terms.
SECTION 2.05 No Conflict; Required Filings and Consents.
(a) Section 2.05(a) of the Seller Disclosure Schedule lists each of
the following material agreements, contracts or other instruments (including all
amendments
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thereto), written or oral, to which the Company or any of its Subsidiaries is a
party or by which any of them is bound:
(i) contracts with any current or former officer, director,
management employee, scientist, consultant, agent or shareholder;
(ii) contracts with any labor union or association
representing any employee;
(iii) contracts which are material to the business of the
Company and its Subsidiaries for the sale or provision (or for the purchase or
acquisition) of materials, supplies, equipment, merchandise or services (and any
such contracts and other agreements, whether or not material to the business of
the Company and its Subsidiaries, under which the payments to the Company or its
Subsidiaries are inadequate to cover current costs of the Company or its
Subsidiaries related thereto (other than non-recurring sales of inventory in the
ordinary course and other than sales of immaterial assets not exceeding $250,000
in the aggregate));
(iv) patent, trademark, service xxxx, trade name, and
copyright and franchise licenses, royalty agreements or similar contracts;
(v) supply, distributorship, representative, broker,
management, research and development, marketing, sales agency, printing or
advertising contracts which are material to the business of the Company and its
Subsidiaries;
(vi) contracts for the grant to any person of any rights to
purchase any of the assets, properties or businesses of the Company or its
Subsidiaries (other than the sale of inventory in the ordinary course and other
than sales of immaterial assets not exceeding $250,000 in the aggregate);
(vii) joint venture, partnership, and other similar contracts;
(viii) contracts under which the Company or any of its
Subsidiaries has guaranteed the obligations of any person;
(ix) contracts relating to any indebtedness or deferred
purchase obligation of the Company or its Subsidiaries;
(x) contracts under which the Company or its Subsidiaries
agrees to indemnify any person or to share Liability (as such term is defined in
Section 2.08 hereof) with any person;
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15
(xi) contracts limiting the freedom of the Company or its
Subsidiaries to engage in any line of business, compete with any person or carry
on its business in any geographic area;
(xii) Company Employee Plans (as such term is defined in
Section 2.12 hereof);
(xiii) contracts relating to the acquisition by the Company or
its Subsidiaries of any operating business or the capital stock of any person;
(xiv) contracts for the payment of fees or other consideration
to Parent or Seller (or any affiliate thereof), or any officer or director of
Parent or Seller (or any affiliate thereof), the Company or any other entity in
which any of the foregoing has an interest;
(xv) leases of real or personal property which are material to
the business of the Company and its Subsidiaries; and
(xvi) any other contract, whether or not made in the ordinary
course of business, that is, or may reasonably be expected to have an effect
material to the business of the Company and its Subsidiaries.
(b) Except as disclosed in Section 2.05(b) of the Seller Disclosure
Schedule, (i) neither the Company nor any of its Subsidiaries has breached, is
in default under, or has received written notice of any breach of or default
under, any of the agreements, contracts or other instruments referred to in
Section 2.05(a), (ii) to the knowledge of each of Parent, Seller and the
Company, no other party to any of the agreements, contracts or other instruments
referred to in Section 2.05(a) has breached or is in default of any of its
obligations thereunder, and (iii) each of the agreements, contracts and other
instruments referred to in Section 2.05(a) is in full force and effect.
(c) Except as set forth in Section 2.05(c) of the Seller Disclosure
Schedule, the execution and delivery of this Agreement by Parent, Seller and the
Company do not, and the performance of this Agreement by Parent, Seller and the
Company and the consummation by Parent, Seller and the Company of the
Transactions will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws of Parent, Seller or the Company, (ii) conflict with or
violate any federal, foreign, state or provincial law, rule or regulation or any
order, judgment or decree of any Governmental Authority (collectively, "LAWS
AND/OR ORDERS") applicable to Parent, Seller or the Company or any of the
Company's Subsidiaries or by which any of the Seller Shares or the properties of
the Company or its Subsidiaries are bound or affected, or (iii) conflict with,
violate, result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair, the
Company's or any of the Company's Subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or
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16
cancellation of, or result in the creation of a Lien on any of the properties or
assets of the Company or any of the Company's Subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent, Seller, the Company
or any of their respective Subsidiaries is a party or by which the Parent,
Seller, the Company, any of their respective Subsidiaries or any of their
respective properties are bound or affected, except where any such conflicts,
violations, breaches, defaults, impairments, rights, or creations of Liens under
clauses (ii) and (iii) affecting only Parent or Seller (and not affecting the
Company or its Subsidiaries) would not prevent or materially delay the
Transactions or otherwise prevent or materially delay Parent, Seller or the
Company from performing their obligations hereunder (none of which matters would
impair the ability of the Company and its Subsidiaries to operate their
business, or to own their assets, in the ordinary course of business after the
Closing).
(d) The execution and delivery of this Agreement by Parent, Seller
and the Company do not, and the performance of this Agreement by Parent, Seller
and the Company will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority except (i) for
applicable requirements, if any, of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), state securities laws ("BLUE SKY LAWS"), the pre-merger
notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), and the filing of the Restated Certificate, or
(ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or
materially delay consummation of the Transactions or otherwise prevent or
materially delay Parent, Seller or the Company from performing their obligations
under this Agreement, or (iii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not impair the ability of the Company and its Subsidiaries to operate
their business, or to own their assets, in the ordinary course of business after
the Closing.
SECTION 2.06 Compliance; Permits.
(a) Except as disclosed in Section 2.06(a) of the Seller Disclosure
Schedule, the Company and its Subsidiaries have complied in all material
respects with, and are not in conflict with, or in default or violation of, (i)
any Law and/or Order applicable to the Company or any of its Subsidiaries or by
which its or any of their respective properties are bound or affected or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is, or its or any of their respective properties are bound or
affected.
(b) Except as disclosed in Section 2.06(b) of the Seller Disclosure
Schedule, the Company and its Subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from governmental authorities that are
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material to the operation of the business of the Company and/or its Subsidiaries
as it is now being conducted (collectively, the "COMPANY PERMITS"). The Company
and its Subsidiaries are in material compliance with the terms of each of the
Company Permits, which will not terminate or be forfeited, violated, cancelled
or materially modified as a result of consummation of the Transactions.
SECTION 2.07 Financial Statements. (a) The audited consolidated balance
sheets of the Company as of, and the related consolidated statements of
operations, stockholders' equity and changes in cash flows for the periods ended
March 31, 1996 and March 31, 1997 (including the related notes thereto), and the
unaudited consolidated balance sheets of the Company as of, and the related
consolidated statements of operations, stockholders' equity and changes in cash
flow for the periods ended December 31, 1997, December 31, 1998, and December
31, 1999, as set forth in Section 2.07 of the Seller Disclosure Schedule
(collectively, the "FINANCIAL STATEMENTS"), present fairly the financial
position of the Company and its Subsidiaries, and the results of operations and
the cash flows, as the case may be, of the Company and its Subsidiaries for the
periods presented therein, all in conformity with GAAP applied on a consistent
basis, except as otherwise noted therein and except for the absence of
footnotes.
(b) The balance sheet of the Company as at December 31, 1999 and the
related statements of income, stockholders' equity and cash flows for the year
then ended, including the notes thereto, to be audited by Xxxxxx Xxxxxxxx LLP
(Stamford), independent certified public accountants (such audit to be separate
and not merely a part of the audit of the financial statements of Seller) and to
be delivered to Buyer by February 21, 2000, will fairly present the consolidated
financial position of the Company as at December 31, 1999 and the results of
operations and changes in stockholders' equity and cash flows for the year then
ended in accordance with GAAP applied on a consistent basis. The foregoing
audited financial statements, as at December 31, 1999, and for the year then
ended, are hereinafter referred to collectively as the "1999 FINANCIALS" and the
balance sheet to be included in the 1999 Financials is hereinafter referred to
as the "1999 BALANCE SHEET".
SECTION 2.08 Absence of Certain Changes or Events. Except as set forth in
Section 2.08(i) through Section 2.08(xii) of the Seller Disclosure Schedule,
since June 30, 1999, the Company has conducted its business in the ordinary
course and there has not occurred: (i) any Material Adverse Effect or any
change, event, occurrence or development which could reasonably be expected to
have a Material Adverse Effect; (ii) any amendments or changes in the
Certificate of Incorporation or By-Laws of the Company or similar organizational
documents of its Subsidiaries; (iii) any damage to, destruction or loss of any
material asset of the Company or any of its Subsidiaries (whether or not covered
by insurance); (iv) any material change by the Company in its accounting
methods, principles or practices; (v) any material revaluation by the Company of
any of its or any of its Subsidiaries' assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business; (vi) any sale, pledge, lease,
disposition of, or the imposition of a Lien or encumbrance upon any assets of
the Company or any of its Subsidiaries (except (A)
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18
sales of assets in the ordinary course of business, (B) dispositions of obsolete
or worthless assets, and (C) sales of immaterial assets not in excess of
$250,000 in the aggregate); (vii) any declaration or payment of any dividend or
distribution with respect to, or any redemption or repurchase of, any capital
stock of the Company or its Subsidiaries; (viii) cancellation or notice of
cancellation or surrender of any policy of insurance (which has not been cured
by payment of the premium, purchase of an equivalent policy, or otherwise)
relating to or affecting the assets of the Company or its Subsidiaries; (ix) any
payment, discharge or satisfaction of any claim, Lien, obligation or liability
(whether absolute, accrued, contingent or otherwise and whether due or to become
due, matured or unmatured, liquidated or unliquidated) ("LIABILITIES"), other
than (A) claims, Liens, or Liabilities (1) that are reflected or reserved
against in the Financial Statements or (2) that were incurred and paid,
discharged or satisfied since the dates of the Financial Statements in the
ordinary course of business consistent with past practices or (B) Liabilities
not exceeding $10,000.00 (individually) or $100,000.00 (in the aggregate); (x)
any default on any material claim, Liability or obligation; (xi) any prepayment,
advance or other deposit made by customers of the Company or its Subsidiaries
with respect to products or services contracted for but not provided as of the
date hereof or any other unearned income other than prepayments, advances or
deposits in the ordinary course of business consistent with past practices; or
(xii) other than bonuses paid or to be paid in the ordinary course of business,
there has been no increase by more than $10,000 in the compensation of any of
the officers or employees of the Company or its Subsidiaries who earn more than
$50,000 annually or loans made by the Company or its Subsidiaries to any of
their respective directors, officers or employees.
SECTION 2.09 No Undisclosed Liabilities. Except as is disclosed in Section
2.09 of the Seller Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any Liabilities, except Liabilities (i) in the aggregate
adequately provided for in the Company's unaudited balance sheet (including any
related notes thereto) for the year ended December 31, 1999, included in the
Company's Financial Statements (the "DECEMBER 31 UNAUDITED COMPANY BALANCE
SHEET"), (ii) incurred in the ordinary course of business (but not arising out
of litigation, breach of contract or warranty, fraud, tort, violation of law or
other similar circumstances) and not required under GAAP to be reflected on the
December 31 Unaudited Company Balance Sheet, (iii) incurred since December 31,
1999, in the ordinary course of business (but not arising out of litigation,
breach of contract or warranty, fraud, tort or other similar circumstances), or
(iv) incurred in connection with this Agreement.
SECTION 2.10 Absence of Litigation. Set forth in Section 2.10 of the
Seller Disclosure Schedule are descriptions of all claims, actions, suits,
proceedings or investigations pending or, to the knowledge of Parent, Seller or
the Company or its Subsidiaries, threatened against the Company or any of its
Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, before or by any court, arbitrator or administrative, governmental
or regulatory authority or body, domestic or foreign, and, in the case of any
such claims for damages, which seek damages in excess of (or may reasonably be
expected to result in Liabilities in excess of) $100,000 ("COMPANY LITIGATION").
Except as set forth in Section
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2.10 of the Seller Disclosure Schedule, no such Company Litigation would result
in a Material Adverse Effect. None of Parent, Seller or the Company has
knowledge of any fact, event or circumstances that may reasonably be expected to
give rise to any Company Litigation. Neither the Company nor any of the
Company's Subsidiaries nor any property of any of them is subject to any order,
judgment, decree, consent decree, settlement agreement or ruling entered by any
Governmental Authority and outstanding against the Company or any of its
Subsidiaries.
SECTION 2.11 Employment Agreements; Change in Control Payments. Except as
set forth in Section 2.11 of the Seller Disclosure Schedule, neither the Company
nor any of its Subsidiaries is a party to any written or oral employment or
consulting contract or other contract for services involving payments of more
than $50,000 annually or that is not terminable without a cost to the Company of
more than $50,000 or at will. Except as set forth in Section 2.11 of the Seller
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
plans, programs or agreements to which they are parties, or to which they are
subject, pursuant to which payments in excess of $50,000 (or acceleration of
material benefits), individually or in the aggregate, may be required upon, or
may become payable directly or indirectly as a result of, the Transactions
contemplated by this Agreement or a change of control of the Company.
SECTION 2.12 Employee Benefit Plans. Except as set forth in Section 2.12
of the Seller Disclosure Schedule, the Company has no employee pension plans (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), employee welfare plans (as defined in Section 3(1) of
ERISA), or any material bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance or similar fringe or employee
benefit plans, programs or arrangements (collectively, the "COMPANY EMPLOYEE
PLANS"). The Company has delivered to Buyer (i) a copy of each Company Employee
Plan and each amendment thereto, (ii) annual reports and actuarial reports filed
with respect to each Company Employee Plan since December 31, 1993, (iii)
summary plan descriptions and other communications to employees relating to each
Company Employee Benefit Plan; (iv) all trust agreements and other similar
documents or agreements relating to the organization of any such Company
Employee Plan and all separate financial statements of such Company Employee
Plan; and (v) all letters from the IRS approving or confirming the tax-exempt
status of any such Company Employee Plan. Except in each case as set forth in
Section 2.12 of the Seller Disclosure Schedule, (i) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Internal Revenue Code of 1986, as amended (the "CODE"), with
respect to any Company Employee Plans which would result in Liability of the
Company or any of its Subsidiaries; (ii) all Company Employee Plans are in
substantial compliance with the requirements prescribed by applicable Laws
(including ERISA and the Code), currently in effect with respect thereto
(including all applicable requirements for notification to participants or the
Department of Labor, Pension Benefit Guaranty Corporation (the "PBGC"), Internal
Revenue Service (the "IRS") or Secretary of the Treasury), and the Company and
each of its Subsidiaries have performed all material obligations required to be
performed by them under, are not in default under or violation of, and Seller
has no knowledge of any material default or violation by any other party to, any
of the Company
-13-
20
Employee Plans; (iii) each Company Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code is the subject of a favorable determination letter from the
IRS, and nothing has occurred which may reasonably be expected to impair such
determination; (iv) all contributions required to be made to any Company
Employee Plan pursuant to applicable Laws and/or Orders, or the terms of the
Company Employee Plan or any collective bargaining agreement, have been made on
or before their due dates and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid to each such
Company Employee Plan or reserved for on the books and records of the Company or
applicable Subsidiary in accordance with past practice and custom; (v) with
respect to each Company Employee Plan, no "reportable event" within the meaning
of Section 4043 of ERISA (excluding any such event for which the 30-day notice
requirement has been waived under the regulations to Section 4043 of ERISA) nor
any event described in Section 4062, 4063 or 4041 of ERISA has occurred; (vi) no
withdrawal (including a partial withdrawal) has occurred with respect to any
multi employer plan within the meaning set forth in Section 3(37) of ERISA
resulting in withdrawal liability for the Company or any of its Subsidiaries;
(vii) neither the Company nor any of its Subsidiaries has incurred any material
liability under Title IV of ERISA (other than liability for premium payments to
the PBGC, and contributions not in default to the respective plans, arising in
the ordinary course); (viii) the PBGC has not instituted any termination
proceedings with respect to any Company Employee Plan, and no material risk of
such proceedings being instituted exists; (ix) the market value of assets under
each Company Employee Plan which is an employee pension benefit plan within the
meaning of ERISA Section 3(2) (an "Employee Pension Benefit Plan") (other than
any multiemployer plan as defined in ERISA Section 3(37) (a "Multiemployer
Plan")) equals or exceeds the present value of all vested and nonvested
liabilities thereunder determined in accordance with PBGC methods, factors, and
assumptions applicable to an Employee Pension Benefit Plan terminating on the
date for determination; (x) no immediate vesting or acceleration of any rights
or the payment of any benefits will occur under any Company Employee Plan as a
result of the consummation of the Transactions contemplated by this Agreement;
and (xi) none of the Company, any of its Subsidiaries or any Person that,
together with the Company or any of its Subsidiaries, is considered one employer
under applicable provisions of ERISA or the Code, contributes to, ever has
contributed to, or ever has been required to contribute to any Multiemployer
Plan or any Employee Pension Benefit Plan, or has any material liability
(whether know or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any withdrawal liability (as
defined in ERISA Section 4201), under any Multiemployer Plan; and (xii) none of
the Company and its Subsidiaries maintains or ever has maintained or
contributes, ever has contributed, or ever has been required to contribute to
any employee welfare benefit plan (within the meaning of ERISA Section 3(1))
providing medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B).
SECTION 2.13 Labor Matters. Except as set forth in Section 2.13 of the
Seller Disclosure Schedule: (i) there are not now (and there have not been
within the 60 months
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immediately prior to the date hereof) claims or proceedings pending or, to the
knowledge of Parent, Seller or the Company, threatened, between the Company or
any of its Subsidiaries and any of their respective employees, including,
without limitation, charges of unfair labor practices pending before the
National Labor Relations Board; (ii) neither the Company nor any of its
Subsidiaries is or has been a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by the Company or any
of its Subsidiaries, and neither Seller nor the Company knows of any activities
or proceedings of any labor union to organize any such employees; (iii) there
have been no past and there are no present strikes, slowdowns, work stoppages,
lockouts, or, to the knowledge of Parent, Seller or the Company, threats
thereof, by or with respect to any employees of the Company or any of its
Subsidiaries; and (iv) each of the Company and its Subsidiaries is in compliance
in all material respects with all applicable labor Laws and/or Orders.
SECTION 2.14 Title to Property. (a) Personal Property. Except as set forth
in Section 2.14(a) of the Seller Disclosure Schedule, the Company and each of
its Subsidiaries have good and marketable title to all of their personal
property, free and clear of all Liens, except Liens for current year Taxes not
yet due and payable and such minor liens or other imperfections of title which,
individually or in the aggregate, do not detract from the value of the affected
personal property or otherwise impair the business operations of the Company or
its Subsidiaries; and all leases pursuant to which the Company or any of its
Subsidiaries lease from others personal property are valid, effective and
enforceable in accordance with their respective terms, and there is not under
any of such leases any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) by the Company or,
to the knowledge of Seller or the Company, by other party or parties to such
leases. The personal property owned, operated or leased by the Company and any
of its Subsidiaries and used in their businesses is in a normal state of repair
and operating condition, reasonable wear and tear excepted, and suitable for the
uses for which it is intended.
(b) Real Property. Section 2.14(b) of the Seller Disclosure Schedule
sets forth a list and summary description of: (i) all real property owned by the
Company and all buildings, structures and other improvements located on such
real property and (ii) all leases, subleases or other contracts and other
agreements under which the Company is a lessor or lessee of any real property.
The Company and each Subsidiary have good and marketable title to their
respective owned real properties, free and clear of all Liens except (i) as
shown on such Financial Statements, (ii) Liens for current Taxes and assessments
not yet delinquent or being contested in good faith by appropriate proceedings,
(iii) such imperfections of title and encumbrances, if any, which individually
or in the aggregate do not detract from the value of or interfere with the
present use of the real properties subject thereto or affected thereby or
otherwise impair business operations conducted by the Company or any of its
Subsidiaries and (iv) matters set forth in the title insurance policies or title
commitments which have previously been delivered to Buyer. The Company and each
Subsidiary, to the extent any of them leases as lessee any real property, have
good, valid and insurable title to the leasehold estate under each lease, as
lessee, free and clear of all Liens except for (i) Liens for current Taxes and
assessments
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22
not yet delinquent or being contested in good faith by appropriate proceedings
and (ii) such imperfections of title and encumbrances, if any, which
individually or in the aggregate do not detract from the value of or interfere
with the present use of the real properties subject thereto or affected thereby
or otherwise impair business operations conducted by the Company or any of its
Subsidiaries. Each lessee enjoys peaceful and quiet possession of its leased
premises, and there is not under any lease any default by the lessee thereunder
or any condition which with notice or the passage of time or both would
constitute such a default, and no lessee has received notice asserting the
existence of any such default or condition. All buildings and improvements
located on such real properties are in good structural condition and, to the
knowledge of Parent, Seller and the Company, no conditions exist which would
make such real property unsafe or hazardous.
With respect to all such real property, (i) there is no condemnation
proceeding or eminent domain proceeding of any kind pending or, to the best
knowledge of Parent, Seller and the Company, threatened, against any such real
properties; (ii) all such real properties are occupied under a valid and current
occupancy permit or the like, and the Transactions contemplated by this
Agreement will not require the issuance of any new or amended certificate of
occupancy; (iii) all such real properties are, and, to the knowledge of Parent,
Seller and the Company, all improvements thereon were, constructed in compliance
in all material respects with all applicable federal, state or local statutes,
laws, ordinances, regulations, rules, codes, orders or requirements (including,
but not limited to, any building, zoning or environmental laws or codes)
affecting such premises; and (iv) such real properties and the present use and
condition thereof do not violate any applicable deed restrictions or other
covenants, restrictions, or governmental regulations applicable to such real
properties as modified by any duly issued variances, and no permits, licenses or
certificates pertaining to the ownership or operation of such real properties,
other than those which are transferable with such real properties, are required
by any Governmental Authority having jurisdiction over such real properties or
their operation.
SECTION 2.15 Taxes.
(a) For purposes of this Agreement, "TAX" or "TAXES" shall mean
taxes, fees, levies, duties, tariffs, imposts, and governmental impositions or
charges of any kind in the nature of (or similar to) taxes, payable to any
federal, state, local or foreign taxing authority, including (without
limitation) (i) income, franchise, profits, gross receipts, ad valorem, net
worth, value added, sales, use, service, real or personal property, special
assessments, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, and (ii) interest, penalties, additional taxes and additions to tax
imposed with respect thereto; "TAX RETURNS" shall mean returns, reports and
information statements with respect to Taxes required to be filed with the IRS
or any other federal, foreign, state or provincial taxing authority, domestic or
foreign, including, without limitation, consolidated, combined and unitary tax
returns; and
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23
"AFFILIATED GROUP" shall mean an affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law.
(b) Other than as disclosed in Section 2.15(b) of the Seller
Disclosure Schedule, (i) the Company and each of its Subsidiaries have filed all
Tax Returns required to be filed by it or requests for extensions to file such
Tax Returns have been timely filed, granted and have not expired; (ii) all Tax
Returns filed by the Company and each of its Subsidiaries are complete and
accurate; (iii) the Company and each of its Subsidiaries have paid (or the
Company has paid on the Subsidiaries' behalf) all Taxes shown as due on such
returns, and the Financial Statements reflect an adequate reserve, in accordance
with GAAP (exclusive of any reserve for deferred Taxes), for all Taxes payable
by the Company and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements; (iv) no deficiencies for
any Taxes have been proposed, asserted or assessed against the Company or any of
its Subsidiaries that are not adequately reserved for, and no requests for
waivers of the time to assess any such Taxes have been granted or are pending;
(v) the Company and its Subsidiaries have made adequate provisions in their
books and records for all Taxes (exclusive of any reserve for deferred Taxes)
with respect to their current taxable year, in accordance with past custom and
practice of the Company and its Subsidiaries respectively; (vi) the statute of
limitations for the assessment of federal and state income Taxes has expired for
taxable years prior to March 31, 1996 for all material state and consolidated
federal income Tax Returns of the consolidated group that includes the Company,
and there is no claim or assessment pending against the Company or any of its
Subsidiaries for any alleged deficiency in Taxes (except for assessment assessed
prior to the date payment is required); (vii) there is no audit or investigation
currently being conducted as to which the Seller or the Company has received
written notice that could cause the Company or any of its Subsidiaries to be
liable for any Taxes; (viii) there are no agreements in effect to extend the
period of limitations for the assessment or collection of any Tax for which the
Company or any of its Subsidiaries may be liable; (ix) the Company is not, and
has not within the preceding six completed taxable years been, a party to any
agreement that required or would require it or Buyer to make any excess
parachute payment pursuant to Section 280G of the Code and the Company has not
made any such payment; (x) none of the Company and its Subsidiaries has been a
United States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii); (xi) none of the Company and its Subsidiaries is a
party to any tax allocation or sharing agreement; (xii) neither the Company nor
any of its Subsidiaries has been a member of an Affiliated Group filing a
consolidated federal income Tax Return other than the Affiliated Group the
common parent of which is Seller; (xiii) Seller, on behalf of the Affiliated
Group of which Seller is the common parent, has filed all income Tax Returns
that it was required to file for each taxable period during which any of the
Company and its Subsidiaries was a member of such group, all such Tax Returns
were correct and complete (A) in all respects in so far as they relate to any of
the Company and its Subsidiaries and (B) in all material respects in so far as
they do not relate to the Company and its Subsidiaries; (xiv) all income Taxes
owed by such Affiliated Group (whether or not shown on any Tax Return) have been
paid for each taxable period during which any of the Company and its
Subsidiaries was a member of the group; (xv) none of the
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Company and its Subsidiaries has any Liability for the Taxes of any Person other
than the Company and its Subsidiaries (A) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign law), (B)
as a transferee or successor, (C) by contract or (D) otherwise; and (xvi) none
of the Company and its Subsidiaries has any net operating loss or capital loss
carryovers in its current Tax Year under Regulation Section 1.1502-20(g) or
otherwise.
SECTION 2.16 Environmental Protection.
(a) Except as set forth in Section 2.16 of the Seller Disclosure
Schedule hereto:
(i) Each of the Company and its Subsidiaries is in compliance
with all applicable Environmental Laws, and within the period of all applicable
statutes of limitations has been in such compliance; and there are no
circumstances that are reasonably likely to prevent or interfere with such
compliance in the future.
(ii) Each of the Company and the Subsidiaries holds all
Environmental Permits necessary to conduct its operations as they are currently
conducted. Schedule 2.16 contains a true and complete list of all such
Environmental Permits and, where applicable, their expiration dates. None of the
Company, any of its Subsidiaries, or Seller has any reason to believe that any
such Environmental Permits (A) will not be renewed, or (B) will be renewed under
terms that are reasonably likely to have an adverse effect on the ability of the
Company and its Subsidiaries to operate their respective businesses in the
ordinary course.
(iii) There are no Materials of Environmental Concern present
at, and no Materials of Environmental Concern are or have been in any way
released or reasonably likely to be released from, any property currently or
formerly owned, leased or otherwise operated by the Company or any Subsidiary of
the Company, or as a result of present or former operations of the Company or
any Subsidiary of the Company, that are reasonably likely to be in violation of,
or otherwise to give rise to Liability of the Company or any Subsidiary of the
Company under, any Environmental Law.
(iv) No reports of any kind have been made to or required by
an Governmental Authority pursuant to any Environmental Law concerning spills or
any other releases of any kind, at, or in any way from, any property currently
or formerly owned, leased or otherwise operated by the Company or any Subsidiary
of the Company, or as a result of present or former operations of the Company or
any Subsidiary of the Company, for which spills, releases, or reports thereof
the Company or any Subsidiary of the Company may be liable under any
Environmental Law. True and complete copies of all written reports concerning
such spills and other releases have been provided or made available to Buyer.
(v) None of the following are or have been on, under, in or at
any property currently or formerly owned, leased or otherwise operated by the
Company or any Subsidiary of the Company: (A) underground or aboveground storage
tanks containing any
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Materials of Environmental Concern, (B) polychlorinated biphenyls, (C) asbestos
or asbestos-containing materials, (D) septic tanks, septic fields, dry-xxxxx, or
similar structures, (E) lagoons or impoundments to which Materials of
Environmental Concern may have been discharged, or (F) landfills, dumping areas,
or similar locations where Materials of Environmental Concern are reasonably
likely to have been placed.
(vi) None of the Company, any of its Subsidiaries, or Seller
has received any Environmental Claim, and, to the knowledge of the Company, any
of its Subsidiaries, and Seller, no Environmental Claim against the Company or
any of its Subsidiaries has been threatened.
(vii) None of the Company, any of its Subsidiaries, or Seller
has entered into, agreed to, nor is the Company or any of its Subsidiaries
otherwise subject to any judgment, decree, order or similar requirement under
any Environmental Law, nor is the Company, any of its Subsidiaries or Seller
negotiating any such judgment, decree, order or requirement.
(viii) None of the Company, any of its Subsidiaries, or Seller
has assumed or retained, contractually or by operation of Law, any Liabilities
or obligations, contingent or otherwise, in connection with any Environmental
Law.
(ix) There are no past or present actions, activities, events,
conditions or circumstances, including without limitation, the release,
threatened release, emission, discharge, generation, treatment, storage or
disposal of Materials of Environmental Concern, that could give rise to any
Liability or obligation of the Company or any of the Subsidiaries under any
Environmental Laws.
"ENVIRONMENTAL CLAIM" means any written notice by any Governmental
Authority alleging potential Liability (including without limitation, potential
Liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, fines or
penalties) arising out of, based on or resulting from (a) the presence, or
release into the environment, of any Material of Environmental Concern at any
location, whether or not owned, leased or otherwise operated by the Company or
any Subsidiary of the Company or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"ENVIRONMENTAL LAWS" means any and all Laws and/or Orders,
guidelines, codes, decrees, or other legally enforceable requirements
(including, without limitation, common law) of any Governmental Authority
regulating, relating to or imposing liability or standards of conduct concerning
protection of the environment or of human health, or employee health and safety.
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"ENVIRONMENTAL PERMIT" means any permit, filing, approval, consent
or similar item required under any Environmental Law.
"MATERIALS OF ENVIRONMENTAL CONCERN" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants,
contaminants, radioactive materials, and any other substances or forces of any
kind, whether or not any such substance or force is defined as hazardous or
toxic under any Environmental Law, that is regulated pursuant to or could give
rise to liability under any Environmental Law.
(b) Set forth in Section 2.16 of the Seller Disclosure Schedule is a
complete list of reports, studies, assessments, audits, and other similar
documents in the possession or control of the Company, any of its Subsidiaries,
Parent or Seller that address any issues of actual or potential noncompliance
with or actual or potential liability under, any Environmental Laws that may
affect the Company or any of its Subsidiaries. Copies of all such reports have
been provided or made available to Buyer prior to signing hereof.
(c) Except as set forth in Section 2.16 of the Seller Disclosure
Schedule, no Environmental Law requires any permit, license, consent, or other
authorization to be obtained from, or any application, filing, or other notice
to be given to, any person in connection with this Agreement or any transactions
contemplated by this Agreement.
(d) None of the matters set forth in Section 2.16 of the Seller
Disclosure Schedule, or any aggregation thereof, could reasonably be expected to
result in a Material Adverse Effect.
SECTION 2.17 Intellectual Property.
(a) Set forth in Section 2.17 of the Seller Disclosure Schedule are
descriptions of all patents, trademarks, trade names, service marks, copyrights,
and any applications therefor, technology, know-how and tangible or intangible
proprietary information or material, or licenses with respect to any of the
foregoing, that are material to the business of the Company and its Subsidiaries
as currently conducted by the Company or any of its Subsidiaries (the "COMPANY
INTELLECTUAL PROPERTY RIGHTS"). The Company, directly or indirectly, owns, or is
licensed or otherwise possesses legally enforceable rights to use, all Company
Intellectual Property Rights.
(b) Either the Company or one of its Subsidiaries is the owner of,
or the licensee of, with all right, title and interest in and to (free and clear
of any Liens), the Company Intellectual Property Rights; in the case of Company
Intellectual Property Rights owned by the Company or any of its Subsidiaries,
has the right to the use thereof or the material covered thereby in connection
with the services or products in respect of which the Company Intellectual
Property Rights are being used; and in the case of Company Intellectual Property
Rights licensed
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by the Company, the licenses thereof are valid, binding and enforceable in
accordance with their terms, and no default or event of default (or any event
that, with the giving of notice or passage or time, or both, would result in a
default or event of default) by the Company or any of its Subsidiaries or, to
the knowledge of the Company, by any other party or parties exists under such
licenses. Except as set forth in Section 2.17(b) of the Seller Disclosure
Schedule, no claims with respect to the Company Intellectual Property Rights
have been asserted or, to the knowledge of Parent, Seller or the Company, are
threatened by any person (i) to the effect that the manufacture, sale, license,
or use of any product of the Company or any of its Subsidiaries as now
manufactured, sold or licensed or used or proposed for manufacture, use, sale or
license by the Company or any of its Subsidiaries infringes on any copyright,
patent, trademark, service xxxx or trade secret, (ii) against the use by the
Company or any of its Subsidiaries of any trademarks, service marks, trade
names, trade secrets, copyrights, patents, technology, know-how or computer
software programs and applications used in the business of the Company and its
Subsidiaries as currently conducted or as proposed to be conducted, or (iii)
challenging the ownership by the Company or any of its Subsidiaries or the
validity of any of the Company Intellectual Property Rights. All registered
patents, trademarks, service marks and copyrights held by the Company or any of
its Subsidiaries are valid and subsisting. Except as set forth in Section
2.17(b) of the Seller Disclosure Schedule, to the knowledge of Parent, Seller
and the Company, there is no currently unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property Rights by any third
party, including any employee or former employee of the Company or any of its
Subsidiaries. No Company Intellectual Property Right or product of the Company
or any of its Subsidiaries is subject to any outstanding decree, order,
judgment, or stipulation restricting in any manner the licensing thereof by the
Company or any of its Subsidiaries.
SECTION 2.18 Certain Distribution Agreements. Except as set forth in
Section 2.18 of the Seller Disclosure Schedule, neither the Company nor any of
its Subsidiaries has entered into any material agreement under which the Company
or any of its Subsidiaries is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
SECTION 2.19 Insurance. Parent maintains for the benefit of the Company
and its Subsidiaries fire and casualty, general liability, business
interruption, product liability and sprinkler, water damage and other insurance
policies and coverages with reputable insurance carriers, which are in character
and amount substantially similar to that carried by entities engaged in a
similar business and subject to the same or similar perils or hazards. Section
2.19 of the Seller Disclosure Schedule lists each such policy, coverage and/or
self-insurance arrangement. None of Parent, Seller, the Company or any of their
respective Subsidiaries is in default with respect to any provision contained in
any such policy or binder nor has Parent, Seller or the Company or any of their
respective Subsidiaries failed to give any notice or present any claim under any
such policy or binder in due and timely fashion. Except as set forth in Section
2.19 of the Seller Disclosure Schedule, there are no outstanding unpaid claims
under any such policy or binder or any self-insurance program. None of Parent,
Seller, the Company or
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any of their respective Subsidiaries has received a notice of cancellation or
nonrenewal of any such policy or binder and there are no historical gaps in
coverage or, to the knowledge of Parent, Seller or the Company, insolvent
carriers in respect of any such policy, binder or self-insurance program. None
of Parent, Seller, the Company or any of their respective Subsidiaries has any
knowledge of any inaccuracy in any application for such policies or binders or
failure to pay any premiums when due. None of Parent, Seller, the Company or any
of their respective Subsidiaries has any knowledge of any increase in insurance
premiums covering or affecting the Company and its Subsidiaries that has been
proposed or that is reasonably likely to occur.
SECTION 2.20 Brokers. Except as set forth in Section 2.20 of the Seller
Disclosure Schedule, no broker, finder or investment banker or other party is
entitled to any brokerage, finder's or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
Parent, Seller, the Company or any of their respective Subsidiaries or
Affiliates. Parent and Seller will, jointly and severally, pay all of the fees
and expenses of the entities listed on Section 2.20 of the Seller Disclosure
Schedule (without regard to deductibles and caps set forth in Section 11.01(c)).
SECTION 2.21 Customers and Suppliers. Section 2.21 of the Seller
Disclosure Schedule sets forth the twenty largest customers and suppliers of the
Company and its Subsidiaries for the year ended December 31, 1999, as measured
by amounts of goods shipped by the Company and its Subsidiaries or by amounts of
goods and services provided to the Company and its Subsidiaries, as the case may
be. The relationships of the Company and its Subsidiaries with its customers and
suppliers are good commercial working relationships and, except as set forth in
Section 2.21 of the Disclosure Schedule, during the last 24 months, none of the
twenty largest customers or suppliers of the Company and its Subsidiaries has
canceled or otherwise terminated, or threatened to cancel or otherwise
terminate, its relationship with the Company or its Subsidiaries or materially
decreased, or threatened to materially decrease or limit, its usage of the
services of, or purchase of the goods of, the Company or its Subsidiaries or its
provision of services to, or sale of goods to, the Company or its Subsidiaries.
Neither the Company nor any of the Subsidiaries has any notice that any of the
twenty largest customers or suppliers of the Company and its Subsidiaries
intends to cancel or otherwise materially modify its relationship with the
Company or to materially decrease or limit its usage of the services of, or
purchase of the goods of, the Company or its Subsidiaries or its provision of
services to, or its sale of goods to, the Company or its Subsidiaries, and the
Transactions will not, to the best knowledge of the Company and each of its
Subsidiaries, adversely affect the relationship of the Company or its
Subsidiaries with any of the twenty largest customers or suppliers of the
Company and its Subsidiaries.
SECTION 2.22 Accounts and Notes Receivable. All accounts and notes
receivable reflected on the Financial Statements or to be reflected on the 1999
Balance Sheet and all accounts and notes receivable arising subsequent to
December 31, 1999 and on or prior to the Closing Date, have arisen or are
reasonably expected to arise in the ordinary course of business, represent or
are reasonably expected to represent legal, valid, binding and enforceable
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obligations to the Company or its Subsidiaries and to the knowledge of the
Company and its Subsidiaries, are not, and are not reasonably expected to be,
subject to any contests, claims, counterclaims or setoffs.
SECTION 2.23 Inventory. Since January 1, 1999, the inventories of the
Company and its Subsidiaries have been purchased or produced in the ordinary
course of business consistent with the reasonably anticipated requirements of
the Company and its Subsidiaries.
SECTION 2.24 Product Warranties; Returns.
(a) Section 2.24 of the Seller Disclosure Schedule lists all
material agreements that include specific product warranties and sets forth the
forms of the product warranties of the Company and its Subsidiaries that are on
the date of this Agreement being made for products being sold on such date.
Neither the Company nor any of its Subsidiaries is aware of any basis for
product warranty claims under any of the agreements listed on Section 2.24 of
Seller Disclosure Schedule. Neither the Company nor any of its Subsidiaries is
aware of any basis for product warranty claims which would result in costs
materially in excess of the reserve for product warranty claims set forth on the
face of the December 31 Unaudited Company Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and the practice of the Company. No product
manufactured, sold or distributed by the Company or any of its Subsidiaries is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale. To the knowledge of the Company and its
Subsidiaries, neither the Company nor any of its Subsidiaries has any material
Liability arising out of any injury to persons or property as a result of the
ownership, use, or possession of any products manufactured, sold or distributed
by the Company or its Subsidiaries. The products manufactured, sold or
distributed by the Company and its Subsidiaries have been, in all material
respects, in conformity with all applicable contractual commitments and all
express or implied warranties.
(b) Section 2.24 of the Seller Disclosure Schedule lists the product
recall and product return history of the Company and its Subsidiaries for the
three fiscal years ended December 31, 1999. Neither the Company nor its
Subsidiaries has any contract with any customer that upon return of any product
to the Company or its Subsidiaries the customer will be entitled to a credit for
any amount other than the invoice price of the product so returned and there is
no standard in the industry of the Company and its Subsidiaries for customers to
obtain credits in excess of such amounts.
SECTION 2.25 Transactions with Affiliates.
Except as disclosed in Section 2.25 of the Seller Disclosure
Schedule and except for intercompany transactions between the Company and its
Subsidiaries, neither the Company nor any of its Subsidiaries is now, nor during
the past three years has been, a party, directly or indirectly, to any contract,
lease, arrangement or transaction, whether for the purchase, lease or
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sale of property, for the rendition of services or otherwise, with any affiliate
of Parent, Seller, their respective Subsidiaries, the Company or the Company's
Subsidiaries, or any officer, director, employee, proprietor, partner,
shareholder or any "associate" of the Company or any affiliate of the Company or
its Subsidiaries (as the term "associate" is defined in Rule 405 of the
Securities Act), other than a contract or arrangement by reason of, which
relates to or is in connection with the full or part time employment of an
employee, nor are there now, nor for the past three years have there been, any
loans outstanding to any of such persons from the Company or any of its
Subsidiaries (other than employee loans relating to the exercise of stock
options, which loans have been paid in full). All goods sold by the Company and
its Subsidiaries to Seller or its Subsidiaries or Affiliates as of December 31,
1999 and as of the Closing represent bona fide sales of goods in the normal and
ordinary course of business in amounts consistent with past practice of Seller,
its Subsidiaries and Affiliates and none of such sales have resulted in Seller
or its Subsidiaries or Affiliates holding inventory in amounts which are greater
than historical levels. Section 2.25 of the Seller Disclosure Schedule
identifies any material changes in accounting policies of the Company and its
Subsidiaries relating to intercompany sales, inventory, receivables, payables or
other matters, in each case adopted at any time during the eight most recently
completed fiscal quarters.
SECTION 2.26 Investment. Seller is acquiring the Preferred Shares for
investment for Seller's own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. Seller
understands that the Preferred Shares have not been, and will not be, registered
under the Securities Act or the securities laws of any state by reason of
exemptions from the registration provisions of the Securities Act and such laws
which depend upon, among other things, the bona fide nature of the investment
intent and the accuracy of Seller's representations as expressed herein. Seller
is an "accredited investor" as defined in the rules promulgated under the
Securities Act. Seller acknowledges that the Preferred Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Seller is aware of the provisions
of Rule 144 promulgated under the Securities Act which permit the limited resale
of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, (i) the existence of a public
market for the shares, (ii) the availability of certain current public
information about the Company, (iii) the resale occurring not less than one year
after a party (who is not an "affiliate") has purchased and fully paid for the
shares to be sold, (iv) the sale being effected through a "broker's transaction"
or in transactions directly with a "market maker" (as provided by Rule 144(f))
and (v) the number of shares being sold during any three-month period not
exceeding specified limitations. Seller understands that no public market now
exists for any of the securities issued by the Company and that there is no
assurance that a public market will ever exist for the Preferred Shares.
SECTION 2.27 Full Disclosure. All documents delivered by or on behalf of
the Company and its Subsidiaries in connection with this Agreement and the
transactions contemplated hereby, taken as a whole, are true, complete and
authentic in all material respects. The representations and warranties made by
or on behalf of Parent, Seller and the Company to
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Buyer in connection with this Agreement and the Transactions contemplated hereby
do not contain any untrue statement of a material fact and do not omit to state
a material fact required to be stated therein or necessary to make the
statements made, in the context in which made, not false or misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
SECTION 3.01 Organization and Qualification. Buyer is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite limited partnership power and
authority and is in possession of all Approvals necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted. Buyer is duly qualified or licensed as a
foreign limited partnership to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing does not constitute a Material Adverse Effect.
SECTION 3.02 Authority Relative to this Agreement. Buyer has the requisite
limited partnership power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by Buyer and the consummation by Buyer
of the Transactions hereby have been duly and validly authorized by the
requisite limited partnership action on the part of Buyer, and no other limited
partnership proceedings on the part of Buyer are necessary to authorize this
Agreement or to consummate the Transactions. This Agreement has been duly and
validly executed and delivered by Buyer and, assuming the due authorization,
execution and delivery by Seller and the Company, constitutes a legal, valid and
binding obligation of Buyer enforceable against Buyer in accordance with its
terms.
SECTION 3.03 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by Buyer does not,
and the performance of this Agreement by Buyer and the consummation by Buyer of
the transactions contemplated hereby will not, (i) conflict with or violate
Buyer's Certificate of Limited Partnership or Agreement of Limited Partnership,
(ii) conflict with or violate any Laws and/or Orders applicable to Buyer or by
which its properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Buyer's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of Buyer pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other
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instrument or obligation to which Buyer is a party or by which Buyer or its
properties are bound or affected, except in the case of clauses (ii) and (iii)
herein for any such conflicts, violations, breaches, defaults or other
occurrences that do not result in a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Buyer does not,
and the performance of this Agreement by Buyer will not, require Buyer to make
or obtain any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Act, the
Exchange Act, the Blue Sky Laws, or the pre-merger notification requirements of
the HSR Act, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, either (A)
would not prevent or materially delay consummation of the Transactions or
Buyer's purchase of the Purchased Shares or otherwise prevent or materially
delay Buyer from performing its obligations under this Agreement, or (B) do not
result in a Material Adverse Effect.
SECTION 3.04 Financing. Buyer has funds available sufficient to acquire
and pay for the Purchased Shares. Buyer has procured the commitments attached as
Schedule 3.04 hereto (the "COMMITMENTS") for the benefit of the Company for the
Financing.
SECTION 3.05 Absence of Litigation. No claims, actions, suits, proceedings
or investigations are pending or, to the knowledge of Buyer, threatened against
Buyer, before or by any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, which might prevent or
materially delay the Transactions.
SECTION 3.07 Brokers. No broker, finder or investment banker or other
party is entitled to any brokerage, finder's or other similar fee or commission
in connection with the Transactions based upon arrangements made by or on behalf
of Buyer or any of its Subsidiaries or Affiliates.
SECTION 3.08 Investment. Buyer is acquiring the Purchased Shares for
investment for Buyer's own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. Buyer
understands that the Purchased Shares have not been, and will not be, registered
under the Securities Act or the securities laws of any state by reason of
exemptions from the registration provisions of the Securities Act and such laws
which depend upon, among other things, the bona fide nature of the investment
intent and the accuracy of Buyer's representations as expressed herein. Buyer is
an "accredited investor" as defined in the rules promulgated under the
Securities Act. Buyer acknowledges that the Purchased Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Buyer is aware of the provisions
of Rule 144 promulgated under the Securities Act which permit the limited resale
of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, (i) the existence of a public
market for the shares, (ii) the availability of certain current public
information about the Company, (iii) the resale occurring not less than one year
after a party
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(who is not an "affiliate") has purchased and fully paid for the shares to be
sold, (iv) the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" (as provided by Rule 144(f)) and (v)
the number of shares being sold during any three-month period not exceeding
specified limitations. Buyer understands that no public market now exists for
any of the securities issued by the Company and that there is no assurance that
a public market will ever exist for the Purchased Shares.
ARTICLE IV
COVENANTS OF PARENT, SELLER AND THE COMPANY
SECTION 4.01 Conduct of Business by the Company Pending the Closing. Each
of Parent, Seller and the Company covenants and agrees that, during the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing Date, unless Buyer shall otherwise
agree in writing and except as set forth in Section 4.01 of the Seller
Disclosure Schedule or as contemplated by this Agreement, the Company shall (and
Parent and Seller shall cause the Company to) conduct its business, and shall
cause the businesses of its Subsidiaries to be conducted, only in the ordinary
course of business; and the Company shall (and Parent and Seller shall cause the
Company to) use all reasonable efforts to preserve substantially intact the
business organization of the Company and its Subsidiaries, to keep available the
services of the present officers, employees and consultants of the Company and
its Subsidiaries and to preserve the present relationships of the Company and
its Subsidiaries with customers, suppliers and other persons with which the
Company or any of its Subsidiaries has significant business relations. By way of
amplification and not limitation, neither the Company nor any of its
Subsidiaries shall, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the Closing
Date, directly or indirectly do, or propose to do, any of the following without
the prior written consent of Buyer:
(a) except for the filing of the Restated Certificate and the
consummation of any split requested by Buyer in order to facilitate the
allocation of Purchased Shares at the Closing, amend or otherwise change the
Certificate of Incorporation or By-Laws of the Company or similar organizational
documents of any of its Subsidiaries;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares, of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in the
Company or any of its Subsidiaries;
(c) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except (A) for cash sweeps in the ordinary
course of business consistent with past practices, (B) that a Subsidiary of the
Company may declare and pay a dividend to its parent in
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the ordinary course in a manner consistent with past practice and (C) subject to
compliance with the other provisions hereof, the Company may make dividends of
any available excess cash to Seller, (ii) unless requested by Buyer in order to
facilitate the allocation of Purchased Shares at the Closing, split, combine or
reclassify any of its capital stock, or (iii) amend the terms or change the
period of exercisability of, purchase, repurchase, redeem or otherwise acquire,
or permit any Subsidiary to purchase, repurchase, redeem or otherwise acquire,
any of its securities or any securities of any of its Subsidiaries or of Parent
or Seller, including, without limitation, shares of Company Common Stock or any
option, warrant or right, directly or indirectly, to acquire shares of Company
Common Stock, or provide that upon the exercise or conversion of any such
option, warrant or right the holder thereof shall receive cash;
(d) sell, pledge, dispose of or encumber any assets of the Company
or any of its Subsidiaries (except for (i) sales of assets in the ordinary
course of business, (ii) dispositions of obsolete or worthless assets, and (iii)
sales of immaterial assets not in excess of $250,000 in the aggregate);
(e) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) except in the ordinary course of business, incur, guarantee or
assume any Funded Debt (as defined below) or other indebtedness not currently
outstanding; (iii) except in the ordinary course of business, assume, guarantee
or endorse or otherwise as an accommodation become responsible for the
obligations of any person (other than the Company or any of its wholly-owned
Subsidiaries); (iv) except in the ordinary course of business, make any loans or
advances to any person (other than the Company or any of its Subsidiaries); (v)
enter into or amend any material contract or agreement; (vi) authorize any
capital expenditures or purchases of fixed assets in excess of $2,000,000 in the
aggregate for the Company and its Subsidiaries taken as a whole; or (vii) enter
into or amend any contract, agreement, commitment or arrangement to effect any
of the matters prohibited by this Section 4.01(e);
(f) (i) increase the compensation payable or to become payable to
its officers or employees, except for increases in the ordinary course of
business in salary or wages of employees of the Company or any of its
Subsidiaries who are not officers of the Company; (ii) grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of the Company or any of its
Subsidiaries; or (iii) establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance, stock depreciation rights, contingent value rights, or
other plan, agreement, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers or employees, except, in each case, as may
be required by law;
(g) except as may be required as a result of a change in law or in
GAAP, take any action to change accounting policies or procedures (including,
without limitation,
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procedures with respect to revenue recognition, payments of accounts payable and
collection of accounts receivable);
(h) make any Tax election inconsistent with past practice or settle
or compromise any federal, state, local or foreign Tax Liability or agree to an
extension of a statute of limitations;
(i) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the Financial
Statements or incurred in the ordinary course of business;
(j) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.01(a) through (i) above; or
(k) except as contemplated by Section 2.25 of the Seller Disclosure
Schedule and except for the purchase and sale of goods in the ordinary course of
business, engage in any actions that affect any intercompany payables or
receivables.
For purposes of this Agreement, "FUNDED DEBT" means, without
duplication, (i) all indebtedness for borrowed money or which has been incurred
in connection with the acquisition of assets, in each case having a final
maturity of one or more than one year from the date of origin thereof (or which
is renewable or extendible at the option of the obligor for a period or periods
more than one year from the date of origin), but excluding all payments in
respect thereof that are required to be made within one year from the date of
any determination of Funded Debt to the extent the obligation to make such
payments shall constitute a current liability of the obligor under GAAP, (ii)
all rentals payable under capitalized leases, and (iii) all guaranties of Funded
Debt of others.
SECTION 4.02 Access to Information; Buyer Confidentiality. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements to
which such party is subject (from which such party shall use reasonable efforts
to be released), each of Parent, Seller and the Company shall (and shall cause
each of their respective Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of Buyer, reasonable access,
during the period prior to the Closing Date, to all the Company's properties,
books, contracts, commitments and records and, during such period, each of
Parent, Seller and the Company shall (and shall cause each of their respective
Subsidiaries to) furnish promptly to Buyer all information concerning the
Company's business, properties and personnel as Buyer may reasonably request,
and each shall make available to Buyer the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of the Company's
business, properties and personnel as Buyer may reasonably request. Buyer shall
keep such information confidential in accordance with the terms of the
confidentiality letter between Parent
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and Centre Partners Management, LLC dated August 17, 1999 (the "CONFIDENTIALITY
LETTER").
ARTICLE V
MUTUAL COVENANTS
SECTION 5.01 HSR Act; Etc. As promptly as practicable after the date of
the execution of this Agreement, Buyer, on the one hand, and Parent and Seller,
on the other hand, shall file notifications under and in accordance with the HSR
Act and the legal requirements of any foreign jurisdictions requiring
notification in connection with the Transactions. Buyer, Parent and Seller shall
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "ANTITRUST DIVISION") for additional information or documentation
and shall respond as promptly as practicable to all inquiries and requests
received from any State Attorney General or other Governmental Authority
(foreign or domestic) in connection with antitrust matters and shall otherwise
use their best efforts to cause the waiting period thereunder to expire or be
terminated.
SECTION 5.02 Consents; Approvals. The Company, Parent, Seller and Buyer
shall each use all reasonable efforts to obtain all consents, waivers,
approvals, authorizations or orders (including, without limitation, all United
States and foreign governmental and regulatory rulings and approvals), and the
Company, Parent, Seller and Buyer shall make all filings (including, without
limitation, all filings with United States and foreign Governmental Authorities)
required in connection with the authorization, execution and delivery of this
Agreement by each of them and the consummation by them of the Transactions, in
each case as promptly as practicable. The Company, Parent, Seller and Buyer
shall furnish promptly all information required for any application or other
filing to be made pursuant to the rules and regulations of any Governmental
Authority in connection with the transactions contemplated by this Agreement.
SECTION 5.03 Notification of Certain Matters. Seller and the Company shall
give prompt notice to Buyer, and Buyer shall give prompt notice to Seller, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty contained in
this Agreement to become materially untrue or inaccurate, and (ii) any failure
of the Seller, the Company, or Buyer, as the case may be, materially to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.03 shall not limit or otherwise affect the remedies
available hereunder (including remedies in respect of a breach or alleged
breach) to any party, or affect or amend the representations or warranties (or
disclosure schedules) of any party, or affect the conditions to closing of any
party, and provided, further, that failure to give such notice shall not be
treated as a breach of covenant for the purposes of Section 6.06 or 7.06, unless
the failure to give such notice results in material prejudice to the other
party.
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SECTION 5.04 Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the Transactions, to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings, and otherwise to satisfy or cause to be satisfied all conditions
precedent to its obligations under this Agreement.
SECTION 5.05 Public Announcements. Parent, Seller and Buyer shall consult
with each other before issuing any press release with respect to the purchase
and sale of the Company's capital stock or this Agreement and shall not issue
any such press release or make any such public statement without the prior
consent of the other party, which shall not be unreasonably withheld; provided,
however, that a party may, without the prior consent of the other parties, issue
such press release or make such public statement as may upon the advice of
outside counsel be required by law or the rules and regulations of the New York
Stock Exchange (in which case the disclosing party will use its best efforts to
advise the other parties prior to making the disclosure); provided, further,
that Parent also anticipates filing with the Securities and Exchange Commission
any such press release as an exhibit to a Current Report on Form 8-K.
SECTION 5.06 Conveyance Taxes. Parent, the Company, Seller and Buyer shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
Taxes, any transfer, recording, registration and other fees, and any similar
Taxes (collectively, the "TRANSFER TAXES") that become payable in connection
with the Transactions that are required or permitted to be filed at or before
the Closing Date. Each of the Company and Seller shall pay one-half of all
Transfer Taxes (including New York State Real Property Transfer Gains Tax or
similar Taxes) imposed in connection with the Transactions.
SECTION 5.07 Restrictions on Seller and the Company.
(a) In order to induce Buyer to execute this Agreement, each of
Parent, Seller and the Company agrees that, except as otherwise permitted under
Section 5.07(c), it shall not, directly or indirectly, and it shall not permit
its employees, agents or representatives to, directly or indirectly, initiate,
solicit, encourage or participate in discussions in connection with, or supply
information relating to, any merger, consolidation, share exchange or similar
transaction involving the Company or any of its Subsidiaries, or for the
liquidation, dissolution or recapitalization of the Company or any of its
Subsidiaries, or for the acquisition of any equity interest in the Company or
any of its Subsidiaries, or of any portion of the assets of the Company or any
of its Subsidiaries, outside the ordinary course of business, or for any tender
offer, sale of securities, acquisition of beneficial ownership of or the right
to vote securities of the Company or its Subsidiaries, during the period
commencing upon the date hereof and ending
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on the earlier of the consummation of the Transactions or the termination of
this Agreement pursuant to Section 10.01 hereof.
(b) Parent, Seller and the Company shall immediately cease and
terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any party or parties conducted heretofore by or
on behalf of Parent, Seller or the Company with respect to any Acquisition
Proposal (as defined below). Each of Parent, Seller and the Company agrees to
notify Buyer promptly if any person makes any inquiry, proposal or contact with
respect to any of the foregoing, and will provide details of the terms of any
such inquiry, proposal or contact. The parties hereto recognize that irreparable
damage will result in the event that the provisions of this Section 5.07 are not
specifically enforced. If any dispute arises concerning this Section 5.07, the
parties hereto agree that an injunction may be issued restraining the
consummation of any action prohibited by this Section 5.07 pending a
determination of such controversy and that no bond or other security shall be
required in connection therewith. In any dispute arising with respect to this
Section 5.07, without limiting in any way any other rights or remedies to which
Buyer or any of its Affiliates may be entitled, each of Parent, Seller and the
Company agrees that the provisions of this Section 5.07 shall be enforceable by
a decree of specific performance.
(c) Notwithstanding the foregoing, Seller and Parent may engage in
discussions or negotiations with, furnish reasonable information to, and/or may
accept a Superior Proposal (as defined below) from, a third party who (without
any solicitation, initiation or encouragement, directly or indirectly, by
Seller, Parent, the Company or their respective employees, agents or
representatives after the date hereof) seeks to initiate such discussions or
negotiations or to receive information or has made a Superior Proposal, if and
only to the extent that, in each case:
(i) the third party has first made a bona fide Acquisition
Proposal in writing to acquire, directly or indirectly, 100% of the consolidated
assets of the Company or outstanding voting power of the Company's securities
that is financially superior to the Transactions and not subject to any
financing, due diligence or other material condition, as determined in good
faith in each case by the Boards of Directors of Parent and the Company after
consultation with Parent's third party financial and legal advisors (a "SUPERIOR
PROPOSAL"); and
(ii) prior to entering into discussions or negotiations with
or furnishing information to the third party which has made the Superior
Proposal and/or accepting the Superior Proposal, Parent and Seller (x) provide
Buyer with immediate oral telephonic notice to Buyer (as set forth in Section
12.02) and, thereafter, prompt written notice (by hand or telecopier) of such
Superior Proposal (which shall mean by 9:00 a.m., New York time, on the day
immediately after actual receipt by Parent, Seller, the Company or any of their
employees, agents or representatives of such Superior Proposal), including
copies of all correspondence, summaries of terms and conditions and notices of
subsequent developments, and (y) receive
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from such person or entity an executed confidentiality agreement in reasonably
customary form on terms no more favorable to such person or entity than those
contained in the Confidentiality Letter.
(d) As used herein "ACQUISITION PROPOSAL" shall mean:
(i) a bona fide proposal or offer (other than by
another party hereto, or an affiliate thereof) to
acquire (whether by purchase, recapitalization,
initial issuance, or otherwise), directly or
indirectly the securities of the Company; or
(ii) a bona fide proposal or offer (other than by
another party hereto, or an affiliate thereof) for
a merger, consolidation or other business
combination involving an acquisition of all of the
Company; or
(iii) any other bona fide proposal (other than by
another party hereto, or an affiliate thereof) to
acquire, directly or indirectly, in any manner all
the equity interests in or all or substantially
all of the assets of the Company.
(e) Parent, Seller and their employees, agents and representatives
shall not be deemed to have violated Section 5.07(a)-(c) if, in response to an
inquiry from a third party (without any solicitation, initiation or
encouragement, directly or indirectly, by Seller, Parent, the Company or their
respective employees, agents or representatives after the date hereof) with
respect to an Acquisition Proposal, Parent, Seller or their employees, agents
and representatives merely inform such third party that this Agreement requires
that Parent or Seller must have received a written Superior Proposal in order
for the Parent or Seller to conduct discussions or negotiations, furnish
information or accept such Superior Proposal.
ARTICLE VI
BUYER'S CLOSING CONDITIONS
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
Date of the following conditions:
SECTION 6.01 HSR Act, Etc. The waiting period applicable to the
consummation of the Transactions under the HSR Act, and any extensions thereof,
shall have expired or been terminated, and any requirements of other foreign
jurisdictions applicable to the consummation of the Transactions shall have been
satisfied, unless the failure of such requirements of other foreign
jurisdictions to be satisfied would not (x) prevent or materially delay
consummation of the Transactions or otherwise prevent or materially delay
Parent, Seller or the Company from
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performing their obligations under this Agreement, or (y) impair the ability of
the Company and its Subsidiaries to operate their business, or to own their
assets, in the ordinary course of business after the Closing.
SECTION 6.02 Consents; Approvals. All consents, waivers, approvals,
authorizations or orders of third parties to the consummation of the
Transactions (other than those consents, waivers, approvals, authorizations or
orders which, if not obtained, would not (x) prevent or materially delay
consummation of the Transactions or otherwise prevent or materially delay
Parent, Seller or the Company from performing their obligations under this
Agreement, or (y) impair the ability of the Company and its Subsidiaries to
operate their business, or to own their assets, in the ordinary course of
business after the Closing), and all of the consents listed in Section 2.05 of
the Seller Disclosure Schedule, shall have been obtained.
SECTION 6.03 No Injunctions or Restraints; Illegality. No statute, rule,
regulation, executive order, decree, ruling, temporary restraining order,
preliminary or permanent injunction or other order shall have been enacted,
entered, promulgated, enforced or issued by any court or governmental authority
of competent jurisdiction or shall otherwise be in effect that prohibits,
restrains, enjoins or restricts the consummation of the Transactions.
SECTION 6.04 Blue Sky Laws. All material permits and other authorizations
necessary under the Blue Sky Laws to sell the Purchased Shares to Buyer shall
have been obtained.
SECTION 6.05 Representations and Warranties. Each of the representations
and warranties of Parent, Seller and the Company contained in this Agreement:
(i) must have been accurate in all respects as of the date
hereof; and
(ii) shall be true and correct in all material respects at and
as of the Closing Date (without giving effect to any supplement to the
Seller Disclosure Schedule), as if made at and as of such time, except for
(x) changes contemplated by this Agreement, and (y) those representations
and warranties that address matters only as of a particular date (which
shall have been true and correct as of such date), with the same force and
effect as if made at and as of the Closing Date; and
Buyer shall have received a certificate to such effect signed by the Chief
Executive Officer(s) and the Chief Financial Officer(s) of Parent, Seller and
the Company (each acting in their capacity as such officer, and not
individually).
SECTION 6.06 Agreements and Covenants. Each of Parent, Seller and the
Company shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or complied
with by it at or prior to the Closing
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Date, and Buyer shall have received a certificate to such effect signed by the
Chief Executive Officer(s) and the Chief Financial Officer(s) of Parent, Seller
and the Company (each acting in their capacity as such officer, and not
individually).
SECTION 6.07 Opinion of Counsel. Buyer shall have received a written
opinion of Snow Xxxxxx Xxxxxx P.C., special counsel to the Company, dated as of
the Closing Date, the written opinion of Xxxxxx Xxxxx, General Counsel of
Parent, Seller and the Company, dated as of the Closing Date, and the written
opinion of Brazilian counsel to the Company and the Brazilian Subsidiary, dated
as of the Closing Date, in the forms delivered concurrently with execution of
this Agreement.
SECTION 6.08 Receipt of Closing Documents. Buyer shall have received all
certificates, instruments, agreements and other documents to be delivered by
Parent, Seller or the Company at or before the Closing as provided in this
Agreement.
SECTION 6.09 Restated Certificate. The Restated Certificate shall have
been filed with the Secretary of State of the State of Delaware.
SECTION 6.10 Proceedings and Documents. All corporate and other
proceedings in connection with the Transactions and all documents and
instruments incident to such Transactions shall be reasonably satisfactory in
substance and form to Buyer and its special counsel, and Buyer shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
SECTION 6.11 Supply Agreement. The Company, Parent, Seller and any of
Parent's or Seller's Subsidiaries that are customers of the Company shall have
entered into a Supply Agreement in the form of Exhibit C hereto.
SECTION 6.12 Title Searches. The Buyer shall have received such title
searches, abstracts or title insurance commitments as are reasonably necessary
to verify the accuracy of the representations and warranties of the Company with
respect to the real property owned by the Company and any leased real property.
SECTION 6.13 FIRPTA Certificate. Seller shall have executed and delivered
to Buyer a FIRPTA certificate.
SECTION 6.14 Stockholders Agreement. The Company, Seller and certain other
parties thereto shall have entered into the Stockholders Agreement.
SECTION 6.15 Financing. The terms and conditions for the Financing shall
be consistent with the terms and conditions of the Commitments, as reasonably
determined by Buyer. Concurrently with the Closing, the Company shall have
borrowed or have available for borrowing the amounts described in the
Commitments. A complete and correct copy of each of
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the senior loan agreement, subordinated debt purchase agreement (or other
similar agreement) and the related agreements shall have been delivered to
Buyer, together with evidence satisfactory to Buyer of such borrowings, or the
availability thereof, under the senior loan agreement and subordinated debt
purchase agreement (or other similar agreement), and no other agreements or
instruments shall exist relating to the material terms of such borrowings.
SECTION 6.16 Solvency Opinions. Any solvency opinions required under the
Commitments shall have been received and shall be satisfactory to the lenders.
SECTION 6.17 Release from Seller. The Seller shall have delivered to the
Company a release of Liabilities of the Company and its Subsidiaries to Seller
and its Subsidiaries in form and substance as set forth on Exhibit D.
SECTION 6.18 Zebra. Seller or the Company shall have delivered to Buyer a
written waiver, in form and substance reasonably satisfactory to Buyer and its
counsel, from Zebra Technologies Corporation ("Zebra") with respect to Zebra's
right under Section 14(d) of the Agreement, dated September 1, 1997, by and
between Zebra and the Company, to terminate such agreement in the event that
substantially all of the assets or shares of the Company are acquired by another
company.
SECTION 6.19 Certain Agreements. Parent, Seller and any other applicable
parties shall have entered into agreements satisfactory to Buyer pursuant to
which the Company is released from all Liability under the agreements listed on
Schedule 6.19 hereto, or alternatively, Parent and Seller shall have indemnified
and held the Company harmless from and against all Liability under the
agreements listed on Schedule 6.19 hereto on terms reasonably satisfactory to
Buyer.
SECTION 6.20 Redemption. The Redemption shall occur immediately after the
purchase of the Purchased Shares.
SECTION 6.21 1999 Financials. The Buyer shall have received the 1999
Financials at least 5 business days prior to the Closing and such 1999
Financials shall be substantially identical, in all material respects, to the
unaudited financial statements as of December 31, 1999 attached as part of
Section 2.07 of the Seller Disclosure Schedule (except that such 1999 Financials
will have footnotes).
SECTION 6.22 Termination. All guarantees by the Company or its
Subsidiaries of any indebtedness or other obligations of Parent or any of its
Subsidiaries (including any arrangements whereby the Company or any of its
Subsidiaries is a co-obligor in respect of such indebtedness or other
obligations), and any related Liens on the properties of the Company and its
Subsidiaries or their capital stock, shall have been terminated on terms
reasonably satisfactory to Buyer and its special counsel.
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SECTION 6.23 Debt at Closing. At Closing, the Company and its
Subsidiaries shall have no obligations for indebtedness of any type (whether
current portion or long term), including guarantees of indebtedness, other than
the indebtedness (both current portion and long-term) of approximately $180,000
payable to Fleet Bank (it being agreed that this Section 6.23 does not apply to
mere accounts payable or similar current liabilities not related to borrowed
money).
ARTICLE VII
SELLER'S CLOSING CONDITIONS
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to the following conditions:
SECTION 7.01 HSR Act, Etc. The waiting period applicable to the
consummation of the Transactions under the HSR Act, and any extensions thereof,
shall have expired or been terminated, and any requirements of other foreign
jurisdictions applicable to the consummation of the Transactions shall have been
satisfied unless the failure of such requirements of other foreign jurisdictions
to be satisfied would not result in a Material Adverse Effect in respect of
Buyer or Seller.
SECTION 7.02 Consents; Approvals. All consents, waivers, approvals,
authorizations or orders of third parties to the consummation of the
Transactions shall have been obtained, other than those that, if not obtained,
would not result in a Material Adverse Effect.
SECTION 7.03 No Injunctions or Restraints; Illegality. No statute,
rule, regulation, executive order, decree, ruling, temporary restraining order,
preliminary or permanent injunction or other order shall have been enacted,
entered, promulgated, enforced or issued by any court or governmental authority
of competent jurisdiction or shall otherwise be in effect that prohibits,
restrains, enjoins or restricts the consummation of the Transactions.
SECTION 7.04 Blue Sky Laws. All material permits and other
authorizations necessary under the Blue Sky Laws to sell the Purchased Shares to
Buyer shall have been obtained.
SECTION 7.05 Representations and Warranties. Each of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as if
made at and as of such time, except for (i) changes contemplated by this
Agreement, and (ii) those representations and warranties that address matters
only as of a particular date (which shall have been true and correct as of such
date), with the same force and effect as if made on and as of the Closing Date,
and Parent and Seller shall have received a certificate to such effect signed by
the general partner of Buyer.
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SECTION 7.06 Agreements and Covenants. Buyer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and Parent and Seller shall have received a certificate to such effect
signed by the general partner of Buyer.
SECTION 7.07 Receipt of Closing Documents. Seller and the Company shall
have received all certificates, instruments, agreements and other documents to
be delivered by Buyer at or before the Closing as provided in this Agreement.
SECTION 7.08 Stockholders Agreement. Buyer and certain other parties
thereto shall have entered into the Stockholders Agreement.
SECTION 7.09 Redemption; Preferred Shares. The Redemption (including
the payment of the Initial Cash Redemption Payment) shall occur at the Closing,
promptly after the purchase of the Preferred Shares and the completion of the
Financing.
SECTION 7.10 Non-Compete Payment. The Company shall pay the Non-Compete
payment concurrently with the Redemption.
SECTION 7.11 Proceedings and Documents. All corporate and other
proceedings in connection with the Transactions and all documents and
instruments included to such Transactions shall be reasonably satisfactory in
substance and form to Parent and Seller and its counsel, and Parent and Seller
shall have received all such counterpart originals or certified or other copies
of such documents as it may reasonably request.
SECTION 7.12 Supply Agreement. The Company shall have entered into a
Supply Agreement in the form of Exhibit C hereto.
SECTION 7.13 Release from the Company. The Company shall have delivered
to Parent a release of Liabilities of Parent and its Subsidiaries to the Company
and its Subsidiaries in form and substance as set forth on Exhibit E.
SECTION 7.14 Solvency Opinions. Seller and the Company shall have
received copies of solvency opinions (which may be the solvency opinions
required under the Commitments, if such solvency opinions, shall either (i) be
addressed to Seller and the Company or (ii) entitle Seller and the Company to
rely thereon).
ARTICLE VIII
THE CLOSING
SECTION 8.01 Closing. The Closing of the transactions contemplated by
this Agreement shall take place at the offices of Snow Xxxxxx Xxxxxx P.C., 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 (or at the offices of counsel to any
lender in the Financing), at
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10:00 a.m. local time on the second business day following the satisfaction or
waiver of all conditions to the obligations of the parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the parties will take at the Closing itself), or on such other date and at such
other time or place as the parties may mutually agree. The date of the closing
is referred to in this Agreement as the "CLOSING DATE." It is the contemplation
of the parties that, at the Closing, the resignations contemplated by Section
8.02(c) hereof shall be delivered and that new directors to be designated by
Buyer will approve the Financing, all substantially concurrently with the
Closing, it being agreed that the payment of the redemption price in the
Redemption and the payment of the Non-Compete Payment will not occur until
immediately after the consummation of the Financing.
SECTION 8.02 Obligations and Closing Deliveries of Parent, Seller and
the Company. At the Closing, Parent, Seller and the Company shall deliver, or
cause to be delivered, to Buyer the following:
(a) One or more certificates representing the Purchased
Shares;
(b) The Company's corporate minute books and stock transfer
books;
(c) Written resignations of all of the Company's directors
and, if requested by Buyer, any officers of the Company;
(d) The opinions of counsel and officers' certificates
required by Sections 6.05, 6.06 and 6.07 hereof;
(e) All Approvals required by Section 6.02 hereof;
(f) Any other material Approvals, instruments or documents
that are contemplated by this Agreement or necessary or appropriate to issue and
sell the Purchased Shares to Buyer;
(g) A Secretary's Certificate of Parent, Seller and the
Company certifying the Certificate of Incorporation and By-Laws of each of
Parent, the Company and Seller and the resolutions authorizing the Transactions;
(h) A written receipt for payment of the Purchase Price duly
executed on behalf of the Company;
(i) The documents set forth in Sections 6.08, 6.11, 6.13,
6.14, 6.15, 6.17, 6.18, 6.19 and 6.22;
(j) A written receipt from Seller for the certificates
evidencing the Preferred Shares; and
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(k) A written receipt from Parent and Seller for payment of
the Non-Compete Payment.
SECTION 8.03 Buyer's Obligations and Closing Deliveries. At the
Closing, Buyer shall deliver, or cause to be delivered, to the Company and
Seller (in the case of Section 8.03(b), (c), (d) and (f)) the following:
(a) The full Purchase Price in accordance with Section 1.02;
(b) The general partner's certificates required by Sections
7.05 and 7.06;
(c) All Approvals required by Section 7.02 hereof;
(d) Any other material Approvals, instruments or documents
that are contemplated by this Agreement or necessary or appropriate to purchase
the Purchased Shares from the Company;
(e) A written receipt for the certificates representing the
Purchased Shares duly executed on behalf of Buyer; and
(f) The documents set forth in Sections 7.07 and 7.08.
SECTION 8.04 Company's Obligations and Closing Deliveries to Seller. At
the Closing, the Company shall deliver, or cause to be delivered to Seller, the
following:
(a) The Initial Cash Redemption Payment;
(b) The general partner's certificates required by Sections
7.05 and 7.06;
(c) All Approvals required by Section 7.02 hereof;
(d) Any other material Approvals, instruments or documents
that are contemplated by this Agreement or necessary or appropriate to purchase
the Purchased Shares from the Company;
(e) One or more certificates evidencing the Preferred Shares;
(f) A written receipt from the Company for the certificates
evidencing the Redeemed Shares;
(g) The Non-Compete Payment, and
(h) The documents set forth in Sections 7.08, 7.12 and 7.13.
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ARTICLE IX
POST-CLOSING AND CERTAIN OTHER OBLIGATIONS
SECTION 9.01 Indemnification and Insurance. The By-Laws of the Company
shall contain the provisions with respect to indemnification set forth in the
By-Laws of the Company on the date hereof, which provisions shall not be
amended, repealed or otherwise modified before October 28, 2003, in any manner
that would adversely affect the rights thereunder of individuals who on or prior
to October 28, 1997 were directors, officers, employees or agents of the
Company, unless such modification is required by law.
(a) At the cost of Parent and Seller (jointly and severally)
under Section 11.01(c), the Company shall, to the fullest extent permitted under
applicable law or under the Company's Certificate of Incorporation or By-Laws,
indemnify and hold harmless, each present and former director, officer or
employee of the Company or any of its Subsidiaries who was an officer or
director of the Company prior to October 28, 1997 (collectively, the "COMPANY
INDEMNIFIED PARTIES") against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, (x)
arising out of or pertaining to the transactions contemplated by the Agreement
of Merger, dated as of July 14, 1997, among Parent, Ribbon Manufacturing, Inc.,
and the Company (the "MERGER AGREEMENT") or (y) otherwise with respect to any
acts or omissions occurring at or prior to October 28, 1997, to the same extent
as provided in the Company's Certificate of Incorporation or By-Laws or any
applicable contract or agreement as in effect on the date of the Merger
Agreement, in each case until October 28, 2003.
(b) At the cost of Parent and Seller (jointly and severally
under Section 11.01(c)), the Company shall honor and fulfill in all respects the
obligations of the Company pursuant to indemnification agreements with the
Company Indemnified Parties existing at or before October 28, 1997 and listed on
Schedule 9.01 hereto.
(c) Parent shall provide the coverage required under Section
5.7 of the Merger Agreement, in which case the Company shall have no
responsibility or obligation under this Section 9.01(c); provided, however, that
if Parent fails to provide such coverage, then the Company shall maintain in
effect until October 28, 2003, if available, directors' and officers' liability
insurance covering those persons who, as of October 28, 1997, were covered by
the Company's directors' and officers' liability insurance policy (a copy of
which has been made available to Buyer) on terms comparable to those required to
be maintained under Section 5.7 of the Merger Agreement; provided, further, that
(i) any insurance required to be provided by the Company by this Section 9.01(c)
shall only relate to claims relating to any acts or omissions of Company
Indemnified Parties arising at or prior to October 28, 1997, and (ii) the
Company's obligations under this Section 9.01(c) are conditioned upon Parent and
Seller, jointly and severally, being solely responsible for the incremental cost
to the Company of any such insurance required by this Section 9.01(c).
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SECTION 9.02 Employment and Benefit Matters. Parent shall be solely
responsible for administration of, and all liabilities and obligations arising
under: (i) any stock option, stock purchase or other similar plans of the
Company or Parent, including the 1990 Incentive Plan, 1984 Stock Plan and 1993
Outside Director Stock Option and Restricted Stock Plan (the "PRIOR PLANS") and
the Amended and Restated 1997 Stock Option Plan of Parent, and (ii) any of the
agreement(s) listed on Schedule 6.19 hereto. The Company shall not, after the
Closing, purport to issue any awards or otherwise purport to take any action
under the Prior Plans.
SECTION 9.03 Transition. For a period ending on the first anniversary
of the date on which Seller or any of its Subsidiaries cease to hold any shares
of Common Stock of the Company, neither Parent nor Seller will, and each of
Parent and Seller will cause its respective Subsidiaries and its and their
respective officers, directors and employees not to, take any action that is
designed or intended to have the effect of discouraging any customer, supplier,
lessor, licensor, or other business associate of the Company or its Subsidiaries
from maintaining the same business relationships with the Company and its
Subsidiaries after the Closing as it maintained with the Company and its
Subsidiaries prior to the Closing. For a period ending on the first anniversary
of the date on which Seller or any of its Subsidiaries cease to hold any shares
of Common Stock of the Company, each of Parent and Seller will, and each of
Parent and Seller will use its best efforts to cause its Subsidiaries and its
and their respective officers, directors and employees to, refer all customer
inquiries relating to the businesses of the Company and its Subsidiaries to the
Company and its Subsidiaries from and after the Closing. Notwithstanding the
foregoing, nothing in this Section 9.03 shall prohibit (i) Parent, Seller or any
of their respective Subsidiaries from manufacturing small order runs of the type
permitted by the Supply Agreement or (ii) Parent, Seller or any of their
respective Subsidiaries from acquiring, directly or indirectly, substantially
all of the assets or control of a majority of the equity interests (voting or
otherwise) of any enterprise where (x) less than fifteen percent of such
enterprise's revenues is derived from any business that the Company or its
Subsidiaries conducts as of the Closing Date or (y) the revenues of such
enterprise which are derived from any business that the Company or its
Subsidiaries conducts as of the Closing Date do not exceed $1,000,000.
SECTION 9.04 Confidentiality. For a period ending on the fifth
anniversary of the date on which Seller or any of its Subsidiaries cease to hold
any shares of capital stock of the Company, each of Parent and Seller will, and
each of Parent and Seller will cause its respective Subsidiaries and its and
their respective officers, directors and employees to, treat and hold as such
all of the Confidential Information (as defined below), refrain from using any
of the Confidential Information except in connection with this Agreement, and
deliver promptly to the Company or destroy, at the request and option of the
Company, all tangible embodiments (and all copies) of the Confidential
Information which are in his, her or its possession. In the event that Parent,
Seller or any of their respective Subsidiaries is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential
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Information, Parent and/or Seller will notify the Company promptly of the
request or requirement so that the Company may seek an appropriate protective
order or waive compliance with the provisions of this Section 9.04. If, in the
absence of a protective order or the receipt of a waiver hereunder, Parent,
Seller or any of their respective Subsidiaries or any of its and their
respective officers, directors and employees is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, Parent, Seller, such Subsidiary or such other person may
disclose the Confidential Information to the tribunal; provided, however, that
Parent, Seller, such Subsidiary or such other person shall use his, her or its
best efforts to obtain, at the request and expense of the Company, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as the Company shall
designate. Nothing in this Section is intended to prohibit the continued use and
exchange by Parent of technical information relating to the Company (other than
exclusive formulas of the Company) in the same manner as such technical
information has been exchanged prior to the date hereof. For purposes hereof,
"CONFIDENTIAL INFORMATION" shall mean any information concerning the businesses
and affairs of the Company and its Subsidiaries that is kept confidential by the
Company and its Subsidiaries, but it does not include information that (i)
becomes generally available to the public other than as a result of a disclosure
by Parent, Seller, or any other person subject to the obligations of this
Section 9.04, (ii) is known or was available to Parent, Seller or such other
person on a non-confidential basis prior to its disclosure to Parent, Seller, or
such other person by the Company or its representatives, (iii) was or becomes
available to Parent, Seller, or such other person on a non-confidential basis
from a source other than the Company or its representatives, provided that such
source has represented to the recipient (and which recipient has no reason to
disbelieve) that such source is not bound by a confidentiality agreement with
the Company or its representatives or is otherwise not prohibited from
transmitting the information to the recipient, or (iv) is independently
developed by persons retained by Parent or Seller who did not directly or
indirectly have access to such confidential information.
SECTION 9.05 Covenant Not to Compete. In consideration of the Company's
payment to Parent and Seller of the Non-Compete Payment, Parent and Seller
covenant to the Company as set forth in this Section 9.05:
For a period ending on the first anniversary of the date on which
Seller or any of its Subsidiaries cease to hold any shares of capital stock of
the Company (the "NONCOMPETITION PERIOD"), each of Parent and Seller covenants
not to engage directly or indirectly (including through Subsidiaries, Affiliates
(other than non-employee directors) or officers, directors (other than
non-employee directors) or employees) in any business that the Company or its
Subsidiaries conducts as of the Closing Date in any geographic area in which any
of the Company or its Subsidiaries conducts or plans to conduct business;
provided, however, that ownership of less than 1% of the outstanding stock of
any publicly-traded corporation shall not be deemed to engage solely by reason
thereof in any of its businesses. During the Noncompetition Period, neither
Parent nor Seller shall directly or indirectly induce or attempt to induce any
customer or supplier of the Company or any of its Subsidiaries to terminate its
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relationship with the Company or any of its Subsidiaries or to enter into any
business relationship to provide or purchase the same or substantially the same
services as are provided to or purchased from the business of the Company or any
of its Subsidiaries which might harm the Company or any Subsidiary.
Notwithstanding the foregoing, nothing in this Section 9.05 shall prohibit (i)
Parent, Seller or any of their respective Subsidiaries from manufacturing small
order runs of the type permitted by the Supply Agreement or (ii) Parent, Seller
or any of their respective Subsidiaries from acquiring, directly or indirectly,
substantially all of the assets or control of a majority of the equity interests
(voting or otherwise) of any enterprise where (x) less than fifteen percent of
such enterprise's revenues is derived from any business that the Company or its
Subsidiaries conducts as of the Closing Date or (y) the revenues of such
enterprise which are derived from any business that the Company or its
Subsidiaries conducts as of the Closing Date do not exceed $1,000,000. During
the Noncompetition Period, neither Parent nor Seller shall directly or
indirectly (including through Subsidiaries, Affiliates (other than non-employee
directors) or officers, directors (other than non-employee directors) or
employees) hire or retain, or attempt to hire or retain, in any capacity any
person who is, or was at any time during the preceding twelve (12) months, a
management employee or officer of the Company or its Subsidiaries (provided that
Parent or Seller may engage in undirected advertising of employment
opportunities and recruiting representatives of Parent or Seller may conduct
employment searches which are not directed to employees of the Company or its
Subsidiaries). If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 9.05 is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
SECTION 9.06 Tax Matters.
(a) Any tax sharing agreement between Parent, Seller and any
of the Company and its Subsidiaries will be terminated as of the Closing Date
and will have no further effect for any taxable year (whether the current year,
a future year, or a past year), except for Parent or Seller's obligation to pay
to the Company or its Subsidiaries any amounts payable thereunder, which shall
not terminate.
(b) Parent and Seller, jointly and severally, agree to
indemnify Buyer from and against the entirety of any Indemnified Liabilities
Buyer may suffer resulting from, arising out of, relating to, in the nature of,
or caused by any Liability of any of the Company and its Subsidiaries for Taxes
of any Person other than any of the Company and its Subsidiaries (i) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv)
otherwise.
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(c) Parent will include the income of the Company and its
Subsidiaries (including any income triggered into income by Treasury Regulation
Section 1.1502-13 and Treasury Regulation Section 1.1502-14 and any excess loss
accounts taken into income under Treasury Regulation Section 1.1502-19) on
Parent's consolidated federal income Tax Returns for all periods through the
Closing Date and pay any federal income Taxes attributable to such income. The
Company and its Subsidiaries will furnish Tax information to Parent for
inclusion in Parent's consolidated federal income Tax Return for the period
which includes the Closing Date in accordance with the Company's past custom and
practice. Parent will allow Buyer an opportunity to review and comment upon such
Tax Returns (including any amended returns) to the extent that they relate to
the Company and its Subsidiaries. Parent will take no position on such Tax
Returns that relate to the Company and its Subsidiaries that would adversely
affect the Company and its Subsidiaries after the Closing Date. The income of
the Company and its Subsidiaries will be apportioned to the period up to and
including the Closing Date and the period after the Closing Date by closing the
books of the Company and its Subsidiaries as of the end of the Closing Date in
accordance with Treasury Regulation Section 1.1502-76(b)(2)(i). Taxes imposed on
the basis of revenue, sales, receipts, profits, gains or the like will be
apportioned on a manner consistent with the preceding sentence. Taxes other than
Taxes that are described in the two preceding sentences and payable for a
taxable period that includes, but does not end on, the Closing Date shall be
allocated between the portion of such period ending on the Closing Date and the
portion of such period beginning on the day following the Closing Date on the
basis of the number of days in each such portion as compared to the number of
days in the entire taxable period.
(d) Parent will allow the Company and its counsel to
participate in any audits of Parent consolidated federal income Tax Returns to
the extent that such returns relate to the Company and its Subsidiaries. Parent
will not settle any such audit in a manner which would adversely affect the
Company and its Subsidiaries after the Closing Date without the prior written
consent of Buyer, which consent shall not unreasonably be withheld.
(e) Parent will immediately pay to the Company any Tax refund
(or reduction in Tax liability) resulting from a carryback of a postacquisition
Tax attribute of any of the Company and its Subsidiaries into the Parent
consolidated Tax Return (such attribute being utilized, in the case of a
carryback of an attribute of the Company or its Subsidiaries to a year in which
attributes of Parent or its Subsidiaries are also carried, in accordance with
the provisions of the Code or other applicable law, or, if there is no such
provision, pro rata in accordance with the respective amounts of comparable
attributes), when such refund or reduction is realized by the Parent group.
Parent will cooperate with the Company and its Subsidiaries in obtaining such
refunds (or reduction in Tax liability), including through the filing of amended
Tax Returns or refund claims. The Company agrees to indemnify Parent for any
Taxes resulting from the disallowance of such postacquisition Tax attribute on
audit or otherwise.
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(f) Parent will not elect to retain any net operating loss
carryovers or capital loss carryovers of the Company and its Subsidiaries under
Treasury Regulations Section 1.1502-20(g).
SECTION 9.07 Insurance Matters. Parent agrees that the Company shall be
entitled to tender any applicable claims for any circumstances, events, losses
or claims for which insurance may be available under the policies maintained by
Parent for the benefit of its Subsidiaries (including the Company and its
Subsidiaries) for any period prior to Closing, including any occurrence-based
insurance policies. Parent agrees that, after the Closing, the Company shall
enjoy all rights and benefits under such policies as it enjoyed prior to the
Closing, only with respect to Liabilities arising out of circumstances, events,
losses or claims arising prior to the Closing.
SECTION 9.08 Certain Workers Compensation Matters. Buyer, Parent,
Seller and the Company agree as follows with respect to W/C Liabilities (as
defined below) arising out of or related to any injury, claim or workers'
compensation claim or other similar claim arising out of the period during which
the Company and its Subsidiaries maintained self-insurance arrangements for
workers' compensation, including any injury claims, workers' compensation claims
or other similar claims by or on behalf of the persons identified on Schedule
9.08 attached hereto (collectively, all such claims, the "W/C MATTERS"):
(a) Parent, Seller and the Company, in consultation with Buyer
and its representatives, shall use reasonable best efforts to obtain, prior to
Closing, one or more "run-off" or other insurance policies on terms reasonably
satisfactory to each such party insuring each of Parent, Seller, the Company and
Buyer against all W/C Liabilities. The Company and its Subsidiaries (other than
the Brazilian Subsidiary) shall be named as an insured on all such policies, and
all such policies shall require the applicable insurer to provide the Company
and Buyer with 30 days' prior written notice of impending cancellation. If such
insurance cannot be obtained prior to Closing or if either Parent or Buyer
reasonably concludes that such insurance is unreasonably costly, (i) the
Company, Parent and Seller shall use reasonable best efforts, in consultation
with Buyer and its representatives, to obtain such insurance after the Closing
and (ii) if such insurance also cannot be obtained after Closing or if either
Parent or Buyer reasonably concludes that such insurance is unreasonably costly,
then, subject to the agreement of the parties to be responsible for the W/C
Liabilities in accordance with the sharing provisions of Section 9.08(c), the
Company shall be solely entitled to administer, and to take all other reasonable
actions with respect to, any W/C Matters.
(b) If the insurance described in Section 9.08(a) is obtained
prior to Closing, then the costs thereof shall be borne in accordance with
Section 9.08(c), and, as contemplated by Section 1.04(f)(iii), Target Working
Capital shall be adjusted. If the insurance described in Section 9.08(a) is not
obtained prior to Closing or is never obtained, then Section 9.08(c) shall still
apply, but there shall be no adjustment to Target Working Capital.
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(c) The parties agree that the W/C Liabilities accruing from
and after the date hereof shall be borne by the Company, on the one hand, and
Parent and Seller, on the other hand, as follows:
(i) The Company shall be liable for 100% of all
W/C Liabilities up to an aggregate amount
equal to the W/C Reserve and, in connection
with the foregoing, if W/C Liabilities total
less than the W/C Reserve, Parent and Seller
shall be entitled to payments from the
Company as follows:
(A) If the W/C Liabilities are less than the
amount obtained by subtracting $100,000 from
the W/C Reserve (the "LOWER LIMIT"), then
the Company shall pay to Parent and Seller
an amount equal to the sum of (1) $50,000
plus (2) the difference between (x) the
Lower Limit and (y) the amount of the W/C
Liabilities; and
(B) If the W/C Liabilities are greater than
the Lower Limit but less than the W/C
Reserve, then the Company shall pay to
Parent and Seller an amount equal to 50% of
the difference between the W/C Reserve and
the amount of the W/C Liabilities;
(ii) The Company, on the one hand, and Parent and
Seller, on the other hand, shall be each be
liable for 50% of all additional W/C
Liabilities in excess of the W/C Reserve,
until the aggregate amount of W/C
Liabilities to be borne by all of the
parties under the preceding clause (i) and
this clause (ii) equals the sum of (x) the
W/C Reserve plus (y) $200,000; and
(iii) Parent and Seller shall be solely liable for
any additional W/C Liabilities (ie, any W/C
Liabilities in excess of the sum of (x) the
W/C Reserve plus (y) $200,000). If and to
the extent that W/C Liabilities exceed the
sum of (x) the W/C Reserve plus (y)
$200,000, Parent or Seller may request, at
its sole cost and expense, to assume the
administration of the W/C Matters, and the
Company shall agree, at the cost of Parent
and Seller, to reasonable arrangements to
effect the transfer of such administration.
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The parties agree to make appropriate adjustment payments to each other pursuant
to the preceding allocation schedule on a reasonable periodic basis to give
effect to changes in actual W/C Liabilities that result in reallocation of
responsibility or payments pursuant to the preceding schedule. Each party shall
reasonably cooperate with the other to provide access to information regarding
the W/C Matters and the amount of W/C Liabilities actually incurred by any party
over time from and after the Closing. Any amounts payable, or subject to
reimbursement by, a party under this Section 9.08(c) shall be made promptly and,
to the extent not paid within 10 business days after written request therefor by
the other party, shall be subject to interest at the prime rate charged from
time to time by Citibank, N.A. from the date of the request through the date of
payment. Section 11.01(b) shall not apply to the W/C Matters and the W/C
Liabilities.
(d) For purposes hereof, the term "W/C RESERVE" means the
reserve in respect of the W/C Matters, as of the Closing Date.
(e) For purposes hereof, the term "W/C LIABILITIES" refers to
all costs or expenses (including attorneys' fees and expenses), judgments,
fines, losses, claims, damages, Liabilities and amounts paid in settlement in
connection with, arising out of or related to the W/C Matters, including,
without limitation, the cost of any related insurance (whether contemplated
hereby or otherwise), carrying costs associated with letters of credit, and any
other out-of-pocket costs in connection with the W/C Matters (excluding any
allocation of overhead of any party and excluding any allocation of employee
time of any party associated with the W/C Matters).
(f) Parent, Seller, the Company and Buyer agree to mutually
cooperate to use reasonable efforts to reduce the amount of, or eliminate the
requirement for, any letter of credit required by any Governmental Authority in
respect of W/C Matters. In this connection, if such a letter of credit is
required by a Governmental Authority to be maintained from and after the
Closing, then the parties agree that (i) if Parent continues to maintain such
letter of credit, the Company shall reimburse Parent for the annual carrying
cost thereof in a proportion equal to (x) the amount of W/C Liabilities still
required to be borne by the Company under Sections 9.08(a) - (e) divided by (y)
the amount of the letter of credit; or (ii) the Company, on the one hand, and
Parent, on the other hand, may maintain, at their own expense, separate letters
of credit in an aggregate amount equal to the amount required by the
Governmental Authority to be maintained, with the Company's maximum letter of
credit obligation at any time being equal to the amount of W/C Liabilities still
required to be borne by the Company under Sections 9.08(a) - (e).
Illustrative Examples to Sections 9.08(a) - (e):
In each case, assume a W/C Reserve of $283,000:
Example A. Prior to closing, the Company obtains the insurance
described herein for an amount equal to $150,000.
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i. The Company reimburses Parent and Seller for all
of such premium after the Closing.
ii. The Company pays to Parent and Seller an amount
equal to the sum of $33,000 (the Lower Limit of $183,000 minus $150,000) plus
$50,000.
iii. Target Working Capital is increased by the
amount of the W/C Reserve.
Example B. After closing, the Company obtains the insurance
described herein for an amount equal to $150,000.
i. The Company pays all of such premium.
ii. The Company pays to Parent and Seller an amount
equal to the sum of $33,000 (the Lower Limit minus $150,000) plus $50,000.
Example C. After closing, the Company obtains the insurance
described herein for an amount equal to $400,000.
i. The Company pays all of such premium.
ii. The Company, on the one hand, and Parent and
Seller, on the other hand, each are liable for an amount equal to $58,500
($400,000-W/C Reserve), and Parent and Seller reimburse their obligation to the
Company.
Example D. No insurance is obtained, and W/C Liabilities (via
settlements, final rulings, costs of administration, etc.) aggregate $400,000.
i. The Company bears the first $283,000 of such W/C
Liabilities.
ii. The Company, on the one hand, and Parent and
Seller, on the other hand, each are liable for an amount equal to $58,500 (50%
*($400,000-W/C Reserve)).
SECTION 9.09 Limited Access to Financial Information. If a party or its
representatives possesses information and/or books and records that are relevant
to the preparation of the Closing Statement, and such information or books and
records (or similar information and books and records) are not also possessed by
the other parties, then, only in such instance, upon reasonable request to the
possessing party, the other party and its representatives and agents (including,
without limitation, the accountants employed by each) shall have, at no charge:
(i) reasonable access during normal business hours to such information or books
and records (or to copies or extracts therefrom), and (ii) access to the
accountants' non-proprietary work papers included within such information after
appropriate access letters have been delivered to such accountants; provided,
however, that the access in (i)-(ii) shall not unreasonably interfere with the
operations of the possessing party.
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SECTION 9.10 Transition Services Agreement. Parent and Seller agree to
provide to the Company, at reasonable cost consistent with past practices, those
services reasonably requested by Buyer and the Company that have been provided
prior to the Closing by Parent, Seller, or Parent's Subsidiaries, all for a
reasonable period after the Closing Date.
ARTICLE X
TERMINATION
SECTION 10.01 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent duly authorized by the Board of
Directors of Seller and by Buyer; or
(b) by Seller if any of the conditions set forth in Article
VII hereof shall not have been met and shall not have been waived by Seller as
of March 31, 2000, because Buyer has failed to perform in any material respect
any of its obligations under this Agreement (following notice and a 15-day
opportunity to cure, to the extent that such failure is capable of being cured);
or
(c) by Buyer if any of the conditions set forth in Article VI
hereof shall not have been met and shall not have been waived by Buyer as of
March 31, 2000, because any of Parent, Seller or the Company has failed to
perform in any material respect any of its obligations under this Agreement
(following notice and a 15-day opportunity to cure, to the extent that such
failure is capable of being cured); or
(d) by either Seller or Buyer if the Closing shall not have
been consummated by March 31, 2000 (provided that the right to terminate this
Agreement under this Section 10.01(d) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such date); or
(e) by either Seller or Buyer if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a nonappealable final order, decree or ruling or taken any
other action having the effect of permanently restraining, enjoining or
otherwise prohibiting the Transactions (provided that the right to terminate
this Agreement under this Section 10.01(e) shall not be available to any party
who has not complied with its obligations under Section 5.04 and such
noncompliance materially contributed to the issuance of any such order, decree
or ruling or the taking of such action); or
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(f) by Seller, if there has been a material misrepresentation,
material breach of warranty or material breach of covenants in the
representations and warranties or covenants made by Buyer that cannot be cured
at or prior to the Closing Date; or
(g) by Buyer, if there shall have been a failure of any of the
conditions in Sections 6.05 or 6.06 that shall not have been waived by Buyer in
its sole discretion; or
(h) by Parent and Seller, upon five business days' (not
including the date upon which such notice is received by Buyer) prior written
notice to Buyer (the "SUPERIOR PROPOSAL NOTICE"), if, as a result of a Superior
Proposal, the Boards of Directors of Parent and the Company determine in good
faith to accept the Superior Proposal; provided, however, that such Boards of
Directors, in making any such determination, shall have considered all
concessions which have then been offered by Buyer (it being understood that
prior to any such termination Parent, Seller and the Company shall, and shall
cause their respective financial and legal advisors to, negotiate in good faith
with Buyer to make such adjustments in the terms and conditions of this
Agreement in favor of Parent, Seller and the Company as would induce Parent,
Seller and the Company to proceed with a transaction with Buyer rather than
consummation of a Superior Proposal made by the third party); provided, further,
that prior to or contemporaneous with any termination under this Section
10.01(h), Parent shall pay to Buyer or its designee in immediately available
funds the fees and expenses required to be paid and reimbursed pursuant to
Section 10.03 hereof; or
(i) by Buyer, after receipt by Parent and Seller of a Superior
Proposal, if by the end of the fifth business day following (but not including)
the day that Buyer notifies Parent, Seller and the Company in writing that it
wishes that their respective Boards of Directors reaffirm in writing their
approval of the Transactions contemplated hereby and reject the Superior
Proposal, the Boards of Directors of Parent, Seller and the Company shall have
failed to reaffirm in writing their approval of the Transactions contemplated
hereby and to reject the Superior Proposal.
SECTION 10.02 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 10.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders, except that nothing herein
shall relieve any party from liability for any breach of this Agreement
occurring prior to termination or relieve Parent, Seller or the Company from any
obligation under Section 10.03. The Confidentiality Letter shall survive
termination of this Agreement as set forth therein, but shall terminate as of
the Closing (other than confidentiality obligations relating to confidential
information of Parent, Seller or any Subsidiaries (other than the Company and
its Subsidiaries), which shall survive the Closing in accordance with the terms
of the Confidentiality Letter). Promptly following termination of this
Agreement, Buyer shall return to Seller all written information delivered to
Buyer by any officers, directors, employees and/or agents of Seller or any
Affiliate of Seller in connection with the transactions
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contemplated hereby, except documents that have been publicly distributed and
drafts of any agreements contemplated hereunder.
SECTION 10.03 Fees and Expenses.
(a) In the event that Buyer elects to terminate this Agreement
pursuant to Section 10.01(c), Section 10.01(d) (due to the failure of any of the
conditions in Article VI hereof to be satisfied), Section 10.01(g) (including,
but not limited to, a termination due to a breach of Section 5.07 above) or
Section 10.01(i) or in the event that Parent and Seller elect to terminate this
Agreement pursuant to Section 10.01(h), Parent and Seller, jointly and
severally, shall pay to Buyer (or its designees) all fees, costs, claims and
expenses incurred by Buyer in connection with the Transactions (including the
Financing (including under the Commitments)) upon submission of reasonable
documentation therefor. If such termination arises under Section 10.01(c), (d)
or (g) and does not involve a Superior Proposal or a breach of Section 5.07, the
fees, costs, claims and expenses to be reimbursed by Parent and Seller shall not
exceed $1,000,000, exclusive of fees, costs, claims or expenses arising out of
any litigation, ruling, order, injunction, proceeding, arbitration or
investigation, as to which no maximum shall be imposed under this sentence.
Notwithstanding the foregoing, Parent and Seller shall have no obligation under
this Section 10.03(a) in the event of a termination of the Agreement by Buyer
under Section 10.01(d) which arises solely out of the failure of the financing
condition in Section 6.15 to be satisfied and there shall have been no other
basis for termination of this Agreement, whether arising out of failure of a
condition, breach or otherwise.
(b) In addition to the reimbursement of all such expenses
described in Section 10.03(a):
(i) If this Agreement is terminated (A) by Buyer as a
result of a breach of Section 5.07 or pursuant to its rights under Section
10.01(i), or (B) by Parent and Seller pursuant to their rights under Section
10.01(h), then, in addition to any amounts payable under Section 10.03(a),
Parent shall pay to Buyer (or its designees) a fee of $7,000,000 in cash.
(ii) If within 12 months after any termination
described in Sections 10.01(c) or (g) above, the Company becomes a
majority-owned subsidiary of another person or entity or accepts a written offer
to consummate or consummates an Acquisition Proposal, then upon the signing of a
definitive agreement relating to such Acquisition Proposal, or, if no such
agreement is signed, then at the closing (and as a condition of the closing) of
the Company becoming such a subsidiary or of such Acquisition Proposal, Parent
shall pay to Buyer (or its designees) a fee of $7,000,000 in cash, in addition
to any amounts payable, or previously paid, under Section 10.03(a).
Notwithstanding the foregoing, such fee shall only be payable under this Section
10.03(b)(ii) if this Agreement shall have been terminated by Buyer because (x)
of a breach by Parent, Seller or the Company of any agreement or covenant or
obligation in this Agreement required to be performed or complied with by
Parent, Seller or the Company, or
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(y) any representation or warranty of Parent, Seller or the Company in this
Agreement was not accurate in all respects as of the date when such
representation or warranty was made.
(c) Each of Parent, Seller and the Company acknowledges and
agrees that the agreements contained in this Section 10.03 are an integral part
of the Transactions contemplated by this Agreement. No termination by Parent,
Seller or the Company of this Agreement under this Article X shall be effective
unless and until all fees and expenses required to be then paid by Parent
pursuant to this Section 10.03 shall have been received in immediately available
funds by Buyer (or its designees). Notwithstanding anything to the contrary
contained in this Section 10.03, if Parent fails to pay Buyer (or its designees)
any fees or expenses due under this Section 10.03 within the time required under
this Agreement or, if no time period is specified, within two business days
after the event giving rise to the payment of such fees and expenses, in
addition to any other amounts paid or payable pursuant to this Agreement, Parent
shall also pay the out-of-pocket costs and expenses (including reasonable legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment together with interest
on the amount of any unpaid fees and expenses at the publicly announced prime
rate of Citibank N.A. from the date such fees and expenses were required to be
paid.
ARTICLE XI
INDEMNIFICATION
SECTION 11.01 Indemnity.
(a) Indemnity by Buyer. Subject to the terms and conditions of
this Agreement, effective as of the Closing Date, Buyer shall indemnify, hold
harmless and defend, Parent, Seller and any present and future directors,
shareholders, officers, employees, attorneys, agents, contractors, consultants
and representatives of Parent, Seller, and the successors, transferees and
assigns of any thereof (collectively the "SELLER INDEMNIFIED PERSONS"), from and
against, and shall reimburse them for, any and all Indemnified Liabilities
related to or arising from any breach of any representation, warranty, covenant
or agreement of, or any misstatement or omission by, Buyer in this Agreement.
(b) Indemnity by the Company. Subject to the terms and
conditions of this Agreement, effective as of the Closing Date, the Company
shall indemnify, hold harmless and defend the Seller Indemnified Persons from
and against any and all Indemnified Liabilities arising out of any third party
claims with respect to the Company regardless of (A) when such claims arose or
arise, (B) by whom asserted, (C) whether the facts on which any such claims are
based occurred prior or subsequent to the Closing, (D) whether any such claims
are asserted prior or subsequent to the Closing, and (E) whether known or
unknown, fixed or unfixed, asserted or unasserted, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured, matured or unmatured, accrued,
absolute, contingent or otherwise, including without limitation any and all
claims with respect to environment, health, safety, personal injury, property
damage
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or employment claims arising out of contracts, product liability,
merchantability or fitness for any particular purpose of goods or conformity of
goods to contractual requirements. Notwithstanding the foregoing, in no event
shall the Company be obligated to indemnify any Seller Indemnified Person in
respect of a third party claim relating to a Liability or other matter for which
Seller is obligated to indemnify a Buyer Indemnified Person (as defined in
Section 11.01(c) hereof) pursuant to this Article XI (or would have been
obligated to indemnify a Buyer Indemnified Person, but for the dollar amount
and/or survival limitations in Sections 11.01(c) and 12.01(a)) or that Seller
has otherwise agreed to assume pursuant to this Agreement). The right to be
indemnified and held harmless set forth in this Section 11.01(b) shall survive
the Closing until the expiration of the period of the statute of limitations
applicable to the underlying claim.
(c) Indemnification by Parent and Seller. Subject to the terms
and conditions of this Agreement, effective as of the Closing Date, Parent and
Seller shall, jointly and severally, indemnify, hold harmless and defend Buyer,
any Subsidiaries and Affiliates of Buyer and any partners, members, manager,
directors, shareholders, officers, employees, attorneys, agents, contractors,
consultants and representatives of Buyer or any Subsidiary or Affiliate of
Buyer, and, at the Buyer's request, the Company and/or its Subsidiaries, and the
successors, transferees and assigns of any thereof (collectively, the "BUYER
INDEMNIFIED PERSONS"), from and against, and shall reimburse them for, any and
all Indemnified Liabilities related to or arising from (i) any breach of any
representation or warranty of, or any misstatement or omission by, Parent,
Seller or the Company in this Agreement; and (ii) any breach of any covenant or
agreement of Parent, Seller or the Company in this Agreement; and (iii) any
Liability incurred by any Buyer Indemnified Person pursuant to the provisions of
Section 9.01 hereof or Section 5.7 of the Merger Agreement; and (iv) any
Liability incurred by any Buyer Indemnified Person for any Taxes of the Company
and its Subsidiaries with respect to any Tax year ending on or before the
Closing Date or for any Tax year beginning before and ending after the Closing
Date to the extent allocable to the portion of such period beginning before and
ending after the Closing Date in either case as allocated pursuant to Section
9.06(c) (and regardless of whether or not such Taxes are reflected on the
December 31 Unaudited Company Balance Sheet, the 1999 Balance Sheet, the Closing
Balance Sheet or the books and records of the Company and its Subsidiaries).
Anything in this Section 11.01(c) to the contrary notwithstanding, Parent and
Seller shall have no obligation to indemnify Buyer or the Company under clause
(i) of this Section 11.01(c) with respect to (x) the first $750,000 of
Indemnified Liabilities, in the aggregate, which are attributable to breaches,
misstatements or omissions described in clause (i) or (y) Indemnified
Liabilities exceeding $19,750,000, in the aggregate, which are attributable to
breaches, misstatements or omissions described in clause (i). Notwithstanding
the foregoing, if (1) prior to the Closing, Seller delivers to Buyer a written
notice (which Seller will use reasonable efforts, in light of the circumstances,
to deliver at least three business days prior to Closing) which specifically
states that (A) a representation and warranty contained in Article II hereof
which was true and correct in all respects at and as of the date of this
Agreement has ceased to be true and correct as of the Closing and (B) as a
result, there is a failure to satisfy the conditions contained in Section 6.05
and (2) Buyer elects in
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writing, in its sole discretion, to waive either or both of such closing
conditions in Section 6.05 and to consummate the Transactions, then the
representations and warranties of Parent, Seller and the Company in this
Agreement shall be deemed, solely for purposes of Section 11.01(c)(i), to have
been supplemented by the written notice delivered by Seller pursuant to this
sentence. Parent and Seller shall have no obligation to indemnify any Buyer
Indemnified Person with respect to violations of federal securities laws or Blue
Sky Laws arising solely out of a breach of the representations of the Buyer or
its assignees in Section 3.08 hereof.
SECTION 11.02 Indemnification Procedure. The obligation of the Company,
Buyer, Parent or Seller, as applicable (the "INDEMNIFYING PARTY"), to indemnify,
hold harmless, defend and reimburse another party (the "INDEMNIFIED PARTY",
which with respect to Seller shall also include all Seller Indemnified Persons
and with respect to the Buyer shall also include all Buyer Indemnified Persons)
under Section 11.01 hereof with respect to any claim for which such
indemnification is sought (a "CLAIM") is conditioned upon receiving from such
Indemnified Party written notice of such Claim promptly after such Indemnified
Party becomes aware of such Claim; provided, however, that any delay in giving
such notice shall not release an Indemnifying Party from its obligations under
this Article XI except to the extent and only to the extent that such
Indemnified Party was prejudiced by such delay. The Indemnifying Party shall at
its sole expense defend, contest, settle or otherwise protect against any Claim
(including without limitation by taking reasonably necessary or appropriate
action to remediate) with legal counsel or other appropriate consultants or
experts (collectively, "EXPERTS") of its own selection that are reasonably
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right, but not the obligation, to (i) elect to defend, contest, settle or
otherwise protect against such claims with Experts of its own choice, (ii)
participate in the defense, contest, settlement or other protection of such
claims with Experts of its own choice, and (iii) assert any and all defenses,
cross claims or counterclaims it may have; provided, however, that such
election, participation and assertion shall be at the Indemnified Party's sole
cost and expense, notwithstanding anything in this Agreement to the contrary,
unless (x) the Indemnified and Indemnifying Parties have agreed otherwise, (y)
representation of both parties by the same Experts would be inappropriate due to
actual or potential differing interests between them or (z) the Indemnifying
Party fails to take reasonably necessary or appropriate action and employ
appropriate Experts that are reasonably satisfactory to the Indemnified Party
within a reasonable period of time. The Indemnifying Party shall not be liable
for any settlement of a Claim effected without its prior written consent (which
shall not be unreasonably withheld, delayed or conditioned). The Indemnifying
Party shall not settle any Claim without the relevant Indemnified Party's prior
written consent (which shall not be unreasonably withheld, conditioned or
delayed) unless the settlement includes an unconditional general release of such
Indemnified Party from all Liabilities that are the subject matter of the
proceeding. The Indemnified Party shall cooperate, and shall cause each other
Indemnified Party to at all times cooperate, in all reasonable ways with, make
(subject to the assertion of attorney-client and other applicable privileges)
its respective relevant files and records available for inspection and copying
by, and make its employees available or otherwise render reasonable assistance
to, the Indemnifying Party in its defense, contest, settlement or protection of
any Claim subject to indemnification
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hereunder. Notwithstanding anything in this Agreement to the contrary, as a
condition precedent to any Indemnified Party's right to be indemnified or held
harmless with respect to any Claim based on a breach of a representation or
warranty, the written notice required under the first sentence of this Section
11.02 with respect to such Claim must be received by the Indemnifying Party
prior to the time such representation or warranty ceases to survive under this
Agreement in accordance with Section 12.01(a). Notwithstanding the foregoing, if
any Indemnified Party determines in good faith that there is a reasonable
probability that an action may materially and adversely affect it or its
Subsidiaries or Affiliates other than as a result of monetary damages, such
Indemnified Party may, by written notice to the Indemnifying Party, assume the
exclusive right to defend, compromise or settle such action, but the
Indemnifying Party shall not be bound by any determination of an action so
defended or any compromise or settlement thereof effected without its consent
(which shall not be unreasonably withheld or unreasonably delayed); provided,
however, that the Indemnified Party shall act in good faith and reasonably in
compromising or settling any such action. Anything herein to the contrary
notwithstanding, in the case of any suit, action, claim, proceeding or
investigation by any customer of the Company with respect to business conducted
by the Company prior to the Closing, the Company shall give an indemnification
notice under Section 11.02 with respect thereto, but, unless the Buyer shall
request Parent to defend the Claim arising out of such action, claim proceeding
or investigation, the Company shall have the exclusive right to defend,
compromise and settle any such Claim, subject to the duty of the Company to
consult with the Indemnifying Party and its counsel in connection with such
defense; provided, however, that the Company shall act in good faith and
reasonably in compromising or settling any such Claim and shall not compromise
or settle any such Claim without the consent of the Indemnifying Party (not to
be unreasonably withheld) if the terms of compromise or settlement would subject
the Indemnifying Party to injunctive provisions or payment of damages.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.01 Effectiveness of Representations, Warranties and
Agreements, Etc.
(a) Except as otherwise provided in this Section 12.01 and
Section 11.02, the representations, warranties, covenants and agreements of each
party hereto shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any other party hereto, any person
controlling any such party or any of their officers or directors, whether prior
to or after the execution of this Agreement. The representations and warranties
in Articles II and III shall survive the closing until earlier of June 30, 2002
or the 45th day after delivery of the audited financial statements of the
Company for the year ending December 31, 2001; provided, however, that the
representations in Sections 2.01 - 2.04, 2.11, 2.12, 2.15, 2.26 and 3.01, 3.02
and 3.08 shall survive until the 13th day after expiration of the applicable
statute of limitations and provided, further, that the representations in
Section 2.16 (Environmental) shall survive until the fourth anniversary of the
date hereof. All statements contained in any Schedule hereto or in any
certificate delivered by or on behalf of the parties pursuant to this
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Agreement shall be deemed representations and warranties by the parties
hereunder. All covenants and agreements of the parties herein shall terminate as
of the Closing or upon the termination of this Agreement pursuant to Article X,
as the case may be. Notwithstanding the preceding sentence, the covenants and
agreements set forth in Sections 5.04 and 5.06, Articles IX, XI and XII shall
survive the Closing indefinitely and those set forth in Section 10.03 shall
survive any such termination (whether at the Closing Date or pursuant to Article
X) indefinitely. Nothing in this Section 12.01(a) shall relieve any party for
any breach of any representation, warranty or agreement in this Agreement
occurring prior to termination.
(b) Any disclosure made with reference to one or more Sections
of the Seller Disclosure Schedule shall be deemed disclosed only with respect to
such Section unless such disclosure is made in such a way as to make its
relevance to the information called for by another Section of such schedule
readily apparent, in which case, such disclosure shall be deemed to have been
included in such other Section, notwithstanding the omission of a cross
reference thereto. However, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself).
SECTION 12.02 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally or by overnight courier to the
parties at the following addresses or sent by electronic transmission, with
confirmation of receipt, to the telecopy numbers specified below (or at such
other address or telecopy number for a party as shall be specified by like
notice):
(a) If to Parent or Seller:
c/o Paxar Corporation
000 Xxxxxxxxx Xxxx Xxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
Attention: General Counsel
With a copy to:
Xxxx Xxxxxx, Esq.
Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: 000 000-0000
Telephone No.: 000 000-0000
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(b) If to the Company:
International Imaging Materials, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
Attention: President
With a copy to Buyer after the Closing.
(c) If to Buyer:
Xxxxx Xxxxx
Centre Capital Investors III, L.P.
c/o Centre Partners Management LLC
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier No.: 212 332-5801
Telephone No.: 000 000-0000
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With a copy to:
Xxxxxxx X. Xxxxxxx, Esq. and
Xxxxxxx X. Xxxxxx III, Esq.
Xxxx Xxxxx & Xxxxxxx LLP
Xxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, XX 00000
Telecopier No.: 000 000-0000
Telephone No.: 000 000-0000
SECTION 12.03 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" or "Affiliate" means a person that, directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "beneficial owner" with respect to any shares of Company
Common Stock means a person who shall be deemed to be the beneficial owner of
such shares (i) which such person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 of the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding, or
(iii) which are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares;
(c) "business day" means any day other than a day on which
banks in the State of New York are required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "GAAP" shall mean United States generally accepted
accounting principles;
(f) "Governmental Authority" shall mean any foreign, federal,
state, local or provincial body, government, agency, court, panel or tribunal;
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(g) "Indemnified Liabilities" shall mean all direct or
indirect indebtedness, investigations, suits, actions, proceedings, litigation,
judgments, orders, writs, injunctions, awards, decrees, claims, liabilities,
obligations, losses, costs, expenses (including, without limitation, remediation
expenses and other costs of response under Environmental Laws), levies, imposts,
duties, deficiencies, assessments, charges, allegations, demands and damages
(whether currently known or unknown) of any kind or nature whatsoever, including
without limitation, all legal fees and other expenses incurred in connection
with enforcing an indemnity or with defending, preparing to defend, settling or
investigating any third party action or claim or governmental action, claim or
proceeding;
(h) "knowledge" of the Company, Parent, Seller or Buyer, as
the case may be, shall mean the actual knowledge of the executive officers of
the Company, Parent, Seller or Buyer, as such knowledge has been or reasonably
should have been obtained in the normal conduct of business;
(i) "Material Adverse Effect" means any change, effect or
circumstance that, individually or when taken together with all other such
changes, effects or circumstances that have occurred prior to the date of such
change, effect or circumstance, (i) is materially adverse to the business,
assets, financial condition, prospects, or results of operations of the Company
and its Subsidiaries taken as a whole, or (ii) prevents the consummation of the
Transactions;
(j) "person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d) (3) of the Exchange Act); and
(k) "subsidiary" or "Subsidiaries" of the Company, Parent,
Seller, Buyer or any other person means any corporation, partnership, joint
venture or other legal entity of which the Company, Parent, Seller, Buyer or
such other person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 12.04 Amendment. This Agreement may not be amended except by an
instrument in writing signed by Parent, Seller, the Company and Centre Capital
Investors III, L.P.
SECTION 12.05 Waiver. Any party hereto may with respect to any other
party hereto (a) extend the time for the performance of any of the obligations
or other acts, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or (c) waive
compliance with any of the agreements or conditions contained
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herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
SECTION 12.06 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 12.07 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the Transactions are fulfilled to the fullest extent possible.
SECTION 12.08 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letters), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof.
SECTION 12.09 Assignment. This Agreement shall not be assigned by
operation of law or otherwise; provided, however, that the rights of Buyer and
the Company hereunder may be assigned collaterally to any lender or other
financing source; and provided, further, that the rights of the Company
hereunder may be assigned, after the Closing, to any successor to substantially
all of the business of the Company. Furthermore, Buyer may assign its right to
purchase Purchased Shares to any related fund or entity and/or to certain
members of management of the Company, who will be entitled to the rights and
benefits of, and subject to the obligations of Buyer, under this Agreement (it
being contemplated that such assignees may (i) be listed on a Schedule to be
attached hereto at Closing and (ii) make representations reasonably necessary to
satisfy federal and state securities law exemptions), provided that nothing in
this sentence shall relieve Buyer of its obligation to purchase at the Closing
any Purchased Shares not purchased by any defaulting assignee.
SECTION 12.10 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation.
SECTION 12.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude
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any other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
SECTION 12.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (other than any
conflicts of law rules which might result in the application of the laws of any
other jurisdiction).
SECTION 12.13 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 12.14 Consent to Jurisdiction; Specific Performance. Each of
the parties hereto:
(a) consents to submit itself to the personal jurisdiction of
the United States District Court for the Southern District of New York or the
courts of the State of New York located in the Borough of Manhattan, City of New
York in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement;
(b) agrees that it will not attempt to deny or defeat such
personal jurisdiction or venue by motion or other request for leave from any
such courts;
(c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than such courts;
(d) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to a party at
its address set forth in Section 12.02 or at such other address of which a party
shall have been notified pursuant thereto;
(e) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law;
(f) hereby irrevocably waives all rights to trial by jury in
any action, proceeding or counterclaim arising out of or relating to this
agreement or any other document; and
(g) acknowledges and agrees that the other parties would be
damaged irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties agrees that the other parties shall be entitled
to an injunction or injunctions to prevent breaches of the
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provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court described in
Section 12.14(a) (subject to the provisions set forth herein, in addition to any
other remedy to which they may be entitled, at law or in equity).
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IN WITNESS WHEREOF, Buyer, Parent, Seller and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
PARENT:
PAXAR CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
SELLER:
PAXAR CAPITAL CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
THE COMPANY:
INTERNATIONAL IMAGING MATERIALS, INC.
By: /s/ Xxxx Xxxxx
------------------------------
Name: Xxxx Xxxxx
Title: Vice President
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BUYER:
CENTRE CAPITAL INVESTORS III, L.P.
CENTRE CAPITAL INDIVIDUAL INVESTORS III, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS III, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS III, L.P.
By: Centre Partners III, L.P.,
as general partner of such partnerships
By: Centre Partners Management LLC,
attorney-in-fact
By: /s/ Xxxxx Xxxxx
--------------------------------
Name: Xxxxx Xxxxx
Title: Managing Director
CENTRE PARTNERS COINVESTMENT III, L.P.
By: Centre Partners III LLC
as general partner
By: /s/ Xxxxx Xxxxx
---------------------------------
Name: Xxxxx Xxxxx
Title: Managing Director
