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Exhibit 10.9
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MERGER AGREEMENT
Among
NBC ACQUISITION CORP.
EXECUTING SHAREHOLDERS
and
NBC MERGER CORP.
January 6, 1998
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MERGER AGREEMENT
THIS AGREEMENT is made as of January 6, 1998, among NBC Merger
Corp., a Delaware corporation ("Buyer"), NBC Acquisition Corp., a Delaware
corporation (the "Company"), and, upon execution of a counterpart hereof, each
of the Persons executing this Agreement as an Executing Shareholder
(collectively referred to herein as the "Executing Shareholders" and
individually as an "Executing Shareholder"). Unless otherwise provided,
capitalized terms used herein are defined in Article XI below.
The Persons listed on the Shareholders Schedule attached hereto
(collectively referred to as the "Shareholders" and individually as a
"Shareholder") own all of the issued and outstanding capital stock of the
Company, which as of the date hereof consists of 2,755,776 shares of Class A
Common Stock, par value $.01 per share (the "Class A Common"), and 48,148 shares
of Class B Common Stock, par value $.01 per share (the "Class B Common"). In
addition, certain of the Shareholders own options to acquire in the aggregate
200,000 shares of Class A Common (the "Shareholder Options"), and certain other
Shareholders own warrants to acquire 381,818 shares of Class A Common (the
"Warrants"). The outstanding shares of Class A Common and Class B Common are
referred to collectively as the "Shares."
The Company owns all of the issued and outstanding shares of capital
stock of Nebraska Book Company, Inc., a Kansas corporation (the "Subsidiary").
Subject to the terms and conditions set forth herein, the boards of
directors of the Company and Buyer have approved the merger (the "Merger") of
Buyer with and into the Company, such that the Company shall be the surviving
corporation (the "Surviving Corporation"), with the effect that (a) all Shares
(including shares issued upon the exercise of Options or Warrants after the date
hereof but before the Closing) shall either be converted into the right to
receive an amount of cash consideration or (pursuant to Section 3.04 hereof)
shall remain outstanding as an equal number of shares of common stock, par value
$0.01, of the Surviving Corporation ("Surviving Corporation Shares"), (b) all
Warrants and Options shall be converted into the right to receive an amount of
cash consideration, and (c) all shares of common stock, par value $0.01, of
Buyer ("Buyer Shares") issued and outstanding prior to the Closing shall be
converted into an equal number of Surviving Corporation Shares. Prior to or
contemporaneous with the Closing hereunder, the Company shall offer to redeem
and cancel all of the issued and outstanding options to purchase the Company's
capital stock which are owned by individuals other than Shareholders (the
"Non-Shareholder Options") as provided in Section 6.06 below.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
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ARTICLE I
MERGER, EFFECTS OF MERGER AND CLOSING
1.01 Merger of Buyer with and into the Company. In accordance with
the provisions of this Agreement and the Delaware General Corporations Law (the
"DGCL"), at the Closing (as defined below), Buyer shall be merged with and into
the Company, which shall continue as the Surviving Corporation. At the Closing,
the separate existence and corporate organization of Buyer shall cease and each
Buyer Share issued and outstanding immediately prior to the Closing shall be
converted into a Surviving Corporation Share as set forth herein.
1.02 Effect of the Merger.
(a) Certificate of Incorporation. Article 4 of the Certificate
of Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows:
"The total number of shares of stock that this corporation shall
have authority to issue is Five Million (5,000,000) shares of Class
A Common Stock, $.01 par value per share ("Common Stock"). Each
share of Common Stock shall be entitled to one vote."
(b) By-laws. The By-laws of Buyer as in effect immediately
prior to the Closing shall be the By-laws of the Surviving Corporation until
altered, amended or repealed as provided therein and in the Certificate of
Incorporation of the Surviving Corporation.
(c) Officers and Directors. The officers and directors of
Buyer immediately prior to the Closing shall become the officers and directors
of the Surviving Corporation until their respective successors are duly
appointed or elected and qualified.
1.03 Effect of Merger. (a) At the Closing, the Merger shall have the
effects set forth in Section 259 of the DGCL. Without limiting the generality of
the foregoing, and subject thereto: (i) the Surviving Corporation shall possess
all the rights, privileges, powers and franchises, of a public and private
nature, and shall be subject to all the restrictions, disabilities and duties of
each of Buyer and the Company (the "Constituent Corporations"); (ii) all
property, real, personal and mixed, and all debts due to either Constituent
Corporation on whatever account, including all choses in action and other things
belonging to the Constituent Corporations, shall be vested in the Surviving
Corporation; (iii) all property, rights, privileges, powers and franchises, and
every other interest of each of the Constituent Corporations shall be, from and
after the Closing Date, the property of the Surviving Corporation and the title
to any real estate vested by deed or otherwise in the Constituent
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Corporations shall not revert or be impaired in any way by this Agreement or the
Merger provided for herein, but all rights of creditors and all liens upon any
property of either Constituent Corporation shall be preserved unimpaired, and
all debts, liabilities and duties of the Constituent Corporations shall, from
and after the Closing, attach to and become the debts, liabilities and duties of
the Surviving Corporation, and may be enforced against the Surviving Corporation
to the same extent as if said debts, liabilities and duties had been incurred or
contracted by the Surviving Corporation; and (iv) all transfers vesting in the
Surviving Corporation referred to herein shall be deemed to occur by operation
of law and no consent or approval of any other person shall be required in
connection with any such transfer or vesting unless such consent or approval is
specifically required in the event of merger or consolidation by law or express
provision of any contract, agreement, decree, order or other instrument to which
either or both of the Constituent Corporations is a party or is bound.
(b) The Surviving Corporation shall assume and be liable for
all the liabilities, obligations and penalties of each of the Constituent
Corporations. No liability or obligation due or to become due, and no claim or
demand for any cause existing against either Constituent Corporation or any
stockholder, officer or director thereof, shall be released or impaired by the
Merger. No action or proceeding, whether civil or criminal, then pending by or
against either Constituent Corporation or any stockholder, officer or director
thereof, shall xxxxx or be discontinued by the Merger, but may be enforced,
prosecuted, settled or compromised as if the Merger had not occurred. The
Surviving Corporation may be substituted in any such action or special
proceeding in place of either Constituent Corporation.
(c) At the Closing, the accounting entries with respect to the
assets, liabilities, capital, surplus and any and all other items of the
Constituent Corporations shall be taken up on the books of the Surviving
Corporation at the amounts which they, respectively, are then carried on the
books of said Constituent Corporations, subject to such adjustments as may be
appropriate in giving effect to the Merger.
1.04 Additional Actions. If, at any time after the Closing, the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, title
to and possession of any property or right of Buyer or the Company acquired or
to be acquired by reason of, or as a result of, the Merger, or (b) otherwise to
carry out the purpose of this Agreement, Buyer and the Company and their
respective proper officers and directors shall be deemed to have granted to the
Surviving Corporation and its proper officers and directors, and each of them,
an irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such property or rights in
the Surviving Corporation and otherwise to carry out the purposes of this
Agreement; and the proper officers and directors of the Surviving Corporation,
and each of
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them, are fully authorized in the name of Buyer and the Company or otherwise to
take any and all such action.
1.05 The Closing.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxx, Weiss, Rifkind, Xxxxxxx
& Xxxxxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, on February
11, 1998 or on such other date as is mutually agreeable to Buyer and the
Shareholders' Representative. The date and time of the Closing are herein
referred to as the "Closing Date."
(b) Subject to the terms and conditions set forth in this Agreement,
the parties hereto shall consummate the following "Closing Transactions" on the
Closing Date:
(i) the Shareholders' Representative (on behalf of the Shareholders
other than Dissenting Shareholders) shall deliver to Buyer stock
certificates representing the Shares of such Shareholders and instruments
evidencing such Shareholders' Warrants and such Shareholders' Shareholder
Options, accompanied by duly executed letters of transmittal in the form
of Exhibit A (each a "Letter of Transmittal").
(ii) Buyer shall deliver to the Shareholders' Representative (on
behalf of the Shareholders who submit duly executed Letters of Transmittal
(x) an aggregate amount equal to the amounts into which Shares, Warrants
and Options represented by duly executed Letters of Transmittal from such
Shareholders are to be converted pursuant to Sections 3.02(b)(i), (c) and
(d) and (y) certificates representing Surviving Corporation Shares to be
issued to certain Shareholders pursuant to Section 3.02(b)(ii);
(iii) Buyer shall repay, or cause to be repaid, on behalf of the
Company and the Subsidiary, as a reduction of the Merger Consideration as
provided in Section 3.01(a), all amounts necessary to discharge fully the
then outstanding balance of the Indebtedness listed on the Indebtedness
Schedule by wire transfer of immediately available funds as directed by
the holders of such Indebtedness at or prior to the Closing; and
(iv) Buyer shall cause the Certificate of Merger, substantially in
the form of Exhibit B hereto, to be filed with the Secretary of State of
the State of Delaware.
(v) Buyer, the Company and the Shareholders' Representative (on
behalf of the Shareholders) shall make such other deliveries as are
required by and in accordance with Article II hereof.
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ARTICLE II
CONDITIONS TO CLOSING
2.01 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing Date, any one or more
of which may be waived by Buyer:
(a) The representations and warranties set forth in Article IV
hereof shall be true and correct in all material respects (except to the extent
qualified as to materiality, in which case such representations and warranties
shall be true and accurate in all respects, after giving effect to such
materiality) at and as of the Closing Date as though then made and as though the
Closing Date was substituted for the date of this Agreement throughout such
representations and warranties, except for (i) events contemplated by this
Agreement and (ii) those representations and warranties that address matters
only of a particular date (which shall be true and correct in all material
respects (except to the extent qualified as to materiality, in which case such
representations and warranties shall be true and accurate in all respects, after
giving effect to such materiality) as of such date);
(b) The Company shall have performed in all material respects all of
the covenants and agreements (except to the extent qualified as to materiality,
in which case such covenants and agreements shall have been performed in all
respects, after giving effect to such materiality) required to be performed by
it under this Agreement at or prior to the Closing;
(c) The applicable waiting periods, if any, under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 0000 ( xxx "XXX Xxx") shall have
expired or been terminated, and all other material governmental filings,
consents, authorizations and approvals that are required for the consummation of
the transactions contemplated hereby (all of which items are set forth on the
Governmental Consents Schedule attached hereto) shall have been made and
obtained;
(d) No judgment, decree or order shall have been entered and remain
in effect which prevents the performance of this Agreement or the consummation
of any of the transactions contemplated hereby, declares unlawful the
transactions contemplated by this Agreement or causes such transactions to be
rescinded;
(e) On or prior to the close of business on January 26, 1998, the
Company shall have consummated the acquisition of Collegiate Services
Corporation ("CSC") and the consummation of such acquisition shall have taken
place substantially in the manner described on Schedule 2.01(e). If the
condition contained in this Section 2.01(e) is not satisfied by such date, Buyer
may give notice to the Company, on or prior to the close of business on February
2, 1998, of its intention not to consummate the transaction contemplated by this
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Agreement. If Buyer fails to give such notice within the prescribed period, the
condition in this Section 2.01(e) shall be deemed satisfied;
(f) The Company shall have redeemed and canceled, or simultaneously
with the Closing shall redeem and cancel, all of the Non-Shareholder Options;
(g) Prior to January 15, 1998, Shareholders who own not less than
95% of the Shares shall have executed this Agreement as Executing Shareholders
or the Executing Shareholders shall have agreed to bear their Pro Rata Share of
95% of any Losses that may be the subject of indemnification under Section
10.02(a). If the condition contained in this Section 2.01(g) is not satisfied
prior to close of business on January 15, 1998, Buyer may give notice to the
Company, prior to close of business on January 20, 1998, of its intention not to
consummate the transactions contemplated by this Agreement. If Buyer fails to
give such notice prior to close of business on January 20, 1998, the condition
in this Section 2.01(g) shall be deemed satisfied;
(h) The holders of not more than two percent of the Shares shall
have perfected appraisal rights under Section 262 of the DGCL with respect to
the Merger;
(i) The Persons listed on Schedule 2.01(i) shall have elected to
convert, in aggregate, a number of Shares equal to $3,850,000 divided by the Per
Share Cash Consideration Amount into Surviving Corporation Shares; and
(j) The Company or the Shareholders' Representative (on behalf of
the Shareholders who wish to participate in the Merger), as the case may be,
shall have delivered to Buyer each of the following:
(i) a certificate of the Company in the form set forth in
Exhibit C attached hereto, dated the Closing Date, stating that the
preconditions specified in subsections (a) through (i) hereof, inclusive,
have been satisfied;
(ii) copies of the governmental consents required by
subsection (c) above;
(iii) the stock certificates representing the Shares, the
instruments representing the Warrants and the instruments representing the
Shareholder Options from the Shareholders, in each case duly endorsed for
transfer or assignment or accompanied by duly executed Letters of
Transmittal;
(iv) all minute books, stock books, ledgers and registers,
corporate seals and other corporate records relating to the organization,
ownership and maintenance of the Company and its Subsidiary; and
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(v) a copy of the Company's Certificate of Incorporation,
certified by the Secretary of State of Delaware, and Certificate of Good
Standing from the Secretary of State of Delaware evidencing the Company's
good standing in such jurisdiction, and a copy of the Subsidiary's
Certificate or Articles of Incorporation, certified by the Secretary of
State of Kansas, and a Certificate of Good Standing from the Secretary of
State of Kansas, and each state wherein the Subsidiary is duly qualified
evidencing the Subsidiary's good standing therein.
2.02 Conditions to the Company's Obligations. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions as of the Closing Date,
any one or more of which may be waived by the Company:
(a) The representations and warranties set forth in Article V hereof
shall be true and correct in all material respects (except to the extent
qualified as to materiality, in which case such representations and warranties
shall be true and accurate in all respects, after giving effect to such
materiality) at and as of the Closing as though then made and as though the
Closing Date was substituted for the date of this Agreement throughout such
representations and warranties, except for those representations and warranties
that address matters only as of a particular date (which shall be true and
correct in all material respects (except to the extent qualified as to
materiality, in which case such representations and warranties shall be true and
accurate in all respects, after giving effect to such materiality) as of that
date);
(b) Buyer shall have performed in all material respects all the
covenants and agreements (except to the extent qualified as to materiality, in
which case such covenants and agreements shall have been performed in all
respects, after giving effect to such materiality) required to be performed by
it under this Agreement at or prior to the Closing;
(c) No judgment, decree or order which prevents the performance of
this Agreement or the consummation of any of the transactions contemplated
hereby, declares unlawful the transactions contemplated by this Agreement or
causes such transactions to be rescinded shall have been entered and remain in
effect;
(d) The applicable waiting periods, if any, under the HSR Act shall
have expired or been terminated, and all other material governmental filings,
consents, authorizations and approvals that are required for the consummation of
the transactions contemplated hereby shall have been duly made and obtained;
(e) Buyer shall have delivered to the Shareholders' Representative
(on behalf of the Shareholders) a certificate in the form set forth as Exhibit D
attached hereto, dated the
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Closing Date, stating that the preconditions specified in subsections (a)
through (d) hereof, inclusive, have been satisfied;
(f) The Closing Transactions set forth in Section 1.04(b)(ii) and
(iii) shall have been completed.
ARTICLE III
CONSIDERATION, CONVERSION OF
SHARES AND DISSENTING SHAREHOLDERS
3.01 Merger Consideration.
(a) The "Merger Consideration" shall be equal to $245.0 million (i)
minus the amount, as of the Closing Date, of Indebtedness required to be
described on the Indebtedness Schedule, (ii) minus the Option Payment, if any,
and (iii) plus an amount equal to the sum of (x) the lesser of (A) $5,000,000 or
(B) the amount of Excess Cash plus (y) 75% of the excess, if any, of Excess Cash
over $6,666,667.00; as adjusted pursuant to subsection (b) below.
(b) If the Closing occurs after February 11, 1998 (other than as the
result of a breach of a covenant, representation or warranty contained herein by
the Company or the Shareholders or by reason of the failure of any of the
conditions precedent to the obligations of Buyer contained in Section 2.01,
provided that the failure of the condition precedent under Section 2.01(c) shall
not prevent the incurrence of the increase to Merger Consideration provided in
this Section 3.01(b) in the event that Buyer's filing under the HSR Act is filed
later than four business days after the date hereof), then the Merger
Consideration shall be increased by an amount equal to $67,123.29 per day for
each day between and including February 11, 1998 to, but not including, the
Closing Date.
3.02 Automatic Conversion of Outstanding Shares. At the Closing:
(a) Each issued and outstanding Buyer Share shall, by virtue
of the Merger and without any action on the part of any person or entity, be
converted into a Surviving Corporation Share.
(b) Each Share shall, by virtue of the Merger and without any
action on the part of any person or entity, either (i) be converted into the
right to receive payment of cash consideration in an amount equal to (x) the sum
of (A) the Merger Consideration plus (B) an amount (if any) equal to the
aggregate exercise price of the Shareholder Options and the Warrants which are
to be converted to the right to receive payment under Sections 3.02(c)
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and (d) between the date hereof and the Closing divided by (y) the number of
Shares at Closing plus the number of Shares that would be required to be issued
if all of the Shareholder Options and Warrants were exercised prior to Closing
(the "Per Share Cash Consideration Amount") or (ii) subject to Section 3.04,
remain outstanding as a Surviving Corporation Share.
(c) Each Shareholder Option shall, by virtue of the Merger and
without any action on the part of any person or entity, be converted into the
right to receive payment of cash consideration in an amount equal to (i) the
number of shares for which such option is exercisable, multiplied by (ii) the
Per Share Cash Consideration Amount less the per-share exercise price applicable
to such option.
(d) Each Warrant shall, by virtue of the Merger and without
any action on the part of any person or entity, be converted into the right to
receive payment of cash consideration in an amount equal to (i) the number of
shares for which such Warrant is exercisable, multiplied by (ii) the Per Share
Cash Consideration Amount less the per-share exercise price applicable to such
Warrant.
(e) The Surviving Corporation shall be entitled to deduct from
the cash consideration payable pursuant to clauses (c) and (d) above any amounts
required to satisfy any federal, state, or local withholding tax requirements.
3.03 Exchange of Shares. As soon as practicable after the Closing,
the Surviving Corporation shall mail or deliver to each former Company record
holder whose outstanding shares have been converted into Surviving Corporation
Shares as provided in Section 3.02(b)(ii) and who has surrendered his share
certificates representing Shares together with a duly executed Letter of
Transmittal, indicating his election to convert such Shares, a certificate
representing that aggregate number of Surviving Corporation Shares to which such
former Company record holder is entitled pursuant to Section 3.02(b)(ii).
3.04 Converting Company Stockholders. Each Person named on Schedule
2.01(i), by executing a counterpart of this Agreement and delivering a Letter of
Transmittal to the Company at or prior to the Closing, may designate in such
Letter of Transmittal the number of Shares to be converted into Surviving
Corporation Shares and the number of Shares to be converted into the right to
receive cash consideration.
3.05 Dissenting Stockholders
(a) Election. The provisions of Article III to the contrary
notwithstanding, any Shares as to which the holder thereof shall have properly
demanded appraisal in accordance with the requirements of Section 262 of the
DGCL (any holder duly making such demand is referred to herein as a "Dissenting
Stockholder") shall not be
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converted into the right to receive the Per Share Cash Consideration Amount or
to convert such Shares into Surviving Corporation Shares, unless and until such
holder shall have failed to perfect, or shall have effectively withdrawn or
lost, the right to appraisal of and payment for such Shares under Section 262 of
the DGCL. In the event that a notice of exercise of appraisal rights under
Section 262 of the DGCL was not required prior to the Closing, at such time as a
holder of Shares subsequently properly demands appraisal rights, certificates
for Shares as to which such appraisal rights are properly demanded (to the
extent such certificates have not theretofore surrendered pursuant to Section
3.03) shall thereupon cease to represent the right to receive the Per Share Cash
Consideration Amount, and shall represent only the right to receive payment for
such shares under Section 262 of the DGCL.
(b) Payment. Each Dissenting Stockholder who becomes entitled,
pursuant to the provisions of Section 262 of the DGCL, to payment of the value
of its Shares shall receive payment therefor from the Company (but only after
the value thereof shall have been agreed upon or finally determined pursuant to
such provisions). If a Dissenting Stockholder fails to perfect, or effectively
withdraws or loses the right to receive payment for such Shares, pursuant to
Section 262 of the DGCL, such Dissenting Stockholder (to the extent the
certificates representing such shares have not theretofore been surrendered in
accordance with Section 3.03) shall be entitled to convert such Shares as
provided in Section 3.01(b)(i).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that:
4.01 Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and the Company has all requisite corporate power and
authority and all authorizations, licenses and permits necessary to own and
operate its properties and to carry on its businesses as now conducted, except
where the failure to hold such authorizations, licenses and permits would not
have a Material Adverse Effect. The Company has made available to Buyer complete
and correct copies of the certificate of incorporation, by-laws and minute
books, each as currently in effect, of the Company.
4.02 Subsidiaries. Except as set forth on the attached Subsidiary
Schedule, neither the Company nor the Subsidiary own or hold the right to
acquire any stock, partnership interest or joint venture interest or other
equity ownership interest in any other corporation, organization or entity. The
Company owns all of the issued and outstanding capital stock of the Subsidiary.
The Subsidiary is duly organized, validly existing and in good standing under
the laws of the State of Kansas, has all requisite corporate power and authority
and all authorizations, licenses and permits necessary to own its properties and
to carry on
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its businesses as now conducted and is qualified to do business in every
jurisdiction in which its ownership of property or the conduct of business
requires it to qualify, except where the failure to hold such authorizations,
licenses and permits or to be so qualified would not have a Material Adverse
Effect. The Company has made available to Buyer complete and correct copies of
the certificate of incorporation, by-laws and minute books, each as currently in
effect, of the Subsidiary.
4.03 Authorization; No Breach. Except as set forth on the attached
Authorization Schedule, the execution, delivery and performance of this
Agreement by the Company and the Shareholders and the consummation of the
transactions contemplated hereby do not conflict with or result in any material
breach of, constitute a material default under, result in a material violation
of, result in the creation of any material lien, security interest, charge or
encumbrance upon any material assets of the Company or the Subsidiary, or
require any material authorization, consent, approval, exemption or other action
by or notice to any court or other governmental body, under the provisions of
the Company's or the Subsidiary's certificate of incorporation or bylaws or any
material indenture, mortgage, lease, loan agreement or other agreement or
instrument to which the Company or the Subsidiary is bound, or any law, statute,
rule or regulation or order, judgment or decree to which the Company or the
Subsidiary is subject. None of the foregoing items shall be deemed to be
"material" unless the failure to meet the requirements thereof, in combination
with all other failures to meet such requirements, would have a Material Adverse
Effect. This Agreement and the other agreements being entered into herewith have
been duly authorized and approved by the board of directors of the Company and
the requisite number of stockholders of the Company by consent in lieu of a
meeting and have been duly executed and delivered by the Company and, assuming
that this Agreement is a valid and binding obligation of Buyer, this Agreement
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws and to general principles of equity
(whether considered in proceedings at law or in equity).
4.04 Capital Stock. The authorized number of shares of capital stock
of the Company consist of the following: 4,500,000 shares of Class A Common and
500,000 shares of Class B Common. As of the date hereof, 2,755,776 shares of
Class A Common and 48,148 shares of Class B Common are issued and outstanding
and are owned of record by the Shareholders in the amounts as set forth on the
Shareholders Schedule. All of the outstanding shares of capital stock of the
Company and the Subsidiary have been duly authorized and are validly issued,
fully paid and nonassessable. Except as set forth on the Capital Stock Schedule,
neither the Company nor the Subsidiary has any other capital stock, equity
securities or securities containing any equity features authorized, issued or
outstanding, and there are no agreements, options, warrants or other rights or
arrangements existing or outstanding which provide for the sale or issuance of
any of the foregoing by the Company or the Subsidiary. Except for the Warrants
and the Shareholder Options and as set forth on
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the Capital Stock Schedule, there are no rights, subscriptions, warrants,
options, conversion rights or agreements of any kind outstanding to purchase or
otherwise acquire any shares of capital stock or other equity securities of the
Company or the Subsidiary of any kind. Except as set forth on the Capital Stock
Schedule, there are no agreements or other obligations (contingent or otherwise)
which require the Company or the Subsidiary to repurchase or otherwise acquire
any shares of the Company's capital stock or other equity securities.
4.05 Financial Statements; Cost Reports. The Company has furnished
Buyer with copies of (i) its unaudited consolidated balance sheet as of
September 30, 1997, and the related statement of income for the fiscal period
then ended (the "Unaudited Financial Statements" and such balance sheet referred
to herein as the "Latest Balance Sheet") and (ii) its audited consolidated
balance sheet and statements of income and cash flows for the fiscal years ended
March 31, 1997 and March 31, 1996 (the "Audited Financial Statements," and
collectively with the Unaudited Financial Statements, the "Financial
Statements"). Except as set forth on the attached Accounting Schedule, such
Financial Statements have been based upon the information contained in the
Company's and the Subsidiary's books and records, have been prepared in
accordance with generally accepted accounting principles, consistently applied
throughout the periods indicated, and present fairly in all material respects
the financial condition and results of operations of the Company and the
Subsidiary as of the times and for the periods referred to therein, subject in
the case of the Unaudited Financial Statements to (i) the absence of footnote
disclosure and other presentation items and (ii) changes resulting from normal
year-end adjustments.
4.06 Absence of Certain Developments. Since the date of the Latest
Balance Sheet (the "Latest Balance Sheet Date"), there has not been any change,
occurrence or event which (individually or together with other changes,
occurrences or events) has had or will have a Material Adverse Effect on the
Company and the Subsidiary, taken as a whole. Except as set forth on the
attached Developments Schedule and except as expressly contemplated by this
Agreement, since the Latest Balance Sheet Date, neither the Company nor the
Subsidiary has:
(a) borrowed any amount or incurred or become subject to any
material liabilities, except liabilities incurred in the ordinary course
of business, liabilities under contracts entered into in the ordinary
course of business and borrowings from banks (or similar financial
institutions) necessary to meet ordinary course working capital
requirements;
(b) mortgaged, pledged or subjected to any lien, charge or
other encumbrance, any material portion of its assets, except liens for
current property taxes not yet due and payable and mechanics',
materialmen's and contractors' liens or encumbrances incurred in the
ordinary course of business;
14
(c) sold, assigned or transferred any material portion of its
tangible assets, except in the ordinary course of business;
(d) sold, assigned or transferred any material patents,
trademarks, trade names, copyrights, trade secrets or other intangible
assets except in the ordinary course;
(e) suffered any extraordinary losses or waived any rights of
material value;
(f) issued, sold or transferred any of its capital stock or
other equity securities, securities convertible into its capital stock or
other equity securities or warrants, options or other rights to acquire
its capital stock or other equity securities, or any bonds or debt
securities;
(g) declared or paid any dividends or made any distributions
on the Company's capital stock or other equity securities or redeemed or
purchased any shares of the Company's capital stock or other equity
securities, except for the cancellation and redemption of the
Non-Shareholder Options pursuant to Section 6.06 hereof;
(h) made any material change in its accounting methods,
principles or practices affecting its assets, liabilities or businesses,
except insofar as may have been required by a change in generally accepted
accounting principles ("GAAP");
(i) adopted a plan of liquidation or resolutions providing for
the liquidation, dissolution, merger, consolidation or other
reorganization of the Company or the Subsidiary;
(j) entered into any agreement relating to, or the occurrence
of any wage or salary increase or bonus, or increase in any other direct
or indirect compensation or benefits (including any severance or
termination payment) for or to any officers, directors or employees of the
Company or the Subsidiary or any accrual for or contract or other
agreement to make or pay the same except in the ordinary course of
business in a manner consistent with past practice;
(k) entered into any loan or facility to advance to any
officers, directors or employees, or other representatives of the Company
or the Subsidiary (other than travel advances made in the ordinary course
of business in a manner consistent with past practice) or any other loan
or advance except in the ordinary course of business in a manner
consistent with past practice;
15
(l) except for any acquisition of tangible property acquired
in the ordinary course of business in a manner consistent with past
practice, acquired all or any part of the assets, properties, capital
stock or business of any other person;
(m) undertaken any action that is outside the ordinary course
of business and in a manner inconsistent with past practice;
(n) undertaken any actions outside of the ordinary course of
business which would affect its respective cash position, including (i)
any failure to make scheduled capital expenditures substantially in
accordance with its ordinary course and customary practice; (ii) any
failure to pay trade payables or other liabilities in the ordinary course;
(iii) any discounting or other actions designed to accelerate the payment
of accounts receivable or (iv) any use of cash to prepay Indebtedness,
otherwise than in the ordinary course of business;
(o) used any Cash, including Excess Cash or any proceeds of
the revolving credit facility of the Company described on the Indebtedness
Schedule (the "Revolver"), for any purpose other than (i) up to $7,100,000
plus the amount of Excess CSC Consideration (which Excess CSC
Consideration shall not exceed $1,200,000), for the acquisitions of (w)
CSC, (x) the retail store in Flagstaff, Arizona, (y) the retail stores in
Charleston, Columbia and West Columbia, South Carolina and (z) the retail
store in Houston, Texas, (ii) for normal capital expenditure projects
consistent with past practices, (iii) for the payment of Taxes when due
and payable, (iv) for the payment of interest on Indebtedness when due and
payable, (v) for payment of (A) the specific monthly mortgage payment
amounts in connection with the retail property in Knoxville, Tennessee,
described on the Indebtedness Schedule as being due and payable in the
ordinary course and (B) an amount of $75,000 in connection with a
scheduled repayment of principal amount of Tranche B (as described on the
Indebtedness Schedule), (vi) for payment of amounts due under the Revolver
and (vii) for normal general working capital obligations incurred in the
ordinary course consistent with past practices;
(p) suffered any material damage, destruction or theft, not
covered by insurance, to any of its material assets;
(q) suffered or undertaken any cancellation, compromise,
waiver or release of any right or claim (or series of rights or claims)
except such as would not have a Material Adverse Effect; or
(r) granted any material license or sublicense of any rights
under or with respect to any of its intangible property not in the
ordinary course of business.
16
4.07 Title to Properties.
(a) The real property demised by the leases described on the
attached Leased Real Property Schedule constitutes all of the real property
leased by the Company and the Subsidiary (the "Leased Real Property").
(b) The leases described on the Leased Real Property Schedule are in
full force and effect, and the Company or the Subsidiary holds a valid and
existing leasehold interest under each of the leases set forth on the Leased
Real Property Schedule. The Company has made available to Buyer complete and
accurate copies of each of the leases described on the Leased Real Property
Schedule, and none of the leases has been modified in any respect, except to the
extent that such modifications are disclosed by the copies made available to
Buyer. All rent and other sums and charges payable by each of the Company and
the Subsidiary as tenant in respect of any Leased Real Property are current, no
written notice of default or termination under any such lease is outstanding,
and, to the knowledge of the Company, no termination event or condition or
uncured default on the part of the Company or the Subsidiary or, to the
knowledge of the Company or the Subsidiary, the applicable landlord, exists
under any of such leases. Except as set forth on Leased Real Property Schedule,
each of the Company and the Subsidiary holds the leasehold estate and interest
in its leases free and clear of all Liens, except for Permitted Liens. To the
Company's knowledge, neither the Company nor the Subsidiary is in default in any
material respect under any of such leases.
(c) Except as set forth on the attached Owned Real Property
Schedule, neither the Company nor the Subsidiary owns any real property. With
respect to each parcel of real property listed on the Owned Real Property
Schedule (the "Owned Real Property"):
(i) either the Company or the Subsidiary owns good and
marketable title to such parcel of real property, free and clear of all
Liens, other than (A) Permitted Liens and (B) other encumbrances and
exceptions set forth on the Owned Real Property Schedule;
(ii) there are no leases, subleases, licenses, concessions or
other agreements granting to any party or parties the right of use or
occupancy of any material portion of such parcel of real property; and
(iii) there are no outstanding options or rights of first
refusal to purchase such parcel of real property, any portion thereof or
interest therein.
(d) The Leased Real Property and the Owned Real Property are
hereinafter collectively referred to as the "Real Property."
17
(e) To the Company's knowledge, the Real Property is properly zoned
for the businesses now being conducted on the Real Property and the Company has
received no written notice of any pending or threatened proceedings or hearing
which may materially and adversely affect such zoning. Except as set forth on
the Owned Real Property Schedule and the Leased Real Property Schedule, to the
Company's knowledge, all material use, occupancy or similar permits required by
the appropriate governmental authorities to use, occupy and enjoy the Real
Property as currently operated have been issued, there is no outstanding notice
or order of any governmental authority not duly complied with, in all material
respects, affecting the use, occupancy, enjoyment, or operation of the Real
Property or of the improvements thereon, or requiring any repairs, additions, or
improvements thereto, and there is no material violation thereof, or of any
rule, regulation, ordinance, statute, or law of any governmental agency,
involving the acquisition, use, operation, or condition of the Real Property.
(f) Utilities are installed in, and are duly connected to, the Real
Property or the improvements thereon and, to the Company's knowledge, there is
no material charge for their use except the normal and usual metered charges
imposed and deposits customarily required.
(g) Except as set forth on the Owned Real Property Schedule and the
Leased Real Property Schedule, to the Company's knowledge, there are no written
leases, licenses or other agreements vesting in any third party any right to
possess or occupy any portion of the Real Property. The Company has no knowledge
of any pending, contemplated or threatened condemnation or similar proceeding or
any litigation affecting the Real Property or any part thereof.
(h) All of the land, buildings, structures and other improvements
used by the Company and the Subsidiary in the conduct of their businesses are
included in the Real Property.
(i) All material components of all buildings, structures, fixtures
and other improvements in, on or within the Real Property (the "Improvements"),
including to the roofs, structural elements and the building systems and
facilities thereof, are in generally good operating condition and repair,
subject to normal wear and tear and continued repair and replacement in
accordance with past practice.
(j) No portion of the Real Property has suffered any material damage
by fire or other casualty which has not heretofore been completely repaired and
restored.
4.08 Tax Matters. Except as set forth on Schedule 4.08, (a) all
United States federal income Tax Returns of or with respect to the Company and
the Subsidiary required by law to be filed have been timely filed, all such Tax
Returns are true and complete
18
in all material respects and all Taxes shown on such returns have been timely
paid; (b) all other Tax Returns of or with respect to the Company and the
Subsidiary required to be filed pursuant to applicable federal, foreign, state,
local or other law have been filed, all such Tax Returns are true and complete
and all Taxes shown on such Tax Returns and all other Taxes due, or claimed to
be due whether by proposed assessment or otherwise by any taxing authority, have
been timely paid except for Taxes which are being contested in good faith by
proper proceedings with adequate reserves having been taken in accordance with
GAAP; and (c) the charges, accruals and reserves on the books of the Company and
the Subsidiary in respect of any liability for Taxes based on or measured by net
income for any years not finally determined or with respect to which the
applicable statute of limitations has not expired are believed to be adequate to
satisfy any assessment for such Taxes for any such years. With respect to any
period for which Tax Returns have not yet been filed, or with respect to which
Taxes are not yet due or owing, the Company and the Subsidiary have made due and
sufficient current accruals for such Taxes in accordance with GAAP. Each of the
Company and the Subsidiary has made all required estimated Tax payments
sufficient to avoid any underpayment penalties. The Tax Returns of each of the
Company and the Subsidiary and of each affiliated, consolidated, combined or
unitary group of which the Company and the Subsidiary are or have been members
have not been audited (or if audited have subsequently been closed by the
application of the statute of limitations) or examined by the IRS. There are no
outstanding agreements, waivers or arrangements extending the statutory period
of limitations applicable to any claim for, or the period for the collection or
assessment of, Taxes due from or with respect to the Company or the Subsidiary
for any taxable period. No closing agreement pursuant to Section 7121 of the
Code (or any predecessor provision) or any similar provision of any state, local
or foreign law has been entered into by or with respect to the Company or the
Subsidiary. No assessment of Tax is proposed in writing against the Company or
the Subsidiary or any of their respective properties or assets. No consent to
the application of Section 341(f)(2) of the Code (or any predecessor provision)
has been made or filed by or with respect to the Company or the Subsidiary or
any of their respective properties or assets. Neither the Company nor the
Subsidiary has agreed to or is required to make any adjustment for any period
after the Closing Date pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method of such
entity, there is no application pending with any taxing authority requesting
permission for any such change in any accounting method of the Company or the
Subsidiary and the IRS has not proposed any such adjustment or change in
accounting method. Neither the Company nor the Subsidiary has been or is in
violation (or with notice or lapse of time or both, would be in violation) of
any applicable law relating to the payment or withholding of Taxes, the result
of which violation has or may reasonably be expected to have a Material Adverse
Effect. The Company and the Subsidiary have duly and timely withheld from
employee salaries, wages and other compensation and paid over to the appropriate
taxing authorities all material amounts required to be so withheld and paid over
for all periods under all applicable laws. Except as disclosed on Schedule 4.08,
neither the Company nor the Subsidiary is a party to, is bound by, or has any
obligation under, any Tax sharing agreement
19
or similar contract. Except for this Agreement, there is no contract, agreement,
plan or arrangement covering any person that, individually or collectively, to
the knowledge of the Company give rise to the payment of any amount that would
not be deductible by the Company or the Subsidiary by reason of Section 280G of
the Code. Neither the Company nor the Subsidiary has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
4.09 Contracts and Commitments.
(a) Except as set forth on the attached Contracts Schedule, neither
the Company nor the Subsidiary is a party to any: (i) collective bargaining
agreement or contract with any labor union; (ii) bonus, pension, profit sharing,
retirement or other form of deferred compensation plan, other than as set forth
on the attached Employee Benefits Schedule; (iii) stock purchase, stock option
or similar plan, other than as set forth on the attached Capital Stock Schedule;
(iv) contract for the employment of any officer or other senior management
person on a full-time or consulting basis, other than as set forth on the
attached Employee Benefits Schedule; (v) agreement or indenture relating to the
borrowing of money or to mortgaging, pledging or otherwise placing a lien on any
material asset of the Company or the Subsidiary, other than as set forth on the
Latest Balance Sheet or on the attached Liens Schedule; (vi) guaranty of any
material obligation for borrowed money or other material guaranty; (vii) lease
or agreement under which it is lessee of, or holds or operates any personal
property owned by any other party, for which the annual rental exceeds $150,000;
(viii) lease or agreement under which it is lessor of or permits any third party
to hold or operate any property, real or personal, for which the annual rental
exceeds $150,000; (ix) contract or group of related contracts with the same
party for the purchase of products or services, under which the undelivered
balance of such products and services has a selling price in excess of $150,000;
(x) contract or group of related contracts with the same party for the sale of
products or services under which the undelivered balance of such products or
services has a sales price in excess of $150,000; (xi) contract which prohibits
the Company or the Subsidiary from freely engaging in business anywhere in the
world; (xii) contract relating to the acquisition or licensing of any material
patent, trademarks, service xxxx, trade name or copyright or any franchise
license, royalty agreements or similar contracts; (xiii) contracts or other
agreements for the grant to any person of any preferential rights to purchase
any of the Company's or Subsidiary's assets (other than inventory), properties
or business; (xiv) contracts or other agreements under which the Company or the
Subsidiary agrees to share any liability for Taxes with any person; (xv)
contracts or other agreements relating to the acquisition by the Company or the
Subsidiary of any operating business or the capital stock of any person; or
(xvi) contracts or other agreements for the payment of fees or other
consideration to any officer or director of the Company or the Subsidiary or any
other entity in which any of the foregoing has an interest.
20
(b) Buyer either has been supplied with, or has been given access
to, a true and correct copy of all written contracts which are referred to on
the Contracts Schedule, together with all material amendments, waivers or other
changes thereto.
(c) Neither the Company nor the Subsidiary nor, to the knowledge of
the Company, any other party to such contract, is in breach of or default under
any contract listed on the Contracts Schedule, and, to the knowledge of the
Company, there does not exist under any thereof any event which, with the giving
of notice or the lapse of time, would constitute such a breach or default,
except for such breaches, defaults and events as to which requisite waivers or
consents have been obtained or which would not, in the aggregate, have a
Material Adverse Effect.
4.10 Licenses. Listed on the Licenses Schedule are all material
licenses, permits, certifications, provider agreements, or other governmental or
regulatory authorizations or approvals regarding the Company or the Subsidiary
(the "Licenses") owned or held by the Company, or used in the business of the
Company. To the Company's knowledge, there are no other Licenses necessary to
enable the Company to carry on its business as presently conducted or as is
contemplated. To the Company's knowledge, all such Licenses are valid,
unrestricted, in full force and effect and there exists no material default
thereunder. To the Company's knowledge, there is no pending or threatened
litigation or other proceeding under which any material License may be
restricted, revoked, terminated or suspended.
4.11 Intellectual Property. Schedule 4.11 sets forth all patents,
patent licenses, trademarks, service marks, trade names, copyrights, franchises,
all applications for any of the foregoing, and all permits, grants and licenses
or other rights running to or from the Company and the Subsidiary relating to
any of the foregoing which are owned by the Company and the Subsidiary or used
in the business of the Company and the Subsidiary. Each of the Company and the
Subsidiary owns, possesses or licenses adequate patents, patent licenses,
trademarks, service marks, copyrights, franchises and trade names necessary to
carry on its business as presently conducted. Except as set forth on Schedule
4.11, none of the Company or the Subsidiary has received any written notice of
infringement of or conflict with asserted rights of others with respect to any
inventions, processes, know-how, formulas, trade secrets, patents, trademarks,
trade names, brand names and copyrights that are owned or used by, or licensed
to, the Company or the Subsidiary. To the knowledge of the Company, except as
set forth on Schedule 4.11, neither the Company nor the Subsidiary is infringing
or has infringed any patent, trademark, service xxxx, trade name, copyright or
franchise rights of any third person or is using or has used without
authorization any trade secret process or confidential information of any third
party.
4.12 Litigation. Except as set forth on the attached Litigation
Schedule, there are no actions, suits or proceedings pending or, to the
Company's knowledge, overtly threatened against the Company or the Subsidiary,
at law or in equity, or before or by any
00
xxxxxxx, xxxxx, xxxxxxxxx or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign and neither the Company
nor the Subsidiary is subject to any outstanding judgment, order or decree of
any court or governmental body.
4.13 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Company, the Subsidiary or the Shareholders, except for the
fees and expenses of NationsBanc Xxxxxxxxxx Securities, Inc. and Chase
Securities Inc.
4.14 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act and the filing of the Certificate of Merger and
except as set forth on the Governmental Consents Schedule, no material permit,
consent, approval or authorization of, or declaration to or filing with, any
governmental or regulatory authority is required in connection with any of the
execution, delivery or performance of this Agreement by the Company or the
Shareholders or the consummation by the Company or the Shareholders of any other
transaction contemplated hereby.
4.15 Employee Benefit Plans.
(a) Except as listed on the Employee Benefits Schedule attached
hereto, with respect to employees of the Company or the Subsidiary, (i) neither
the Company nor the Subsidiary maintains or contributes to any nonqualified
deferred compensation or retirement plans, (ii) neither the Company nor the
Subsidiary maintains or contributes to any qualified defined contribution
retirement plans, (iii) neither the Company nor the Subsidiary maintains or
contributes to any qualified defined benefit pension plans (the plans described
in (ii) and (iii) are collectively referred to as the "Pension Plans"), and (iv)
neither the Company nor the Subsidiary maintains or contributes to any welfare
benefit plans (the "Welfare Plans"). The Pension Plans and the Welfare Plans are
collectively referred to as the "Plans." Each of the Pension Plans (other than
any multiemployer Pension Plans) has received a favorable determination letter
from the Internal Revenue Service that such Plan is a "qualified plan" under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
the related trusts are exempt from tax under Section 501(a) of the Code, and the
Company is not aware of any facts or circumstances that would jeopardize the
qualification of such Pension Plan. The Plans (other than any multiemployer
Pension Plans) comply in form and in operation in all material respects with the
requirements of the Code and the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
(b) With respect to the Plans (other than any multiemployer Pension
Plans), (i) all required contributions have been made or properly accrued on the
Financial Statements, (ii) there are no material actions, suits or claims
pending, other than routine claims for
22
benefits, and (iii) there have been no "prohibited transactions" (as that term
is defined in Section 406 of ERISA or Section 4975 of the Code).
(c) The Company has furnished to Buyer true and complete copies of
(i) the most recent determination letter received from the Internal Revenue
Service regarding the Plans (other than any multiemployer Pension Plans) and
(ii) the latest financial statements for the Plans (other than any multiemployer
Pension Plans) and latest prepared actuarial reports.
(d) Neither the Company, the Subsidiary nor, to the Company's
knowledge, any of its directors, officers, employees or any other "fiduciary,"
as such term is defined in Section 3 of ERISA, has committed any material breach
of fiduciary responsibility imposed by ERISA or any other applicable law with
respect to the Plans which would subject the Company, the Subsidiary or any of
their respective directors, officers or employees to any material liability
under ERISA or any applicable law.
(e) Neither the Company nor the Subsidiary has incurred any material
liability for any tax or civil penalty imposed by Section 4975 of the Code or
Section 502 of ERISA.
(f) Neither the Company nor the Subsidiary has any liability under
any plan which provides medical or death benefits with respect to current or
former employees of the Company or the Subsidiary beyond their termination of
employment (other than coverage mandated by law), and there are no reserves,
assets, surplus or prepaid premiums under any such plan.
(g) To the Company's knowledge, the Company and the Subsidiary have
complied in all material respects with all applicable laws, rules and
regulations relating to their employees or to the employment of labor (including
those relating to wages, hours, collective bargaining and the payment and
withholding of taxes and other sums as required by appropriate governmental
authorities). Except as set forth in the Employee Benefits Schedule, to the
Company's knowledge, there is no unfair labor practice complaint pending or
threatened against the Company or the Subsidiary before the National Labor
Relations Board or any state or local agency, no pending labor strike, and no
other material labor grievance.
4.16 Insurance. The attached Insurance Schedule lists and briefly
describes each material insurance policy maintained by the Company and the
Subsidiary. All of such insurance policies are in full force and effect, and to
the Company's knowledge, neither the Company nor the Subsidiary is in material
default with respect to its obligations under any of such insurance policies.
23
4.17 Compliance with Laws. Except as set forth on Schedule 4.17, the
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any Governmental Authority, except for violations,
which individually or in the aggregate with other violations, would not have a
Material Adverse Effect. As of the date of this Agreement, the Company has
received no written notice that any investigation or review by any Governmental
Authority with respect to the Company which would result in a Material Adverse
Effect is pending, or, to the knowledge of the Company, threatened.
4.18 Environmental Compliance and Conditions.
(a) The Company and the Subsidiary have obtained and possess all
material permits, licenses and other authorizations required under federal,
state and local laws and regulations relating to public health and safety,
worker health and safety and pollution or protection of the environment
(including all laws and regulations relating to the emission, discharge, release
or threatened release of any chemicals, petroleum, pollutants, contaminants or
hazardous or toxic materials, substances or wastes into ambient air, surface
water, groundwater or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any chemicals, petroleum, pollutants, contaminants or hazardous or
toxic materials, substances or waste ("Environmental and Safety Requirements")),
except where the failure to possess such licenses, permits and authorizations
("Environmental Permits") would not have a Material Adverse Effect. Except as
set forth on the attached Environmental Compliance Schedule, the Company and the
Subsidiary are in compliance with all terms and conditions of such permits,
licenses and authorizations and are also in compliance with all other
Environmental and Safety Requirements or any written notice or demand letter
issued, entered, promulgated or approved thereunder, except where the failure to
comply would not have a Material Adverse Effect.
(b) To the Company's knowledge, neither the Company nor the
Subsidiary has received any written notice of violations or liabilities arising
under Environmental and Safety Requirements, including any investigatory,
remedial or corrective obligations, relating to the Company or the Subsidiary
and arising under Environmental and Safety Requirements.
(c) Except as disclosed in the Environmental Compliance Schedule, to
the Company's knowledge, all disposal, storage, treatment, handling, production
or processing of any hazardous, dangerous, medical or toxic substances or solid
waste by the Company has been conducted in compliance in all material respects
with all applicable Environmental and Safety Requirements. Except as set forth
on the Environmental Compliance Schedule, to the Company's knowledge, there are
no underground storage tanks on the Real Property or the Leased Real Property.
24
(d) This Section 4.18 constitutes the sole and exclusive
representations and warranties of the Company with respect to the Environmental
and Safety Requirements, Environmental Permits and all other environmental
matters.
4.19 Inventory and Accounts Receivable. The inventories of the
Company reflected on the Latest Balance Sheet are reflected thereon in
accordance with GAAP, will be realizable in the ordinary course of business and
are not damaged or obsolete. The accounts receivable reflected on the Latest
Balance Sheet were, and accounts receivables arising since the Latest Balance
Sheet Date are, valid receivables subject to no setoffs or counterclaims.
4.20 Title to Properties; Liens.
(a) Each of the Company and Subsidiary has good and legal title to
all its respective properties and assets (except that this representation shall
not apply to the Real Property, which is addressed in Section 4.07), free and
clear of any Lien or encumbrances, except for Permitted Liens.
(b) The assets of the Company and Subsidiary include, in all
material respects, all of the assets used in the conduct by the Company and
Subsidiary of their business currently and through the Closing Date as
contemplated herein.
4.21 Transactions with Affiliates. Except as set forth in Schedule
4.21, agreements to be terminated on the Closing Date and transactions among the
Company and the Subsidiary, neither the Company nor the Subsidiary has engaged
in any transaction with any stockholder, director or executive officer of the
Company or the Subsidiary (or any Affiliate thereof).
4.22 Indebtedness. Except as set forth on the Indebtedness Schedule,
there are no contracts, agreements understandings or other obligations relating
to Indebtedness with respect to the Company or the Subsidiary.
4.23 Absence of Undisclosed Liabilities. The Company and the
Subsidiary have no liabilities of the nature required to be disclosed under GAAP
arising out of transactions entered into prior to the Closing, or any action or
inaction prior to the Closing, or any state of facts existing prior to the
Closing, except (i) liabilities under contracts or commitments described in the
Contracts Schedule or under contracts and commitments which are not required to
be disclosed thereon, (ii) liabilities reflected on the Latest Balance Sheet,
(iii) liabilities which have arisen after the Latest Balance Sheet Date in the
ordinary course of business or otherwise in accordance with the terms and
conditions of this Agreement, (iv) liabilities otherwise disclosed in this
Agreement or the schedules attached hereto and (v) liabilities which
individually or collectively would not have a Material Adverse Effect on the
Company and the Subsidiary.
25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Shareholders and the Company
that:
5.01 Organization and Corporate Power. Buyer is a corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to enter into this Agreement
and perform its obligations hereunder.
5.02 Authorization. The execution, delivery and performance of this
Agreement by Buyer and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all requisite corporate action, and no
other corporate proceedings on its part are necessary to authorize the
execution, delivery or performance of this Agreement. Assuming that this
Agreement is a valid and binding obligation of the Executing Shareholders and
the Company, this Agreement constitutes a valid and binding obligation of Buyer,
enforceable against it in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization or other similar laws and to the general
principles of equity (whether considered in proceedings at law or in equity).
5.03 No Violation. Buyer is not subject to or obligated under its
certificate of incorporation, its bylaws, any applicable law, or rule or
regulation of any governmental authority, or any material agreement or
instrument, or any license, franchise or permit, or subject to any order, writ,
injunction or decree, which would be breached or violated in any material
respect by its execution, delivery or performance of this Agreement.
5.04 Governmental Authorities; Consents. Except for the applicable
requirements of the HSR Act and the filing of the Certificate of Merger with the
State of Delaware, Buyer is not required to submit any notice, report or other
filing with any governmental authority in connection with the execution,
delivery or performance by it of this Agreement or the consummation of the
transactions contemplated hereby. No consent, approval or authorization of any
governmental or regulatory authority or any other party or Person is required to
be obtained by Buyer in connection with its execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated hereby.
5.05 Litigation. There are no actions, suits or proceedings pending
or, to Buyer's knowledge, overtly threatened against or affecting Buyer at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would adversely affect Buyer's performance under this
Agreement or the consummation of the transactions contemplated hereby.
26
5.06 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Buyer, except for the fees and expenses of Xxxx Wheat & Partners
Incorporated, which fees and expenses shall be paid by Buyer.
5.07 Financing. Buyer has delivered to the Company true and complete
copies of written commitments of third parties to provide Buyer with financing
in an amount sufficient to effectuate the transactions contemplated hereby.
5.08 No Knowledge of Misrepresentations or Omissions. Other than
with respect to representations and warranties contained in Section 4.04,
4.06(g), 4.06(o), 4.08 and 4.22, Buyer has no actual knowledge which it has
deliberately concealed from the Shareholders to the effect that the
representations and warranties of the Company in this Agreement and the
Schedules hereto contain any material misrepresentations.
ARTICLE VI
PRE-CLOSING COVENANTS
From the date of this Agreement up to and including the Closing Date
(unless this Agreement is terminated pursuant to Article VIII), the parties
hereto covenant and agree:
6.01 Conduct of the Business.
(a) Except as contemplated by this Agreement, the Company shall, and
shall cause the Subsidiary to, conduct its business and operations only in the
ordinary course and, without the prior written consent of Buyer, the Company
shall not, and shall ensure that the Subsidiary does not, undertake any action
requiring disclosure under Section 4.06.
(b) Notwithstanding Section 6.01(a), neither the Company nor the
Subsidiary may use Cash (including Excess Cash and proceeds from the Revolver)
for any purpose other than as described in Section 4.06(o).
6.02 Access to Books and Records. The Company shall provide Buyer
and its authorized representatives ("Buyer's Representatives") with full access
at all reasonable times and upon reasonable notice to the offices, properties,
personnel, books and records of the Company and the Subsidiary in order for
Buyer to have the opportunity to make such investigation as it shall reasonably
desire to make of the affairs of the Company and the Subsidiary. Buyer
acknowledges that it remains bound by the Confidentiality Agreement, dated
November 20, 1997, with the Company (the "Confidentiality Agreement").
27
6.03 Notification. The Company shall disclose to Buyer in writing
any material variances from the representations and warranties contained in
Article IV promptly upon discovery thereof.
6.04 Regulatory Filings. The Company shall make or cause to be made
all filings and submissions under the HSR Act and any other laws or regulations
applicable to the Shareholders, the Company and the Subsidiary for the
consummation of the transactions contemplated herein. The Company shall
coordinate and cooperate with Buyer in exchanging such information and
assistance as Buyer may reasonably request in connection with all of the
foregoing.
6.05 Conditions. The Company shall use its best efforts to cause the
conditions set forth in Section 2.01 to be satisfied and to consummate the
transactions contemplated herein as soon as reasonably possible after the
satisfaction of the conditions set forth in Article II (other than those to be
satisfied at the Closing).
6.06 Options. Prior to or contemporaneous with the Closing, the
Company shall offer to redeem and cancel all Non-Shareholder Options. The amount
to be paid in connection with such redemption or cancellation is referred to
herein as the "Option Payment."
6.07 Shareholder Approval of Payments. The Company shall have
satisfied the shareholder approval requirements of Section 280G(b)(5)(B) of the
Code with respect to all payments to be made to disqualified individuals
(within the meaning of Section 280G(c) of the Code) in connection with the
transactions contemplated hereby.
ARTICLE VII
COVENANTS OF BUYER
7.01 Access to Books and Records. From and after the Closing, Buyer
shall, and shall cause the Surviving Corporation and the Subsidiary to, provide
the Shareholders' Representative, the Shareholders and their agents with
reasonable access (for the purpose of examining and copying), during normal
business hours, to the books and records of the Company and the Subsidiary with
respect to periods or occurrences prior to the Closing Date in connection with
any matter whether or not relating to or arising out of this Agreement or the
transactions contemplated hereby. Unless otherwise consented to in writing by
the Shareholders' Representative, neither the Company nor the Subsidiary shall,
for a period of seven years following the Closing Date, destroy, alter or
otherwise dispose of any of the books and records of the Company or the
Subsidiary for the period prior to the Closing Date without first offering to
surrender to the Shareholders' Representative such books and records
28
or any portion thereof which Buyer, the Company or the Subsidiary may intend to
destroy, alter or dispose of.
7.02 Notification. Prior to the Closing, upon discovery, Buyer shall
promptly inform the Company and the Shareholders' Representative in writing of
any material variances from Buyer's representations and warranties contained in
Article V.
7.03 Director and Officer Liability and Indemnification. For a
period of six years after the Closing, Buyer shall not, and shall not permit the
Company or the Subsidiary to amend, repeal or modify any provision in the
Company's or the Subsidiary's certificate or articles of incorporation or bylaws
relating to the exculpation or indemnification of former officers and directors
(unless required by law), it being the intent of the parties that the officers
and directors of the Company and the Subsidiary prior to the Closing shall
continue to be entitled to such exculpation and indemnification to the fullest
extent permitted under applicable law.
7.04 Regulatory Filings. Buyer shall make or cause to be made all
filings and submissions under the HSR Act and any other laws or regulations
applicable to Buyer as may be required of Buyer for the consummation of the
transactions contemplated herein, and Buyer shall be responsible for all filing
fees under the HSR Act. Buyer shall coordinate and cooperate with the Company in
exchanging such information and assistance as the Company may reasonably request
in connection with all of the foregoing.
7.05 Conditions. Buyer shall use its best efforts to cause the
conditions set forth in Section 2.02 to be satisfied and to consummate the
transactions contemplated herein as soon as reasonably possible after
satisfaction of the conditions set forth in Article II.
7.06 Contact with Customers and Suppliers. Prior to the Closing,
Buyer and Buyer's representatives shall contact and communicate with the
employees, customers and suppliers of the Company and the Subsidiary in
connection with the transactions contemplated hereby only with the prior written
consent of the Company or the Shareholders' Representative.
7.07 Maintain Employee Benefits. Buyer agrees to provide, for a
period of at least one year after Closing, substantially comparable employee
benefits to the employees and former employees of the Company as are provided
immediately prior to Closing.
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ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual consent of Buyer and the Shareholders'
Representative;
(b) by Buyer, if there has been a material violation or breach by
the Company of any covenant, representation or warranty contained in this
Agreement which has prevented or, if not curable, would prevent the satisfaction
of any condition to the obligations of Buyer at the Closing and such violation
or breach has not been waived by Buyer or, in the case of a covenant breach,
cured by the Company by the earlier of the Closing or within ten days after
written notice thereof from Buyer;
(c) by the Shareholders' Representative, if there has been a
material violation or breach by Buyer of any covenant, representation or
warranty contained in this Agreement which has prevented or, if not curable,
would prevent the satisfaction of any condition to the obligations of the
Company at the Closing and such violation or breach has not been waived by the
Shareholders' Representative or, with respect to a covenant breach, cured by
Buyer by the earlier of the Closing or within ten days after written notice
thereof by the Shareholders' Representative (provided that the failure of Buyer
to deliver any of the Per Share Cash Consideration Amount at the Closing as
required hereunder shall not be subject to cure hereunder unless otherwise
agreed to in writing by the Shareholders' Representative); or
(d) by either Buyer or the Shareholders' Representative if the
transactions contemplated hereby have not been consummated by the close of
business on February 25, 1998, provided that neither Buyer nor the Shareholders'
Representative shall be entitled to terminate this Agreement pursuant to this
Section 8.01(d) if such Person's (or the Company's or any Shareholder's, in the
case of the Shareholder's Representative) willful breach of this Agreement or
willful misconduct has prevented the consummation of the transactions
contemplated hereby.
8.02 Effect of Termination.
(a) In the event of termination of this Agreement by either Buyer or
the Shareholders' Representative as provided above, the provisions of this
Agreement shall immediately become void and of no further force and effect
(other than this Section 8.02, Article IX, Article X and Article XII hereof and
the Confidentiality Agreement which shall survive the termination of this
Agreement), and there shall be no liability on the part of either Buyer, the
Company or the Shareholders to one another.
30
(b) In the event that this Agreement is terminated, other than
pursuant to Section 8.01(a) or as the result of a breach of a covenant,
representation or warranty contained herein by the Company or by reason of the
failure of any of the conditions precedent to the obligations of Buyer contained
in Section 2.01, Buyer shall pay to the Company five million dollars
($5,000,000) in immediately available funds within five business days of such
termination which the parties agree is a genuine estimate of the costs incurred
by the Company, the Subsidiary, the Shareholders' Representative and the
Shareholders as a result of Buyer's failure to close the transactions
contemplated hereby.
(c) The right accorded to the Company under Section 8.02(b) shall be
the exclusive remedy of the Company, the Subsidiary and the Shareholders for the
termination of this Agreement to which Section 8.02(b) would apply. In
furtherance of the foregoing, the Company, the Subsidiary and the Shareholders
hereby waive, to the fullest extent permitted under applicable law, and agree
not to assert in any action or proceeding of any kind, any and all rights,
claims and causes of action any of such parties may now or hereafter have
against Buyer, HWH Capital Partners, L.P. or Xxxx Wheat & Partners Incorporated
(or any of their respective directors, officers, partners, shareholders or
affiliates) by reason of such termination (including, without limitation, any
such rights, claims or causes of action arising under or based upon common law)
other than claims for payment of the amount set forth in Section 8.02(b).
ARTICLE IX
SHAREHOLDERS' REPRESENTATIVES
9.01 Designation. Olympus Growth Fund II, L.P. or its designee (the
"Shareholders' Representative") is hereby designated by each of the Executing
Shareholders to serve as the representative of the Executing Shareholders with
respect to the matters expressly set forth in this Agreement to be performed by
the Shareholders' Representative. By due execution of a Letter of Transmittal
each Shareholder (other than Executing Shareholders, who have appointed such
Shareholders' Representative hereby) thereby designate Olympus Growth Fund II,
L.P. or its designee as its representative with respect to matters expressly set
forth in this Agreement to be performed by the Shareholders' Representative.
Until Buyer is notified in writing to the contrary, Xxxxx X. Xxxxxxxxxx or
Xxxxxx X. Xxxxxx shall act on behalf of the Shareholders' Representative.
9.02 Authority. Each of the Executing Shareholders, by the execution
of this Agreement, hereby, and each Shareholder (other than the Executing
Shareholder) duly executing a Letter of Transmittal thereby, irrevocably
appoints the Shareholders' Representative as the agent, proxy and
attorney-in-fact for such Shareholders for all purposes of this Agreement
(including the full power and authority on such Shareholder's behalf (i) to
consummate the transactions contemplated herein, and in the event of such
consummation, to
31
receive payment on behalf of such Shareholder for its securities pursuant to
Section 3.03(a); (ii) to pay such Shareholder's expenses incurred in connection
with the negotiation and performance of this Agreement (whether incurred on or
after the date hereof), it being understood that such expenses shall be
allocated among the Shareholders pro rata based on each such Shareholder's Pro
Rata Share; (iii) to disburse any funds received hereunder to such Shareholder
and each other Shareholder; (iv) to endorse and deliver any certificates
required hereunder, including the endorsement and delivery of any stock
certificates or instruments representing the securities and execution and
delivery of stock powers and such further instruments of assignment as Buyer
shall reasonably request; (v) to execute and deliver on behalf of such
Shareholder any amendment or waiver hereto; provided, however, that such
amendment or waiver does not change the form of payment to the Shareholders, and
does not increase the Shareholders' liabilities in any material respect; (vi) to
take all other actions to be taken by or on behalf of such Shareholder in
connection herewith; (vii) to pay or accept any amount pursuant to Article I
hereof; (viii) to negotiate, settle, compromise and otherwise handle all claims
made by Buyer; and (ix) to do each and every act and exercise any and all rights
which such Shareholder or the Shareholders collectively are permitted or
required to do or exercise under this Agreement). In furtherance thereof, the
Shareholders' Representative is expressly authorized to retain accountants,
legal counsel and other agents. The Shareholders agree that such agency and
proxy are coupled with an interest, are therefore irrevocable without the
consent of the Shareholders' Representative and shall survive the death,
incapacity, bankruptcy, dissolution or liquidation of any Shareholder.
9.03 Exculpation. Neither the Shareholders' Representative (in its
capacity as the Shareholders' Representative) nor any agent employed by it shall
incur any liability to any Shareholder or to Buyer by virtue of the failure or
refusal of the Shareholders' Representative for any reason to consummate the
transactions contemplated hereby or relating to the performance of its other
duties hereunder, except for actions or omissions constituting fraud, bad faith
or gross negligence. Shareholders, on a several basis and in accordance with
their Pro Rata Share, hereby agree to indemnify the Shareholders' Representative
and any agent employed by them for and hold harmless against any loss,
liability, or expense incurred without fraud or bad faith on the part of the
Shareholders' Representative arising out of or in connection with their
performance under this Agreement.
9.04 Resignation, Discharge and Appointment. The Shareholders'
Representative may resign and be discharged from his or its duties and
obligations under this Agreement by giving notice in writing of such resignation
specifying a date (no earlier than 30 days following the date of such notice)
when such resignation will take effect; provided, however, that until a
successor shareholders' representative is appointed by the Shareholders'
Representative or a majority in interest of the Shareholders (determined based
on such Shareholders' Pro Rata Share), the Shareholders' Representative shall
continue to perform its duties and obligations under this Agreement.
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ARTICLE X
ADDITIONAL COVENANTS
10.01 Survival of Representations and Warranties; Effect of Closing.
The representations, warranties and covenants (except those post-Closing
covenants set forth in Sections 7.01, 7.03, 7.07 and Articles IX, X and XII of
this Agreement) set forth in this Agreement or in any writing delivered by any
Person in connection with this Agreement shall survive the execution and
delivery of this Agreement but shall terminate upon the consummation of the
transactions contemplated hereby or the termination of this Agreement and shall
not survive beyond the Closing; provided that (i) the representations and
warranties set forth in Sections 4.12 and 4.18 shall survive for six months
following the Closing Date and shall have no further force or effect thereafter,
and (ii) the representations and warranties set forth in each Letter of
Transmittal and in Sections 4.04, 4.06(g), 4.06(o) 4.08, 4.22 and 5.08 and the
covenants set forth in Sections 6.01(b) and 10.05 shall survive for three years
following the Closing Date and shall have no further force or effect thereafter.
10.02 Indemnification.
(a) Indemnification by Executing Shareholders. Subject to the
limitations contained in Section 10.02(c) and Section 10.01, each Executing
Shareholder, individually and not jointly, agrees to indemnify, defend and hold
harmless, Buyer (and its directors, officers, employees, successors and assigns)
from and against any and all losses, claims, damages, liabilities and expenses
("Losses") up to an amount equal to each such Shareholder's Pro Rata Share of
any such Loss based upon, arising out of or otherwise in respect of any
inaccuracy in or any breach of the representations, warranties or covenants made
by Company or the Subsidiary in Sections 4.04, 4.06(g), 4.06(o), 4.08, 4.12,
4.18, 4.22, 6.01(b) and 10.05 of this Agreement or in any certificate relating
to such representations, warranties or covenants delivered pursuant hereto.
(b) Notice and Opportunity to Defend. When making a claim under
Section 10.02(a), Buyer shall, promptly after the receipt of notice of the
commencement of any action, investigation, claim or other proceeding against it,
the Company or the Subsidiary in respect of which indemnity may be sought from
the Executing Shareholders under this Section 10.02(a), notify the Shareholders'
Representative in writing of the commencement thereof. The failure of Buyer to
so notify the Shareholders' Representative of any such action shall not relieve
the Executing Shareholders from any liability which it may have to Buyer (i)
other than pursuant to Section 10.02(a) or (ii) under Section 10.02(a) unless,
and only to the extent that, such failure results in the Executing Shareholders'
forfeiture of substantial rights or defenses. In any case in which any action,
claim or other proceeding shall be brought against Buyer, the Company or the
Subsidiary, and it shall notify the Shareholders' Representative of the
commencement thereof, the Shareholders' Representative shall be entitled to
assume the defense thereof at its own expense, with counsel reasonably
satisfactory to Buyer; provided,
33
however, that Buyer may, at its own expense, retain separate counsel to
participate in such defense. The Shareholders' Representative agrees that it
will not, without the prior written consent of Buyer, the Company or the
Subsidiary (as the case may be), settle, compromise or consent to the entry of
any judgment in any pending or threatened claim, action or proceeding relating
to the matters contemplated hereby (if Buyer, the Company or the Subsidiary is a
party thereto or has been actually threatened to be made a party thereto) unless
such settlement, compromise or consent includes an unconditional release of
Buyer, the Company or the Subsidiary (as the case may be) from all liability
arising or that may arise out of such claim, action or proceeding. The Executing
Shareholders shall be liable for any settlement of any claim, action or
proceeding effected against Buyer, the Company or the Subsidiary without their
written consent, which consent shall not be unreasonably withheld. The rights
accorded to Buyer, the Company or the Subsidiary under Section 10.02 shall be
the exclusive remedy of such parties for any Losses based upon, arising out of
or otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant or agreement contained in this Agreement or in any documents
delivered pursuant hereto.
(c) Limitations on Indemnifications. Except as provided in Section
10.02(c)(iii) below, the indemnification provided for in Section 10.02 shall be
subject to the following limitations:
(i) The Executing Shareholders shall not be obligated to pay
any amount for indemnification under Section 10.02(a) until the aggregate amount
of Losses equals one million five hundred thousand dollars ($1,500,000) (the
"Basket Amount"), whereupon the Executing Shareholders shall be obligated to pay
in full all amounts for indemnification in excess of the Basket Amount.
(ii) The Executing Shareholders shall not be obligated to make
any payment for indemnification under Section 10.02(a) in excess of three
million dollars ($3,000,000) in the aggregate.
(iii) The limitations set forth in this Section 10.02(c) shall
only apply to breaches of any of the representations and warranties set forth in
Sections 4.12 and 4.18.
(d) Indemnification by Buyer and the Company. After the Closing,
subject to the limitations contained in Section 10.01, Buyer and the Company
hereby jointly and severally agree to indemnify, defend and hold harmless, the
Executing Shareholders from and against any and all Losses based upon, arising
out of or otherwise in respect of any inaccuracy in or any breach of the
representations, warranties or covenants made by Buyer in this Agreement or in
any certificate relating to such representations, warranties or covenants
delivered pursuant hereto.
34
10.03 Limitation of Recourse. The rights accorded to Buyer, the
Company and Subsidiary under this Article X shall be the exclusive remedy of
such parties for any Losses based upon, arising out of or otherwise in respect
of any inaccuracy or breach of any representation, warranty and covenant
contained in this Agreement or in any documents delivered pursuant hereto;
provided, that, this Section 10.03 does not limit the liability of any
Shareholder for any breach of any term of such Shareholder's Letter of
Transmittal for which each such Shareholder will be severally liable. In
furtherance of the foregoing, Buyer hereby waives, with respect to Losses based
upon, arising out of or otherwise in respect of any inaccuracy or breach of any
representation, warranty and covenant under this Agreement, to the fullest
extent permitted under applicable law, and agrees not to assert in any action or
proceeding of any kind related thereto, any and all rights, claims and causes of
action it may now or hereafter have against the Executing Shareholders relating
to this Agreement (including, without limitation, any such rights, claims or
causes of action arising under or based upon common law) other than claims for
indemnification asserted as permitted by and in accordance with the provisions
set forth in this Article X. The obligations of the Executing Shareholders for
all purposes under this Agreement are several and not joint and several, and in
no event shall the Executing Shareholders, the Shareholders' Representative or
any present or former officer, director or employee (present or former) of the
Company or the Subsidiary have any shared or vicarious liability for the actions
or omissions of any other Person.
10.04 Arbitration Procedure.
(a) Buyer, the Executing Shareholders and the Shareholders'
Representative agree that the arbitration procedure set forth below shall be the
sole and exclusive method for resolving and remedying any and all disputes
regarding claims for money damages based upon, arising out of or in any way
connected with the Agreement or the transactions contemplated herein (the
"Disputes"). Nothing in this Section 10.04 shall prohibit a party hereto from
instituting litigation to enforce any Final Determination (as defined below).
The parties hereby agree and acknowledge that, except as otherwise provided in
this Section 10.04 or in the Commercial Arbitration Rules of the American
Arbitration Association as in effect from time to time, the arbitration
procedures and any Final Determination hereunder shall be governed by and shall
be enforced pursuant to the Uniform Arbitration Act as in effect in the State of
Delaware.
(b) In the event that any party asserts that there exists a Dispute,
such party shall deliver a written notice to each other party involved therein
specifying the nature of the asserted Dispute and requesting a meeting to
attempt to resolve the same. If no such resolution is reached within 45 days
after such delivery of such notice, the party delivering such notice of Dispute
(the "Disputing Person") may, within 75 days after delivery of such notice,
commence arbitration hereunder by delivering to each other party involved
therein a notice of arbitration (a "Notice of Arbitration") and by filing a copy
of such Notice of Arbitration with the Wilmington, Delaware office of the
American Arbitration Association.
35
Such Notice of Arbitration shall specify the matters as to which arbitration is
sought, the nature of any Dispute, the claims of each party to the arbitration
and the amount and nature of damages or other relief sought to be recovered as a
result of any alleged claim and any other matters required by the Commercial
Arbitration Rules of the American Arbitration Association as in effect from time
to time to be included therein.
(c) Buyer and the Shareholders' Representative each shall select one
arbitrator expert in the subject matter of the Dispute (the arbitrators so
selected shall be referred to herein as "Buyer's Arbitrator" and "Seller's
Arbitrator," respectively). In the event that either party fails to select an
arbitrator as set forth herein within 30 days after the delivery of a Notice of
Arbitration, then the matter shall be resolved by the arbitrator selected by the
other party. Seller's Arbitrator and Buyer's Arbitrator shall select a third
independent, neutral arbitrator expert in the subject matter of the Dispute, and
the three arbitrators so selected shall resolve the Dispute according to the
procedures set forth in this Section 10.04. If Seller's Arbitrator and Buyer's
Arbitrator are unable to agree on a third arbitrator within 20 days after their
selection, Seller's Arbitrator and Buyer's Arbitrator shall each prepare a list
of three independent arbitrators. Seller's Arbitrator and Buyer's Arbitrator
shall each have the opportunity to designate as objectionable and eliminate one
arbitrator from the other arbi trator's list within ten days after submission
thereof, and the third arbitrator shall then be selected by lot from the
arbitrators remaining on the lists submitted by Seller's Arbitrator and Buyer's
Arbitrator.
(d) The arbitrators selected pursuant to paragraph (c) shall
determine the allocation of the costs and expenses of arbitration based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party.
(e) The arbitration shall be conducted in Wilmington, Delaware under
the Commercial Arbitration Rules of the American Arbitration Association as in
effect from time to time, except as otherwise set forth herein or as modified by
the agreement of Buyer and the Shareholders' Representatives. The arbitrators
shall conduct the arbitration such that a final result, determination, finding,
judgment and/or award (the "Final Determination") is made or rendered as soon as
practicable, but in no event later than 120 days after the delivery of the
Notice of Arbitration nor later than ten days following completion of the
arbitration. The Final Determination shall be made in writing, shall state the
basis for such determination and shall be agreed upon and signed by the sole
arbitrator or by at least two of the three arbitrators (as the case may be). The
Final Determination shall be final and binding on all parties, and there shall
be no appeal from or reexamination of the Final Determination, except for fraud,
perjury, evident partiality or misconduct by an arbitrator prejudicing the
rights of any party and to correct manifest clerical errors.
36
(f) Buyer and the Shareholders may enforce any Final Determination
in any state or federal court having jurisdiction over the Dispute. For the
purpose of any action or proceeding instituted with respect to any Final
Determination, each party hereto hereby irrevocably submits to the jurisdiction
of such courts, irrevocably consents to the service of process by registered
mail or personal service and hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter have as to
personal jurisdiction or jurisdiction, the laying of the venue of any such
action or proceeding brought in any such court and any claim that any such
action or proceeding brought in any court has been brought in an inconvenient
form.
10.05 Preparation of Tax Returns. The following provisions shall
govern the allocation of responsibility as between Buyer and the Company on the
one hand and the Executing Shareholders and the Shareholders' Representative on
the other hand for certain tax matters following the Closing:
(a) For any tax periods ending on or before the Closing Date or for
the portion of any tax period beginning on or before the Closing Date through to
the Closing Date, the Company shall prepare or cause to be prepared all Tax
Returns for the Company and the Subsidiary which are filed after the Closing
Date. Subject to the requirements of applicable law, each such Tax Return shall
be prepared in a manner consistent with past practices of the Company and the
Subsidiary. Each such Tax Return shall be submitted to the Shareholders'
Representative at least fifteen days prior to the due date (including any
extension thereof) for filing such Tax Return. The Company shall make any
changes in such proposed Tax Return as are reasonably requested by the
Shareholders' Representative no less than five days prior to the due date
(including extensions) for filing such Tax Return. The Company shall file timely
or cause to be filed timely such Tax Return, as so modified. In the event the
Company is required to make any payment of an amount for Taxes relating or
attributable to any tax period ending on or before the Closing Date or for the
portion of any tax period beginning on or before the Closing Date through to the
Closing Date, the Shareholders hereby covenant and agree with Buyer, the Company
and the Subsidiary to pay such amount (the "Pre-Closing Taxes"). The Executing
Shareholders shall, within five days of receipt of written notice from the
Company of any Pre-Closing Taxes, pay to the Company, by check or wire transfer
as directed by the Company in such notice, their Pro Rata Share of the amount of
the Pre-Closing Taxes less any amount due and payable by the Company to the
Shareholders' Representative on account of any refund or credit of Taxes to be
paid by the Company to the Shareholders' Representative pursuant to this Section
10.05(a) to the extent that such refund amount has not already been paid by the
Company to the Shareholders' Representative. In the event the Company or the
Subsidiary receives a refund or credit of Taxes relating or attributable to any
tax period ending on or before the Closing Date or for the portion of any tax
period beginning on or before the Closing Date through to the Closing Date,
Buyer shall cause the Company to, and the Company shall, within five business
days of receipt or utilization of such amount, pay to the Shareholders'
Representative
37
(on behalf of the Shareholders) the amount by which such refund or credit
exceeds the amount (if any) required to be paid by the Shareholders'
Representative to the Company or the Subsidiary with respect to any Pre-Closing
Taxes. For the purposes of the foregoing, a credit shall be deemed utilized at
such time as the actual liability of the Company or the Subsidiary for Taxes
(including estimated Taxes) is less than it would have been had such credit not
been available. In the event that the liability of the Company or the Subsidiary
for Taxes for any tax period beginning after the Closing Date or for any portion
of a tax period such portion beginning after the Closing Date (in each case, a
"Post-Closing Period") is reduced as a result of taking into account in any such
Post-Closing Period any item of loss or deduction attributable to (i) the
exercise or cashing out of any warrants or options for stock of the Company
after the date hereof and on or before the Closing Date and (ii) payments in the
nature of prepayment penalties with respect to the Indebtedness referred to in
Section 1.05(b)(iii) hereof (in each case, a "Tax Reduction Item"), Buyer shall
cause the Company to, and the Company shall, within fifteen business days of the
close of such Post-Closing Period, pay to the Shareholder's Representative (on
behalf of the Shareholders) the amount of such reduction. For purposes of the
foregoing the amount of any reduction in Taxes attributable to a Tax Reduction
Item to be taken into account for any Post-Closing Period shall be an amount
equal to the excess if any of (x) the liability of the Company or the Subsidiary
for Taxes for such Post-Closing Period determined without regard to any Tax
Reduction Items over (y) the liability of the Company or the Subsidiary for
Taxes for such Post-Closing Period determined by taking into account any Tax
Reduction Items properly taken into account for such Post-Closing Period and all
prior Post-Closing Periods. To the extent that taking any Tax Reduction Item
into account for any Post-Closing Period results in a reduction in Taxes in
accordance with the preceding sentence, such Tax Reduction Item shall not be
taken into account in any subsequent Post-Closing Period. In the event of any
adjustment to the taxable income of the Company or the Subsidiary for any
Post-Closing Period as a result of an audit or otherwise, the amount of any
reduction in Taxes for all Post-Closing Periods shall be recalculated and the
Company shall pay to the Shareholders' Representative (on behalf of the
Shareholders) or the Shareholders' Representative (on behalf of the
Shareholders) shall pay to the Company the amount of any adjustment in such
reduction of Taxes. For purposes of this Section 10.5(a) the liability for
Pre-Closing Taxes and for Taxes for the Post-Closing Period beginning after the
Closing Date shall be determined by closing the books of the Company as of the
close of business on the Closing Date and allocating all items through such time
to the Pre-Closing Period ending on the Closing Date and allocating all items
arising thereafter to the Post-Closing Period beginning on the day after the
Closing Date.
(b) Buyer, the Company, the Executing Shareholders and the
Shareholders' Representative shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section 10.05 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making employees
38
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Company shall retain all
books and records with respect to Tax matters pertinent to the Company and the
Subsidiary relating to any tax periods and shall abide by all record retention
agreements entered into with any taxing authority, and shall give the
Shareholders' Representative reasonable written notice prior to transferring,
destroying or discarding any such books and records prior to the expiration of
the applicable statute of limitations for that tax period, and if the
Shareholders' Representative so requests, the Company shall allow the
Shareholders' Representative to take possession of such books and records.
10.06 Further Assurances. From time to time, as and when requested
by any party hereto and at such party's expense, any other party shall execute
and deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.
ARTICLE XI
DEFINITIONS
"Affiliates" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership of voting
securities, contract or otherwise.
"Allowable Deferred Acquisition Amount" means the sum of (A) an amount equal to
the lesser of (i) the aggregate of any deferred and unpaid purchase price
outstanding as of the Closing Date and relating to (x) the retail store in
Flagstaff, Arizona, (y) the retail stores in Charleston, Columbia and West
Columbia, South Carolina and (z) the retail store in Houston, Texas (the
"Acquired Stores") and (ii) the excess of $4,100,000 over the aggregate cash
purchase price actually paid on or before the Closing for the acquisition of the
Acquired Stores, plus (B) an amount equal to the lesser of (i) the aggregate of
any deferred and unpaid purchase price outstanding as of the Closing Date
relating to the acquisition of CSC and (ii) the excess of $4,200,000 over the
aggregate cash purchase price actually paid on or before the Closing for the
acquisition of CSC. The parties acknowledge that the full amounts described in
clauses (A)(i) and (B)(i) of this definition are Indebtedness, and thus subject
to reduction pursuant to clause (iii) of the second sentence of the definition
of Indebtedness.
"Buyer's Share of Excess Cash" means an amount equal to the excess of Excess
Cash over the amount by which the Merger Consideration is increased by reason of
Section 3.01(a)(iii).
39
"Cash" means the aggregate amount of the Company's and the Subsidiary's cash and
cash equivalents as of the time of determination determined on a consolidated
basis in accordance with the accounting principles, methods and procedures used
in preparation of the Company's March 31, 1997 consolidated financial
statements.
"Excess Cash" means all Cash as of the close of business on the business day
prior to the Closing Date ((x) less an amount equal to any accrued interest on
Indebtedness accrued but unpaid through the Closing Date, (y) plus an amount
equal to any asset, net of all applicable fees and expenses, resulting from the
termination of any interest rate swap, collar, cap or similar hedging
arrangement and (z) less the Allowable Deferred Acquisition Amount (if any)),
except (i) Cash maintained at any of the retail stores of the Company or the
Subsidiary for regular business purposes consistent with past practice and (ii)
Cash in the possession or in the control of any employee of the Company or the
Subsidiary, to be used in the normal course of the wholesale textbook purchasing
operations of the Company and the Subsidiary.
"Excess CSC Consideration" means the amount by which the purchase price paid and
to be paid (including any deferred purchase price) by the Company or the
Subsidiary for the acquisition of CSC exceeds $3,000,000.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administration functions of or pertaining to government
or any other government authority, agency, department, board, commission or
instrumentality of the United States, any foreign government, any state of the
United States or any political subdivision thereof, and any court, tribunal or
arbitrator(s) of competent jurisdiction, and any governmental or
non-governmental self-regulatory organization, agency or authority.
"Indebtedness" means, without duplication, (i) all indebtedness of or any
obligation of the Company and the Subsidiary for borrowed money, whether
current, short-term, or long-term, secured or unsecured, (ii) all indebtedness
of the Company and the Subsidiary for the deferred purchase price for purchases
of property outside the ordinary course which is not evidenced by trade
payables, (iii) all lease obligations of the Company and the Subsidiary under
leases which are capital leases in accordance with GAAP, (iv) all off-balance
sheet financings of the Company and the Subsidiary including, without
limitation, synthetic leases and project financing, (v) any payment obligations
of the Company or the Subsidiary in respect of banker's acceptances or letters
of credit (other than stand-by letters of credit in support of ordinary course
trade payables), (vi) any liability of the Company or the Subsidiary with
respect to interest rate swaps, collars, caps and similar hedging obligation,
(vii) any present, future or contingent obligations of the Company or the
Subsidiary under (A) any phantom stock or equity appreciation rights, plan or
agreement, (B) any consulting, deferred pay-out or earn-out arrangements in
connection with the purchase of any business or entity or (C) any
non-competition agreement, (viii) an amount equal to the Seller's Expenses, if
any, paid by
40
the Company or the Subsidiary, (ix) 50% of the amount of any liability as of the
Closing of the Company or the Subsidiary under deferred compensation plans
(other than Stock Option Plans) of the type reflected under "Other Long-Term
Liabilities" on the balance sheet in the Audited Financial Statements (which
liability shall be determined consistently with its determination on such
balance sheet) and (x) any accrued and unpaid interest (to the extent not
otherwise included as a reduction of Excess Cash) or any contractual prepayment
premiums, penalties or similar contractual charges resulting from the
transactions contemplated hereby or the discharge of such obligations with
respect to any of the foregoing. Indebtedness shall: (i) include any amount of
Excess Cash applied to reduce Indebtedness from the close of business on the
business day prior to the Closing Date through the Closing, (ii) include an
amount by which Buyer's Share of Excess Cash has been reduced by virtue of the
use of Cash to pay (A) the Excess CSC Consideration and (B) the $75,000
principal payment to reduce Tranche B (as set forth in Section 4.06(o)) and
(iii) be reduced by the Allowable Deferred Acquisition Amount (if any).
"Lien" or "Liens" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company or the Subsidiary, any filing or
agreement to file a financing statement as debtor under the Uniform Commercial
Code or any similar statute other than to reflect ownership by a third party of
property leased to the Company or the Subsidiary under a lease which is not in
the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of business).
"Material Adverse Effect" means a material adverse effect on the business,
results of operations, properties, assets or condition (financial or otherwise)
of the Company or the Subsidiary, taken as a whole, other than with respect to
any adverse effects which, directly or indirectly, relate to or result from (i)
public or industry knowledge relating to the transactions contemplated by this
Agreement or (ii) general economic conditions generally affecting the industry
in which the Company and the Subsidiary compete.
"Permitted Liens" means (i) Liens for taxes, assessments and governmental
charges or Liens which are either not yet due or being contested in good faith;
(ii) deposits, Liens or pledges made in connection with, or to secure payment
of, performance of bids or trade contracts, surety and appeal bonds, performance
bonds, compensation, unemployment insurance, old age pensions or other social
security obligations that are not due and payable or which are being contested
in appropriate proceedings; (iii) operating leases or purchase money security
interests in any property acquired by the Company or the Subsidiary in the
ordinary course of business to the extent disclosed in the schedules to this
Agreement or reflected in the most recent Financial Statement; (iv) statutory
interests or title of a lessor under any lease disclosed in the schedules to
this Agreement; (v) carriers', warehousemen's, statutory mechanics,
41
materialmen's or contractors' Liens or encumbrances or any similar statutory
Lien which is not filed and for which no amounts are past due or in dispute and
other like Liens arising in the ordinary course of business and securing
obligations not yet due and payable; (vi) matters which would be disclosed by an
accurate survey of each parcel of real property; (vii) zoning restrictions,
easements, rights-of-way, restrictions, licenses, covenants, conditions, rights
of way and other similar charges and encumbrances not interfering with the
ordinary conduct of the business of the Company and the Subsidiary or materially
detracting from the value of the assets of the Company and the Subsidiary, (v)
Liens outstanding on the date hereof which secure Indebtedness to be repaid on
the Closing Date and which are described in the Schedules to this Agreement and
(vi) Liens which individually or in the aggregate are not material.
"Person" means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Pro Rata Share" means the pro rata share of each Shareholder as set forth on
the Shareholders Schedule.
"Tax" or "Taxes" means any federal, state, local or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, ad valorem/personal property, stamp,
excise, occupation, sales, use, transfer, value added, alternative minimum,
estimated or other tax, including any interest, penalty or addition thereto,
whether disputed or not.
"Tax Returns" means any return, report, information return or other document
(including schedules or any related or supporting information) filed or required
to be filed with any governmental entity or other authority in connection with
the determination, assessment or collection of any Tax or the administration of
any laws, regulations or administrative requirements relating to any Tax.
ARTICLE XII
MISCELLANEOUS
12.01 Press Releases and Communications. No press release or public
announcement related to this Agreement or the transactions contemplated herein,
or prior to the Closing any other announcement or communication to the
employees, customers or suppliers of the Company or the Subsidiary, shall be
issued or made without the joint approval of Buyer and the Shareholders'
Representative, unless required by law (in the reasonable opinion of counsel) or
court order in which case Buyer and the Shareholders'
42
Representative shall have the right to review such press release or announcement
prior to publication.
12.02 Expenses. Except as otherwise expressly provided herein, the
Shareholders (on behalf of themselves and the Shareholders' Representative)
shall pay all of their own expenses and those incurred by the Company (other
than amounts (if any) incurred by the Company in relation to the financing
referenced in Section 5.07) or the Subsidiary (including attorneys' and
accountants' fees and expenses) (the "Seller's Expenses"), and Buyer shall pay
all of its own expenses (including attorneys' and accountants' fees and
expenses), incurred in connection with the negotiation of this Agreement, the
performance of its obligations hereunder and the consummation of the
transactions contemplated by this Agreement (whether consummated or not);
provided that Buyer shall pay all filing fees required under the HSR Act; and
provided, further, that the Shareholders' Representative may elect to have the
Company pay the Seller's Expenses, in which case, the amount of such Seller's
Expenses so paid shall be included in the definition of Indebtedness as set
forth therein.
12.03 Waiver of Certain Transfer Restrictions. In connection with
the transactions contemplated in this Agreement, the Shareholders hereby
expressly waive the applicability of any provision of that certain Stockholders
Agreement, dated as of August 31, 1995 (as amended, the "Stockholders
Agreement"), between the Company, the Shareholders and the other parties listed
on the signature page thereto, and the Stockholders Agreement and Registration
Rights Agreement, dated as of August 31, 1995, shall terminate and be of no
further force and effect as of the Closing.
12.04 Knowledge Defined. For purposes of this Agreement, the term
"the Company's knowledge" and any similar terms used herein shall mean the
actual current knowledge of Xxxx X. Xxxxxxxx, Xxxxx X. Xxxxxx, Xxxxxxxx Xxxxx,
Xxxxxxx Xxxxx, and Xxxxxx Xxxx without any duty to investigate. The "Buyer's
knowledge" and any similar term used herein shall mean the actual current
knowledge of Xxxxxx X. Xxxx and Xxxxxxx X. Xxxxx, without any duty to
investigate.
12.05 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when personally delivered,
delivered by Federal Express or similar overnight courier service or mailed by
first class mail, return receipt requested. Notices, demands and communications
to Buyer, the Company and the Shareholders shall, unless another address is
specified in writing, be sent to the address indicated below:
43
Notices to Buyer:
NBC Merger Corp.
in care of Xxxx Wheat & Partners Incorporated
000 Xxxxxxxx Xxxxx - Xxxxx 0000
Xxxxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Xxxxxx X. Xxxx or
Xxxxxxx X. Xxxxx
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn.: Xxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
Notices to Shareholders or the Shareholders' Representative:
Olympus Partners
Metro Center
Xxx Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxxx
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, P.C.
Xxxx X. Xxxxxxxxxx
Notices to Company:
NBC Acquisition Corp.
c/o Nebraska Book Company
X.X. Xxx 00000
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000-0000
Attn: President
44
with a copy (if prior to Closing) to:
Olympus Partners
Metro Center
Xxx Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxxx
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, P.C.
Xxxx X. Xxxxxxxxxx
with a copy (if after Closing) to:
Xxxx Wheat & Partners Incorporated
000 Xxxxxxxx Xxxxx - Xxxxx 0000
Xxxxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Xxxxxx X. Xxxx or
Xxxxxxx X. Xxxxx
and
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn.: Xxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
12.06 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned or
delegated by Buyer without the prior written consent of the Shareholders'
Representative.
12.07 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such
45
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
12.08 No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Person.
12.09 Amendment and Waiver. Any provision of this Agreement or the
Schedules or Exhibits hereto may be amended or waived only in writing signed by
Buyer, the Company and the Shareholders' Representative. No waiver of any
provision hereunder or any breach or default thereof shall extend to or affect
in any way any other provision or prior or subsequent breach or default.
12.10 Complete Agreement. This Agreement and the documents referred
to herein (including the Confidentiality Agreement) contain the complete
agreement between the parties hereto and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way. The representations
and warranties by each party constitute the sole and exclusive representations
and warranties of such party to the other parties hereto in connection with the
transactions contemplated hereby, and each party understands, acknowledges and
agrees that all other representations and warranties of any kind or nature
expressed or implied are specifically disclaimed.
12.11 Counterparts. This Agreement may be executed in multiple
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same instrument.
12.12 Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of laws of any jurisdiction other than the State of Delaware.
* * * *
46
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
NBC MERGER CORP.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Its: Senior Vice President
NBC ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxxxxxx
----------------------------------------
Its: President
The undersigned hereby guarantees the obligation of Buyer under Section 8.02(b)
and executes this Agreement as an acknowledgment of such guarantee and for no
other purpose.
HWH CAPITAL PARTNERS, L.P.
By: HWH, L.P., general partner
By: HWH Incorporated, general partner
By: /s/ Xxxxxx X. Xxxx
----------------------------------
Its: Chairman
47
EXECUTING SHAREHOLDERS:
OLYMPUS GROWTH FUND II, L.P.
By: OGPII, L.P.
----------------------------------------
Its: General Partner
By: RSM, L.L.C.
----------------------------------------
Its: a general partner
/s/ Xxxxxx X. Xxxxxx
---------------------------------------
Xxxxxx X. Xxxxxx
President
48
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P.
----------------------------------------
Its: General Partner
By: RSM, L.L.C.
----------------------------------------
Its: a general partner
/s/ Xxxxxx X. Xxxxxx
---------------------------------------
Xxxxxx X. Xxxxxx
President
49
PMI MEZZANINE FUND, L.P.
By: PACIFIC MEZZANINE INVESTORS, L.P.
----------------------------------------
Its: General Partner
By: /s/ Xxxxxxxx Xxxxx
----------------------------------------
Its: Principal
50
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln Investment Management, Inc.
Its Attorney-in-Fact
By: /s/ Xxxx Xxxxxxxx
----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Vice President
51
LINCOLN NATIONAL INCOME FUND, INC
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
52
CHASE CAPITAL PARTNERS
By: /s/ [ILLEGIBLE]
----------------------------------------
Its: General Partner
By:
----------------------------------------
Its:
----------------------------------------
53
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
By: /s/ [ILLEGIBLE]
----------------------------------------
Its: Assistant Treasurer
54
XXXX X. XXXXXXXX
By: /s/ Xxxx X. Xxxxxxxx
----------------------------------------
Its:
----------------------------------------
55
XXXXX X. XXXXXX
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Its:
----------------------------------------
56
XXXXX X. XXXXX
By: /s/ Xxxxx X. Xxxxx
----------------------------------------
Its:
----------------------------------------
57
XXXXXX X. XXXX
By: /s/ Xxxxxx X. Xxxx
----------------------------------------
Its:
----------------------------------------
58
XXXXXXX X. XXXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Its:
----------------------------------------
59
XXXXXXX X. XXXXX
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Its:
----------------------------------------
60
XXXXXX X. XXXXX
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
Its: Shareholder
----------------------------------------
61
XXXXXXX X. XXXX
By: /s/ Xxxxxxx X. Xxxx
----------------------------------------
Its: Shareholder
---------------------------------------
62
EXHIBITS
Exhibit A Form of Letter of Transmittal
Exhibit B Merger Certificate
Exhibit C Company Certificate
Exhibit D Buyer Certificate
63
SCHEDULES
Shareholders (Recitals, xx.xx. 1.01, 3.03, 4.04)
Indebtedness Schedule (xx.xx. 1.05, 3.01, 4.06, 4.22, 6.01)
Collegiate Services Corporation (ss. 2.01(e))
Converting Shareholders (ss. 2.01(i))
Governmental Consents (xx.xx. 2.01, 4.14)
Subsidiaries (ss. 4.02)
Authorization (ss. 4.03)
Capital Stock (xx.xx. 4.04, 4.09)
Accounting (ss. 4.05)
Developments (ss. 4.06)
Leased Real Property (ss. 4.07)
Owned Real Property (ss. 4.07)
Liens (xx.xx. 4.09, 4.20)
Taxes (ss. 4.08)
Contracts (xx.xx. 4.09, 4.23)
Licenses (ss. 4.10)
Intellectual Property (ss. 4.11)
Litigation (ss. 4.12)
Employee Benefits (ss. 4.15)
Insurance (ss. 4.16)
Compliance with Laws (ss. 4.17)
Environmental Compliance (ss. 4.18)
Transactions with Affiliates (ss. 4.21)
64
Exhibit A
Merger of NBC Merger Corp.,
with and into NBC Acquisition Corp.,
By Mail: By Hand or Overnight Courier:
[ ] [ ]
[FORM OF] LETTER OF TRANSMITTAL
=====================================================================================
Name & Address of Registered Certificate(s) Surrendered
Holder(s):
(Please fill in if blank, include zip code) Certificate Number Number of Shares
-------------------------------------------------------------------------------------
------------------ ----------------
------------------ ----------------
------------------ ----------------
------------------ ----------------
Total
=====================================================================================
The certificate(s) listed above, for shares of common stock, par value
$.01 per share ("Shares"), of NBC Acquisition Corp., a Delaware corporation (the
"Company"), is/are surrendered herewith in exchange for (i) the right to receive
the Per Share Cash Consideration Amount (as defined in the Merger Agreement
dated January 6, 1998 among the Company, Buyer and the Executing Shareholders
(as defined therein) (the "Merger Agreement")) for each Share surrendered or
(ii) subject to Section 3.04 of the Merger Agreement, an equal number of shares
of common stock, par value $0.01, of Buyer ("Buyer Shares"), in each case, in
accordance with the terms and conditions of the Merger Agreement.
I am a party named on the Converting Shareholders Schedule to the Merger
Agreement and hereby elect to convert _____________ of the Shares surrendered
hereby into Buyer Shares, pursuant to Section 3.02(b)(ii) of the Merger
Agreement, and the remainder of the Shares surrendered hereby into the right to
receive the Per Share Cash Consideration Amount. [strike if not applicable]
65
Please issue certificate(s) as indicated above (see "A" or "B" below if
required).
=====================================================================================
"A" SPECIAL EXCHANGE "B" SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
-------------------------------------------------------------------------------------
(See instruction 4 on reverse side) To be completed only if a certificate(s)
To be completed only if a certificate(s) and check, if any, is/are to be issued to
and check, if any, is/are to be issued to the registered holder(s) but delivered to
someone other than the registered someone other than the registered
holder(s). holder(s).
NAME NAME
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
ADDRESS (include zip code) ADDRESS (include zip code)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Taxpayer Identification Number
(TIN):
=====================================================================================
REQUIRED: TAXPAYER IDENTIFICATION NUMBER & CERTIFICATION (SEE INSTRUCTION 6)
================================================================================
Taxpayer Identification Number (TIN)/Social Security Number:
================================================================================
CERTIFICATION: Under penalties of perjury, I hereby certify as follows:
(1) The number shown above is my correct taxpayer identification number,
or I am waiting for a number to be issued to me, and
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
IMPORTANT: You must cross out item 2 above if you have been notified by the IRS
that you are currently subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after being notified by
the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding,
do not cross out item 2.
REPRESENTATIONS AND WARRANTIES: I hereby represent and warrant to the Company as
follows:
66
(A) As of the date hereof, [I am/we are] the beneficial owner(s) of the
Shares being transferred hereby and have full power and authority to transfer
such Shares and surrender the certificate(s) submitted in connection herewith.
Upon the delivery to [me/us] by Buyer of the Per Share Cash Consideration Amount
or Buyer Shares, as the case may be, in respect of the Shares surrendered
hereby, neither Buyer nor the Company will be subject to any adverse claim in
respect of such certificate(s).
(B) I am acquiring the Buyer Shares with the present intention of holding
them for investment purposes and not with a view to, or in connection with, any
distribution thereof in violation of any federal or state securities laws.
(C) Upon request, I will execute and deliver any additional documents
reasonably deemed appropriate or necessary by Buyer or the Company in connection
with the surrender of the certificate(s) surrendered hereby.
IMPORTANT PLEASE SIGN HERE Signature Guarantee
(see instruction 4 on reverse side)
--------------------------------------------------------------------------------
Signature of Owner
--------------------------------------------------------------------------------
Signature of Co-Owner, If Any Eligible Guarantor Institution
--------------------------------------------------------------------------------
Telephone Number Date: Official Signature
--------------------------------------------------------------------------------
67
INSTRUCTIONS FOR LETTER OF TRANSMITTAL
1. GENERAL
This Transmittal should be properly filled in, dated and signed by the
holder(s) of the shares which are being surrendered, and delivered or
mailed with the stock certificate(s) for Shares to [ ] at
the address on the cover. The method of delivery is at your option and
risk, but if sent by mail, we suggest insured registered mail with return
receipt.
2. STOCK ISSUED IN SAME NAME
If a new share certificate is to be issued in the same name as the shares
surrendered, simply sign this Transmittal and provide Taxpayer
Identification Number (See No. 6 below). In this case, no endorsement of
the stock certificate is required.
3. STOCK ISSUED IN DIFFERENT NAME
If the new share certificate is to be issued in a name other than that of
the registered holder(s) of the shares surrendered, the signature(s) on
this Transmittal must be guaranteed by an eligible guarantor institution
such as a commercial bank, trust company, securities broker/dealer, credit
union or savings and loan that is a member of the Medallion Signature
Guarantee Program. A verification by a notary public is not acceptable.
4. ENDORSEMENT
This Transmittal should be endorsed exactly as the name(s) appear(s) on
the face of the certificate(s). In case the endorsement is executed by an
attorney, executor, administrator, guardian or other fiduciary, or by an
officer of a corporation, the person executing the endorsement must give
his full title in such capacity and appropriate evidence of authority to
act in such capacity must be forwarded with the certificate(s)
surrendered. If the endorsement is executed by anyone other than the
registered holder(s) of the shares surrendered, please provide legal
documentation which will serve as appropriate evidence of authority to
act. If you have questions about appropriate documentation, please call
the telephone number listed below.
5. TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
You are required to provide the Company with a correct Taxpayer
Identification Number (TIN) or Social Security Number and certification,
which is provided on the front hereof. Failure to provide the information
may subject you to a 31% federal income tax withholding on any cash
payment to you.
68
6. LOST CERTIFICATE
If any Share certificate(s) are lost, please complete this Transmittal
with the notation that such certificate(s) are lost and deliver or mail
the Transmittal as instructed above. The Company will send you an
Affidavit of Loss, which you will need to complete and return to [ ].
You will be required to pay an indemnity bond premium fee, which is equal
to 2% of the market value of your lost certificate.
7. STOCK IN THE NAME OF DECEDENT
If any Share certificate(s) are currently registered in the name of a
decedent, please see No. 4 above.
8. QUESTIONS
For further information, please call [ ] at [ ]. If
you have any unusual circumstances for which you need assistance, please
call prior to sending in your certificates for exchange in order to
expedite the exchange of your certificates.
69
Exhibit B
CERTIFICATE OF MERGER
OF
NBC MERGER CORP.
INTO
NBC ACQUISITION CORP.
UNDER SECTION 251 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Pursuant to Section 251 of the General Corporation Law of the State of
Delaware (the "DGCL"), NBC Acquisition Corp., a Delaware corporation (the
"Company"), hereby certifies to the following information relating to the merger
(the "Merger") of NBC Merger Corp., a Delaware corporation (the "Merging
Company"), into the Company:
FIRST: That the names and states of incorporation of the Company and the
Merging Company, which are the constituent corporations in the Merger (the
"Constituent Corporations"), are as follows:
Name State
---- -----
NBC Acquisition Corp. Delaware
NBC Merger Corp. Delaware
SECOND: That the Agreement and Plan of Merger dates as of January 6, 1998
(the "Merger Agreement") between the Constituent Corporations and the Executing
Shareholders (as defined therein) setting forth the terms and conditions of the
Merger, has been approved, adopted, certified, executed and acknowledged by each
of the Constituent Corporations in accordance with the provisions of section 251
of the DGCL.
THIRD: That NBC Acquisition Corp. is the corporation that will survive the
Merger (the "Surviving Corporation").
70
2
FOURTH: That the Certificate of Incorporation of the Surviving Corporation
is hereby amended as follows:
(1) Article Fourth is amended to read in its entirety as follows: "The
total number of shares of stock that his corporation shall have
authority to issue is five million (5,000,000) shares of Class A
Common Stock, $.01 par value per share ("Common Stock"). Each share
of Common Stock shall be entitled to one vote."
Except to the extent amended hereby, the provisions of the Certificate of
Incorporation of the Surviving Corporation shall remain unmodified and in full
force and effect.
FIFTH: That the executed Merger Agreement is on file at the principal
place of business of the Surviving Corporation. The address of the principal
place of business of the Surviving Corporation is: [insert]
SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of either
of the Constituent Corporations.
SEVENTH: That this Certificate of Merger shall be effective on February
[11], 1998.
71
3
IN WITNESS WHEREOF, NBC Acquisition Corp. has caused this certificate
to be signed by its President this __ day of February, 1998
NBC ACQUISITION CORP.
By:
--------------------------------------
President
ATTEST:
By:
--------------------------
Secretary
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EXHIBIT C
COMPANY CERTIFICATE
NBC ACQUISITION CORP.
I, Xxxxx X. Xxxxxxxxxx, do hereby certify that I am the duly elected
and acting President of NBC Acquisition Corp., a Delaware corporation (the
"Company"). This Certificate is executed and delivered pursuant to the Merger
Agreement dated the date hereof (the "Merger Agreement") between the Company,
NBC Merger Corp., a Delaware corporation and each of the Persons executing the
Merger Agreement as an Executing Shareholder. Unless otherwise indicated herein,
all capitalized terms used and not defined in this Certificate shall have the
meaning ascribed to such terms in the Merger Agreement. In my capacity as such
officer of the Company, I DO HEREBY CERTIFY THAT:
1. The preconditions specified in Section 2.01(a)-(i) of the Merger
Agreement have been satisfied;
IN WITNESS WHEREOF, I have executed this Certificate on this ____
day of January, 1998.
NBC ACQUISITION CORP.
By:
--------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Its: President
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EXHIBIT D
BUYER CERTIFICATE
NBC MERGER CORP.
I, _______________, do hereby certify that I am the duly elected and
acting President of NBC Merger Corp., a Delaware corporation (the "Buyer"). This
Certificate is executed and delivered pursuant to the Merger Agreement dated the
date hereof (the "Merger Agreement") between the Buyer, NBC Acquisition Corp., a
Delaware corporation and each of the Persons executing the Merger Agreement as
an Executing Shareholder. Unless otherwise indicated herein, all capitalized
terms used and not defined in this Certificate shall have the meaning ascribed
to such terms in the Merger Agreement. In my capacity as such officer of the
Buyer, I DO HEREBY CERTIFY THAT:
1. The preconditions specified in Section 2.02(a)-(d) of the Merger
Agreement have been satisfied;
IN WITNESS WHEREOF, I have executed this Certificate on this ___ day
of January, 1998.
NBC Merger Corp.
By:
--------------------------------------
Its: President
