Exhibit 2.1
FINAL EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
AAH HOLDINGS CORPORATION,
AAH ACQUISITION CORPORATION
and
AMSCAN HOLDINGS, INC.,
Dated as of March 26, 2004
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions....................................................2
ARTICLE II
THE MERGER
Section 2.1. The Merger.....................................................9
Section 2.2. Effective Time.................................................9
Section 2.3. Closing of the Merger..........................................9
Section 2.4. Effects of the Merger; Further Actions.........................9
Section 2.5. Certificate of Incorporation and Bylaws........................9
Section 2.6. Board and Officers of the Surviving Corporation...............10
Section 2.7. Effect on Capital Stock.......................................10
Section 2.8. Surrender and Payment.........................................11
Section 2.9. Company Options and Company Warrants..........................13
Section 2.10. Restricted Stock..............................................14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. Incorporation; Authorization; etc.............................14
Section 3.2. Capitalization; Structure.....................................16
Section 3.3. Sufficiency of Assets.........................................17
Section 3.4. Financial Statements..........................................17
Section 3.5. Undisclosed Liabilities; Material Adverse Effect..............18
Section 3.6. Information...................................................18
Section 3.7. Litigation; Orders............................................18
Section 3.8. Compliance with Laws; Permits.................................19
Section 3.9. Certain Contracts.............................................19
Section 3.10. Taxes.........................................................20
Section 3.11. ERISA.........................................................21
Section 3.12. Environmental Matters.........................................22
Section 3.13. Intellectual Property.........................................23
Section 3.14. Real Estate...................................................23
Section 3.15. Brokers, Finders, etc.........................................24
-i-
Page
Section 3.16. Affiliate Transactions........................................24
Section 3.17. Customers and Suppliers.......................................24
Section 3.18. Labor Matters.................................................25
Section 3.19. Insurance.....................................................25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 4.1. Incorporation; Authorization; etc.............................25
Section 4.2. Litigation; Orders............................................27
Section 4.3. Financial Capability..........................................27
Section 4.4. Interim Operations of Merger Sub..............................27
Section 4.5 Solvency of the Company Following the Merger..................28
Section 4.6. Information...................................................28
Section 4.7. Brokers, Finders, etc.........................................28
ARTICLE V
COVENANTS OF THE COMPANY AND PARENT
Section 5.1. Investigation of Business; Access to Properties and Records...28
Section 5.2. Agreement to Cooperate; Reasonable Best Efforts;
Obtaining Consents ...........................................30
Section 5.4. Conduct of Business.......................................... 29
Section 5.3. Further Assurances............................................30
Section 5.4. Conduct of Business...........................................31
Section 5.5. Public Announcements..........................................34
Section 5.6. Employment Benefits Arrangements..............................34
Section 5.7. Indebtedness..................................................35
Section 5.8. Directors' and Officers' Indemnification......................36
Section 5.9. Stockholder Approval; Drag-Along..............................38
Section 5.10. Restrictions on Parent and the Company........................38
Section 5.11. Merger Sub....................................................38
Section 5.12. Company Warrants..............................................38
Section 5.13. FIRPTA Certificate; Affidavits................................38
Section 5.14. Notice of Developments........................................39
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO CLOSE
Section 6.1. Company Stockholder Approval..................................39
Section 6.2. HSR...........................................................39
Section 6.3. No Injunction.................................................40
Section 6.4. Solvency Opinion..............................................40
-ii-
Page
ARTICLE VII
CONDITIONS OF PARENT'S OBLIGATION TO CLOSE
Section 7.1. Covenants.....................................................40
Section 7.2. Representations and Warranties................................40
Section 7.3. Certificate...................................................40
Section 7.4. Cancellation of Agreements with Affiliates....................40
Section 7.5. Funding.......................................................40
Section 7.6. Agreement with GSCPII.........................................40
Section 7.7. Opinion.......................................................40
Section 7.8. Consents......................................................41
Section 7.9. Appraisal Shares..............................................41
ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS TO CLOSE
Section 8.1. Covenants.....................................................41
Section 8.2. Representations and Warranties................................41
Section 8.3. Certificates..................................................41
Section 8.4. Merger Consideration and Other Payments.......................41
ARTICLE IX
TERMINATION
Section 9.1. Termination...................................................42
Section 9.2. Procedure and Effect of Termination...........................42
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices.......................................................42
Section 10.2. Governing Law.................................................44
Section 10.3. Entire Agreement..............................................44
Section 10.4. Expenses......................................................44
Section 10.5. Counterparts..................................................44
Section 10.6. Successors and Assigns........................................44
Section 10.7. Amendments and Waivers........................................45
Section 10.8. No Implied Representation.....................................45
Section 10.9. Construction of Certain Provisions............................45
Section 10.10. Headings.....................................................46
Section 10.11. Interpretation...............................................46
-iii-
Page
Section 10.12. Third Party Beneficiaries....................................46
Section 10.13. Partial Invalidity...........................................46
Section 10.14. Consent to Jurisdiction......................................46
Section 10.15. Waiver of Jury Trial.........................................47
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
EXHIBIT
Ownership of Equity Securities
-iv-
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
March 26, 2004, is by and among AAH Holdings Corporation, a Delaware corporation
("Parent"), AAH Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Parent ("Merger Sub"), and Amscan Holdings, Inc., a Delaware
corporation ("Company").
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub have determined to engage in a business combination transaction on
the terms and subject to the conditions stated herein;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have approved this Agreement, and deem it advisable, and in the best
interests of their respective stockholders to consummate the merger of Merger
Sub with and into the Company on the terms and conditions set forth herein (the
"Merger"), whereby, among other things, (1) each issued and outstanding share of
common stock, par value $0.10 per share, of the Company ("Company Common
Stock"), other than the Company Common Stock owned by Parent, Merger Sub or the
Company (or any of their respective direct or indirect wholly-owned
Subsidiaries) and other than any Appraisal Shares (as defined below), shall be
converted into the right to receive the Common Stock Merger Consideration (as
defined below), and (2) each of the issued and outstanding shares of Series A
Redeemable Convertible Preferred Stock, par value $0.10 per share, of the
Company ("Company Preferred Stock"), other than the Company Preferred Stock
owned by Parent, Merger Sub or the Company (or any of their respective direct or
indirect wholly-owned Subsidiaries), shall be converted into the right to
receive the Preferred Stock Merger Consideration (as defined below);
WHEREAS, Exhibit A to the Company Disclosure Schedule sets forth the
ownership of Company Common Stock, Company Preferred Stock, Company Options (as
defined below) and Company Warrants (as defined below), and Parent has required,
as a condition to its willingness to enter into this Agreement, that certain
holders of Company Common Stock, Company Preferred Stock, Company Options and
Company Warrants (each, a "Principal Stockholder," and collectively, the
"Principal Stockholders") enter into a support agreement with Parent, dated as
of the date of this Agreement ("Support Agreement" and collectively the "Support
Agreements")) simultaneously herewith, pursuant to which, among other things,
each Principal Stockholder has agreed to (i) vote all its shares of outstanding
Company Common Stock (including any shares of Company Common Stock acquired upon
the conversion of any Company Preferred Stock or the exercise of any Company
Options and Company Warrants) and, to the extent owned by it, shares of
outstanding Company Preferred Stock in favor of adoption of this Agreement, and
(ii) waive any rights of appraisal, if any, that such Principal Stockholders may
have under Section 262 ("Section 262") of the Delaware General Corporation Law
("DGCL"), in each case, on the terms and subject to the conditions contained in
the Support Agreement, and in order to induce Parent to enter into this
Agreement; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement;
NOW, THEREFORE, in consideration of and reliance upon the premises
and the representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions. As used in this Agreement the following
terms shall have the following respective meanings:
"Acquisition Financing" shall have the meaning set forth in Section
4.3.
"Affiliate" shall mean, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by or under common control with
such first Person. A Person shall be deemed to control another Person if such
first Person possesses, directly or indirectly, the power to direct or to cause
the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" shall have the meaning set forth in the Preamble.
"Appraisal Shares" shall have the meaning set forth in Section 2.7(d).
"Balance Sheet" shall have the meaning set forth in Section 3.4(a).
"Benefits Continuation Period" shall have the meaning set forth in
Section 5.6(a).
"Business Condition" shall mean, with respect to any Person, the
condition (business, financial or otherwise), assets and results of operations
of such Person and its Subsidiaries taken as a whole.
"Certificate" shall mean, with respect to shares of Company Common
Stock and Company Preferred Stock, certificates that, immediately prior to the
Effective Time, represented any such shares, and with respect to Company Options
or Company Warrants, the appropriate corresponding documentation that,
immediately prior to the Effective Time, represented such securities.
"Certificate of Merger" shall have the meaning set forth in Section
2.2.
"Closing" shall have the meaning set forth in Section 2.3.
"Closing Date" shall have the meaning set forth in Section 2.3.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitments" shall have the meaning set forth in Section 4.3.
-2-
"Common Stock Merger Consideration" shall have the meaning set forth
in Section 2.7(c).
"Company" shall have the meaning set forth in the Preamble.
"Company Common Stock" shall have the meaning set forth in the
Recitals.
"Company Disclosure Schedule" shall have the meaning set forth in
Article III.
"Company Options" shall have the meaning set forth in Section 2.9(a).
"Company Option Plan" shall have the meaning set forth in Section
2.9(a).
"Company Permits" shall have the meaning set forth in Section 3.8(b).
"Company Plans" shall have the meaning set forth in Section 3.11(a).
"Company Preferred Stock" shall have the meaning set forth in the
Recitals.
"Company Required Governmental Approvals" shall have the meaning set
forth in Section 3.1(d).
"Company Restricted Stock" shall have the meaning set forth in Section
2.10.
"Company Stockholder Approval" shall have the meaning set forth in
Section 3.1(b).
"Company Warrant Agreement" shall mean the warrant agreement, dated as
of August 6, 1998, between the Company and Xxxxx Xxxxxx Retained Annuity Trust.
"Company Warrant Consideration" shall have the meaning set forth in
Section 2.9(b).
"Company Warrants" shall mean the warrants issued under the Company
Warrant Agreement.
"Confidentiality Agreement" shall have the meaning set forth is
Section 5.1(b).
"Contracts" shall have the meaning set forth in Section 3.9.
"Convertidora Agreement" shall mean that certain Asset Purchase
Agreement by and among Convertidora Industrial, S.A. de C.V., Anagram Mexico S.
de X.X., Amscan Holdings, Inc and Anagram International, Inc., dated as of
September 3, 2003.
"Credit Agreements" shall mean the Loan Agreement and the Indenture.
"Credit Facilities" shall mean that (i) certain credit facility by and
among, HSBC Bank Canada and Amscan Distributors Canada Ltd., dated Xxxxx 00,
0000 (xx) certain credit facility by and among, NatWest UK and Amscan
International Limited, dated April 23, 2002, in
-3-
and (iii) certain Revolving Note by and between Anagram International, Inc. and
U.S. Bank National Association, dated as of January 12, 2004, each case, as
amended or extended.
"Debt Offer" shall have the meaning set forth in Section 5.7(b).
"December 31, 2002 Financial Statements" shall have the meaning set
forth in Section 3.4(a).
"December 31, 2003 Financial Statements," shall have the meaning set
forth in Section 3.4(a).
"DGCL" shall have the meaning set forth in the Recitals.
"Drag-Along Right" shall have the meaning set forth in Section 2.5.1
of the Stockholders' Agreement.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Employee Benefit Plan" shall mean each "employee benefit plan"
(within the meaning of Section 3(3) of ERISA), including pension, profit
sharing, 401(k), severance, welfare, disability, deferred compensation, and all
other employee benefit plans, including severance, stock purchase, stock option,
employment, vacation, change-in-control, fringe benefit, bonus, incentive
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or otherwise),
whether formal or informal, or oral or written.
"Employees" shall have the meaning set forth in Section 5.6(a).
"Encumbrances" shall have the meaning set forth in Section 3.2(a).
"Environmental Laws" shall mean all United States federal, state or
local, laws or any foreign laws, relating to pollution, or protection of human
health from Hazardous Materials or the environment (including, ambient air,
surface water, groundwater, land surface or subsurface strata), including, laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations, codes, decrees,
injunctions, judgments, licenses, notices, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
"Environmental Permits" shall mean any permit, approval, license or
other authorization required under or issued pursuant to any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean, with respect to any entity, trade or
business, any other entity, trade or business that is, or was at the relevant
time, a member of a group described in Section 414(b), (c), (m) or (o) of the
Code or Section 4001(b)(1) of ERISA that includes or
-4-
included the first entity, trade or business, or that is, or was at the relevant
time, a member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
"Exchange Act" shall have the meaning set forth in Section 3.4(b).
"Filed SEC Reports" shall have the meaning set forth in Section
3.4(b).
"Financial Statements" shall have the meaning set forth in Section
3.4(a).
"Financing Commitment" shall have the meaning set forth in Section
4.3.
"Foreign Plan" shall have the meaning set forth in Section 3.11(d).
"GAAP" shall mean United States generally accepted accounting
principles, as in effect from time to time, consistently applied with past
practice.
"Xxxxxxx Xxxxx" shall mean Xxxxxxx, Sachs & Co.
"Governmental Authority" shall have the meaning set forth in Section
3.1(d).
"GSCPII" shall mean GS Capital Partners II, L.P., a Delaware limited
partnership.
"Hazardous Materials" shall mean (i) any petroleum or petroleum
products, radioactive materials, asbestos that is friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
containing levels of poly-chlorinated biphenyls, and radon gas, and (ii) any
chemicals, materials or substances defined as "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants" or words of similar import under any applicable Environmental Law.
"Highly Compensated Employee" shall have the meaning set forth in
Section 5.4(b).
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"Indenture" shall mean the Indenture, dated as of December 19, 1997,
among the Company, the Guarantors listed therein and IBJ Xxxxxxxxx Bank & Trust
Company, as amended from time to time, providing for the issuance of 9.875%
Senior Subordinated Notes due 2007 ("Senior Subordinated Notes"), as
supplemented by (1) that certain Supplemental Indenture, dated as of September
17, 1998, among the Company, the Guarantors listed therein and IBJ Xxxxxxxxx
Bank & Trust Company, as amended from time to time and (2) that certain Second
Supplemental Indenture, dated as of March 2002, among the Company, the
Guarantors listed therein and the Bank of New York, as amended from time to
time.
"Indenture Amendments" shall have the meaning set forth in Section
5.7(b).
"Individual Agreement" shall have the meaning set forth in Section
3.11(a).
-5-
"Information" shall have the meaning set forth in Section 3.6.
"Intellectual Property" shall refer to all rights, title and interests
in and to trademarks, non-patented formulae, copyrights, patents, inventions,
know-how, manufacturing procedures, processes, trade secrets, proprietary
information, software licenses, registered and unregistered design rights, any
and all registrations, applications, licenses, all works, discoveries,
innovations, know-how, information, and all other forms of technology, including
improvements, modifications, works in process, derivatives or changes, whether
tangible or intangible, embodied in any form, whether or not protectible or
protected by patent, copyright, trade secret law or otherwise, and contractual
obligations relating to any of the foregoing and all rights to obtain renewals,
continuations, divisions or other extensions of legal protections pertaining
thereto, in each case, that are used in the business of the Company and its
Subsidiaries. For the avoidance of doubt Intellectual Property includes all
material rights to characters and material proprietary designs granted to the
Company or its Subsidiaries.
"knowledge of the Company" and "knowledge of Parent" shall have their
respective meanings set forth in Section 10.11.
"Leased Real Estate" shall have the meaning set forth in Section
3.14(b).
"Letter of Transmittal" shall have the meaning set forth in Section
2.8(b).
"Liabilities" shall have the meaning set forth in Section 3.5.
"Loan Agreement" shall mean the Second Amended and Restated Credit and
Guaranty Agreement, dated as of December 20, 2002, among the Company, certain
Subsidiaries of the Company, the Lenders listed therein, Xxxxxxx Sachs Credit
Partners L.P., General Electric Corporation, and Fleet National Bank, as amended
from time to time.
"Material Adverse Effect" shall mean an effect or change, as
applicable, on the Business Condition of the Company and its Subsidiaries taken
as a whole (that is not cured prior to the Closing), or on the ability to
consummate timely the transactions contemplated by this Agreement other than any
change arising or resulting from or relating to (x) the economy, the financial
or securities markets in general, the industries in which the Company and/or its
Subsidiaries operate or any acts of terrorism, military actions or war, or (y)
this Agreement or the transactions contemplated hereby, including the
announcement or pendency thereof.
"Merger" shall have the meaning set forth in the Recitals.
"Merger Sub" shall have the meaning set forth in the Preamble.
"Merger Sub Common Stock" shall have the meaning set forth in Section
2.7(a).
"multiemployer plan" shall have the meaning set forth in Section
3.11(c).
"New Plans" shall have the meaning set forth in Section 5.6(b).
"Obligations" shall have the meaning set forth in the Loan Agreement.
-6-
"Offer Documents" shall have the meaning set forth in Section 5.7(c).
"Owned Real Estate" shall have the meaning set forth in Section
3.14(a).
"Parent" shall have the meaning set forth in the Preamble.
"Parent Disclosure Schedule" shall have the meaning set forth in
Article IV.
"Parent Required Governmental Approvals" shall have the meaning set
forth in Section 4.1(d).
"Paying Agent" shall have the meaning set forth in Section 2.8(a).
"Permitted Encumbrance" shall mean any (i) Encumbrances reflected or
reserved against in the Balance Sheet or described in the SEC Reports filed as
of the date hereof with respect to Company Indebtedness; (ii) liens incurred and
pledges and deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance, old-age pensions and other social
security benefits; (iii) zoning, entitlement, building and other land use
regulations imposed by Governmental Authorities having jurisdiction over any
Owned Real Estate; (iv) covenants, conditions, restrictions, easements,
encumbrances and other similar matters of record affecting title to but not
adversely affecting current occupancy or use of the Owned Real Estate in any
material respect; (v) liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of debt), statutory obligations, surety,
customs and appeal bonds and other obligations of like nature, incurred as an
incident to and in the ordinary course of business; (vi) liens imposed by law,
such as carriers', warehouseman's, mechanics', materialmen's, landlords',
laborers', suppliers' and vendors' liens, incurred in good faith in the ordinary
course of business which liens would not be material to the Company and its
Subsidiaries taken as a whole; (vii) statutory liens securing the payment of
Taxes, either (A) not delinquent or (B) being contested in good faith by
appropriate legal or administrative proceedings or (C) for which appropriate
reserves have been established in accordance with GAAP; and (viii) any
Encumbrances arising under the Credit Agreements.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization, or other
form of business or legal entity.
"Plans" shall have the meaning set forth in Section 3.11(a).
"Preferred Stock Merger Consideration" shall have the meaning set
forth in Section 2.7(c).
"Principal Stockholder" and "Principal Stockholders" shall have the
respective meanings set forth in the Recitals.
"prohibited transaction" shall have the meaning set forth in Section
3.11(c).
"Qualified Plans" shall have the meaning set forth in Section 3.11(a).
-7-
"Rollover Agreement" shall have the meaning set forth in the Recitals.
"Rollover Stockholders" shall have the meaning set forth in the
Recitals.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall mean the forms, reports, statements and documents
required to be filed by the Company with the SEC since January 1, 2002,
including all exhibits and schedules thereto and documents incorporated therein
by reference.
"Section 262" shall have the meaning set forth in the Recitals.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Senior Subordinated Notes" shall have the meaning set forth under the
definition of Indenture.
"Significant Subsidiary" or "Significant Subsidiaries" shall mean the
significant Subsidiaries of the Company determined under Rule 1-02 of Regulation
S-X of the SEC.
"Stockholders' Agreement" shall mean that certain Amended and Restated
Stockholders Agreement, dated as of February 20, 2002, by and among the Company
and the other parties thereto, as amended by Amendment No.1 to the Amended and
Restated Stockholders Agreement, dated as of March 26, 2004], as amended from
time to time.
"Subsidiary" or "Subsidiaries" shall mean any corporation,
partnership, joint venture or other legal entity of which the Company or such
other Person, as the case may be with respect to when such term is used (either
alone or through or together with any other Subsidiary thereof), owns, directly
or indirectly, stock or other equity interests the holders of which are
generally entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
"Support Agreement" and "Support Agreements" shall have the respective
meanings set forth in the Recitals.
"Surviving Corporation" shall have the meaning set forth in Section
2.1.
"Tax Return" shall have the meaning set forth in Section 3.10(c).
"Taxes" shall have the meaning set forth in Section 3.10(b).
"Third-Party Consents" shall have the meaning set forth in Section
5.2(a).
"Walk-Away Date" shall have the meaning set forth in Section 9.1(b).
-8-
ARTICLE II
THE MERGER
Section 2.1. The Merger. At the Effective Time, and subject to and
upon the terms and conditions of this Agreement and in accordance with the DGCL,
Merger Sub shall be merged with and into the Company in the Merger and the
separate corporate existence of Merger Sub shall cease. The Company shall
continue as the surviving corporation (sometimes referred to as the "Surviving
Corporation") under the laws of the State of Delaware in the Merger, and as of
the Effective Time shall be a wholly-owned Subsidiary of Parent.
Section 2.2. Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Articles VI, VII and VIII,
but on or prior to the Closing Date, the Company, Parent and Merger Sub will
cause a certificate of merger with respect to the Merger meeting the applicable
requirements of the DGCL ("Certificate of Merger") to be executed and filed with
the Secretary of State of the State of Delaware in accordance with the
provisions of the DGCL. The Merger shall become effective at such time as the
Certificate of Merger has been duly filed with the Secretary of State of the
State of Delaware, or at such later time as is agreed between the parties and
specified in the Certificate of Merger ("Effective Time").
Section 2.3. Closing of the Merger. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Article IX, and subject to the satisfaction or waiver of
each of the conditions contained in Articles VI, VII and VIII, the closing of
the Merger ("Closing") shall take place at 10:00 a.m., New York City time, on
the second business day after satisfaction or waiver of the conditions set forth
in Articles VI, VII and VIII ("Closing Date"), at the offices of Wachtell,
Lipton, Xxxxx & Xxxx, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless
another time, date or place is agreed to in writing by the parties hereto.
Section 2.4. Effects of the Merger; Further Actions.
(a) From and after the Effective Time, the Merger shall have the
effects set forth in the Certificate of Merger and in the applicable provisions
of the DGCL. Without limiting the generality of the foregoing, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation following the Merger, and
all restrictions, disabilities, debts, liabilities and duties of the Company and
Merger Sub shall become the restrictions, disabilities, debts, liabilities and
duties of the Surviving Corporation following the Merger.
(b) If at any time after the Effective Time any further action is
necessary to vest in the Surviving Corporation the title to all property or
rights of Merger Sub or the Company, the authorized officers and directors of
the Surviving Corporation are fully authorized in the name of Merger Sub or the
Company, as the case may be, to take, and shall take, any and all such lawful
action.
Section 2.5. Certificate of Incorporation and Bylaws. At the Effective
Time:
-9-
(a) The certificate of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
(b) The bylaws of the Company, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
Section 2.6. Board and Officers of the Surviving Corporation. At the
Effective Time:
(a) The directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation following the
Merger, each to hold office until the earlier of such individual's resignation
or removal or until a successor is duly elected and qualified, as the case may
be.
(b) The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation following the
Merger, each to hold office until the earlier of such individual's resignation
or removal or until a successor is duly elected and qualified, as the case may
be.
Section 2.7. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Company, Parent,
Merger Sub or any holder of any shares of Company Common Stock, Company
Preferred Stock or any shares of capital stock of Merger Sub:
(a) Common Stock of Merger Sub. Each share of common stock, par value
$0.01 per share, of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of Company Common Stock and Company Preferred Stock that is owned by Parent,
Merger Sub or the Company (or any of their respective direct or indirect
wholly-owned Subsidiaries) issued and outstanding immediately prior to the
Effective Time (i) shall automatically be cancelled and retired, and (ii) shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock and Company Preferred Stock.
Subject to the terms and upon the conditions herein (including Schedule 5.2 of
the Company Disclosure Schedule), (i) each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares to be
cancelled in accordance with Section 2.7(b) and the Appraisal Shares) shall be
converted into the right to receive an amount in cash equal to $182,000 ("Common
Stock Merger Consideration"), and (ii) each share of Company Preferred Stock
issued and outstanding immediately prior to the Effective Time (other than
shares to be cancelled in accordance with Section 2.7(b) and the Appraisal
Shares) shall be converted into the right to receive an amount in cash equal to
the product of (A) the Common Stock Merger Consideration multiplied by (B) the
number of shares of Company Common Stock into which each such share of Company
Preferred Stock issued and outstanding immediately
-10-
prior to the Effective Time is convertible ("Preferred Stock Merger
Consideration"). At the Effective Time, by virtue of the Merger and without any
action on the part of the Company, Parent, Merger Sub, or the holders thereof,
all such shares of Company Common Stock and Company Preferred Stock shall no
longer be outstanding and shall automatically cease to exist and each holder of
a Certificate shall cease to have any rights with respect thereto, except the
right to receive (Y) for each share of Company Common Stock, the Common Stock
Merger Consideration, and (Z) for each share of Company Preferred Stock, the
Preferred Stock Merger Consideration, in each case, in accordance with this
Section 2.7(c). Notwithstanding anything to the contrary herein, upon surrender
of any Certificate representing fractional shares of Company Common Stock or
Company Preferred Stock, the holder thereof shall be paid the cash value of such
fraction, which shall be equal to such fraction multiplied by the Common Stock
Merger Consideration or the Preferred Stock Merger Consideration with respect
thereto, as the case may be.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, shares of Company Common Stock or Company Preferred Stock issued
and outstanding immediately prior to the Effective Time that are held by any
holder who is entitled to demand and properly demands appraisal of such shares
pursuant to, and who complies in all respects with, the provisions of Section
262 ("Appraisal Shares") shall not be converted into the right to receive the
consideration payable as provided in Section 2.7(c), but instead such holder
shall be entitled to such rights (but only such rights) as are granted by
Section 262. At the Effective Time, all Appraisal Shares shall no longer be
outstanding and shall automatically cease to exist, and, except as otherwise
provided by applicable law, each holder of Appraisal Shares shall cease to have
any rights with respect thereto, other than such rights as are granted by
Section 262. Notwithstanding the foregoing, if any such holder shall fail to
validly perfect or shall otherwise waive, withdraw or lose the right to
appraisal under Section 262 or if a court of competent jurisdiction shall
determine that such holder is not entitled to the relief provided by Section
262, then the rights of such holder under Section 262 shall cease, and such
Appraisal Shares shall be deemed to have been converted at the Effective Time
into, and shall have become, the right to receive the consideration payable as
provided in Section 2.7(c). The Company shall give prompt notice to Parent of
any demands for appraisal of any shares of Company Common Stock or Company
Preferred Stock, and Parent shall have the opportunity to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.
Section 2.8. Surrender and Payment.
(a) Paying Agent. Prior to the Effective Time, for the benefit of
holders of Company Common Stock, Company Preferred Stock, Company Options and
Company Warrants, Parent shall designate, or shall cause to be designated
(pursuant to an agreement in form and substance reasonably acceptable to Parent
and the Company), a bank or trust company acceptable to the Company, in its
reasonable discretion, to act as agent for the payment of the cash amounts
contemplated pursuant to Section 2.7(c) and Section 2.9 upon surrender of
Certificates in accordance with this Article II ("Paying Agent"), from time to
time at or after the Effective Time. At or promptly after the Effective Time,
Parent shall deposit, or cause Merger
-11-
Sub to deposit, with the Paying Agent cash in the amounts sufficient for the
payment of the aggregate amounts payable pursuant to Section 2.7(c) and Section
2.9.
(b) Exchange Procedure. As soon as reasonably practicable after the
date hereof but in no event later than the tenth business day prior to the
anticipated Closing Date (as mutually and reasonably determined by Parent and
the Company), Parent shall cause the Paying Agent to mail to each holder of
record of a Certificate (i) a form of letter of transmittal (the "Letter of
Transmittal") (that shall (A) specify that delivery shall be effected, and risk
of loss and title to the Certificates held by such Person shall pass, only upon
proper delivery of the Certificates to the Paying Agent and (B) be in customary
form reasonably acceptable to the Company and Parent with no representations or
warranties or indemnities from holders of shares of Company Common Stock,
Company Preferred Stock, Company Options or Company Warrants other than
customary representations and warranties from such holders with respect to
ownership of such stock, warrants or options and the right to sell such stock,
warrants or options, and (C) have such other provisions as Parent and the
Company may reasonably specify), and (ii) instructions for use in effecting the
surrender of Certificates in exchange for the amount of cash such holder shall
be entitled to receive pursuant to Section 2.7(c) and Section 2.9. Upon
surrender of a Certificate for cancellation to the Paying Agent, together with
such Letter of Transmittal, duly completed and validly executed, and such other
documents as may reasonably be required by the Paying Agent consistent with this
Section 2.8(b), the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which the shares, options or warrants
formerly represented by such Certificate shall have been converted pursuant to
Section 2.7(c) and Section 2.9, and the Certificate so surrendered shall
forthwith be cancelled. Parent's agreement with the Paying Agent shall provide
that, upon surrender of a Certificate for cancellation to the Paying Agent, any
holder of shares of Company Common Stock (including shares issuable upon the
exercise of Company Options and Company Warrants) and Company Preferred Stock
shall be entitled to receive payment of (1) the amount of cash such holder shall
be entitled to receive pursuant to Section 2.7(c) in respect of the shares of
Company Common Stock and Company Preferred Stock, and (2) the amount of cash
such holder shall be entitled to receive pursuant to Section 2.9 in respect of
any Company Options and Company Warrants, in each case, held by them on the
Closing Date, in each case, by check or, at such holder's request, by wire
transfer of immediately available funds to the account(s) designated by such
stockholder on the earlier of (X) the Closing Date, if such holder surrendered
such Certificate to the Paying Agent on or prior to 11:00 a.m. New York City
time on the Closing Date, and (Y) the first business day after such delivery, if
such delivery is made after such time. In the event of a transfer of ownership
of Company Common Stock, Company Preferred Stock, Company Options or Company
Warrants that is not registered in the stock transfer books of the Company, the
proper amount of cash may be paid in exchange therefor to a Person other than
the Person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer, and the Person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a Person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. No interest shall be paid or shall
accrue on the cash payable upon surrender of any Certificate.
(c) Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers on the stock
-12-
transfer books of the Surviving Corporation of the shares of Company Common
Stock and Company Preferred Stock or Company Options and Company Warrants that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Paying Agent for transfer or for any other reason, they shall be cancelled and
exchanged as provided in this Article II.
(d) No Liability. None of Parent, Merger Sub, the Company or the
Paying Agent shall be liable to any Person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. All funds held by the Paying Agent for payment to the holders of
unsurrendered Certificates and unclaimed at the end of 6 months after the
Effective Time shall be returned to Parent, after which time any holder of
unsurrendered Certificates shall look as a general creditor only to the
Surviving Corporation for payment of such funds to which such holder may be due,
subject to applicable law.
(e) Lost Documents. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Paying Agent
shall pay in respect of such lost, stolen or destroyed Certificate the amount of
cash contemplated pursuant to Section 2.7(c) or Section 2.9, as the case may be.
(f) Withholding Rights. Parent, the Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock, Company Preferred Stock, Company Options and Company Warrants,
such amounts as Parent, the Surviving Corporation or the Paying Agent is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of U.S. state or local tax law. To the extent that
amounts are so withheld and paid over to the appropriate taxing authority by
Parent, the Surviving Corporation or the Paying Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock, Company Preferred Stock, Company
Options and Company Warrants in respect of which such deduction and withholding
was made by Parent, the Surviving Corporation or the Paying Agent.
Section 2.9. Company Options and Company Warrants.
(a) Except as separately agreed to by Parent and any Person holding
Company Options, subject to and upon the terms and conditions herein, all stock
options (the "Company Options") granted under the Company's 1997 Stock Incentive
Plan, as amended ("Company Option Plan"), or otherwise, which remain unvested
immediately prior to the Effective Time shall immediately vest and become
exercisable pursuant to the provisions of the Company Options at the Effective
Time. Except as separately agreed to by Parent and any Person holding Company
Options, all Company Options shall be immediately cancelled concurrently with
the Effective Time and each holder of a Company Option that is outstanding
immediately prior to the Effective Time shall be entitled to receive an amount
in cash equal to the product of (i) the number of shares (or fraction thereof)
of Company Common Stock subject to such Company
-13-
Option at the time of such cancellation, multiplied by (ii) the positive excess
of (A) the Common Stock Merger Consideration, over (B) the per share exercise
price of such Company Option ("Company Option Consideration"). Upon surrender of
such Company Options, such Company Options shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist and each former holder
of such Company Options shall cease to have any rights with respect thereto.
(b) Subject to the terms and conditions herein, at the Effective Time,
by virtue of the Merger and without any action on the part of the Company,
Parent, Merger Sub, or holders of Company Warrants, all Company Warrants shall
no longer represent the right to receive shares of Company Common Stock upon the
due exercise thereof, and each holder shall cease to have any rights with
respect thereto, and all Company Warrants shall thereafter represent the right
to receive an amount in cash equal to the product of (i) the number of shares
(or fraction thereof) of Company Common Stock subject to such Company Warrant as
of the Effective Time, multiplied by (ii) the positive excess of (A) the value
of the Common Stock Merger Consideration over (B) the per share exercise price
of such Company Warrant ("Company Warrant Consideration"). Upon surrender of
such Company Warrants, such Company Warrants shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist and each former holder
of such Company Warrants shall cease to have any rights with respect thereto.
Section 2.10. Restricted Stock. The restrictions on each share of
Company Common Stock ("Company Restricted Stock") granted under the Company
Option Plan or otherwise shall lapse immediately prior to, and effective upon
occurrence of, the Effective Time, and each share of Company Restricted Stock
shall be fully vested in each holder thereof at such time, and each such share
of Company Restricted Stock will be treated at the Effective Time the same as,
and have the same rights and be subject to the same conditions (including the
conditions set forth in Section 2.8) hereunder as, each share of Company Common
Stock not subject to any restrictions as provided in Section 2.7(c).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent that, except as
set forth in the disclosure schedule dated as of the date of this Agreement
delivered by the Company to Parent ( "Company Disclosure Schedule"):
Section 3.1. Incorporation; Authorization; etc.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization. Each of
the Significant Subsidiaries of the Company is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization.
Each of the Company and its Significant Subsidiaries has all requisite power and
authority to own, lease and operate its properties and assets and to carry on
its business as it is now being conducted, and is duly qualified to transact
business in each jurisdiction in which the nature of property owned or leased by
it or the conduct of its
-14-
business requires it to be so qualified, except where the failure to be duly
qualified to transact business, has not had or would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect. The copies of
the certificate of incorporation and bylaws, or other organizational documents
(in each case, together with all amendments thereto) of the Company and each of
its Significant Subsidiaries that have been delivered or made available to
Parent are true and complete. The Company and the Significant Subsidiaries are
not in material default or in violation of any provisions of their respective
organizational documents.
(b) The Company has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and,
subject to the approval of the stockholders of the Company as required by the
DGCL ("Company Stockholder Approval"), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance of the Company's obligations hereunder and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company, and no other corporate proceedings or actions
on the part of the Company, the Board of Directors of the Company or the
stockholders of the Company are necessary to authorize the execution and
delivery of this Agreement, to perform the Company's obligations hereunder and,
except for the Company Stockholder Approval, to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company, and, assuming the due execution and delivery of this Agreement by
Parent and Merger Sub, this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except for (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting the rights
of creditors generally and (ii) the effect of equitable principles of general
application.
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) violate any
provision of the certificate of incorporation or bylaws, or similar
organizational documents, of the Company or any of its Significant Subsidiaries,
(ii) except as disclosed in the Company Disclosure Schedule and except as
provided in the Credit Agreements, the Stockholders' Agreement, the Company
Option Plan (and related option agreements), the Company Warrant Agreement, the
Company Warrants, or any Individual Agreement, violate or conflict with any
provision of, or be an event that is (or with the passage of time will result
in) a violation or conflict of, or result in the termination or acceleration of
or entitle any party to terminate, accelerate, modify or cancel (whether after
the giving of notice or lapse of time or both) any obligation under, or
constitute a default (with or without notice or lapse of time, or both), or
result in (or with notice or the passage of time would result in) the imposition
of any lien upon or the creation of a security interest in any of the Company's
or any of its Subsidiaries' assets or properties or require notice to any Person
pursuant to, any mortgage, lien, lease, agreement, instrument, contract,
license, order, arbitration award, judgment, decree or other arrangement to
which the Company or any of its Subsidiaries is a party or by which any of them
or their assets are bound, or (iii) except as described in the Company
Disclosure Schedule, violate or conflict with any law, order, judgment,
injunction, decree, ordinance, regulation, rule or ruling of any Governmental
Authority to which the Company or any of its Subsidiaries is subject, except for
those that, in the case of clauses (ii) and (iii) above, that are material to
the Company and its Subsidiaries taken as a whole.
-15-
(d) No registrations, filings, applications, notices, consents,
approvals, orders, qualifications, authorizations or waivers are required to be
made, filed, given or obtained by the Company or any of its Significant
Subsidiaries with, to or from any foreign, federal, state, local or other
governmental or administrative authority or regulatory agency, commission,
department or other governmental or administrative subdivision, court, tribunal
or body (each, a "Governmental Authority") in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) those set forth in the Company Disclosure Schedule, (ii)
filings under the HSR Act, (iii) the filing and recordation of appropriate
merger documents as required by the DGCL and other appropriate documents with
the relevant Governmental Authorities of other states in which the Company is
authorized to do business, (iv) those that become applicable solely as a result
of the status or identity of Parent or its Affiliates, or (v) those that the
failure to make, file, give or obtain would not, individually or in the
aggregate, be material to the Company and its Subsidiaries taken as a whole
(clauses (i) through (iv) collectively, the "Company Required Governmental
Approvals").
(e) The Board of Directors of the Company, at a meeting duly called
and held, adopted resolutions that are in full force and effect as, of the date
of this Agreement, (i) approving and declaring advisable the Merger and this
Agreement, (ii) declaring that the Merger and this Agreement are in the best
interests of the Company's stockholders, (iii) recommending that the Company's
stockholders approve and adopt this Agreement, and (iv) exempting to the extent
necessary, this Agreement and the transactions contemplated hereby from the
restrictions of Section 203 of the DGCL.
(f) The only vote of the holders of any class or series of capital
stock of the Company necessary to approve this Agreement, the Merger and the
other transactions contemplated hereby is the affirmative vote of the holders of
a majority of the outstanding shares of Company Common Stock and Company
Preferred Stock, voting together as a single class, with each share of Company
Common Stock entitled to one vote and each share of Company Preferred stock
entitled to such number of votes as is equal to the whole number of shares of
Common Stock into which such shares of Company Preferred Stock are convertible.
Section 3.2. Capitalization; Structure.
(a) The authorized capital stock of the Company consists of 3,000
shares of Company Common Stock and 500 shares of Company Preferred Stock. As of
the date of this Agreement, (i) 1217.9164148 shares of Company Common Stock are
issued and outstanding, (ii) 44.944 shares of Company Preferred Stock are issued
and outstanding, (iii) 45 shares of Company Common Stock have been reserved for
issuance upon conversion of Company Preferred Stock, (iv) 186.485 shares of
Company Common Stock have been reserved for issuance upon exercise of the
Company Options granted under the Company Option Plan, and (v) 10 shares of
Company Common Stock have been reserved for issuance upon exercise of the
Company Warrants and are held of record by the Persons set forth in the Company
Disclosure Schedule. All of the outstanding shares of Company Common Stock have
been duly authorized, are validly issued, fully paid and nonassessable and have
not been issued in violation of any preemptive rights, redemption rights,
repurchase rights or other similar rights. The Company holds no shares of its
capital stock in its treasury. The Company Disclosure Schedule contains a true
and complete list of all Significant Subsidiaries. Except as otherwise set forth
in the
-16-
Company Disclosure Schedule, all of the outstanding shares of capital stock or
other equity interests of each of the Company's Significant Subsidiaries have
been duly authorized, have been validly issued and are fully paid and
nonassessable, have not been issued in violation of any preemptive rights,
redemption rights or repurchase rights and are owned by the Company and one or
more of its Subsidiaries, free and clear of all material mortgages, pledges,
liens, claims, charges, security interests, options, hypothecations, easements,
restrictions (on transfer, voting or otherwise) or conditional sale or other
like restriction agreements, or other encumbrances other than customary
stockholders agreements ("Encumbrances"), except for Permitted Encumbrances,
Encumbrances relating to the Credit Agreements or the Stockholders' Agreement,
or Encumbrances imposed by applicable securities laws. Except as set forth in
this Section 3.2 or as set forth in the Company Disclosure Schedule, neither the
Company nor any of its Significant Subsidiaries has issued, granted or entered
into any options, warrants, calls, commitments, securities, agreements or other
rights of any kind to acquire, or any securities that, upon conversion, exchange
or exercise would require or give any Person the right to require the issuance,
sale or transfer of, or obligations to issue, sell or transfer, shares of
capital stock of any class of, or other debt obligations of or equity interests
in, the Company or of any of its Significant Subsidiaries.
(b) The Company Disclosure Schedule sets forth with respect to the
Company Options and the Company Warrants, the exercise price and number of
shares of capital stock of the Company issuable upon exercise thereof.
Section 3.3. Sufficiency of Assets. The assets of the Company and its
Subsidiaries immediately after the Effective time shall constitute assets
sufficient in all material respects to conduct the business of the Company and
its Subsidiaries as conducted as of the date of this Agreement.
Section 3.4. Financial Statements. (a) As of the date hereof, the
Company has made available a draft of the Company's Form 10-K for 2003 including
a consolidated balance sheet of the Company and its Subsidiaries as of December
31, 2003 ("Balance Sheet"), and the related consolidated statements of
operations, shareholders' equity and cash flows for the year ended December 31,
2003 (including the notes thereto) (the "December 31, 2003 Financial
Statements"). The SEC Reports filed prior to the date hereof include true and
complete copies of the audited consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 2002, and the related consolidated statements of
operations, shareholders' equity and cash flows for the year ended December 31,
2002 (including the notes thereto) ("December 31, 2002 Financial Statements",
and, together with the December 31, 2003 Financial Statements, "Financial
Statements"), together with the Report of Independent Accountants thereon. The
Financial Statements have been prepared, in all material respects, in conformity
with the practices consistently applied by the Company and its Subsidiaries in
the immediately preceding fiscal periods (except as may be indicated in the
notes thereto to the contrary or, in the case of unaudited statements, as
permitted by the instructions to Form 10-Q promulgated by the SEC) and present
fairly, in all material respects, the consolidated financial position, cash
flows and results of operations of the Company and its Subsidiaries, for the
periods and as of the dates set forth therein, in each case in conformity with
GAAP, subject, in the case of the unaudited financial statements, to normal
year-end audit adjustments (which adjustments would not be material to the
Company and its Subsidiaries taken as whole).
-17-
(b) Since January 1, 2002, the Company and its Subsidiaries have filed
all required reports, schedules, forms and other documents required to be filed
by them with the SEC under the Securities Act, or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as the case may be (the "Filed SEC
Reports"). The Filed SEC Reports (i) were, at the time filed, prepared in all
material respects in accordance with the requirements of the Securities Act or
the Exchange Act, and in each case the published rules and regulations of the
SEC thereunder, each as applicable to the Filed SEC Reports, and (ii) did not as
of the time they were filed contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading .
Section 3.5. Undisclosed Liabilities; Material Adverse Effect. Except
as set forth in the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries has any outstanding claims, liabilities or indebtedness
(whether accrued, absolute, contingent or otherwise, and whether due or to
become due) ("Liabilities"), except Liabilities (i) disclosed in the Financial
Statements; (ii) incurred after September 30, 2003 in the ordinary course of
business or in connection with this Agreement or the Merger or the other
transactions contemplated hereby; (iii) that have been discharged or paid in
full prior to the date hereof; (iv) that are of a nature not required to be
reflected in the consolidated financial statements of the Company and its
Subsidiaries prepared in accordance with GAAP consistently applied; or (v) that,
individually or in the aggregate, would not be material to the Company and its
Subsidiaries taken as whole. Since December 31, 2003, there has not occurred any
circumstance or event that would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
Section 3.6. Information. The information supplied or incorporated by
reference by the Company for inclusion in any information to be sent or provided
to stockholders of the Company in connection with any action by the Company's
stockholders to consider and vote upon adoption of this Agreement and in
connection with the Debt Offer (such information, as amended or supplemented,
the "Information"), on the date the Information (and the date of any amendment
or supplement thereto) is first sent or provided to stockholders of the Company,
will not contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to information supplied by or on behalf
of Parent or Merger Sub that is contained in the Information or any amendment or
supplement thereto.
Section 3.7. Litigation; Orders. Except as set forth in the Company
Disclosure Schedule or in the SEC Reports filed prior to the date hereof, there
are no lawsuits, actions, administrative, arbitration or other proceedings or
governmental investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries that (a) would,
individually or in the aggregate, be reasonably likely to be material to the
Company and its Subsidiaries taken as a whole, (b) as of the date of this
Agreement, seek to restrain or prohibit or otherwise challenge the consummation,
legality or validity of the transactions contemplated hereby, or (c) relate to
any alleged hazard or alleged defect in design, manufacture, materials or
workmanship relating to any product manufactured, distributed or sold by or on
behalf of the Company that would, individually or in the aggregate, be
reasonably likely to be material to the
-18-
Company and its Subsidiaries taken as a whole. There are no product recalls or
written post-sales warnings involving a product line of the Company ("Recalls")
that is material to the Company and its Subsidiaries taken as a whole and no
pending investigations being conducted by the Company or, to the knowledge of
the Companys, by any other Person concerning a Recall relating to any product
manufactured, distributed or sold by the Company that is material to the Company
and its Subsidiaries taken as a whole. Except as set forth in the Company
Disclosure Schedule there are no judgments or outstanding orders, injunctions,
decrees, stipulations or awards (whether rendered by a Governmental Authority,
or by an arbitrator) against the Company or any of its Subsidiaries or any of
their respective properties, assets or businesses, that would, individually or
in the aggregate, be reasonably likely to be material to the Company and its
Subsidiaries taken as a whole.
Section 3.8. Compliance with Laws; Permits.
(a) Except as set forth in the Company Disclosure Schedule neither the
Company nor any of its Subsidiaries is in violation of or has been given written
notice of any violation of, any law, statute, order, rule, regulation, ordinance
or judgment of any Governmental Authority that are material to the Company and
its Subsidiaries taken as a whole. This Section 3.8 does not relate to matters
with respect to Taxes, that are the subject of Section 3.10, ERISA, that are the
subject of Section 3.11 or Environmental Laws, that are the subject of Section
3.12.
(b) Except as set forth in the Company Disclosure Schedule, the
Company and its Subsidiaries have all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and approvals
that are material to the Company and its Subsidiaries taken as a whole that are
necessary to conduct their businesses substantially as presently conducted
(collectively, "Company Permits"). The Company and its Subsidiaries are not in
material violation of the terms of any Company Permits.
Section 3.9. Certain Contracts. Except as set forth in the SEC Reports
filed prior to the date hereof or in the Company Disclosure Schedule and except
for Company Plans, Foreign Plans, Credit Agreements and Credit Facilities,
neither the Company nor any of its Subsidiaries is a party to any (i) oral or
written contract, commitment, license or agreement that is required by federal
securities laws to be filed as an exhibit to the SEC Reports; (ii) agreement
restricting the Company's or any Significant Subsidiary's ability to operate or
conduct its business as it is currently being operated or conducted in any
geographic location (including applicable non-competes or similar agreements);
(iii) evidences indebtedness of the Company or any Subsidiary for money borrowed
or extensions of credit in excess of $100,000 (whether incurred, assumed,
guaranteed or secured by any asset), other than accounts payable, non-recourse
indebtedness, indebtedness secured by purchase money security interests,
sale-leaseback arrangements and indebtedness incurred in connection with any
vendor financing, in each case, incurred in the ordinary course of business;
(iv) capitalized lease obligation other than as described in the Financial
Statements or otherwise in an amount in excess of $100,000; (v) agreement under
which the Company or any of its Subsidiaries has granted (or may grant) a
security interest or lien on any of the assets of the Company or any of its
Subsidiaries in excess of $1,000,000; (vi) agreement out of the ordinary course
of business which are not cancellable by the Company or any of its Subsidiaries
upon 60 days' notice and which would require payment by the Company after the
date hereof of, or delivery of goods and services valued at, more than
-19-
$1,000,000 within 12 months from and after the date hereof; (vii) agreement
involving change in control payments in excess of $25,000 per payment and
$100,000 in the aggregate; (viii) agreement for capital expenditures in excess
of $250,000; (ix) any guaranty of, or agreement to become liable for, any
obligations of another Person (except with respect to any such guaranty or
agreement solely among the Company and its Subsidiaries); or (x) an amendment,
supplement, and modification (whether oral or written) in respect of any of the
foregoing (such contracts, commitments and agreements ("Contracts")). With
respect to all such Contracts, except as set forth in the SEC Reports filed
prior to the date hereof or in the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries, nor, to the knowledge of the Company, any
other party to any such Contract is, in breach thereof or default thereunder and
there does not exist under any provision thereof, to the knowledge of the
Company, any event that, with the giving of notice or the lapse of time or both,
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 that
would not be material to the Company and its Subsidiaries taken as a whole. True
and complete copies of each Contract set forth in the Company Disclosure
Schedule have been furnished or made available to Parent, and, to the knowledge
of the Company, all of such Contracts are valid, binding and in full force and
effect, except for such failures to be so valid, binding and in full force and
effect that would not be material to the Company and its Subsidiaries taken as a
whole.
Section 3.10. Taxes.
(a) Except as set forth in the Company Disclosure Schedule, (i) the
Company and its Subsidiaries have duly filed with the appropriate taxing
authorities all material Tax Returns required to be filed by the Company and its
Subsidiaries (ii) such Tax Returns were correct and complete in all material
respects and (iii) the Company and it Subsidiaries (X) have paid in full all
material Taxes of the Company and its Subsidiaries due and owing and (Y) have
not given or requested with respect to the Company and its Subsidiaries any
waivers of statutes of limitations or extension of time with respect to an
assessment of deficiency in connection with any Taxes or Tax Returns. There are
no material liens for Taxes upon the assets of the Company or of its
Subsidiaries except for statutory liens for current Taxes not yet due. Except as
set forth in the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any unpaid deficiency or assessment from any taxing authority
with respect to material Taxes or material Tax Returns of the Company or any of
its Subsidiaries. Except as set forth in the Company Disclosure Schedule, no
dispute, claim, adverse adjustment or deficiency for any Taxes has been
proposed, asserted or assessed (in each case, in writing) against the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries (i) is
liable for Taxes of any other person under Treasury Regulation 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise. The unpaid Taxes of the Company and its Subsidiaries
(A) did not as of December 31, 2003 exceed by a material amount the reserve for
Taxes (other than deferred Taxes established to reflect book-tax timing
differences) set forth on the Company's financial statements and (B) do not
exceed by a material amount that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Company in filing its Tax Returns.
(b) For the purposes of this Agreement, "Taxes" shall mean all
federal, state, local and foreign taxes, charges, fees, imposts or other
governmental assessments, of any kind
-20-
whatsoever, including all net income, gross income, sales, use, franchise,
profits, service, gross receipts, capital, ad valorem, value added, transfer,
inventory, capital stock, license, social security, unemployment, severance,
stamp, recording, occupation, withholding, payroll, employment, excise, or
property taxes and estimated taxes, custom duties, fees or assessments, together
with interest and any penalties with respect thereto.
(c) For purposes of this Agreement, "Tax Return" shall mean any
return, declaration, report, estimate, schedule, information return or other
document (including any related or supporting information) with respect to
Taxes, including any amendments thereto.
Section 3.11. ERISA.
(a) The Company Disclosure Schedule contains a true and complete list
of all material (i) Employee Benefit Plans, programs and policies maintained by,
sponsored or participated in by the Company and its Subsidiaries in which any
current or former employees or directors (or their dependents) of the Company or
its Subsidiaries participate (other than Foreign Plans) (collectively, the
"Plans") and (ii) contracts, offer letters and agreements of the Company or its
Subsidiaries with or addressed to any individual who is rendering or has
rendered services thereto as an employee or consultant pursuant to which the
Company or any of its Subsidiaries have an obligation to provide compensation
and/or benefits in consideration for past, present, or future services (other
than Foreign Plans) (collectively, the "Individual Agreements") (together, the
Plans and the Individual Agreements are referred to as the "Company Plans"). The
Company Disclosure Schedule identifies each Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code ("Qualified
Plans"). Neither the Company nor any of the Subsidiaries has any liability with
respect to any Employee Benefit Plan or any Individual Agreement other than the
Company Plans.
(b) With respect to each Qualified Plan, either (i) the Internal
Revenue Service has issued a favorable determination letter with respect to such
Qualified Plan and the related trust within the preceding three years that has
not been revoked or (ii) such Qualified Plan has applied to the Internal Revenue
Service for a favorable determination letter, which letter remains pending on
the date hereof and the Company knows of no facts or existing circumstances that
would reasonably be expected to result in denial of such application. The
Company knows of no facts or existing circumstances that could adversely affect
the qualified status of any Qualified Plan or the related trust.
(c) (i) All Plans are in material compliance with and have been
administered in material compliance with all applicable requirements of law,
including, the Code, and ERISA, and have been operated in accordance with their
terms; (ii) no "prohibited transaction" (as defined in Section 4975 of the Code)
has occurred with respect to any Plan which would reasonably be expected to
subject any Plan (or its related trust), the Company or any of its Subsidiaries,
to a material tax or penalty imposed under Section 4975 of the Code; (iii) no
Plan is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of
the Code, the Company has not incurred any material liability under Title IV of
ERISA which has not been satisfied in full, and no event has occurred and no
condition exists that would reasonably be expected to result in the Company
incurring a material liability under Title IV of ERISA; and (iv) none of the
Company, its Subsidiaries or any of their respective ERISA Affiliates is
required to contribute to,
-21-
or during the six-year period ending on the Closing will have been required to
contribute to, any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(d) All employee benefit plans, agreements, or arrangements maintained
outside the United States by the Company or any of its Subsidiaries ("Foreign
Plans") are maintained in accordance with applicable law and their terms, and
there are no material undisclosed liabilities with respect to such plans or
arrangements.
(e) No Company Plan provides medical benefits (whether or not
insured), with respect to current or former employees for periods extending
beyond their retirement or other termination of employment, other than pursuant
to Section 4980B of the Code or as mandated by applicable law.
(f) Except as specifically disclosed in the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will neither entitle any current or former employee or other service provider of
the Company or any Subsidiary to severance benefits or any other payment under
any Company Plan nor cause any amounts payable under any Company Plan to fail to
be deductible for federal income tax purposes by virtue of section 280G of the
Code.
(g) With respect to each of the Plans, all material contributions or
premium payments due and payable on or before Closing have been timely made, and
to the extent not presently payable, appropriate reserves have been established
for the payment and properly accrued in accordance with customary accounting
practices.
(h) Every person classified as an independent contractor has been
appropriately classified under applicable law.
(i) With respect to each Plan and Individual Agreement, the Company
has heretofore delivered or made available to Parent true and complete copies of
each of the following documents: (i) a copy of the Plan or Individual Agreement
(including all amendments thereto) and any insurance policies, trust agreements
or other funding vehicles related to any Plan; (ii) a copy of the most recent
annual report, if required under ERISA (including schedules, attachments,
financial statements, and accountant's opinion); (iii) a copy of the most recent
Summary Plan Description (as defined in ERISA), if applicable; and (iv) with
respect to each Qualified Plan, the most recent determination letter received
from the Internal Revenue Service.
Section 3.12. Environmental Matters. Except as disclosed in the
Company Disclosure Schedule or for matters that would not, individually or in
the aggregate, be reasonably likely to have a Material Adverse Effect, (i) the
properties, operations and activities of the Company and its Subsidiaries are in
compliance with all applicable Environmental Laws and Environmental Permits;
(ii) the Company and its Subsidiaries and the properties and operations of the
Company and its Subsidiaries are not subject to any pending or, to the knowledge
of the Company, threatened action by or before any Governmental Authority under
any Environmental Law; and (iii) there has been no release of any Hazardous
Material into the environment by the Company or its Subsidiaries, except to the
extent such action is not in violation of or does not give rise to any liability
under any Environmental Laws.
-22-
Section 3.13. Intellectual Property. Except as set forth in the
Company Disclosure Schedule, or except for those the absence of which would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect, the Company and its Subsidiaries possess all Intellectual
Property necessary for the conduct of their respective businesses as such
businesses are currently conducted and (i) no claims are pending or, to the
knowledge of the Company, threatened, and the Company and its Subsidiaries have
not received any notice or notification alleging, that the Company or any of its
Subsidiaries is infringing on or otherwise violating the rights of any person
with regard to any Intellectual Property owned by, licensed to and/or used by
the Company or its Subsidiaries and, to the knowledge of the Company, there is
no basis therefor; (ii) neither the Company nor any of its Subsidiaries has
infringed upon or misappropriated, or is infringing upon or misappropriating,
any U.S. or foreign patents or copyrights or any U.S., state or foreign
trademarks, or other Intellectual Property rights of any Person; and (iii) to
the knowledge of the Company, no Person is infringing on or otherwise violating
any right of the Company or any of its Subsidiaries with respect to any
Intellectual Property owned by and/or licensed to the Company or its
Subsidiaries (except, in the case of the foregoing clauses (ii) and (iii) such
infringement or misappropriation, as would not individually or in the aggregate
be reasonably likely to have a Material Adverse Effect on the Company). Other
than the licenses reflected on Schedule 5.2 of the Company Disclosure Schedule,
the items disclosed on Section 3.1 of the Company Disclosure Schedule that
relate to Intellectual Property do not and will not limit the ability of the
Company and its Subsidiaries to conduct their business in the ordinary course of
business consistent with past practice, and do not and will not result in the
imposition of significant additional costs, except for such limitations and
costs that would not be material to the Company and its Subsidiaries taken as a
whole.
Section 3.14. Real Estate. (a) Schedule 3.14 lists each parcel of real
estate owned by the Company or its Subsidiaries ("Owned Real Estate"). Except as
set forth on Schedule 3.14, the Company or its applicable Subsidiary has good
and marketable title to all Owned Real Estate, including the buildings,
structures, fixtures and improvements situated thereon, in each case free and
clear of all Encumbrances other than Permitted Encumbrances, except for such
failure to have good and marketable title as would not be reasonably likely to
have a Material Adverse Effect. Except as disclosed in the Company Disclosure
Schedule, neither the Company nor any of its Affiliates has received any notice
from any Governmental Authority of any zoning, building, fire or health code
violation in respect of the Owned Real Estate, other than any such violation
that has been corrected or as would not be reasonably likely to have a Material
Adverse Effect. Except as set forth in the Company Disclosure Schedule, none of
the Company or its Subsidiaries has leased or otherwise granted to any Person
the right to use or occupy the Owned Real Estate or any portion thereof and
there are no outstanding options, rights of first refusal, or rights of first
offer to purchase any of the Owned Real Estate or any portion thereof. There is
no condemnation, expiration or other proceeding in eminent domain pending or
threatened, affecting any parcel of Owned Real Estate or any portion thereof or
interest therein except for such condemnation, expiration or other proceedings
as would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect.
(b) Schedule 3.14 lists each parcel of real estate leased by the
Company or its Subsidiaries ("Leased Real Estate"), including identification of
the lessor and street address. Other than for exceptions to the following set
forth on the Company Disclosure Schedule: (i) the leases relating to the Leased
Real Estate are in full force and effect and are legal, valid, binding
-23-
and enforceable in accordance with their respective terms, except to the extent
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the enforcement of creditors'
rights or by general equitable principles; (ii) no material amount payable under
any such leases is past due; (iii) each party thereto has complied with all
material commitments and obligations on its part to be performed or observed
under each such lease; (iv) except as set forth on Schedule 3.14, neither the
Company nor any of its Subsidiaries has received any notice of a default (which
has not been cured), offset or counterclaim under any such lease, or any other
communication calling upon it to comply with any provision of any such lease or
asserting non-compliance or default; (v) the Company and its Subsidiaries have a
valid leasehold interest in the Leased Real Estate, free and clear of all
Encumbrances, other than Permitted Encumbrances; and (vi) neither the Company
nor any of its Subsidiaries have subleased, licensed or otherwise granted any
Person the right to use or occupy the Leased Real Estate or any portion thereof.
There is no condemnation, expiration or other proceeding in eminent domain
pending or threatened, affecting any parcel of Leased Real Estate or any portion
thereof or interest therein except for such condemnation, expiration or other
proceedings as would not, individually or in the aggregate, be reasonably likely
to have a Material Adverse Effect.
Section 3.15. Brokers, Finders, etc. Except for the services of
Xxxxxxx Xxxxx, neither the Company, any of its Subsidiaries, nor any party
acting on their behalf has employed, paid or become obligated to pay any fee or
commission to any broker, finder, consultant or other intermediary in connection
with the transactions contemplated by this Agreement or the sale process
undergone by the Company and its financial advisors leading to this transaction
who or that might be entitled to a fee or commission in connection with such
transactions.
Section 3.16. Affiliate Transactions. Except as set forth in the
Company Disclosure Schedule, and other than any employment or compensation
agreement or arrangement with directors, officers and employees entered into in
the ordinary course of business consistent with past practice, neither the
Company nor any of its Subsidiaries is a party to any contract, agreement or
commitment with any holder of in excess of 1% of the outstanding Company Common
Stock, and since December 31, 2003, no material transactions have taken place
between the Company or any of its Subsidiaries on the one hand, and any holder
of in excess of 1% of the outstanding Company Common Stock, or any officer or
director of the Company or any of its Subsidiaries, on the other hand, that will
not have been discharged, terminated or otherwise consummated on or prior to the
Closing Date with no further obligation on the part of the Company or any of its
Subsidiaries.
Section 3.17. Customers and Suppliers. The Company Disclosure Schedule
sets forth a complete and accurate list of (a) the ten largest customers
(including distributors) of the Company and its Subsidiaries (measured by
aggregate xxxxxxxx) during the fiscal year ended December 31, 2003 and (b) other
than with respect to Owned Real Estate and Leased Real Estate, the ten largest
suppliers of materials, products or services to the Company and its Subsidiaries
(measured by the aggregate amount purchased by the Company and its Subsidiaries)
during the fiscal year ended on December 31, 2003. The relationships of the
Company and its Subsidiaries with such customers and suppliers required to be
listed on the Company Disclosure Schedule are good commercial working
relationships and none of such customers or suppliers has canceled, terminated
or otherwise materially altered (including any material reduction in the
-24-
rate or amount of sales or purchases or material increase in the prices charged
or paid, as the case may be) or notified the Company or any of its Subsidiaries
of any intention to do any of the foregoing or otherwise threatened in writing
to the Company or any of its Subsidiaries to cancel, terminate or materially
alter (including any material reduction in the rate or amount of sales or
purchases, as the case may be) its relationship with the Company or its
Subsidiaries.
Section 3.18. Labor Matters. Except as disclosed on the Company
Disclosure Schedule (a) no employee of the Company or its Subsidiaries is
represented by a labor union, (b) none of the Company or any of its Subsidiaries
is a party to, or otherwise subject to, any collective bargaining agreement or
other labor union contract, (c) no petition has been filed or proceedings
instituted by an employee or group of employees of the Company or any of its
Subsidiaries with any labor relations board seeking recognition of a bargaining
representative and (d) to the Company's knowledge, there is no organizational
effort currently being made or threatened by, or on behalf of, any labor union
to organize employees of the Company or any of its Subsidiaries and no demand
for recognition of employees of the Company or any of its Subsidiaries has been
made by, or on behalf of, any labor union.
Section 3.19. Insurance. Neither the Company nor any of its
Subsidiaries has received any written notice, or, to the knowledge of the
Company, threats of cancellation or non-renewal of, or, since January 1, 2003,
any material increase of premiums with respect to, any material policies of
insurance currently maintained by the Company and its Subsidiaries. To the
Company's knowledge, there are no material claims by the Company or any of its
Subsidiaries under any of such policies relating to the business, assets or
properties of the Company or its Subsidiaries as to which any insurance company
is denying liability or defending under a reservation of rights or similar
clause.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule dated as of the date of
this Agreement delivered by Parent and Merger Sub to the Company ("Parent
Disclosure Schedule"), each of Parent and Merger Sub hereby jointly and
severally represents and warrants to the Company that:
Section 4.1. Incorporation; Authorization; etc.
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, except where the failure to be duly organized, validly existing or
in good standing, would not, individually or in the aggregate, be expected to
impair in any material respect the ability of Parent or Merger Sub to perform
its obligations under this Agreement or have a material adverse effect on the
Business Condition of Parent and its Subsidiaries, taken as a whole, or prevent
or impede or delay the consummation of the Merger or the other transactions
contemplated this Agreement. Each of Parent and Merger Sub has all requisite
power and authority to own, lease, and operate its properties and assets and to
carry on its business as it is now being conducted. The copies of
-25-
the certificate of incorporation and bylaws, or other organizational documents
(in each case, together with all amendments thereto) of Parent and Merger Sub
that have been previously delivered or made available to the Company are true
and correct.
(b) Each of Parent and Merger Sub has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement, the performance of each of Parent's and Merger
Sub's obligations hereunder, and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of Parent and Merger Sub, and no other corporate proceedings
or actions on the part of Parent or Merger Sub, the respective Boards of
Directors of Parent and Merger Sub or the shareholders of Parent or Merger Sub
are necessary therefor. This Agreement has been duly executed and delivered by
each of Parent and Merger Sub, and, assuming the due execution and delivery of
this Agreement by the Company, this Agreement constitutes the legal, valid and
binding obligation of each of Parent and Merger Sub, enforceable against each in
accordance with its terms, except for (i) the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting the rights of creditors generally and (ii) the effect of equitable
principles of general application.
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) violate any
provision of the certificate of incorporation or bylaws, or similar
organizational documents, of Parent or Merger Sub, (ii) violate or conflict with
any provision of, or be an event that is (or with the passage of time will
result in) a violation or conflict of, or result in the termination or
acceleration of or entitle any party to terminate, accelerate, modify or cancel
(whether after the giving of notice or lapse of time or both) any obligation
under, or constitute a default (with or without notice or lapse of time, or
both), or result in (or with notice or lapse of time, or both, would result in)
the imposition of any lien upon or the creation of a security interest in any of
Parent's or Merger Sub's assets or properties or require notice to any Person
pursuant to, any mortgage, lien, lease, agreement, contract, license,
instrument, order, arbitration award, judgment, decree or other arrangement to
which Parent is a party or by which it or any of its assets are bound, or (iii)
violate or conflict with any law, order, judgment, injunction, decree,
ordinance, regulation or ruling of any Governmental Authority to which Parent or
Merger Sub is subject, except for those that, in the case of clause (ii), would
not reasonably be expected to impair in any material respect the ability of
Parent or Merger Sub to perform its obligations under this Agreement or have a
material adverse effect on the Business Condition of Parent and its
Subsidiaries, taken as a whole, or prevent or impede or delay the consummation
of the Merger or the other transactions contemplated this Agreement.
(d) No registrations, filings, applications, notices, consents,
approvals, orders, qualifications or waivers are required to be made, filed,
given or obtained by Parent with, to or from any Governmental Authority in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) those set forth on the
Parent Disclosure Schedule, (ii) filings under the HSR Act, (iii) the filing and
recordation of appropriate merger documents as required by the DGCL and other
appropriate documents with the relevant Governmental Authorities of other states
in which the Company is authorized to do business, or (iv) those that the
failure to make, file, give or obtain would not,
-26-
individually or in the aggregate, be reasonably expected to impair in any
material respect the ability of Parent or Merger Sub to perform its obligations
under this Agreement or have a material adverse effect on the Business Condition
of Parent and its Subsidiaries, taken as a whole, or prevent or impede or delay
the consummation of the Merger or the other transactions contemplated hereby
(clauses (i) through (iv) above, collectively, the "Parent Required Governmental
Approvals").
Section 4.2. Litigation; Orders. There are no pending or, to the
knowledge of Parent, threatened actions, suits or proceedings, either at law or
in equity, which would reasonably be expected to impair in any material respect
the ability of Parent or Merger Sub to perform its obligations under this
Agreement or have a material adverse effect on the Business Condition of Parent
and its Subsidiaries, taken as a whole, or prevent or impede or delay the
consummation of the Merger or the other transactions contemplated hereby.
Section 4.3. Financial Capability. As set forth in Section 4.3 of the
Parent Disclosure Schedule, Parent and Merger Sub have provided the Company with
a commitment letter from (i) Xxxxxxx Sachs Credit Partners L.P., dated as of the
date hereof, (ii) Xxxxxxx, Xxxxx & Co., dated as of the date hereof, (iii)
Berkshire Fund V, Limited Partnership, Berkshire Fund VI, Limited Partnership
and Berkshire Investors LLC, dated as of the date hereof and (iv) Weston
Presidio Capital IV, L.P. and WPC Entrepreneur Fund II, L.P., dated as of the
date hereof (such commitment letters and any commitment letters in substitution
thereof that are reasonably acceptable to the Company, the "Commitments," and
the financing to be provided thereunder, the "Acquisition Financing"). The
proceeds from such Acquisition Financing constitute all of the financing
required to be provided by Parent and Merger Sub for the consummation of the
Merger and transactions contemplated by this Agreement, including any funds
necessary to pay the Common Stock Merger Consideration, the Preferred Stock
Merger Consideration, the Company Option Consideration, the Company Warrant
Consideration and to repay any indebtedness of the Company that will be
repayable (including at the option of the relevant creditor), and, in each case,
all associated costs and expenses, upon or following consummation of the Merger
and other transactions contemplated by this Agreement. To the knowledge of
Parent and Merger Sub, the obligations to fund the Commitments are not subject
to any condition other than as set forth in the Commitments. As of the date
hereof, the Commitments are in full force and effect, have not been withdrawn or
terminated or otherwise amended or modified in any respect and no Person
extending such Commitments has advised Parent, Merger Sub or any of their
respective Affiliates, and none of Parent, Merger Sub or any of their Affiliates
have any reason to believe, that the Commitments will not lead to the
Acquisition Financing contemplated by this Agreement. All commitment and other
fees required to be paid under the Commitments on or prior to the date hereof
have been paid.
Section 4.4. Interim Operations of Merger Sub. Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, and has engaged in no business and has incurred no liabilities other
than in connection with the transactions contemplated by this Agreement,
including the Acquisition Financing.
Section 4.5. Solvency of the Company Following the Merger. As of the
date hereof, to the knowledge of Parent and Merger Sub, immediately after the
Effective Time and after giving effect to the Merger and the transactions
contemplated by this Agreement, the
-27-
Company and each of its Subsidiaries will not (i) be insolvent (either because
its financial condition is such that the sum of its debts is greater than the
fair market value of its assets or because the fair saleable value of its assets
is less than the amount required to pay its probable liability on its existing
debts as they mature), (ii) have unreasonably small capital with which to engage
in its business or (iii) have incurred debts beyond its ability to pay as they
become due.
Section 4.6. Information. The information supplied by Parent and
Merger Sub for inclusion in the Information on the date such Information (and
the date of any amendment or supplement thereto) is first sent or provided to
stockholders of the Company, will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, Parent and Merger Sub make no representation or warranty with respect
to any information supplied by or on behalf of the Company that is contained in
the Information or any amendment or supplement thereto.
Section 4.7. Brokers, Finders, etc. Neither Parent nor any party
acting on its behalf has employed, paid or become obligated to pay any fee or
commission to any broker, finder, consultant or other intermediary in connection
with the transactions contemplated by this Agreement who or that might be
entitled to a fee or commission from the Company in connection with such
transactions.
ARTICLE V
COVENANTS OF THE COMPANY AND PARENT
Section 5.1. Investigation of Business; Access to Properties and
Records.
(a) After the date of this Agreement, to the extent reasonably
requested, upon reasonable advance notice and subject to applicable law, the
Company shall afford to the officers, employees and authorized representatives
of Parent (including its attorneys and accountants and any financial institution
providing or proposing to provide or underwrite financing in connection with the
transactions contemplated hereby) reasonable access during normal business hours
to the properties, books, contracts, commitments, personnel, financial and
operating data and records of the Company and its Subsidiaries, and shall
furnish to Parent or its authorized representatives, such additional information
concerning the Company, its Subsidiaries and their properties, assets,
employees, businesses and operations as shall be reasonably requested; provided,
however, that no access shall be given to any information that the Company, upon
the advice of outside counsel, deems restricted under the HSR Act, including,
certain types of information relating to market plans, pricing, customers and
vendors. Parent and Merger Sub covenant that any such access shall be conducted
in such a manner as not to interfere unreasonably with the operations of the
Company or its Subsidiaries. Parent and Merger Sub also agree that any such
access shall not be deemed to permit Parent or Merger Sub to conduct any on site
environmental investigations or examinations without the Company's prior written
consent. Notwithstanding anything to the contrary contained in this Agreement,
neither the Company nor any of its Subsidiaries shall be required to provide any
information that (i) it
-28-
reasonably believes it may not provide to Parent by reason of applicable law,
rules or regulations, (ii) constitutes information protected by attorney/client
privilege, or (iii) the Company or any of its Subsidiaries is required to keep
confidential by reason of contract, agreement or understanding with third
parties.
(b) Any information provided to Parent or Merger Sub or their
respective representatives pursuant to this Agreement shall be held by Parent,
Merger Sub and their representatives in accordance with, and shall be subject to
the terms of, (i) that certain Confidentiality Agreement, dated as of December
16, 2003, by and between the Company and Berkshire Partners LLC and (ii) that
certain Confidentiality Agreement dated as of January 15, 2004, by and between
the Company and Weston Presidio (collectively, the "Confidentiality
Agreement")], which is hereby incorporated in this Agreement by reference as
though fully set forth in this Agreement and shall continue in force until the
Effective Time, at which time such confidentiality agreement shall terminate;
provided that Parent, Merger Sub and the Company may disclose such information
as may be necessary in connection with seeking the Parent Required Governmental
Approvals, the Company Required Governmental Approvals and the Company
Stockholder Approval; provided further that if this Agreement is terminated in
accordance with Article IX of this Agreement prior to the Effective Time, the
Confidentiality Agreement shall remain in full force and effect, in accordance
with its terms.
Section 5.2. Agreement to Cooperate; Reasonable Best Efforts;
Obtaining Consents.
(a) Prior to the Closing, subject to the terms and conditions of this
Agreement, each of the Company, on the one hand, and each of Parent and Merger
Sub, on the other hand, shall use its reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable law and regulations to consummate and make
effective as promptly as practicable the Merger and other transactions
contemplated by this Agreement, including using its reasonable best efforts to
obtain all necessary waivers, consents and/or approvals of third parties
required in order to preserve material contractual relationships of Parent, the
Company and their respective Subsidiaries (such waivers, consent and approvals,
the "Third Party Consents"), all necessary waivers, consents or approvals to
effect all necessary registrations, filings and submissions and to lift any
injunction or other legal bar to the consummation of the Merger or other
transactions contemplated by this Agreement (and, in such case, to proceed with
the consummation of the Merger as expeditiously as possible), including through
all possible appeals; provided, however, except as otherwise provided in the
Company Disclosure Schedule, notwithstanding any other provision of this
Agreement, nothing herein shall require the Company or any of its Subsidiaries
or Parent or Merger Sub to make any out-of-pocket expenses, accrue any liability
for its account or make any accommodation or concession to Parent, Merger Sub or
any third party in connection with the foregoing.
(b) In addition to and without limitation of the foregoing, each of
Parent, Merger Sub and the Company undertakes and agrees to (i) file (and Parent
agrees to cause any Person that may be deemed to be the ultimate parent entity
or otherwise to control Parent to file, if such filing is required by law) as
soon as practicable, and in any event prior to ten business days after the date
hereof, a Notification and Report Form under the HSR Act with the United
-29-
States Federal Trade Commission and the Antitrust Division of the United States
Department of Justice (and shall file as soon as practicable any form or report
required by any other Governmental Authority relating to antitrust, competition,
trade or other regulatory matters), and (ii) take any act, make any undertaking
or receive any clearance or approval required by any Governmental Authority or
applicable law. Each of Parent and the Company shall (and Parent shall cause any
such parent entity to) (i) respond as promptly as practicable to any inquiries
or requests received from any Governmental Authority for additional information
or documentation, and (ii) not extend any waiting period under the HSR Act or
enter into any agreement with any Governmental Authority not to consummate the
transactions contemplated by this Agreement, except with the prior consent of
the other parties hereto (which consent shall not be unreasonably withheld or
delayed). Parent and the Company shall take any and all commercially reasonable
steps necessary to avoid or eliminate each and every impediment under any
antitrust, competition, or trade law that may be asserted by any Governmental
Authority with respect to the Merger so as to enable the Effective Time to occur
as soon as reasonably possible and to avoid any suit or proceeding, which would
otherwise have the effect of preventing or delaying the Effective Time. Each
party shall (i) promptly notify the other party of any written communication to
that party or its Affiliates from any Governmental Authority and, subject to
applicable law, permit the other party to review in advance any proposed written
communication to any of the foregoing; (ii) not agree to participate, or to
permit its affiliates to participate, in any substantive meeting or discussion
with any Governmental Authority in respect of any filings, investigation or
inquiry concerning this Agreement or the Merger unless it consults with the
other party in advance and, to the extent permitted by such Governmental
Authority, gives the other party the opportunity to attend and participate
thereat; and (iii) furnish the other party with copies of all correspondence,
filings, and communications (and memoranda setting forth the substance thereof)
between them and their affiliates and their respective representatives on the
one hand, and any Governmental Authority or members of their respective staffs
on the other hand, with respect to this Agreement and the Merger (except that
the Company shall be under no obligation of any kind to provide any other party
documents, material or other information relating to the valuation of the
Company or to alternatives to the proposed Merger and this Agreement).
(c) In addition to and without limitation to the foregoing, in
connection with the Acquisition Financing, Parent shall apply for and use its
commercially reasonable efforts to receive and maintain a credit rating by
Xxxxx'x Investor Services, Inc. and Standard & Poor's Ratings Group, a division
of The McGraw Hill Corporation.
Section 5.3. Further Assurances.
(a) Subject to the terms and conditions of this Agreement and not in
limitation of any such provisions including Section 5.2, each party hereby
agrees to use all reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws to satisfy all conditions to, and to consummate,
the transactions contemplated by this Agreement and to carry out the purposes
hereof, including to perform and cause to be performed any further acts and to
execute and deliver and cause to be executed and delivered any documents that
may be reasonably necessary to carry out the provisions of this Agreement;
provided that, except as otherwise provided in this Agreement,
-30-
notwithstanding anything to the contrary stated in this Agreement, the Company
shall not be required to pay any consideration for any third-party consent or
waiver.
(b) The parties shall engage, at the Company's expense (payable at
Closing), a valuation firm of national reputation reasonably acceptable to the
Company, its stockholders and Parent, to deliver a letter addressed to the
Company, its stockholders and Parent and indicating that at and immediately
after the Effective Time, and after giving effect to the Merger and the
transactions contemplated by this Agreement, the Company will not (i) be
insolvent (either because its financial condition is such that the sum of its
debts is greater than the fair market value of its assets or because the fair
saleable value of its assets is less than the amount required to pay its
probable liability on its existing debts as they mature), (ii) have unreasonably
small capital with which to engage in its business or (iii) have incurred debts
beyond its ability to pay as they become due.
Section 5.4. Conduct of Business.
(a) Except as otherwise permitted or required by the terms of this
Agreement and the Company Disclosure Schedule (including Section 5.4 of the
Company Disclosure Schedule), from the date of this Agreement until the Closing
(or earlier termination of this Agreement), the Company shall, and shall cause
each of its Subsidiaries to, (i) operate and carry on its business only in the
ordinary course consistent with past practice, (ii) use reasonable efforts
consistent with good business practice to keep and maintain its respective
assets and properties in normal operating condition and repair, reasonable wear
and tear and damage by fire or other casualty excepted, and (iii) use reasonable
efforts to maintain the present business organization of the Company and its
Subsidiaries intact and preserve the goodwill of the suppliers, contractors,
licensors, employees, customers, distributors and others having significant
business relations with them in all material respects.
(b) Except as contemplated by this Agreement, as set forth in the
Company Disclosure Schedule or as otherwise required to maintain the business
and assets of the Company and its Subsidiaries, consistent with past practice,
the Company shall not, and shall not cause or allow any of its Subsidiaries to,
without the prior consent in writing of Parent (which consent shall not be
unreasonably withheld, conditioned or delayed):
(i) amend its certificate of incorporation or bylaws or equivalent
organizational documents or amend the terms of their outstanding equity
securities;
(ii) issue or agree to issue (by the issuance or granting of options,
warrants or rights to purchase Company Common Stock, Company Preferred
Stock or other capital stock of the Company or otherwise) any shares of
Company Common Stock or other capital stock of the Company, any securities
exchangeable for or convertible into Company Common Stock or other capital
stock of the Company, or any other securities, except that (A) the Company
may issue or agree to issue shares of capital stock of the Company upon
exercise of the Company Options and the Company Warrants outstanding on the
date hereof pursuant to the terms of such securities on the date hereof and
(B) the Company may issue or agree to issue shares of capital stock of the
Company upon the
-31-
conversion of Company Preferred Stock in accordance with the terms of such
securities on the date hereof;
(iii) split, combine or reclassify any shares of Company Common Stock,
Company Preferred Stock or other capital stock of the Company or declare,
set aside or pay any dividends or make any other distributions (whether in
cash, stock or other property) in respect of Company Common Stock, Company
Preferred Stock or other capital stock of the Company, except for (A) the
payment of dividends in accordance with the terms of Company Preferred
Stock, (B) the payment of dividends or distributions to the Company or any
of its Subsidiaries by a direct or indirect Subsidiary of the Company, or
(C) the payment of dividends or distributions by a non wholly-owned
Subsidiary of the Company pro rata to the equity holders thereof;
(iv) redeem, purchase or otherwise acquire for any consideration
(other than as required by the terms of the Stockholders' Agreement, any
Individual Agreement, the Convertidora Agreement, the Company Option Plan,
Company Options, the Company Warrant Agreement, Company Warrants and
Company Preferred Stock) (A) any outstanding shares of its capital stock or
securities carrying the right to acquire, or which are convertible into or
exchangeable or exercisable for, with or without additional consideration,
such stock, (B) any other securities of the Company or any of its
Subsidiaries, or (C) any interest in any of the foregoing;
(v) (A) except in the ordinary course of business consistent with past
practice and as contemplated by Section 5.7 and except as pursuant to the
terms of the Stockholders' Agreement, the Credit Agreements, the Credit
Facilities, incur any indebtedness for borrowed money in excess of
$500,000, or (B) except in the ordinary course of business consistent with
past practice and as contemplated by Section 5.7, amend, supplement or
otherwise modify in any way any of the terms of the Credit Agreements or
the Credit Facilities;
(vi) make any acquisition or lease, assignment, transfer or
disposition (or series of related acquisitions or leases, assignments,
transfers or dispositions) of stock or assets of any third party in excess
of $500,000 in the aggregate other than inventory, supplies or other assets
in the ordinary course of business consistent with past practice;
(vii) merge or consolidate with any corporation or other entity, or
adopt a plan of complete or partial liquidation, dissolution, bankruptcy,
restructuring, recapitalization or other reorganization, other than
transactions solely between or among the Company and/or among its
wholly-owned Subsidiaries;
(viii) enter into any employment, consulting or similar contract with,
or increase the compensation and/or benefits of, (A) any employee whose
base salary is in excess of $250,000 as of the date of this Agreement (a
"Highly Compensated Employee"), (B) any director or officer of the Company
or any of its Subsidiaries or (C) any Principal Stockholder or any
Affiliate of any Principal Stockholder;
-32-
(ix) except for increases in compensation and benefits that are
required by applicable law or a contract or commitment in effect on the
date of this Agreement, increase the compensation and/or benefits of
employees (other than Highly Compensated Employees) in an amount in excess
of 3% of the aggregate of all employees' (other than Highly Compensated
Employees) annual base salaries and wages, as of the date hereof;
(x) (A) adopt, amend in any material respect adverse to the Company or
terminate any Employee Benefit Plan, severance plan or collective
bargaining agreement, except in the ordinary course of business consistent
with past practice or as required by law or by the terms of any such plan
or agreement or any contract as in existence on the date of this Agreement,
(B) grant or make any loan, bonus, fees, incentive compensation, service
award or other like benefit, to or for the benefit of any officer or Highly
Compensated Employee except pursuant to the Employee Benefit Plans
described on Schedule 3.11 hereto, (C) except as permitted by Section
5.4(b)(ix), enter into any new bonus or incentive agreement (other than in
the ordinary course of business consistent with past practice); provided
that, in either case, no such agreement shall provide for any equity
payments, (D) with respect to any Principal Stockholder or any other
Affiliates, grant, make or accord any payment or distribution or other like
benefit, or otherwise transfer assets, including, any payment of principal
of or interest on any debt owed to any Principal Stockholder or Affiliate;
(xi) mortgage, pledge, or otherwise voluntarily encumber any part of its
assets, tangible or intangible, other than pledges or encumbrances pursuant
to the Credit Agreements or other permitted borrowings in the ordinary
course of business consistent with past practice;
(xii) except as required by GAAP, make any material change in its
accounting principles or the methods by which such principles are applied
for financial reporting purposes;
(xiii) pay, discharge, compromise, satisfy, cancel or forgive any
debts or claims or rights of third parties (or series of rights, debts or
claims) involving, individually or in the aggregate, consideration in
excess of $250,000 except in the ordinary course of business consistent
with past practice;
(xiv) except as permitted under Section 5.4(b)(v), cancel or
terminate, or amend, modify or waive in any way the terms of, any
agreement, contract or commitment to which it is a party or by which it or
any of its assets are bound, which (A) provides for payment by or to the
Company or its Subsidiaries in excess of $250,000 over the life of such
agreement, contract or commitment or (B) involves the performance of
services or the delivery of goods by or to the Company or its Subsidiaries
of an amount or value in excess of $250,000 over the life of such
agreement, contract or commitment, in each case, other than in the ordinary
course of business consistent with past practice;
(xv) other than pursuant to the terms of the Convertidora Agreement,
(A) make an investment in, (B) make a loan or advance or agreement to loan
or advance to, (C) enter into any joint venture, partnership or other
similar arrangement for the conduct of
-33-
business with, or (D) guarantee indebtedness for borrowed money of, (x) any
third party or (y) any portion of the assets of any Person that constitutes
a division or operating unit of such third party, in each case, in excess
of $250,000 (provided that such third party or Person is not an Affiliate);
for purposes of this Section 5.4(b)(xiv) it is acknowledged and agreed that
such transactions solely between the Company and any of its Subsidiaries
shall not be prohibited;
(xvi) enter into any transaction with, or for the benefit of, any
Principal Stockholder or any other Affiliate of the Company or its
Subsidiaries (other than matters permitted by Sections 5.4(b)(viii) and
(ix) and other than payments made to officers, directors and employees in
the ordinary course of business consistent with past practice);
(xvii) make, change or revoke any material Tax election, elect or
change any method of accounting for Tax purposes, settle any material
action in respect of Taxes or enter into any material agreement or contract
in respect of Taxes with any Governmental Authority, except in each case,
in the ordinary course of business or consistent with past practice;
(xviii) except as otherwise permitted in this Section 5.4(b), make any
capital expenditure other than is specified in the plan set forth as
Exhibit A to Schedule 5.4 of the Company Disclosure Schedule in excess of
$250,000 in the aggregate;
(xix) grant any license or sublicense or amend the terms of any
material rights with respect to any Intellectual Property, other than in
the ordinary course of business consistent with past practice; or
(xx) agree, commit or resolve to do or authorize any of the foregoing.
Section 5.5. Public Announcements. The parties have agreed to an
initial press release that shall be released as soon as practicable after the
date hereof, and the parties further agree that any xxxxxx xxxxx release or
public announcement concerning the transactions contemplated hereby shall not be
issued by the Company, Parent or Merger Sub without the prior consent of Parent
and the Company, except as such release or public announcement may be required
by law, rule or regulation, in which case the party required to issue the
release or announcement shall allow Parent and the Company, as applicable,
reasonable time to comment on such release or announcement in advance of its
issuance.
Section 5.6. Employment Benefits Arrangements.
(a) For twelve months following the Closing ("Benefits Continuation
Period"), Parent shall maintain, or cause the Company to maintain, for the
employees of the Company and its Subsidiaries as of the Closing who continue
employment following the Closing ("Employees"), compensation and employee
benefits except for equity or equity related compensation that are, in the
aggregate, no less favorable than those provided by the Company and its
Subsidiaries immediately prior to the Closing. Parent agrees that, from and
after the Closing, Parent will honor or will cause the Company to honor, all
obligations under the Plans, Foreign Plans, and Individual Agreements, provided
that, subject to the foregoing sentence, from and after the Closing, the Company
shall have the right to amend, modify, alter or terminate any
-34-
specific Plan or Foreign Plan to the extent the terms of such Plan or Foreign
Plan permit such action.
(b) For all purposes of determining eligibility and vesting under any
Plan (or similar plan maintained by the Company after Closing (a "New Plan")),
each Employee shall be credited with his or her years of service with the
Company and its Affiliates (and with any additional years of service credited
under the Plans and Foreign Plans) before the Closing, to the same extent as
such Employee was entitled, before the Closing, to credit for such service under
any similar Plans, except to the extent such credit would result in a
duplication of benefits. In addition, and without limiting the generality of the
foregoing: (i) each Employee shall be immediately eligible to participate,
without any waiting time, in any and all employee benefit plans sponsored by
Parent and its Affiliates for the benefit of Employees (such plans,
collectively, the "New Plans") to the extent coverage under such New Plan
replaces coverage under a comparable Plan of the Company in which such Employee
participated immediately before the Closing (such plans, collectively, the "Old
Plans"); and (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any Employee, Parent shall cause all
pre-existing condition exclusions of such New Plan to be waived for such
Employee and his or her covered dependents, and Parent shall cause any eligible
expenses incurred by such Employee and his or her covered dependents during the
portion of the plan year of the Old Plan ending on the date such Employee's
participation in the corresponding New Plan begins to be taken into account
under such New Plan for purposes of satisfying all deductible, coinsurance and
maximum out-of-pocket requirements applicable to such Employee and his or her
covered dependents for the applicable plan year as if such amounts had been paid
in accordance with such New Plan.
(c) Parent hereby acknowledges and agrees that consummation of the
transactions contemplated by this Agreement constitutes a "Change in Control"
under the Company Option Plan.
Section 5.7. Indebtedness. (a) On the Closing Date, simultaneously
with the Closing, Parent shall cause all outstanding Obligations to be paid in
full, providing funds to the Company to do so if necessary, and immediately upon
such payment and any other payments in connection thereto, cause the Loan
Agreement to be cancelled and be of no further force and effect. Parent agrees
to comply and to cause the Company to comply with its obligations to conduct a
"Change of Control Offer", as such term is defined in Section 4.13 of the
Indenture, pursuant to Section 4.13 of the Indenture, if applicable, and to
comply and to cause the Company to comply with all of its other obligations
under the Credit Agreements and any other existing indebtedness in connection
with the transactions contemplated hereby.
(b) The Company shall (provided that Parent and Merger Sub shall
coordinate with the Company regarding such timing) (i) commence a cash tender
offer to purchase all of the outstanding Senior Subordinated Notes and (ii)
solicit the consent of the holders of the Senior Subordinated Notes regarding
the amendments (the "Indenture Amendments") described on Schedule 5.7 of the
Parent Disclosure Schedule to the covenants contained in the Indenture. Such
offer to purchase and consent solicitation (the "Debt Offer") shall be made
substantially on such terms and conditions as are described on Schedule 5.7 of
the Parent Disclosure Schedule; provided that, in any event, the parties agree
that the terms and conditions of the Debt Offer shall
-35-
provide that the closing thereof shall be contingent upon the consummation of
the Merger at the Effective Time. The Company shall not without the Parent's
prior consent, waive any condition to the Debt Offer described on Schedule 5.7
of the Parent Disclosure Schedule, or make any changes to the terms and
conditions of the Debt Offer, except, in each case, as provided in paragraph (c)
below with respect to termination of this Agreement. The Company covenants and
agrees that, subject to the terms and conditions of this Agreement, including
the terms and conditions to the Debt Offer, it will accept for payment, and pay
for, the Senior Subordinated Notes and effect the Indenture Amendments, in each
case, immediately after, and contingent upon, the Effective Time.
(c) Promptly following the date of this Agreement, the Company shall
prepare an offer to purchase the Senior Subordinated Notes and forms of the
related letters of transmittal, as well as all other information and exhibits
that may be necessary or advisable in connection with the Debt Offer
(collectively, the "Offer Documents"). In the event that this Agreement is
terminated, the Company will have the right to amend the Offer Documents and
otherwise terminate the Debt Offer without Parent's consent. The Company will
use its reasonable best efforts to cause the Offer Documents to be mailed to the
holders of the Senior Subordinated Notes as soon as practicable following the
preparation of the Offer Documents.
(d) If at any time prior to the Effective Time any information should
be discovered by any party hereto, which should be set forth in an amendment or
supplement to the Offer Documents mailed to holders of Senior Subordinated Notes
so that such documents would not include any misstatement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties hereto
and, to the extent required by applicable law, the Company shall promptly
prepare an appropriate amendment or supplement describing such information, and,
if required, shall disseminate such amendment or supplement to the holders of
the Senior Subordinated Notes.
(e) Parent and Merger Sub shall, immediately prior to the Effective
Time deposit sufficient funds to a paying agent reasonably acceptable to the
Company to pay all of the amounts owing with respect to all outstanding Senior
Subordinated Notes, including the aggregate principal amount outstanding
immediately prior to the Effective Time, accrued interest and any fees or
charges associated therewith. Notwithstanding anything to the contrary in this
Agreement (including Section 5.4), from the date hereof through the Closing, the
Company may use any available cash and cash equivalents at the Company and its
Subsidiaries to pay amounts outstanding under the Credit Agreements.
Section 5.8. Directors' and Officers' Indemnification.
(a) For a period of six years from the Effective Time, the provisions
of the certificate of incorporation and bylaws, or similar organization
documents, of the Company and of each of its Subsidiaries concerning elimination
of liability and indemnification of directors and officers shall not be amended
in any manner that would adversely affect the rights thereunder of any Person
that is as of the date of this Agreement an officer or director of the Company
or of any such Subsidiary except as may be required by applicable law. From and
after the Effective Time, Parent shall assume, be jointly and severally liable
for, and honor, guaranty and
-36-
stand surety for, and shall cause the Company to honor, in accordance with their
respective terms, each of the covenants contained in this Section 5.8. In
addition to the foregoing, from and after the Closing Date, to the extent
permitted by applicable law Parent and the Company, jointly and severally, shall
indemnify, hold harmless and defend each Person who is a current or former
officer or director of the Company or any of its Subsidiaries against all losses
and expenses (including all losses, costs, obligations, liabilities, settlement
payments, awards, judgments, fines, penalties, damages (including compensatory,
punitive and consequential damages), demands, claims, actions, causes of action,
assessments, deficiencies and other charges and attorneys' fees) arising out of
or pertaining to acts or omissions (or alleged acts or omissions) by them in
their capacities as such, which acts or omissions occurred at or prior to the
Closing. To the maximum extent permitted by applicable law, the indemnification
and related rights hereunder shall be mandatory rather than permissive, and
Parent and/or the Company shall promptly advance expenses in connection with
such indemnification to the fullest extent permitted under applicable law;
provided that, to the extent required by law, the Person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification. At the Closing,
Parent shall assume and become liable for, jointly and severally with the
Company and each such Subsidiary, any liability and all obligations of the
Company and each such Subsidiary under such provisions.
(b) For six years from the Closing Date, Parent shall cause the
Company to maintain officers' and directors' fiduciary and liability insurance
covering the Persons who are presently covered by the Company's (and any
Subsidiary's) officers' and directors' fiduciary and liability insurance
policies (copies of which have heretofore been made available to Parent) with
respect to actions and omissions occurring on or prior to the Closing Date, on
terms which are no less favorable to such Persons than the terms of such current
insurance in effect for the Company on the date of this Agreement; provided,
however, that in no event shall the Company be obligated to pay aggregate annual
premiums greater than 250% of the aggregate annual premiums paid or payable as
of the date of this Agreement; provided, further, that if the aggregate annual
premium for such coverage and amount of insurance would exceed 250% of such
annual rate, the Company shall provide the greatest coverage which shall then be
available at an aggregate annual premium equal to 250% of such rate. The Company
will maintain, through the Effective Time, the Company's existing directors' and
officers' fiduciary and liability insurance in full force and effect without
reduction of coverage. The Company represents to Parent that the annual premium
in connection with the Company's existing directors' and officers' fiduciary and
liability insurance as of the date hereof is $102,515.
(c) Following the Effective Time, the provisions of this Section 5.8
are (i) intended to be for the benefit of, and shall be enforceable by, each
Person entitled to indemnification hereunder, and each such Person's heirs,
representatives, successors or assigns, it being expressly agreed that such
Persons shall be third party beneficiaries of this Section, and (ii) in addition
to, and not in substitution for, any other rights to indemnification or
contribution that any such Person may have by contract or otherwise.
(d) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any director or officer in enforcing
the indemnity and other obligations provided in this Section 5.8.
-37-
(e) In the event Parent, the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity in
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then and in either such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.8.
Section 5.9. Stockholder Approval; Drag-Along. The Company shall,
promptly after the date hereof, use reasonable best efforts to obtain from the
stockholders of the Company their approval and adoption of this Agreement and
the transactions contemplated hereby (including the Merger) at a meeting of the
stockholders called for such purpose. GSCPII shall, to the extent practicable
under the Stockholders' Agreement, exercise its "Drag-Along Right" (as defined
in the Stockholders' Agreement) with respect holders of Company Common Stock,
Company Options or Company Warrants who are parties to the Stockholders'
Agreement by a date that is reasonably calculated to permit the consummation of
the transactions contemplated hereby no later than the Closing Date that would
otherwise be expected to occur.
Section 5.10. Restrictions on Parent and the Company. Parent and the
Company agree that, from and after the date hereof and prior to the Effective
Time, and except as may be agreed in writing by the other parties hereto or as
may be expressly permitted pursuant to this Agreement, it shall not, and shall
not permit any of its Subsidiaries to, agree, in writing or otherwise, to take
any action that could reasonably be expected to delay the consummation of the
Merger or result in the failure to satisfy any condition to consummation of the
Merger.
Section 5.11. Merger Sub. Parent will take all action necessary (i) to
cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement,
and (ii) to ensure that, prior to the Effective Time, Merger Sub shall not
conduct any business or activities or make any investments other than as
specifically contemplated by this Agreement, or incur or guarantee any
indebtedness.
Section 5.12. Company Warrants. Subject to Section 2.9, the Company,
Parent and Merger Sub agree to take all actions required pursuant to the Company
Warrant Agreement to ensure that the Company Warrants, if outstanding following
the Effective Time, shall thereafter be exercisable for the Company Warrant
Consideration, including, by entering into a supplemental warrant agreement in
the form required by the Company Warrant Agreement. At the Effective Time, the
Company Warrants shall be assumed by, and shall be an obligation of, the
Surviving Corporation to pay, and a right of holders thereof to receive in full
satisfaction of such Company Warrants, Company Warrant Consideration in
accordance with Article II of this Agreement and the Company Warrant Agreement.
Section 5.13. FIRPTA Certificate; Affidavits. Either (a) the Company
shall provide to Parent on the Closing Date (i) a certification from the Company
which complies with Treasury Regulations Section 1.1445-2(c)(3), dated no more
than 30 days prior to the Closing Date and signed by a responsible corporate
officer of the Company, that the Company is not, and has not been at any time
during the five years preceding the date of such certification, a United States
real property holding company, as defined in Section 897(c)(2) of the Code, and
(ii) proof reasonably satisfactory to Parent that the Company has provided
notice of such certification to
-38-
the Internal Revenue Service in accordance with the provisions of Treasury
Regulations Section 1.897-2(h)(2), or (b) each stockholder of the Company shall
be requested to provide to the Paying Agent as part of the Letter of Transmittal
an affidavit from such stockholder of the Company stating, under penalty of
perjury, that the indicated number is the transferor's United States taxpayer
identification number and that such transferor is not a foreign Person, pursuant
to Section l445(b)(2) of the Code; provided, that if the documentation described
in clause (a) is not delivered to Parent on or prior to the Closing Date, and to
the extent that any stockholder of the Company fails to provide the Paying Agent
with the affidavit described in clause (b) the Paying Agent shall be entitled to
withhold any amounts required to be withheld pursuant to Section 1445 of the
Code from the Per Share Initial Merger Consideration and the Per Share
Additional Merger Consideration payable to any stockholder that has not
delivered to the Paying Agent, on or prior to the Closing Date, the
documentation described in clause (b).
Section 5.14. Notice of Developments. Each party hereto shall give
prompt written notice to the other party of (i) the occurrence, or failure to
occur, of any event, which occurrence or failure to occur would be, reasonably
likely to cause any representation or warranty made by such party in this Merger
Agreement or in any Schedule to be untrue or inaccurate and (ii) any failure by
such other party to comply with, perform or satisfy any covenant, condition or
agreement to be complied with, performed by or satisfied by it under this Merger
Agreement. In furtherance of the foregoing, Parent and Merger Sub shall promptly
notify the Company in the event that Parent or Merger Sub receive oral or
written notice that the Acquisition Financing is no longer available or is no
longer reasonably expected to be available from the same financing sources and
on terms and conditions identical to the Commitments. No disclosure by any party
pursuant to this Section 5.14, however, shall be deemed to amend or supplement
the Schedules or to prevent or cure any misrepresentation or breach or failure
to satisfy any representations, warrant, covenant, condition or agreement
hereunder.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO CLOSE
The respective obligations of the Company, Parent and Merger Sub to
consummate the Merger shall be subject to the satisfaction or waiver, on or
prior to the Closing Date, of the following conditions:
Section 6.1. Company Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the requisite action of the
stockholders of the Company.
Section 6.2. HSR. All filings and waiting periods applicable
(including any extensions thereof) under the HSR Act shall have expired or been
terminated.
Section 6.3. No Injunction. At the Closing Date, there shall be no
statute, regulation, injunction, restraining order or decree of any nature of
any court or Governmental Authority or body of competent jurisdiction that is in
effect that restrains or prohibits the consummation of the Merger.
-39-
Section 6.4. Solvency Opinion. The Company, its stockholders and
Parent shall have received the letter referred to in Section 5.3(b).
ARTICLE VII
CONDITIONS OF PARENT'S OBLIGATION TO CLOSE
Parent's obligation to consummate the Merger shall be subject to the
satisfaction or waiver, on or prior to the Closing Date, of the following
conditions:
Section 7.1. Covenants. The Company shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Closing.
Section 7.2. Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
at and as of the Closing (without regard to any qualifications therein as to
materiality or Material Adverse Effect), as though made at and as of such time
(or, if made as of a specific date, at and as of such date), except for such
failures to be true and correct as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
Section 7.3. Certificate. Parent shall have received a certificate
signed on behalf of the Company by an executive officer of the Company
indicating that the conditions provided in Sections 7.1 and 7.2 have been
satisfied.
Section 7.4. Cancellation of Agreements with Affiliates. The
agreements specified in Schedule 7.4 of the Company Disclosure Schedules shall
have been terminated.
Section 7.5. Funding. The Financing contemplated by the Commitment
Letters shall have been consummated on the terms set forth therein; provided,
that in the event the Financing contemplated in the Commitment Letters shall not
have been consummated on the terms set forth therein, Parent and Merger Sub
shall have used their respective commercially reasonable efforts to obtain
financing with no greater cost of capital to Parent and Merger Sub and other
terms no less favorable in the aggregate to Parent than the terms contained in
the Commitment Letters, to consummate promptly the Merger and the transactions
contemplated hereby.
Section 7.6. Agreement with GSCPII. GSCPII shall have entered into a
letter agreement with Parent in the form set forth in Schedule 7.6 of the Parent
Disclosure Schedule.
Section 7.7. Opinion. Parent will have received from Xxxxxxx Xxxxxxxxx
Xxxxxx Lever & Xxxxxxx, LLP, counsel to the Company, its opinion with respect to
the transactions contemplated by the Merger Agreement, in substance as described
on Schedule 7.7 of the Company Disclosure Schedule. Such opinion will, at the
request of Parent, be confirmed to any provider of the Financing.
-40-
Section 7.8. Consents. The consents disclosed in Schedule 7.8 of the
Company Disclosure Schedule, will have been obtained or made and not revoked.
Section 7.9. Appraisal Shares. The number of Appraisal Shares shall
represent not more than 5% of the total shares of each of the Company Common
Stock and Company Preferred Stock in the aggregate outstanding as of the date
hereof.
ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS TO CLOSE
The Company's obligations to consummate the Merger are subject to the
satisfaction or waiver, on or prior to the Closing Date, of all of the following
conditions:
Section 8.1. Covenants. Each of Parent and Merger Sub shall have
performed in all material respects all of its obligations hereunder required to
be performed by it at or prior to the Closing.
Section 8.2. Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct at and as of the Closing (without regard to any qualifications
therein as to materiality or material adverse effect), as though made at and as
of such time (or, if made as of a specific date, at and as of such date), except
for such failures to be true and correct as would not reasonably be expected to
materially impair, delay or prevent consummation of the Merger. The
representations and warranties of Parent and Merger Sub contained in Section 4.5
this Agreement shall be true and correct at and as of the Closing, as though
made at and as of such time without reference to the qualification "as of the
date hereof" set forth therein; provided, however, if Parent and Merger Sub
determine, in their reasonable judgment that they cannot make such
representation at and as of the Closing, Parent and Merger Sub shall not be
deemed to have breached their obligations to use their reasonable best efforts
to satisfy the conditions to the transactions contemplated by this Agreement.
Section 8.3. Certificates. The Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent
indicating that the conditions provided in Sections 8.1 and 8.2 have been
satisfied.
Section 8.4. Merger Consideration and Other Payments. The Paying Agent
shall have received, concurrent with the Closing, on behalf of the holders of
outstanding shares of Company Common Stock, Company Preferred Stock, Company
Options and Company Warrants, the cash amounts to be paid in accordance with
Sections 2.7 and 2.9.
-41-
ARTICLE IX
TERMINATION
Section 9.1. Termination. Anything in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing by:
(a) the mutual written consent of the Company and Parent;
(b) Parent, in the event that any condition set forth in Article VI or
VII shall not be satisfied, or shall not be reasonably capable of being
satisfied, by July 25, 2004 ("Walk-Away Date"); or
(c) the Company, in the event that any condition set forth in Article
VI or VIII shall not be satisfied, or shall not be capable of being satisfied,
by the Walk-Away Date;
provided, however, that no party may terminate this Agreement pursuant to
clauses (b) or (c), if the failure of the applicable condition in Article VI,
VII or VIII (as the case may be) to be satisfied or the failure of the Closing
to occur on or before the date referred to in the applicable paragraph results
from (i) the willful and material breach by such party of any covenant in this
Agreement, or (ii) such party's failure to use its required efforts to
consummate the transactions contemplated hereby.
Section 9.2. Procedure and Effect of Termination. In the event of
termination of this Agreement by a party hereto entitled to terminate this
Agreement pursuant to Section 9.1, written notice thereof shall forthwith be
given by the terminating party to the other party hereto, and this Agreement
shall thereupon terminate and become void and have no effect, and the
transactions contemplated hereby shall be abandoned without further action by
the parties hereto, except that the provisions of Sections 5.1(b) and 10.4 shall
survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any willful
breach of any covenant or agreement of such party contained in this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices.
(a) All notices and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
or made (i) five business days after being sent by registered or certified mail,
return receipt requested, (ii) upon delivery, if hand delivered, (iii) one
business day after being sent by prepaid overnight courier with guaranteed
delivery, with a record of receipt, or (iv) upon transmission with confirmed
delivery if sent by telecopy, in each case, to the appropriate address or number
as set forth below.
-42-
(b) Notices to the Company shall be addressed to:
Amscan Holdings, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn.: Corporate Secretary
Telecopy No.: (000) 000-0000
with a copy to:
GS Capital Partners II, L.P.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Xxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxxxx X. Xxxxxxx, Esq.
Telecopy No: (000) 000-0000
or at such other address and to the attention of such other Person as the
Company may designate by written notice to the other party hereto.
(c) Notices to Parent or Merger Sub shall be addressed to:
AAH Holdings Corporation
c/o Berkshire Partners LLC
Xxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attn.: Xx. Xxxxxx X. Small
Telecopy No.: (000) 000-0000
with a copy to:
Weston Presidio Capital
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Attn.: Xxxxx Xxxxx
Telecopy No.: (000) 000-0000
with a copy to:
-43-
Ropes & Xxxx LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
or at such other address and to the attention of such other Person as Parent and
Merger Sub may designate by written notice to the Company.
Section 10.2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY
WITHIN SUCH STATE WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH
STATE.
Section 10.3. Entire Agreement. This Agreement, the Company Disclosure
Schedule, the Parent Disclosure Schedule, the Confidentiality Agreement and the
Support Agreements contain the entire agreement between the parties with respect
to the subject matter of this Agreement and supercede all prior agreements,
understandings, and negotiations, both written and oral between the parties with
respect to the subject matter of this Agreement.
Section 10.4. Expenses. Except as otherwise set forth in this
Agreement or the Company Disclosure Schedule, each party shall be responsible
for and shall pay all costs and expenses incurred by such party in connection
with this Agreement and the transactions contemplated this Agreement, whether
the Merger is or is not consummated; provided, however, that (i) in the event
that the Merger is to be consummated the Company shall not pay in excess of the
amounts disclosed in Section 10.4 of the Company Disclosure Schedule and (ii) in
the event that this Agreement is terminated for any reason whatsoever, Parent
shall upon such termination reimburse one half of the aggregate amount, of all
of the out-of-pocket fees and expenses, incurred by or on behalf of, or paid or
to be paid by, the Company or any of its Subsidiaries relating to the Debt Offer
(including fees and expenses of counsel, investment bankers and accountants). No
later than one business day prior to the Closing Date, the Company shall deliver
to Parent pay-off letters or final invoices for the amounts disclosed in Section
10.4 of the Company Disclosure Schedule. The pay-off letters or final invoices
shall provide that the amounts set forth therein represent payment in full for
all fees and expenses payable by the Company in connection with the transactions
contemplated by this Agreement other than in connection with the Debt Offer.
Section 10.5. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective against the parties that have executed and delivered
the Agreement when one or more counterparts have been signed by Parent, Merger
Sub and the Company and delivered to Parent, Merger Sub and the Company.
Section 10.6. Successors and Assigns. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other party. Subject
to the foregoing, this Agreement shall be
-44-
binding upon and inure to the benefit of the parties hereto and their respective
successors or assigns, heirs, legatees, distributees, executors, administrators
and guardians. At the election of Parent, any direct or indirect wholly-owned
Subsidiary of Parent may be substituted for Merger Sub as a constituent
corporation in the Merger, so long as such substitution would not reasonably be
expected to (i) impose any material delay in the obtaining of, or significantly
increase the risk of not obtaining any Company Required Governmental Approval or
Parent Required Governmental Approval or the expiration or termination of any
applicable waiting period, (ii) significantly increase the risk of any
Governmental Authority entering an order prohibiting the consummation of the
Merger, (iii) significantly increase the risk of not being able to remove any
such order on appeal or otherwise, (iv) materially delay the consummation of the
Merger or (v) otherwise negatively effect the Company or its stockholders. If
the requirements of the previous sentence are met and Parent wishes to designate
another wholly-owned direct or indirect Subsidiary to be a constituent
corporation in lieu of Merger Sub, then all references herein to Merger Sub
shall be deemed references to such other Subsidiary, except that all
representations and warranties made herein with respect to Merger Sub as of the
date of this Agreement shall be deemed representations and warranties made with
respect to such other Subsidiary as of the date of such designation.
Section 10.7. Amendments and Waivers. This Agreement, and the terms
and provisions of this Agreement, may be modified, waived or amended to the
extent permitted by law by an instrument or instruments in writing signed by the
party against whom enforcement of any such modification or amendment is sought
(or, in the case of a waiver, by the intended beneficiary of the waived term or
provision); provided that any such modification or amendment must be authorized
by the respective Boards of Directors of each of the Company, Parent and Merger
Sub. The failure of any party hereto to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of such provision, nor in
any way to affect the validity of this Agreement or any part of this Agreement
or the right of any party thereafter to enforce each and every such provision.
The waiver by any party hereto of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach.
Section 10.8. No Implied Representation. Notwithstanding anything
contained in Article III or IV or any other provision of this Agreement, it is
the explicit intent of each party hereto that the Company is making no
representation or warranty whatsoever, express or implied, beyond those
expressly given in this Agreement, including any implied warranty or
representation as to condition, merchantability or suitability as to any of the
properties or assets of the business of the Company and its Subsidiaries, and it
is understood that Parent and Merger Sub takes the business of the Company and
its Subsidiaries as is and where is. It is understood that any estimates,
projections or other predictions contained or referred to in the Company
Disclosure Schedule or the Parent Disclosure Schedule or in the materials that
have been provided to Parent are not and shall not be deemed to be
representations or warranties of the Company.
Section 10.9. Construction of Certain Provisions. It is understood and
agreed that the specification of any dollar amount in the representations and
warranties contained in this Agreement or the inclusion of any specific item in
the Company Disclosure Schedule or the Parent Disclosure Schedule is not
intended to imply that such amounts or higher or lower amounts, or the items so
included or other items, are or are not material, and no party shall use
-45-
the fact of the setting of such amounts or the fact of the inclusion of any such
item in the Company Disclosure Schedule or the Parent Disclosure Schedule in any
dispute or controversy between the parties as to whether any obligation, item or
matter not described in this Agreement or included in Company Disclosure
Schedule or the Parent Disclosure Schedule is or is not material for purposes of
this Agreement.
Section 10.10. Headings. The Section and Article headings contained in
this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained in this Agreement mean Sections or Articles of
this Agreement, unless otherwise stated.
Section 10.11. Interpretation. For the purposes of this Agreement, (i)
the term "includes" and the word "including" and words of similar import shall
be deemed to be followed by the words "without limitation"; (ii) references to
the "knowledge of the Company" in this Agreement, or words of similar import,
shall mean the actual knowledge after due inquiry of the Company's executive
officers listed on Schedule 10.11, and references to the "knowledge of Parent"
in this Agreement, or words of similar import, shall mean the actual knowledge
after due inquiry of Parent's executive officers listed on Schedule 10.11; (iii)
definitions contained in this Agreement apply to singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms; (iv) words in the singular shall be held to include the
plural and vice versa, and words of one gender shall be held to include the
other gender as the context requires; (v) the terms "hereof," "herein," and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article, Section, paragraph, Schedule and
Exhibit references are to the Articles, Sections, paragraphs, the Company
Disclosure Schedule, the Parent Disclosure Schedule and Exhibits to this
Agreement unless otherwise specified; and (vi) the word "or" shall not be
exclusive.
Section 10.12. Third Party Beneficiaries. Section 5.8, insofar as it
relates to director and officer indemnification, shall inure for the benefit of,
and shall be enforceable by, such directors and officers entitled to such
indemnification. Except as otherwise provided by the terms hereof, this
Agreement shall not confer upon any Person not a party hereto (or their
successors and assigns permitted by Section 10.6) any rights or remedies
hereunder.
Section 10.13. Partial Invalidity. Wherever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but in case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained in this Agreement, unless the
deletion of such provision or provisions would result in such a material change
as to cause completion of the transactions contemplated hereby to be
unreasonable.
Section 10.14. Consent to Jurisdiction. Each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court, in either case,
located in Wilmington, Delaware, in the event any
-46-
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that it will not attempt to deny or defeat the jurisdiction
of such courts by motion or other request for leave from any such court, (iii)
waives any claim that such proceedings have been brought in an inconvenient
forum, and (iv) agrees that it will not bring any action relating to this
Agreement in any court other than a federal court sitting in the State of
Delaware or a Delaware state court, in either case, located in Wilmington,
Delaware.
Section 10.15. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER
VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS MERGER AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
10.15.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
-47-
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the day first above written.
AAH HOLDINGS CORPORATION
By:___________________________
Name: Xxxxxx X. Small
Title: President
AAH ACQUISITION CORPORATION
By:___________________________
Name: Xxxxxx X. Small
Title: President
AMSCAN HOLDINGS, INC.
By:___________________________
Name:
Title: