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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
OROAMERICA, INC.,
AURAFIN LLC,
AND
BENTLEY ACQUISITION LLC
DATED AS OF APRIL 24, 2001
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TABLE OF CONTENTS
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ARTICLE I THE MERGER
1.1 The Merger...........................................................................1
1.2 Surviving Organization...............................................................2
1.3 Effective Time of the Merger.........................................................2
1.4 Governing Documents of the Surviving Organization....................................2
1.5 Conversion of Equity Interests.......................................................2
1.6 Appraisal Rights.....................................................................3
1.7 Stock Options........................................................................3
1.8 Payment for Shares...................................................................3
1.9 No Further Rights or Transfers.......................................................5
ARTICLE II COVENANTS
2.1 Operation of Business of the Company Between the Date of This Agreement and the
Effective Time............................................................................5
2.2 Stockholders' Meeting; Proxy Material...............................................8
2.3 No Shopping..........................................................................9
2.4 Access to Information...............................................................10
2.5 Stock Options.......................................................................10
2.6 All Reasonable Efforts..............................................................10
2.7 Consents............................................................................10
2.8 Public Announcements................................................................11
2.9 Notification of Certain Matters.....................................................11
2.10 Certain Resignations..............................................................11
2.11 Confidentiality Agreement.........................................................11
2.12 Indemnification; D&O Insurance....................................................11
2.13 Substitute Financing..............................................................12
2.14 Subsidiary Conversion; Stock Transfer.............................................13
2.15 Inventory.........................................................................13
2.16 Employee Benefit Plan Termination.................................................13
ARTICLE III CONDITIONS
3.1 Conditions to the Obligations of Buyer and Buyer Subsidiary to Effect the Merger....14
3.2 Conditions to the Obligation of the Company to Effect the Merger....................16
ARTICLE IV CLOSING
4.1 Time and Place......................................................................17
4.2 Deliveries at the Closing...........................................................17
ARTICLE V TERMINATION AND ABANDONMENT
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5.1 Termination.........................................................................17
5.2 Procedure and Effect of Termination.................................................18
5.3 Termination Fees....................................................................19
ARTICLE VI REPRESENTATIONS AND WARRANTIES
6.1 Corporate Organization..............................................................21
6.2 Capitalization......................................................................21
6.3 Authority...........................................................................22
6.4 No Conflicts........................................................................22
6.5 SEC Reports; Financial Statements; No Undisclosed Liabilities.......................22
6.6 Absence of Certain Changes..........................................................23
6.7 Proxy Statement.....................................................................25
6.8 Tax Matters.........................................................................25
6.9 Properties..........................................................................26
6.10 Material Contracts................................................................28
6.11 Intellectual Property.............................................................30
6.12 Litigation........................................................................31
6.13 Compliance with Laws; Licenses and Permits........................................31
6.14 Brokers and Finders...............................................................32
6.15 Employee Benefits.................................................................32
6.16 Environmental Matters.............................................................34
6.17 Business Relationships............................................................36
6.18 Labor Disputes....................................................................37
6.19 Inventories.......................................................................37
6.20 Accounts Receivable...............................................................37
6.21 Insurance.........................................................................37
6.22 Opinion of Financial Adviser......................................................37
6.23 Anti-Takeover Statutes............................................................37
6.24 Stockholder Voting Requirement....................................................37
6.25 Stock Options.....................................................................37
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER SUBSIDIARY
7.1 Organization........................................................................38
7.2 Authority...........................................................................38
7.3 No Conflicts........................................................................38
7.4 Financing Commitments...............................................................39
7.5 Proxy Statement.....................................................................39
7.6 Solvency............................................................................39
7.7 Brokers.............................................................................40
ARTICLE VIII MISCELLANEOUS PROVISIONS
8.1 Expenses............................................................................40
8.2 Termination of Representations and Warranties.......................................40
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8.3 Amendment and Modification..........................................................40
8.4 Waiver of Compliance; Consents......................................................41
8.5 Notices.............................................................................41
8.6 Assignment..........................................................................42
8.7 Rules of Interpretation.............................................................42
8.8 Governing Law.......................................................................42
8.9 Counterparts........................................................................42
8.10 Headings; Internal References.....................................................42
8.11 Entire Agreement..................................................................43
8.12 Severability......................................................................43
8.13 Equitable Remedies................................................................43
8.14 Attorneys' Fees...................................................................43
Exhibit A -- Form of Voting Agreement
Exhibit B -- Form of Escrow Agreement
Exhibit C -- Form of Non-Competition Agreement
Exhibit D -- Terms of Employment Agreement
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is dated as of
April 24, 2001, among OroAmerica, Inc., a Delaware corporation (the "Company"),
Aurafin LLC, a Delaware limited liability company ("Buyer"), and Bentley
Acquisition LLC, a Delaware limited liability company and wholly owned
subsidiary of Buyer ("Buyer Subsidiary"). The Company and Buyer Subsidiary are
sometimes collectively referred to in this Agreement as the "Constituent
Organizations."
RECITALS
The Board of Directors of the Company, the Management Board and the
Members of Buyer, and the sole Member of Buyer Subsidiary deem a merger of the
Company and Buyer Subsidiary under the terms hereof (the "Merger") advisable and
in the best interests of their respective organizations and equity owners.
The Company, Buyer, and Buyer Subsidiary desire to effect the Merger and
the other transactions contemplated hereby.
Concurrently with the execution and delivery of this Agreement, Buyer
and Xxx Xxxxxxxx have executed and delivered an agreement (a "Voting
Agreement"), in substantially the form of Exhibit A hereto, by which Xx.
Xxxxxxxx agrees, among other things, to vote all shares of Company Common Stock
(as defined in Section 1.5 hereof) for which he has voting power in favor of the
adoption of this Agreement in any stockholder vote thereon and grants to Buyer
an irrevocable proxy (the "Irrevocable Proxy"), subject to the terms and
conditions of the Voting Agreement.
Concurrently with the execution and delivery of this Agreement, Buyer,
the Company, and Xxxxx Fargo Bank Minnesota, N.A. (the "Escrow Agent") have
executed and delivered an escrow agreement, in the form attached as Exhibit B
hereto (the "Escrow Agreement"), pursuant to which Buyer has deposited (or will
deposit, no later than one day after the date hereof) with the Escrow Agent the
sum of $3 million, to be held, administered, and disbursed in accordance with
the provisions of the Escrow Agreement and Section 5.3(a) hereof.
AGREEMENT
Now, therefore, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.3) and in
accordance with the terms of this Agreement and the Delaware General Corporation
Law (the "DGCL") and the Delaware Limited Liability Company Act (the "LLC Act"),
the Company shall be merged with and into Buyer Subsidiary, the separate
corporate existence of the Company shall thereupon
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cease, and Buyer Subsidiary shall be the surviving organization in the Merger
(sometimes referred to in this Agreement as the "Surviving Organization").
1.2 Surviving Organization. At the Effective Time, the Surviving
Organization shall thereupon and thereafter possess all the rights, privileges,
powers, and franchises of each of the Constituent Organizations and shall be
subject to all the restrictions, disabilities, and duties of each of the
Constituent Organizations, and the Merger shall have the other effects set forth
in Sections 259 and 261 of the DGCL and Section 18-209 of the LLC Act, including
the assumption by the Surviving Organization of all the tax liabilities of the
Company.
1.3 Effective Time of the Merger. Subject to the satisfaction or waiver
of all conditions to the consummation of the Merger set forth in this Agreement,
Buyer Subsidiary shall execute in the manner required by the LLC Act and deliver
for filing to the Delaware Secretary of State a certificate of merger (the
"Certificate of Merger") with respect to the Merger as required by the LLC Act.
The Merger shall become effective at the time the Certificate of Merger is filed
with the Delaware Secretary of State or at such later time as is set forth in
the Certificate of Merger, and the term "Effective Time" means the date and time
when the Merger becomes effective.
1.4 Governing Documents of the Surviving Organization. The Certificate
of Formation and the Limited Liability Company Agreement of Buyer Subsidiary, as
each is in effect immediately before the Effective Time, shall be the
Certificate of Formation and the Limited Liability Company Agreement of the
Surviving Organization from and after the Effective Time until amended in
accordance with the LLC Act.
1.5 Conversion of Equity Interests. The manner and basis of converting
the equity interests of each of the Constituent Organizations shall be as
follows:
(a) At the Effective Time, each share of common stock of the
Company, par value $.001 per share (the "Company Common Stock"), that is
issued and outstanding immediately before the Effective Time (other than
(1) shares of Company Common Stock as to which appraisal rights are
exercised under Section 262 of the DGCL and Section 1.6 hereof and (2)
shares of Company Common Stock held of record by Buyer or Buyer
Subsidiary or any other direct or indirect wholly owned subsidiary of
Buyer or the Company immediately before the Effective Time) shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into and represent the right to receive (as
provided in Section 1.8 hereof) $14.00 in cash, less the Excess Expense
Amount (as defined in Section 8.1 hereof), if any (the "Merger
Consideration").
(b) At the Effective Time, each unit of membership interest in
Buyer Subsidiary that is issued and outstanding immediately before the
Effective Time shall remain outstanding and shall not be converted into
any other securities or cash in the Merger.
(c) At the Effective Time, each share of Company Common Stock
held of record by Buyer or Buyer Subsidiary or any other direct or
indirect wholly owned
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subsidiary of Buyer or the Company immediately before the Effective Time
and each share of Company Common Stock held in the treasury of the
Company immediately before the Effective Time shall be canceled and
cease to exist, and no payment shall be made with respect thereto.
1.6 Appraisal Rights. Notwithstanding any provision of this Agreement to
the contrary, any shares of Company Common Stock outstanding immediately before
the Effective Time held by a holder who has demanded and perfected the right for
appraisal of those shares in accordance with Section 262 of the DGCL and as of
the Effective Time has not withdrawn or lost such right to such appraisal
("Dissenting Shares") shall not be converted into or represent a right to
receive a cash payment under Section 1.5(a) hereof, but the holder shall only be
entitled to such rights as are granted by the DGCL. If a holder of shares of
Company Common Stock who demands appraisal of those shares under the DGCL shall
effectively withdraw or lose (through failure to perfect or otherwise) the right
to appraisal, then, as of the Effective Time or the occurrence of such event,
whichever occurs later, those shares shall be converted into and represent only
the right to receive the Merger Consideration, as provided in Section 1.5(a)
hereof, without interest, upon compliance with the provisions, and subject to
the limitations, of Section 1.8 hereof. The Company shall give Buyer (a) prompt
notice of any written demands for appraisal of any shares of Company Common
Stock, attempted withdrawals of such demands, and any other instruments received
by the Company relating to stockholders' rights of appraisal, and (b) from and
after the Effective Time, the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
may not, except with the prior written consent of Buyer, voluntarily make any
payment with respect to any demands for appraisal of Company Common Stock, offer
to settle or settle any such demands, or approve any withdrawal of any such
demands.
1.7 Stock Options. Following the Effective Time, each holder of a
then-outstanding option (an "Option") to purchase shares of Company Common Stock
heretofore granted under any employee stock option or compensation plan or other
arrangement with the Company shall be entitled (whether or not such Option is
then exercisable) to receive in cancellation of such Option a cash payment from
the Surviving Organization in an amount equal to the amount, if any, by which
the Merger Consideration exceeds the per-share exercise price of such Option,
multiplied by the number of shares of Company Common Stock then subject to such
Option (the "Option Settlement Amount"), subject to all required tax
withholdings by the Company. Each Option shall be canceled upon payment of the
Option Settlement Amount therefor. The Buyer will cause the Surviving
Organization to make the payments required under this Section 1.7.
1.8 Payment for Shares.
(a) At or before the Effective Time, Buyer or Buyer Subsidiary
shall deposit in immediately available funds with Xxxxx Fargo Bank
Minnesota, N.A., or any other disbursing agent selected by Buyer that
has offices in Southern California, is organized under the laws of the
United States or any state of the United States, and has capital,
surplus, and undivided profits of at least $100 million (the "Disbursing
Agent"), an amount equal to the product of the number of shares of
Company Common Stock issued and outstanding immediately before the
Effective Time (other than shares then held of
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record by Buyer or Buyer Subsidiary or any other direct or indirect
wholly owned subsidiary of Buyer or the Company) times the Merger
Consideration (the "Fund"). Out of the Fund, the Disbursing Agent shall
make the payments referred to in Section 1.5(a) hereof, subject to the
requirements of paragraph (b) of this Section 1.8. At the request of the
Surviving Organization, the Disbursing Agent also may make payments to
holders of Company Common Stock who have exercised appraisal rights
under Section 262 of the DGCL and have not subsequently withdrawn or
lost such rights, as long as payment from the Fund with respect to any
Dissenting Share does not exceed the Merger Consideration. The
Disbursing Agent may invest portions of the Fund as Buyer or the
Surviving Organization directs, provided that substantially all such
investments shall be in obligations of or guaranteed by the United
States of America, in commercial paper obligations receiving the highest
rating from either Xxxxx'x Investors Service, Inc. or Standard & Poor's
Corporation, or in certificates of deposit, bank repurchase agreements,
or bankers' acceptances of commercial banks with capital, surplus, and
undivided profits exceeding $100 million (collectively, "Permitted
Investments"), or in money market funds invested solely in Permitted
Investments. Any net profit resulting from, or interest or income
produced by, such investments shall be payable to the Surviving
Organization. Any amount remaining in the Fund one year after the
Effective Time may be refunded to the Surviving Organization at its
option; provided, however, that the Surviving Organization shall be
liable for all cash payments required to be made thereafter under
Section 1.5(a) hereof or Section 262 of the DGCL.
(b) As soon as practicable after the Effective Time, the
Disbursing Agent shall mail to each holder of record (other than the
Company, Buyer, Buyer Subsidiary, or any direct or indirect subsidiary
of Buyer or the Company) of a certificate (a "Certificate") that
immediately before the Effective Time represented issued and outstanding
shares of Company Common Stock (other than those holders who have
exercised appraisal rights under Section 262 of the DGCL and have not
subsequently withdrawn or lost such rights), a letter of transmittal
(the "Letter of Transmittal") for return to the Disbursing Agent, and
instructions for use in effecting the surrender of Certificates in New
York City or Los Angeles and to receive cash for each of such holder's
shares of Company Common Stock under Section 1.5(a) hereof. The Letter
of Transmittal shall specify that delivery shall be effected, and risk
of loss and title shall pass, only upon proper delivery of such
Certificates to the Disbursing Agent. The Disbursing Agent, as soon as
practicable following receipt of any such Certificate together with the
Letter of Transmittal, duly executed, and any other items specified by
the Letter of Transmittal, shall pay, by check or draft, to the persons
entitled thereto, the amount determined by multiplying the number of
shares of Company Common Stock represented by the Certificate so
surrendered by the Merger Consideration. No interest will be paid or
accrued on the cash payable upon the surrender of the Certificates. If
payment is to be made to a person other than the person in whose name a
Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed
or otherwise in proper form for transfer and that the person requesting
the payment shall pay any transfer or other taxes required by reason of
the payment to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the
Surviving Organization that the tax has been paid or is not applicable.
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(c) If any Certificates have been lost, stolen, or destroyed,
upon the making of an affidavit of that fact by the person claiming any
such Certificate to have been lost, stolen, or destroyed, the amount to
which such person would have been entitled under Section 1.8(b) hereof
but for failure to deliver such Certificate to the Disbursing Agent
shall nevertheless be paid to such person, provided that the Surviving
Organization may, in its sole discretion and as a condition precedent to
such payment, require such person to give the Surviving Organization a
bond in such sum as the Surviving Organization may direct as indemnity
against any claim that may be had against Buyer or the Surviving
Organization with respect to the Certificate alleged to have been lost,
stolen, or destroyed.
1.9 No Further Rights or Transfers. From and after the Effective Time,
all shares of Company Common Stock issued and outstanding immediately before the
Effective Time shall be canceled and cease to exist, and each holder of a
Certificate that represented shares of Company Common Stock issued and
outstanding immediately before the Effective Time shall cease to have any rights
as a stockholder of the Company with respect to the shares of Company Common
Stock represented by such Certificate, except for the right to surrender such
holder's Certificate in exchange for the payment provided under Sections 1.5(a)
hereof or to perfect such holder's right to receive payment for such holder's
shares under Section 262 of the DGCL if such holder has validly exercised and
not withdrawn or lost such holder's right to receive payment for such holder's
shares under Section 262 of the DGCL, and no transfer of shares of Company
Common Stock issued and outstanding immediately before the Effective Time shall
be made on the transfer books of the Surviving Organization.
ARTICLE II
COVENANTS
2.1 Operation of Business of the Company Between the Date of This
Agreement and the Effective Time. From the date of this Agreement through the
Effective Time:
(a) The Company will use all reasonable efforts to preserve
intact its business organization and that of its Subsidiaries (as
defined in Section 6.1 hereof) and to preserve for itself and for the
Surviving Organization the present relationships of the Company and its
Subsidiaries with persons having significant business dealings with the
Company or its Subsidiaries.
(b) The Company shall, and shall cause each of its Subsidiaries
to, except as otherwise consented to in writing by Buyer, conduct its
business and operations in the ordinary course.
(c) Except as required in connection with the Merger or as
otherwise consented to in writing by Buyer, the Company may not:
(1) amend its Certificate of Incorporation or Bylaws;
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(2) split, combine, or reclassify any shares of its
capital stock or make any other changes in its equity capital
structure;
(3) purchase, redeem, or cancel for value, directly or
indirectly, any shares of its capital stock or any Options or
other rights to purchase any such capital stock or any capital
stock of its Subsidiaries or any securities convertible into or
exchangeable for any such capital stock; or
(4) declare, set aside, or pay any dividend or other
distribution or payment in cash, stock, or property in respect
of shares of its capital stock.
(d) The Company may not and may not permit its Subsidiaries to,
except as otherwise consented to in writing by Buyer:
(1) issue, grant, sell, or pledge, or agree or propose
to issue, grant, sell, or pledge, any shares of capital stock of
the Company or its Subsidiaries (other than the issuance of
shares of Company Common Stock upon exercise of Options
heretofore granted by the Company in accordance with their
terms) or any options, rights, or warrants to purchase any such
capital stock or any securities convertible into or exchangeable
for such capital stock, or any stock appreciation rights,
performance shares, or other phantom stock based upon the value
of any such capital stock or designate any class or series of
preferred stock;
(2) except as provided in Schedule 2.1(d)(2) to this
Agreement, purchase, lease, or otherwise acquire (including by
merger, consolidation, or stock or asset purchase) any assets or
properties or incur any other capital expenditures in excess of
$300,000 in the aggregate for the period from the date hereof
through July 31, 2001, and in excess of $500,000 in the
aggregate from the date hereof through August 31, 2001, other
than inventory received on a consignment basis or otherwise
acquired in the ordinary course of business;
(3) sell, lease, encumber, mortgage, or otherwise
dispose of any assets or properties that are material to the
Company or its Subsidiaries, other than sales of inventory in
the ordinary course of business and other than security
interests granted in the ordinary course of business under
consignment contracts or the Company's credit facility;
(4) waive, release, grant, or transfer any rights of
value or modify or change in any material respect any existing
license, contract, or other document or agreement, other than in
the ordinary course of business and in a manner that does not
have a material adverse effect on the business, operations,
results of operations, properties, assets, or condition
(financial or otherwise) of the Company and its Subsidiaries,
taken as a whole, except to the extent that such adverse effect
results from (A) general economic conditions or changes therein,
(B) general fluctuations or conditions in economic markets, (C)
adverse economic changes affecting the wholesale karat gold and
sterling silver jewelry industry
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generally, (D) the announcement of the transactions contemplated
hereby, (E) the loss or business failure of customers, or (F)
the loss of key employees (a "Material Adverse Effect");
(5) incur any indebtedness for money borrowed other than
indebtedness incurred in the ordinary course of business for
working capital purposes (including as permitted indebtedness
borrowings in the ordinary course of business for working
capital purposes under the Company's existing credit facility)
that is prepayable at any time without penalty or premium or
incur any purchase-money indebtedness for fixed assets or enter
into any capitalized lease and except for indebtedness incurred
by a foreign Subsidiary of the Company in an amount not to
exceed $570,000 in connection with the purchase of the real
property identified in Schedule 2.1(d)(5) (and provided that the
Company does not guaranty any such indebtedness);
(6) incur any other liability or obligation, other than
in the ordinary course of business, or assume, guarantee,
endorse (other than endorsements of checks in the ordinary
course of business), or otherwise become responsible for the
obligations of any other person;
(7) except as otherwise required by this Agreement,
enter into any new employee benefit plan, program, or
arrangement, or any new employment, severance, or consulting
agreement, amend any existing employee benefit plan, program, or
arrangement, or any existing employment, severance, or
consulting agreement, or grant any increases in compensation or
benefits, except for bonuses and salary increases in accordance
with the Company's existing compensation plans (oral or written)
that are disclosed on Schedule 6.10;
(8) enter into any collective bargaining agreement;
(9) make any new tax election or settle or compromise
any material federal, state, local, or foreign tax liability;
(10) change any accounting principle used by it, unless
required by generally accepted accounting principles;
(11) make any material change in practices with respect
to the collection of accounts receivable;
(12) enter into or adopt any new Employee Plan (as
defined in Section 6.15(a) hereof) or modify or terminate any
existing Employee Plan;
(13) enter into any other transaction, other than in the
ordinary course of business and consistent with past practices;
or
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(14) enter into any contract, agreement, commitment, or
arrangement with respect to any of the foregoing.
2.2 Stockholders' Meeting; Proxy Materials.
(a) The Company shall cause a meeting of its stockholders to be
duly called and held as soon as practicable after the execution of this
Agreement for the purpose of voting on the adoption of this Agreement.
The stockholders' meeting shall be held for such purpose whether or not
the Company's Board of Directors later determines that this Agreement is
no longer advisable and recommends that Company stockholders reject its
adoption, unless this Agreement shall have been terminated in accordance
with Section 5.1 hereof. The Board of Directors of the Company shall
recommend adoption of this Agreement by the Company's stockholders,
unless the Board of Directors of the Company, in the good-faith exercise
of its fiduciary duties, shall determine (after consultation with its
outside legal counsel and financial adviser) that such recommendation
should not be made. The Company shall use all reasonable efforts to
solicit proxies in connection with a meeting of stockholders called
under this Section 2.2(a) in favor of such adoption, unless the Board of
Directors of the Company, in the good-faith exercise of its fiduciary
duties, shall determine (after consultation with its outside legal
counsel and financial adviser) that such solicitation should not be
made.
(b) The Company will prepare and file with the Securities and
Exchange Commission (the "SEC") a proxy statement, together with a form
of proxy, with respect to the stockholders' meeting described in Section
2.2(a) hereof (such proxy statement, together with any amendments
thereof or supplements thereto, being called the "Proxy Statement"). The
Company will use reasonable efforts to have the Proxy Statement cleared
by the SEC as promptly as practicable, will promptly thereafter mail the
Proxy Statement to Company stockholders, and will otherwise comply with
all applicable legal requirements in respect of such meeting. The
Company shall notify Buyer promptly of the receipt of any comments from
the SEC or its staff and any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional
information and will supply Buyer with copies of all correspondence
between the Company and its representatives, on the one hand, and the
SEC or its staff, on the other hand, with respect to the Proxy Statement
or the Merger. Before filing the Proxy Statement with the SEC, the
Company shall provide reasonable opportunity for Buyer to review and
comment upon the contents of the Proxy Statement. If, at any time before
the meeting of the stockholders of the Company contemplated by this
Section 2.2, any event relating to the Company or any of its
Subsidiaries, officers, or directors is discovered by the Company that
should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly so inform Buyer.
2.3 No Shopping.
(a) The Company will immediately cease or cause to be terminated
any existing activities, discussions, or negotiations with any parties
conducted with respect to any potential Third-Party Acquisition Offer
(as defined in this Section 2.3). From the date
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hereof until the Effective Time, the Company will not, and will use
reasonable efforts not to permit any officer, director, financial
adviser, or other agent or representative of the Company, directly or
indirectly, to:
(i) take any action to seek, initiate, or solicit any
offer from any person or group to acquire more than 10% of the
capital stock of the Company or any capital stock of any of its
Subsidiaries, to merge or consolidate with the Company or of its
Subsidiaries, or to otherwise acquire, except to the extent not
prohibited by Section 2.1(d) hereof, more than 10% of the assets
of the Company and its Subsidiaries, taken as whole (a
"Third-Party Acquisition Offer"), or
(ii) except to the extent the Board of Directors of the
Company or a duly authorized independent committee thereof (the
term "Board of Directors" as used in this Section shall also
include such independent committee) shall otherwise determine in
the good-faith exercise of its fiduciary duties, after
consultation with its outside legal counsel and financial
adviser, engage in any discussions concerning a Third-Party
Acquisition Offer with any person or group that the Company has
reason to believe is considering making or participating in a
Third-Party Acquisition Offer, or disclose non-public financial
information relating to the Company or any of its Subsidiaries
or any confidential or proprietary trade or business information
relating to the business of the Company or any of its
Subsidiaries, or afford access to the properties, books, or
records of the Company or any of its Subsidiaries, to any such
person or group; provided that (1) before furnishing such
non-public information or access to such person or group, the
Company's Board of Directors shall receive from such person or
group an executed confidentiality agreement that is no less
favorable to the Company than the Confidentiality Agreement
dated November 17, 1999 among the Company, Buyer, and certain
other parties, as amended to the date hereof (the
"Confidentiality Agreement"), and (2) before entering into
discussions or negotiations with such person or group, the
Company's Board of Directors determines in good faith, after
consultation with its financial adviser, that such Third-Party
Acquisition Offer, if consummated, would be more favorable to
the Company's stockholders than the Merger and that financing
for such Third-Party Acquisition Offer, to the extent required,
is committed or, in the good-faith judgment of the Company's
Board of Directors, is reasonably capable of being obtained (a
"Superior Offer").
(b) In addition to the obligations of the Company set forth in
this Section 2.3 above, the Company promptly shall advise Buyer orally
and in writing of any Third-Party Acquisition Offer or any inquiry or
request for information that the Company reasonably believes could lead
to or contemplates a Third-Party Acquisition Offer, the terms and
conditions thereof, and the identity of the offeror or the person making
the request or inquiry, and the Company shall keep Buyer informed in all
material respects of the status and details thereof (including changes
or amendments thereto).
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(c) Nothing in this Section 2.3 shall operate to hinder or
prevent the Company from fully complying with Rule 14e-2 promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act") with
regard to a Third-Party Acquisition Offer.
2.4 Access to Information. The Company will give Buyer and Buyer
Subsidiary, and their respective employees, counsel, financial advisers,
auditors, potential lenders, and other authorized representatives, reasonable
access to the offices, properties, books, and records of the Company and its
Subsidiaries at reasonable times upon reasonable notice, and will instruct the
employees, counsel, financial advisers, and auditors of the Company and its
Subsidiaries to cooperate with Buyer, Buyer Subsidiary, and each such
representative in its investigation of the business of the Company and its
Subsidiaries; provided that all (a) communications regarding this investigation,
(b) requests for additional information, and (c) discussions or questions
regarding procedures shall be submitted or directed to Xx. Xxxxxxxx, Xxxx Xxxx,
or such other members of the Company's senior management as may be designated by
either of them; provided further that the Company shall not be required to
provide access to what it reasonably believes to be sensitive competitive
information to anyone other than Buyer's potential lenders. No investigation
under this Section 2.4 shall affect any representation or warranty given by the
Company to Buyer and Buyer Subsidiary hereunder. The Company will confer from
time to time with Buyer at Buyer's request to discuss the status of the
operations of the Company and its Subsidiaries.
2.5 Stock Options. The Company shall use all reasonable efforts to enter
into option-cancellation agreements with the holder of each Option outstanding
at the Effective time (whether or not such Option is then exercisable) whereby
the holder's Options shall be canceled in respect of a cash payment by the
Surviving Organization equal to the Option Settlement Amount for such Option,
subject to applicable tax withholding (which payment the Buyer shall cause the
Surviving Organization to make).
2.6 All Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties shall use all reasonable efforts consistent with
applicable legal requirements to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary or advisable to ensure that the
conditions set forth in Article III hereof are satisfied and to consummate, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement.
2.7 Consents. Buyer and the Company each shall use all reasonable
efforts to obtain all material consents of third parties and governmental
authorities, and to make all governmental filings, necessary for the
consummation of the transactions contemplated by this Agreement. Buyer and the
Company each shall as soon as practicable file a Pre-Merger Notification and
Report Form under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx
"XXX Xxx") with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") and shall use
all reasonable efforts to respond as promptly as practicable to all inquiries or
requests received from the FTC or the Antitrust Division for additional
information or documentation.
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2.8 Public Announcements. Except as provided in this Section 2.8, Buyer
and the Company will consult with each other before issuing any press release or
otherwise making any public statements before the Effective Time with respect to
the Merger or the other transactions contemplated hereby and shall not issue any
such press release or make any such public statement before receiving the
consent of the other party. Nothing stated herein shall prohibit any party from
making any press release, report, or other statement required by law or by
obligations under any listing agreement with any automated interdealer quotation
system if the party making the disclosure has first consulted with the other
parties hereto. Furthermore, Buyer and Buyer Subsidiary agree that they will not
discuss the Company's business with any of the Company's vendors or customers
without the Company's consent.
2.9 Notification of Certain Matters. The Company will give prompt notice
to Buyer and Buyer Subsidiary of the occurrence or non-occurrence of any event
that (a) has had or is reasonably likely to have a Material Adverse Effect, (b)
has caused any representation or warranty of the Company contained in this
Agreement to be untrue or inaccurate in any material respect, or (c) has caused
any failure of the Company to comply in all material respects with or satisfy
any covenant or condition to be complied with or satisfied under this Agreement;
provided, however, that the delivery of any notice under this Section 2.9 will
not limit or otherwise affect the remedies available to Buyer under this
Agreement.
2.10 Certain Resignations. The Company will use all reasonable efforts
to procure the resignation (from director or officer status, but not from
employee status), effective as of the Effective Time, of all of the members of
the Boards of Directors of the Company and its Subsidiaries and all officers of
the Company and its Subsidiaries whose resignations are requested by Buyer.
2.11 Confidentiality Agreement. The Confidentiality Agreement shall
remain in full force and effect until the Effective Time. Until the Effective
Time, the Company and Buyer shall comply with the terms of the Confidentiality
Agreement.
2.12 Indemnification; D&O Insurance.
(a) The Surviving Organization shall, and the Buyer shall cause
the Surviving Organization to, indemnify each person who is now, or has
been at any time before the date of this Agreement, a director, officer,
employee, or agent of the Company (including its Subsidiaries) or their
successors and assigns (individually an "Indemnified Party" and
collectively the "Indemnified Parties"), to the fullest extent permitted
by or under, and in accordance with the terms and conditions thereof,
(1) applicable law, (2) the certificate of incorporation or bylaws of
the Company, or (3) any agreement with the Company as in effect
immediately before the execution of this Agreement, with respect to any
claim, liability, loss, damage, judgment, fine, penalty, amount paid in
settlement or compromise, cost, or expense, including reasonable fees
and expenses of legal counsel (whenever asserted or claimed), based in
whole or in part on, or arising in whole or in part out of, any matter,
state of affairs, or occurrence existing or occurring at or before the
Effective Time whether commenced, asserted, or claimed before or after
the Effective Time, including liability arising under the Securities Act
of 1933 (the "Securities Act"), the
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Exchange Act, or any rule or regulation promulgated thereunder, or state
law or liability based in whole or in part on or arising in whole or in
part out of or pertaining to this Agreement or the transactions
contemplated hereby. The Surviving Organization shall faithfully assume
and honor in all respects the obligations of the Company pursuant to the
Company's certificate of incorporation, bylaws, and any indemnification
agreements between the Company and any Indemnified Party existing and in
force as of the date of this Agreement.
(b) The Surviving Organization shall, and the Buyer shall cause
the Surviving Organization to, (1) maintain in effect for a period of
six years after the Effective Time the current policies of directors'
and officers' liability insurance maintained by the Company on the date
of this Agreement (provided that the Surviving Organization may
substitute therefor policies having at least the same coverage, with a
comparably rated insurer and containing terms and conditions, considered
in the aggregate, that are no less advantageous to the persons currently
covered by such policies) with respect to matters existing or occurring
at or before the Effective Time or (2) purchase a run-off (i.e., "tail")
policy or endorsement with respect to the current policy of directors'
and officers' liability insurance covering claims asserted within six
years arising from facts or events that occurred at or before the
Effective Time; provided, that in any case such insurance shall be
provided so long as the annual premium therefor is not in excess of 150%
of the last annual premium paid prior to the date hereof (the "Current
Premium"); provided, further, that if such insurance cannot be obtained
for 150% or less of the Current Premium, the Surviving Organization will
use reasonable efforts to obtain as much directors' and officers'
liability insurance as can be obtained for a premium not in excess (on
an annualized basis) of 150% of the Current Premium.
(c) The rights under this Section 2.12 are contingent upon the
occurrence of, and will survive consummation of, the Merger and are
expressly intended to benefit each Indemnified Party. Each Indemnified
Party (and his or her respective heirs and estates) is intended to be a
third party beneficiary of this Section 2.12 and may specifically
enforce its terms.
2.13 Substitute Financing. If for any reason any portion of the
financing described in Section 7.4 hereof shall not be available, Buyer shall
use its reasonable efforts to secure one or more substitute financing
commitments on terms no less favorable (taken as a whole) to Buyer than those
contained in the commitment letters relating to such financing until the earlier
of the termination of this Agreement and August 31, 2001.
2.14 Subsidiary Conversion; Stock Transfer.
(a) Before the Effective Time, the Company shall cause the
conversion of OroAmerica Sales Corp. from a Delaware corporation to a
Delaware limited liability company pursuant to Section 266 of the DGCL
and Section 18-214 of the LLC Act. Following such conversion, the
Company shall be the sole member of OroAmerica Sales Corp.
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(b) Before the Effective Time, the Company shall use reasonable
efforts to take such other tax-planning actions as Buyer may reasonably
request, which actions may be made subject to a condition subsequent
that the Merger is completed.
(c) Before the Effective Time, the Company shall cause the
transfer of all but one of the shares of L.A. Estilos currently held by
Xx. Xxxxxxxx to XxxxXxxxx.xxx; and Xx. Xxxxxxxx shall transfer all other
shares of the Company's Subsidiaries currently held by him (and the one
share of L.A. Estilos) to a person or entity designated by Buyer.
(d) Before the Effective Time, the Company shall use reasonable
efforts to cause (1) the transfer of all of the shares of the
Subsidiaries currently held by persons other than the Company or one of
its Subsidiaries to a person or entity designated by Buyer or (2) such
persons to enter into a stockholders agreement with Buyer or Buyer
Subsidiary with respect to the voting and transfer of such shares.
2.15 Inventory. The Company and its auditors shall conduct a physical
inventory at the Company's Burbank facilities to be completed on the day
immediately preceding the day on which the Closing (as defined in Section 4.1
hereof) occurs. The Company, its Subsidiaries, and their auditors shall conduct
physical inventories at facilities of the Company's Subsidiaries (as defined in
Section 6.1) to be completed on the day immediately preceding the day on which
the Closing occurs. All such inventories shall be conducted by the Company and
its auditors in accordance with historical procedures, with observation rights
given to Buyer and its auditors or other representatives. The costs of such
inventories, including the fees of the parties' respective auditors and
representatives, shall be borne by the party incurring such costs. In addition,
at least five business days before the day on which the Closing occurs, the
Company shall provide Buyer a schedule setting forth the methodology used by the
Company in counting Company inventory that is held by third parties on a
consignment basis and by vendors.
2.16 Employee Benefit Plan Termination. Before the date on which the
Closing occurs, the Company shall take all steps necessary to terminate the
OroAmerica, Inc. 401(k) Profit Sharing Plan effective not later than the end of
the day prior to the Closing (which termination may be made subject to the
subsequent condition that the Merger be completed), including the adoption by
the Board of Directors of the Company of any resolutions necessary to terminate
the plan, the timely issuance of any notices to participants, administrators, or
others that may be required by the current plan document, and the adoption of
any amendments of the plan necessary to bring the plan into compliance with
current laws and regulations, to fully vest the current participants, or to
preclude contributions to the plan with respect to services performed on or
after the date the Closing occurs or with respect to compensation related to
such services. Promptly after the Closing, Buyer will allow those persons then
employed by Buyer or the Surviving Organization to elect a direct roll-over of
their accounts in the OroAmerica, Inc. 401(k) Profit Sharing Plan to the Aurafin
401(k) Plan.
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ARTICLE III
CONDITIONS
3.1 Conditions to the Obligations of Buyer and Buyer Subsidiary to
Effect the Merger. The obligations of Buyer and Buyer Subsidiary to effect the
Merger shall be subject to the fulfillment at or before the Effective Time of
the following conditions, any of which (except for the condition set forth in
Section 3.1(d)) may be waived in writing by Buyer and Buyer Subsidiary:
(a) Accuracy of Representations and Warranties; Compliance with
Covenants. The representations and warranties of the Company contained
in Article VI hereof shall be true and correct (1) in all material
respects as of the date hereof and (2) except as would not have a
Material Adverse Effect, immediately before the Effective Time, except
for those representations and warranties that speak of an earlier date,
which shall be true and correct as of such earlier date (provided that,
for both clauses (1) and (2), where any representation or warranty in
Article VI hereof is expressly qualified by Material Adverse Effect
language or other materiality qualifier, such representation or warranty
shall be true and correct in all respects); the Company shall have
performed and complied in all material respects with the agreements and
obligations contained in this Agreement required to be performed and
complied with by it immediately before the Effective Time.
(b) Absence of Material Adverse Effect. There shall not have
been, since the date hereof any event or condition (financial or
otherwise) of any character or any operations or results of operations
that has had, or is reasonably likely to have, a Material Adverse
Effect.
(c) Officers' Certificate. Buyer and Buyer Subsidiary shall have
received a certificate signed by the Chief Executive and Chief Financial
Officers of the Company to the effects set forth in paragraphs (a) and
(b) of this Section 3.1.
(d) Stockholder Adoption of Agreement. This Agreement shall have
been adopted at the meeting of the stockholders of the Company referred
to in Section 2.2 hereof by the vote required by the DGCL and the
Company's Certificate of Incorporation and Bylaws.
(e) Absence of Litigation, Injunctions. No court or other
governmental entity shall have initiated proceedings to restrain or
prohibit the Merger or force rescission, unless such governmental entity
shall have withdrawn and abandoned any such proceedings before the time
that otherwise would have been the Effective Time and there shall not
have been any law or order that would require the divestiture by the
Buyer or Buyer Subsidiary of a material portion of their respective
businesses, assets, or properties, taken as a whole, or impose any
material limitation on the ability of the Buyer or Buyer Subsidiary,
taken as a whole, to conduct their respective businesses and own their
assets and properties, taken as a whole, following the Closing. There
shall not be in effect any injunction, writ, preliminary restraining
order, or any order of any nature issued by a court or governmental
agency of competent jurisdiction directing that the transactions
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contemplated hereby, or any of them, not be consummated as so provided
or any statute, rule, or regulation enacted or promulgated that makes
consummation of the transactions contemplated hereby, or any of them,
illegal.
(f) Consents. The Company, Buyer, and Buyer Subsidiary shall
have obtained the written consents listed on Schedule 3.1(f), if any.
(g) Financing. Buyer or Buyer Subsidiary shall have obtained
funds in the amount of the Senior Commitments and the Mezzanine
Commitment (each, as defined in Section 7.4 hereof).
(h) Dissenting Shares. The holders of not more than 10% of the
issued and outstanding shares of Company Common Stock (excluding shares
for which the holders have withdrawn such action) shall have taken such
action before or at the time of the stockholders' vote as is necessary
as of that time to entitle them to the statutory appraisal rights
referred to in Section 1.6 hereof.
(i) Non-Competition Agreement. Xx. Xxxxxxxx shall have executed
and delivered to Buyer and Buyer Subsidiary a non-competition agreement
substantially in the form of Exhibit C hereto (the "Non-Competition
Agreement").
(j) Employment Agreement. Xx. Xxxxxxxx shall have executed and
delivered to Buyer and Buyer Subsidiary an employment and release
agreement containing the terms and provisions set forth in Exhibit D
hereto and such other terms and provisions as the parties shall agree
(the "Employment Agreement").
(k) Net Working Capital. Immediately before the Effective Time,
the Company shall have Net Working Capital (i.e., Current Assets minus
Current Liabilities), as such capitalized terms are defined in United
States generally accepted accounting principles, of at least $49.5
million, and Buyer shall have been provided a certificate signed by the
Company's Chief Financial Officer to such effect.
(l) Inventory. The cumulative negative amount of all
book-to-physical adjustments (netting positive amounts against negative
amounts) to the Company's inventories from April 1, 2001 to the day of
the Closing, including any such adjustment required as a result of the
physical inventory taken pursuant to Section 2.15, shall not exceed
$500,000.
(m) Title Insurance. The Company shall have provided to Buyer
and Buyer Subsidiary surveys and standard commitments to insure title in
amounts reasonably acceptable to Buyer covering each parcel of real
property owned by the Company or any of its Subsidiaries. Such
commitments shall show, as of a date no more than five days prior to the
Closing, that the Company or one of its Subsidiaries has title in fee
simple to all such real property subject only to easements, covenants
and other restrictions which do not materially adversely affect the
current use of such real property, shall commit to
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delete all standard exceptions, and shall not show any material
inaccuracy in any representation made with respect to such real property
in Section 6.9 hereof.
3.2 Conditions to the Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or before the Effective Time of the following conditions, any one
or more of which (except for the condition set forth in Section 3.2(c)) may be
waived in writing by the Company:
(a) Accuracy of Representations and Warranties; Compliance with
Covenants. The representations and warranties of Buyer and Buyer
Subsidiary contained in Article VII hereof shall be true and correct in
all material respects immediately before the Effective Time (except
those representations and warranties that speak of an earlier date,
which shall be true and correct as of such earlier date), except to the
extent any inaccuracy in any such representation or warranty,
individually or in the aggregate, does not materially impair the ability
of Buyer or Buyer Subsidiary to consummate the transactions contemplated
hereby; Buyer and Buyer Subsidiary shall have performed and complied in
all material respects with the agreements and obligations contained in
this Agreement required to be performed and complied with by them
immediately before the Effective Time.
(b) Officers' Certificate. The Company shall have received a
certificate signed by a duly authorized officer of Buyer and Buyer
Subsidiary to the effects set forth in paragraph (a) of this Section
3.2.
(c) Stockholder Adoption of Agreement. This Agreement shall have
been adopted at the meeting of the stockholders of the Company referred
to in Section 2.2 hereof by the vote required by the DGCL and the
Company's Certificate of Incorporation and Bylaws.
(d) Absence of Litigation, Injunctions. No court or other
governmental entity shall have initiated proceedings to restrain or
prohibit the Merger or force rescission, unless such governmental entity
shall have withdrawn and abandoned any such proceedings before the time
that otherwise would have been the Effective Time and there shall not
have been any law or order that would require the divestiture by the
Buyer or Buyer Subsidiary of a material portion of their respective
businesses, assets, or properties, taken as a whole, or impose any
material limitation on the ability of the Buyer or Buyer Subsidiary,
taken as a whole, to conduct their respective businesses and own their
assets and properties, taken as a whole, following the Closing. There
shall not be in effect any injunction, writ, preliminary restraining
order, or any order of any nature issued by a court or governmental
agency of competent jurisdiction directing that the transactions
contemplated hereby, or any of them, not be consummated as so provided
or any statute, rule, or regulation enacted or promulgated that makes
consummation of the transactions contemplated hereby, or any of them,
illegal.
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ARTICLE IV
CLOSING
4.1 Time and Place. Subject to the provisions of Articles III and V
hereof, the closing (the "Closing") of the transactions contemplated hereby
shall take place at the offices of Xxxxx, Xxxxx & Xxxxxx LLP, Beverly Hills,
California on the same business day as, and promptly following, the meeting of
stockholders referred to in Section 2.2 hereof or at such other place or at such
other time as Buyer and the Company may mutually agree upon for the Closing to
take place.
4.2 Deliveries at the Closing. Subject to the provisions of Articles III
and V hereof, at the Closing:
(a) there shall be delivered to Buyer, Buyer Subsidiary, and the
Company the opinions, certificates, and other documents and instruments
the delivery of which is contemplated under Article III hereof;
(b) Buyer Subsidiary shall cause the Certificate of Merger to be
filed as provided in Section 1.3 hereof, and the Company and Buyer
Subsidiary shall take all other lawful actions and do all other lawful
things necessary to cause the Merger to become effective; and
(c) subject to the rights of the Surviving Organization to
receive a refund of amounts remaining in the Fund one year after the
Effective Time under Section 1.8 hereof, Buyer or Buyer Subsidiary shall
irrevocably deposit with the Disbursing Agent the amount designated as
the Fund in Section 1.8 hereof.
ARTICLE V
TERMINATION AND ABANDONMENT
5.1 Termination. This Agreement may be terminated and the Merger and the
other transactions contemplated herein may be abandoned at any time before the
Effective Time, whether before or after approval of the Merger by the
stockholders of the Company:
(a) by mutual written agreement of Buyer, Buyer Subsidiary, and
the Company;
(b) by Buyer, Buyer Subsidiary, or the Company, if the Merger
shall not have been consummated on or before August 31, 2001 (which date
may be extended by mutual agreement of Buyer, Buyer Subsidiary, and the
Company), unless such failure of consummation shall be due to the
failure by the party seeking to terminate this Agreement to comply in
all material respects with the terms hereof;
(c) by Buyer or Buyer Subsidiary, if (1) any of the conditions
set forth in Section 3.1 hereof shall become impossible to fulfill other
than for reasons totally within the control of Buyer or Buyer
Subsidiary, but only if the failure of such condition did not
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result from the breach by Buyer or Buyer Subsidiary of any of their
representations, warranties, or covenants hereunder, and such condition
shall not have been waived under Section 8.4 hereof, (2) the
stockholders of the Company shall fail to adopt this Agreement by the
vote required by the DGCL and the Company's Certificate of Incorporation
and Bylaws at the first meeting of stockholders called for that purpose
or any adjournment thereof, or (3) the Board of Directors of the Company
approves or recommends a Third-Party Acquisition Offer;
(d) by the Company, if any of the conditions set forth in
Section 3.2 hereof shall become impossible to fulfill other than for
reasons totally within the control of the Company, but only if the
failure of such condition did not result from the breach by the Company
of any of its representations, warranties, or covenants hereunder, and
such condition shall not have been waived under Section 8.4 hereof; or
(e) by the Company, at any time before the vote on the proposal
to adopt this Agreement at the meeting of the Company's stockholders, or
any adjournment thereof, upon five business days' prior written notice
to Buyer, if the Board of Directors of the Company shall have approved
or recommended a Superior Offer; provided, however, that, before
termination, (1) the Company shall have complied with Section 2.3, (2)
the Board of Directors of the Company shall have determined in the
good-faith exercise of its fiduciary duties, after consultation with its
outside legal counsel and financial adviser, that the Superior Offer is
more favorable to the Company's stockholders than the Merger, and (3)
the Company shall have notified Buyer in writing of its intention to
enter into an agreement with respect to a Superior Offer and shall have
provided Buyer with the latest version of the documentation for such
transaction; and provided, further, that, during the five-business-day
notice period, the Company shall negotiate in good faith with Buyer to
make such adjustments to the terms and conditions of this Agreement as
would enable the Company to proceed with the transactions contemplated
hereby, and the notice of termination shall not be effective unless the
Company's Board of Directors shall have determined in good faith, after
consultation with its outside legal counsel and financial adviser, that
any written offer provided by Buyer during such five-business-day notice
period is not at least as favorable to the Company's stockholders as the
Superior Offer.
5.2 Procedure and Effect of Termination. If this Agreement is terminated
by one or more of the parties under Section 5.1 hereof, written notice thereof
shall forthwith be given to the other parties and this Agreement shall terminate
and the Merger shall be abandoned without further action by any of the parties
hereto. If this Agreement is validly terminated as provided herein, and the
transactions contemplated hereby are not consummated, this Agreement shall be
void and no party hereto shall have any liability or further obligation to any
other party to this Agreement; provided, however, that termination shall not
affect (a) the rights and remedies available to a party as a result of the
breach by the other party or parties hereto, (b) the provisions of the
Confidentiality Agreement or Section 8.1 hereof, or (c) the obligations of Buyer
and the Company under Section 5.3 hereof.
5.3 Termination Fees.
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(a) If this Agreement is terminated by Buyer or Buyer Subsidiary
under Section 5.1(b) or Section 5.1(c)(1) hereof or by the Company under
Section 5.1(b) hereof, and, in either case, (1) the condition to
consummating the Merger set forth in Section 3.1(g) hereof has not been
satisfied, and (2) the conditions set forth in the other subsections of
Section 3.1 have been satisfied or are deemed satisfied as of the date
of termination (substituting "the date of termination" for "the
Effective Time" as it appears in those subsections, wherever
appropriate), then, at the request of the Company, Buyer and the Company
shall jointly instruct the Escrow Agent to pay the Company $3 million in
cash within two business days after the notice of such termination. For
purposes of clause (2) of this Section 5.3: (A) the condition set forth
in Section 3.1(c) shall be deemed satisfied if the conditions set forth
in Sections 3.1(a) and 3.1(b) are satisfied; (B) the condition set forth
in Section 3.1(f) shall be deemed satisfied in the absence of reasonable
evidence that such condition would not have been satisfied at or before
the Effective Time; (C) the conditions set forth in Sections 3.1(i) and
(j) shall be deemed satisfied unless Xx. Xxxxxxxx shall have notified
Buyer in writing that he will not execute and deliver any such agreement
at the Effective Time or has failed to execute any such agreement within
two business days after being requested to do so by Buyer; and (D) the
condition set forth in Section 3.1(e) shall be deemed satisfied unless
the Buyer requests within five business days of any such termination
that the inventory contemplated by Section 2.15 be conducted, and if so
requested, shall be deemed satisfied if the condition is satisfied in
accordance with its terms. Buyer and Buyer Subsidiary acknowledge and
agree that Buyer's and Buyer Subsidiary's agreement to deposit $3
million in escrow pursuant to the Escrow Agreement for the purpose of
ensuring payment of the termination fee is a material inducement to the
Company to execute, deliver, and initiate performance of this Agreement
notwithstanding the fact that, as of the date of this Agreement, Buyer
and Buyer Subsidiary lack sufficient funds with which to complete the
Merger on the terms hereof. Successful exercise by the Company of the
right to receive a termination fee under this Section 5.3(a) shall
constitute an election of remedies and shall preclude the Company from
any other remedy against Buyer or Buyer Subsidiary to which the Company
may otherwise be entitled under this Agreement, at law or in equity, or
otherwise because of a breach by Buyer or Buyer Subsidiary of its
representations or obligations under Sections 2.13 or 7.4.
(b) If:
(1) this Agreement is terminated pursuant to Section
5.1(c)(3) or 5.1(e);
(2) a Third-Party Acquisition Offer shall have been made
to the Company or shall have otherwise become known publicly
prior to such termination and shall not have been withdrawn,
this Agreement shall have been terminated by Buyer and Buyer
Subsidiary pursuant to Section 5.1(b) or 5.1(c)(1), the Company
shall be in or shall have committed a material and intentional
breach of any of its agreements and obligations hereunder, and
within 12 months after termination the Company shall have
entered into an agreement with respect to, or consummated, any
Third-Party Acquisition Offer; or
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(3) this Agreement is terminated pursuant to Section
5.1(c)(1) because of the failure of the condition set forth in
Section 3.1(h), prior to such termination a Third-Party
Acquisition Offer shall have been made to the Company or shall
have otherwise become known publicly and shall not have been
withdrawn and the Board of Directors of the Company has failed
to publicly reconfirm and recommend the Merger within five
business days after being requested to do so by Buyer, the
condition set forth in Section 3.1(g) shall not have been
satisfied, and within 12 months after termination, the Company
shall have entered into an agreement with respect to, or
consummated, any Third-Party Acquisition Offer;
then, the Company shall pay to Buyer a fee equal to $3.25 million in
cash, plus an amount in cash, not to exceed $3.75 million, equal to all
documented out-of-pocket expenses and fees incurred by Buyer (including
financing commitment fees and fees and expenses payable to legal,
accounting, financial, and other professional advisers) arising out of,
in connection with or related to this Agreement, the Merger, or the
transactions contemplated by this Agreement. For purposes of clauses (2)
and (3) above, the percentage "50%" shall be substituted for "10%" in
the definition of Third-Party Acquisition Offer. Such fees shall be paid
by wire transfer of immediately available funds to an account designated
by Buyer; in the case of clause (1) above, within three business days
after termination by Buyer or, if terminated by the Company, prior to
such termination, or in the case of clauses (2) and (3) above, within
three business days after the first to occur of entering into such
agreement or consummation (provided, however, the Company shall be
required to pay out-of-pocket expenses and fees pursuant to this Section
5.3(b) within three business days after notice of such fees and expenses
has been provided by Buyer to the Company). It shall be a condition to
termination of this Agreement by the Company pursuant to any paragraph
of Section 5.1 that requires payment of such fees upon termination
pursuant thereto, that such payment has been made. The successful
exercise by Buyer of the right to receive a termination fee and expense
reimbursement under Section 5.3(b)(2) shall constitute an election of
remedies and shall preclude Buyer or Buyer Subsidiary from any other
remedy against the Company to which Buyer or Buyer Subsidiary may
otherwise be entitled under this Agreement, at law or in equity, or
otherwise because of such breach by the Company.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except as set forth in the Schedules to this Agreement, the Company
represents and warrants to Buyer and Buyer Subsidiary as follows:
6.1 Corporate Organization. Each of the Company and the corporations
listed on Schedule 6.1 under the heading "Subsidiaries" and L.A. Estilos
(collectively, the "Subsidiaries") is a corporation duly incorporated, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation (as identified on Schedule 6.1) and has the requisite corporate
power and corporate authority to own, lease, and operate its properties and
assets and to carry on
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its business as it is now being conducted. Each of the Company and its
Subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, operated, or leased by it, or the nature of its business,
makes such qualification or licensing necessary, except such jurisdictions where
failure to be so qualified, licensed, or in good standing would not have,
individually or in the aggregate, a Material Adverse Effect. The copies of the
charter and bylaws (or similar organizational documents) of the Company and each
Subsidiary provided to Buyer by the Company are complete and correct as of the
date hereof.
6.2 Capitalization. The authorized capital stock of the Company consists
of ten million shares of Company Common Stock, of which, as of the date of this
Agreement, 5,294,598 shares are issued and outstanding, and 500,000 shares of
Preferred Stock, $.001 par value, none of which, as of the date of this
Agreement, is issued and outstanding. All of the issued and outstanding shares
of capital stock of the Company and of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, and were not granted in
violation of any statutory preemptive rights. There are no outstanding
subscriptions, options, warrants, calls, or other agreements or commitments
under which the Company or any Subsidiary is or may become obligated to issue,
sell, transfer, or otherwise dispose of, or purchase, redeem, or otherwise
acquire, any shares of capital stock of, or other equity interests in, the
Company or any Subsidiary, and there are no outstanding securities convertible
into or exchangeable for any such capital stock or other equity interests,
except for Options to purchase up to 722,500 shares of Company Common Stock (as
of the date of this Agreement) at the exercise prices set forth on Schedule 6.2.
The Company owns, directly or indirectly, all of the issued and outstanding
shares of capital stock of every class of each Subsidiary, free and clear of all
liens, security interests, pledges, charges, and other encumbrances. Schedule
6.2 contains a complete and correct list of each corporation, limited liability
company, partnership, joint venture, or other business association in which the
Company or any Subsidiary has any direct or indirect equity ownership interest
(other than the Subsidiaries). None of the outstanding shares of capital stock
of the Company or any Subsidiary or the Options were granted in violation of any
preemptive or similar rights. There are no voting trusts or other agreements or
understandings to which the Company or any Subsidiary is a party or of which the
Company otherwise has knowledge with respect to the voting of capital stock of
the Company or any Subsidiary.
6.3 Authority. The Company has the corporate power and authority to
execute and deliver this Agreement and, subject to approval by the holders of
the Company Common Stock at the special meeting of shareholders referred to in
Section 2.2 hereof, to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement by the Company have been
duly authorized by the Board of Directors of the Company, and no further
corporate action of the Company, other than the adoption of this Agreement by
its stockholders, is necessary to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid, and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally, and subject,
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as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a court of law or equity).
6.4 No Conflicts. Neither the execution and delivery of this Agreement
by the Company nor the consummation by the Company of the transactions
contemplated hereby will (a) conflict with or result in a breach of the charter,
bylaws, or similar organizational documents, as currently in effect, of the
Company or any of its Subsidiaries, (b) except for the requirements under the
HSR Act, compliance with the Exchange Act, and the filing of the Certificate of
Merger with the Delaware Secretary of State, require any filing with, or consent
or approval of, any governmental authority having jurisdiction over any of the
business or assets of the Company or any of its Subsidiaries, (c) violate any
statute, law, ordinance, rule, or regulation applicable to the Company or any of
its Subsidiaries or any injunction, judgment, order, writ, or decree to which
the Company or any of its Subsidiaries has been specifically identified as
subject, or (d) result in a breach of, or constitute a default or an event that,
with the passage of time or the giving of notice, or both, would constitute a
default, give rise to a right of termination, cancellation, or acceleration,
create any entitlement of any third party to any material payment or benefit,
require notice to, or the consent of, any third party, or result in the creation
of any lien on the assets of the Company or any of its Subsidiaries under, any
Material Contract (as defined in Section 6.10 hereof).
6.5 SEC Reports; Financial Statements; No Undisclosed Liabilities.
(a) The Company has made available to Buyer, in the form filed
with the SEC, all reports, registration statements, and other filings
(including amendments to previously filed documents) filed by the
Company with the SEC from January 1, 1998 to the date of this Agreement
(all such reports, proxy statements, registration statements, and
filings, other than the Proxy Statement, are collectively called the
"SEC Reports"). No SEC Report, as of its filing date, contained any
untrue statement of a material fact or omitted 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 were made, not misleading, and each SEC Report at the time of its
filing complied as to form in all material respects with all applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations of the SEC promulgated thereunder. From January 1, 1998 to
the date of this Agreement, the Company has filed all reports that it
was required to file with the SEC under the Exchange Act and the rules
and regulations of the SEC.
(b) The consolidated financial statements contained in the SEC
Reports were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto) and fairly present, in
all material respects, the consolidated financial position of the
Company and its Subsidiaries at the respective dates thereof and the
consolidated results of operations and consolidated cash flows of the
Company and its Subsidiaries for the periods indicated, subject, in the
case of interim financial statements, to normal year-end adjustments,
and except that the interim financial statements do not contain all of
the footnote disclosures required by generally accepted accounting
principles.
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(c) There are no material liabilities of the Company or its
Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable, or otherwise, other than (1)
liabilities disclosed or set forth in the most recent audited balance
sheet contained in the SEC Reports (the "Balance Sheet"), (2)
liabilities incurred in the ordinary course of business since the date
of the Balance Sheet, (3) liabilities under, or required to be incurred
under, this Agreement, and (4) liabilities (other than those in default)
under contracts and agreements listed on Schedule 6.10 or the
non-disclosure of which thereon does not represent a breach under
Section 6.10 hereof.
(d) The Company has made available to Buyer the Company's
financial results for the month of February 2001.
6.6 Absence of Certain Changes.
(a) Except as disclosed in SEC Reports filed after the date of
the Balance Sheet, but before the date hereof, from the date of the
Balance Sheet to and including the date of this Agreement, the Company
and the Subsidiaries have conducted their business only in the ordinary
course consistent with past practice, and there has not been any
condition, circumstance, event, or occurrence that, individually or in
the aggregate, has resulted or would be reasonably likely to result in a
Material Adverse Effect.
(b) Without limiting the generality of Section 6.6(a) hereof,
since the date of the Balance Sheet, and except as disclosed in the SEC
Reports filed after the date of the Balance Sheet, but before the date
hereof, neither the Company nor any Subsidiary has:
(1) created, incurred, assumed, or guaranteed any
material indebtedness or become subject to any material
liabilities, except liabilities incurred in the ordinary course
of business consistent with past practice;
(2) sold, assigned, or transferred any material amount
of assets, except inventory sold in the ordinary course of
business;
(3) suffered any extraordinary losses, whether or not
covered by insurance, or, except in the ordinary course of
business, forgiven or canceled any material claims or waived any
right of material value;
(4) increased in any material respects its total number
of employees or the compensation, bonuses, or benefits payable
or to become payable to any directors, officers, employees,
distributors, agents, or representatives, except for increases
to its officers and employees in the ordinary course of business
consistent with past practice or as required under any existing
employment agreement;
(5) suffered any material work stoppage or labor
dispute;
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(6) changed in any material respects any of its
accounting principles or the methods of applying such
principles, other than as required by generally accepted
accounting principles;
(7) declared, set aside, or paid any dividend or made
any other distribution in respect of shares of its capital
stock, except for dividends or distributions by any Subsidiary
to the Company or another Subsidiary;
(8) split, combined, or reclassified any shares of its
capital stock or made any other changes in its equity capital
structure;
(9) purchased, redeemed, or otherwise acquired, directly
or indirectly, any shares of its capital stock or any options,
rights, or warrants to purchase any such capital stock or any
securities convertible into or exchangeable for any such capital
stock;
(10) issued any shares of its capital stock or granted
any options, rights, or warrants to purchase any such capital
stock or any securities convertible into or exchangeable for any
such capital stock, except for issuances of shares of Company
Common Stock upon the exercise of Options;
(11) amended its charter or bylaws (or similar
organizational documents);
(12) made or permitted to have occurred any material
change in practices with respect to the collection of accounts
receivable;
(13) incurred any capital expenditures that exceeded
$100,000 in the aggregate;
(14) entered into, adopted, modified, or terminated any
Employee Plan;
(15) purchased any business, purchased any stock of any
corporation other than the Company, or merged or consolidated
with any person;
(16) incurred, assumed, or guaranteed any indebtedness
for money borrowed other than (A) borrowing incurred for working
capital purposes under the Company's existing revolving credit
facility and (B) intercompany indebtedness; or
(17) except for this Agreement, entered into any
commitment to do any of the foregoing.
6.7 Proxy Statement. The Proxy Statement will not, at the time the Proxy
Statement is mailed to Company stockholders, 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
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therein, in light of the circumstances under which they were made, not
misleading, and will not, at the time of the meeting of stockholders to which
the Proxy Statement relates, as then amended or supplemented, omit to state any
material fact necessary to correct any statement that has become false or
misleading in any earlier communication with respect to the solicitation of any
proxy for such meeting (except that no representation is made by the Company
with respect to statements made in the Proxy Statement based on information
furnished to the Company by Buyer or Buyer Subsidiary for inclusion in the Proxy
Statement).
6.8 Tax Matters.
(a) The Company and its Subsidiaries have timely filed (or
received appropriate extensions of time to file) all material federal,
state, local, and foreign tax returns (collectively, "Tax Returns")
required to be filed by them with respect to income, gross receipts,
withholding, social security, unemployment, payroll, franchise,
property, excise, sales, use, and other taxes of whatever kind
(collectively, including any interest or penalties thereon, "Taxes") and
have paid all Taxes owed (whether or not shown on such Tax Returns) to
the extent such Taxes have become due.
(b) No Tax Returns filed by the Company or any of its
Subsidiaries are the subject of pending audits as of the date of this
Agreement. Neither the Company nor any of its Subsidiaries has received,
before the date of this Agreement, a notice of deficiency or assessment
of additional Taxes that remains unresolved. Neither the Company nor any
of its Subsidiaries has extended the period for assessment or payment of
any Tax, which extension has not since expired.
(c) Neither the Company nor any of its Subsidiaries has been a
member of an affiliated group (as such term is defined in Section 1504
of the Internal Revenue Code of 1986 (the "Code")) filing a consolidated
federal income tax return for any tax year since the tax year ended
December 31, 1993, other than a group the common parent of which was the
Company.
(d) The Company and each of its Subsidiaries have complied in
all material respects with the provisions of the Code relating to the
withholding and payment of Taxes, including the withholding and
reporting requirements under Code Sections 1441 through 1464, 3401
through 3406, and 6041 through 6049, as well as similar provisions under
any other laws of any country or subdivision thereof, and have, within
the time and in the manner prescribed by law, withheld from employees'
wages and paid over to the proper governmental authorities all amounts
required to be so paid.
(e) Neither the Company nor any of its Subsidiaries has agreed
or is required to include in income or make any material adjustment
under either Section 481(a) or Section 482 of the Code (or an analogous
provision of state, local, or foreign law) by reason of a change in
accounting or otherwise. Neither the Company nor any of its Subsidiaries
has disposed of any material property in a transaction being accounted
for under the installment method pursuant to Code Section 453.
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(f) Neither the Company nor any of its Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible corporations.
(g) Neither the Company nor any of its Subsidiaries has been a
United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii).
(h) Neither the Company nor any of its Subsidiaries is a party
to any tax-allocation or tax-sharing agreement other than between the
Company and the Subsidiaries.
(i) The Company has delivered to Buyer true and complete copies
of all requested federal, state, local, and foreign income tax returns
with respect to the Company and each of its Subsidiaries.
(j) No property of the Company or its Subsidiaries is "tax
exempt use property" within the meaning of Code Section 168(h).
(k) None of the Company or any of its Subsidiaries has made any
payment, or is a party to any contract, agreement, or arrangement that
could obligate it to make any payment that would, but for the provisions
of clause (ii) of Code Section 280G(b)(2)(A), constitute a "parachute
payment" within the meaning of Code Section 280G.
6.9 Properties.
(a) Owned Real Property. Schedule 6.9(a) sets forth a list of
each parcel of real property owned in fee simple by the Company or any
of its Subsidiaries, and such parcels, along with all buildings,
fixtures (including trade fixtures) and any other improvements located
thereon and all rights, easements, privileges, and other appurtenances
thereto belonging or in any way appertaining are referred to as the
"Owned Real Property." One or more of the Company and its Subsidiaries
has good and valid title to the Owned Real Property, free and clear of
all mortgages, liens, security interests, charges, and encumbrances,
except for those easements, covenants, and other restrictions that do
not materially adversely affect the current use of such real property.
Neither the Company nor any of its Subsidiaries has received written
notice from any insurance company that it will require alteration of any
Owned Real Property for continuance of a policy insuring such Owned Real
Property or the maintenance of insurance rates with respect thereto.
Neither the Company nor any of its Subsidiaries has entered into nor has
any knowledge of any written development agreement or other written
agreement that limits the Company's or any of the Subsidiaries' ability
to protest Taxes, fixes minimum Taxes, or requires continued business
operations. Neither the Company nor any of its Subsidiaries has received
any written notice nor has any knowledge of any special assessments to
be made against the Owned Real Property by any authority. To the
knowledge of the Company, neither the Company nor any of its
Subsidiaries has received any notice nor has any knowledge of any
pending or threatened governmental action that would impair access to
the Owned Real Property. There are no sales contracts, lease agreements,
options to purchase, or rights of first refusal or similar agreements
with
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respect to any of the Owned Real Property now in effect, and no person
other than one or more of the Company and its Subsidiaries is entitled
to possession of any of the Owned Real Property.
(b) Leased Real Property. Schedule 6.9(b) sets forth a list, as
of the date hereof, of all leases, subleases, licenses, and other
agreements (collectively, the "Real Property Leases") under which the
Company or any Subsidiary uses, occupies, or has the right to use or
occupy, now or in the future, any real property. Each Real Property
Lease is valid, binding, in full force and effect, and enforceable in
accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, or similar laws affecting
the enforcement of creditors' rights generally and by general principles
of equity); all rent and other sums and charges payable by the Company
or any Subsidiary as tenant thereunder are current and not delinquent;
no notice of default or termination under any Real Property Lease is
outstanding; neither the Company nor any of the Subsidiaries nor, to the
knowledge of the Company, any other party to any Real Property Lease is
in breach of any provision thereof, no termination event or condition or
uncured default on the part of the Company or the Subsidiary (or, to the
knowledge of the Company, any other party) exists under any Real
Property Lease, and no event has occurred and no condition exists that
constitutes or, with the giving of notice or the lapse of time or both,
would constitute, such a default or termination event or condition. The
Company has provided to the Buyer correct and complete copies of each of
the Real Property Leases. The consummation of the transactions
contemplated by this Agreement will not constitute a default or event of
default under any Real Property Lease.
(c) General Real Property Matters. The real property described
in Schedule 6.9(a) and the real property subject to the leases described
in Schedule 6.9(b) constitute the only real property used by the Company
and its Subsidiaries in the conduct of their businesses. The buildings,
plants, and structures of the Company and its Subsidiaries that are used
in the operation of their respective businesses are in good condition
and repair (ordinary wear and tear excepted) and do not encroach upon
any property not owned or leased by the Company or its Subsidiaries.
(d) Personal Property. The Company or one or more of the
Subsidiaries has good and marketable title to, or a valid leasehold
interest in, all personal property used in the operation of their
businesses (including good and marketable title to all personal property
reflected in the Balance Sheet other than inventory or supplies sold or
used since the date of the Balance Sheet in the ordinary course of
business), in each case free and clear of all mortgages, liens, security
interests, charges, and encumbrances (other than those evidenced by any
lease, contract, or agreement that is described on Schedule 6.9(d)).
Each material item of equipment or machinery owned by the Company or its
Subsidiaries or used by any of them in the operation of their businesses
is in good condition and repair, ordinary wear and tear excepted.
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6.10 Material Contracts.
(a) Schedule 6.10 sets forth a list, as of the date hereof, of
all of the following contracts and agreements to which the Company or
any Subsidiary is a party, or by which any of their properties or assets
are subject, whether written or unwritten (collectively, the "Material
Contracts"):
(1) any purchase order, agreement, or commitment
involving more than $1 million entered into by the Company or
the Subsidiary to purchase or sell any products or services that
is not terminable by the Company or the Subsidiary without
payment or penalty upon 30 days' notice;
(2) any loan agreement, promissory note, indenture,
letter of credit, or other agreement or instrument evidencing or
providing for the borrowing of money, any consignment agreement,
any contract or agreement for the deferred purchase price of
property (excluding normal trade payables), or any agreement or
instrument guaranteeing any indebtedness, letters of credit, or
obligations to pay the deferred purchase price of property
(other than normal trade payables) or to reimburse the maker of
any letter of credit or banker's acceptance or any endorsement
of any promissory note, xxxx of exchange, or other negotiable
instrument (other than endorsements of negotiable instruments
for collection in the ordinary course of business);
(3) any agreement guaranteeing any obligations of any
person;
(4) any forward-purchase or hedging contract;
(5) any joint venture, partnership, or other arrangement
involving a sharing of profits;
(6) any employment, consulting, severance, or stay-pay
agreement or arrangement;
(7) any non-competition or similar agreement;
(8) any agreement for the sale or lease of any material
assets, other than for the sale of inventory in the ordinary
course of business;
(9) any mortgage, deed of trust, security agreement,
collateral-sharing agreement, or other agreement creating a lien
on any assets, including any capital lease;
(10) any lease (either as lessor or lessee) of personal
property;
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(11) any agreement to pay or receive any royalty or
license fee or to license (either as licensor or licensee) any
intellectual property rights (other than customary
non-negotiated licenses of off-the-shelf computer software);
(12) any agreement under which the Company or any
Subsidiary acquired or disposed of any business;
(13) any agreement for capital expenditures;
(14) any agreement with any of the Company or its
Subsidiaries' officers or directors or their affiliates or with
any holders of more than 5% of the Company Common Stock or their
affiliates; and
(15) any other agreement that was not entered into in
the ordinary course of business.
(b) (1) All Material Contracts are in full force and effect and
are valid, binding, and enforceable in accordance with their terms
except to the extent such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws related to
the enforcement of creditors' rights or by general principles of equity;
(2) neither the Company nor any Subsidiary is in breach of any Material
Contract, which breach, individually, would require the payment of
$10,000 or more by the Company, and which breaches, in the aggregate,
would require the payment of $125,000 or more by the Company or give the
other party thereto a right of termination thereunder; (3) no event has
occurred that constitutes, or after the giving of notice or passage of
time or both, would constitute, a default or event of default under any
Material Contract by or in respect of the Company or any Subsidiary; (4)
to the knowledge of the Company, no other party to a Material Contract
is in breach of any material provision thereof; (5) to the knowledge of
the Company, no event has occurred that constitutes, or after the giving
of notice or passage of time or both, would constitute, a default or
event of default under a Material Contract by or in respect of any other
party thereto.
(c) Correct and complete copies of each written Material
Contract and summaries of each unwritten Material Contract have been
provided by the Company to Buyer.
(d) Each of the following contracts to which the Company or any
Subsidiary is a party (which shall be deemed a Material Contract for
purposes of Section 6.10(b) only) was entered into in the ordinary
course of business, consistent with past practice:
(1) any sales agency, advertising, promotional,
brokerage, or distribution agreement;
(2) any agreement that includes provisions regarding
minimum volumes or volume discounts; or
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(3) any agreement under which a rebate, discount, bonus,
commission, or other payment with respect to the sale of any
product will be payable or required after the Effective Time.
6.11 Intellectual Property.
(a) Schedule 6.11 sets forth a list, as of the date hereof, of
the following:
(1) all United States, state, and foreign patents,
trademark, and service xxxx registrations, copyright
registrations, and applications owned by or, if so noted on
Schedule 6.11, licensed to the Company or any Subsidiary, except
those licensed by the Company or the Subsidiary under customary
non-negotiated licenses of off-the-shelf computer software; and
(2) all licenses granted to or by the Company or any
Subsidiary under written agreements pertaining to patents,
patent applications, proprietary technology, inventions,
trademarks, service marks, trade names, copyrights, or other
intellectual property (collectively with the rights listed
pursuant to clause (1) above, "Intellectual Property"), except
customary non-negotiated licenses by the Company or the
Subsidiary as licensee of off-the-shelf computer software; the
Intellectual Property, together with all other brand marks,
brand names, trade names, logos, package designs, formulae,
inventions, trade secrets, manufacturing processes, manuals, and
other proprietary rights and intellectual property of the
Company and the Subsidiaries, are referred to as "Proprietary
Rights."
(b) (1) The Company or one of its Subsidiaries owns the
Intellectual Property and has the exclusive right to use
(without any license fees, charges, or other payment obligations
that are not listed on Schedule 6.11) and the right to bring
actions for the infringement of, the Intellectual Property and
the right to use the Proprietary Rights (without any license
fees, charges, or other payment obligations that are not listed
on Schedule 6.11).
(2) The operation of the business of the Company and the
Subsidiaries does not infringe on the patents, trademarks,
service xxxx registrations, copyright registrations,
applications therefor, or other intellectual property rights of
any person, and, to the knowledge of the Company, there are no
allegations by any person to the contrary and there is no
pending patent, trademark, service xxxx, or copyright
application of any other person that, if issued or registered,
would be infringed upon by the operations of the Company or the
Subsidiaries.
(3) No licenses, sub-licenses, or agreements pertaining
to any of the Intellectual Property have been granted by the
Company or the Subsidiaries.
(4) Neither the Intellectual Property nor the other
Proprietary Rights are subject to any liens.
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(5) No patents, trademarks, tradenames, service marks,
copyrights, formulae, inventions, trade secrets, or other
intellectual property are used by the Company or the
Subsidiaries in the conduct of their businesses except the
Intellectual Property, other Proprietary Rights, and customary
non-negotiated licenses of off-the-shelf computer software.
(6) The Company and the Subsidiaries have taken all
steps reasonably required to maintain the Intellectual Property,
including timely payment of all fees and timely filing of all
documents required under applicable legal requirements.
6.12 Litigation. No claim, action, litigation, governmental
investigation, administrative, arbitration, or other proceeding by or before any
court or other governmental entity is pending or, to the knowledge of the
Company, threatened against or relating to the Company, any Subsidiary, their
assets, properties, or businesses. Neither the Company nor any Subsidiary is
subject to any order of any court or other governmental entity.
6.13 Compliance with Laws; Licenses and Permits.
(a) The Company and its Subsidiaries have substantially complied
with, and are not in violation of, any laws, ordinances, and regulations
or other governmental restrictions, orders, judgments, or decrees
applicable to their respective businesses, including individual products
marketed by them, except where failure to comply would not have a
Material Adverse Effect.
(b) All licenses, franchises, permits, and other governmental
authorizations of the Company and its Subsidiaries are valid and
sufficient for all businesses presently carried on by the Company and
its Subsidiaries, and the Company and its Subsidiaries are not in
violation of any such material license, franchise, permit, or other
governmental authorization, except where failure to maintain any such
franchise, permit, or authorization would not have a Material Adverse
Effect.
6.14 Brokers and Finders. Except for the fees of Houlihan, Lokey, Xxxxxx
& Zukin payable under the engagement letter with the Company dated May 8, 2000,
there are no claims for brokerage commissions, finders' fees, investment
advisory fees, or similar compensation in connection with this Agreement or the
transactions contemplated hereby based on any arrangement, understanding,
commitment, or agreement made by or on behalf of the Company or its
Subsidiaries, obligating the Surviving Organization, Buyer, or Buyer Subsidiary
to pay such claim.
6.15 Employee Benefits.
(a) Each employee pension benefit plan ("Pension Plan"), as
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), each employee welfare benefit plan ("Welfare Plan"),
as defined in Section 3(1) of ERISA, and each deferred compensation,
bonus, incentive, stock incentive, option, stock purchase, severance, or
other material employee benefit plan, agreement, commitment, or
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arrangement, including any such plan, agreement, commitment, or
arrangement maintained for or covering employees employed outside of the
United States ("Benefit Plan"), which is currently maintained by the
Company or any of its ERISA Affiliates (as defined in Paragraph (i) of
this Section 6.15) or to which the Company or any of its ERISA
Affiliates currently contributes or is under any current obligation to
contribute, or under which the Company or any of its ERISA Affiliates
has any current or potential liability (collectively, the "Employee
Plans" and individually, an "Employee Plan") is listed in Schedule 6.15
and, to the extent an Employee Plan is evidenced by documents, true and
complete copies thereof have been delivered or made available to Buyer.
In addition, copies of the annual report (Form 5500 Series) required to
be filed with any governmental agency with respect to each Pension Plan
and Welfare Plan for the three most recent plan years of such plan for
which reports have been filed have been delivered or made available to
Buyer.
(b) The Company and each of its ERISA Affiliates has made on a
timely basis all contributions or payments required to be made by it
under the terms of the Employee Plans, ERISA, the Code, or other
applicable laws, unless such contributions or payments that have not
been made are immaterial in amount and the failure to make such payments
or contributions will not materially and adversely affect the Employee
Plans. No Pension Plan subject to Section 412 of the Code has incurred
any "accumulated funding deficiency" (as defined in that Code Section),
whether or not material, as of the last day of the most recent plan year
of such plan.
(c) Each Employee Plan (and any related trust or other funding
instrument) has been administered in all material respects in compliance
with its terms and in both form and operation is in compliance in all
material respects with the applicable provisions of ERISA, the Code, and
other applicable laws and regulations (other than adoption of any
Pension Plan amendments for which the remedial amendment period has not
yet expired), and all material reports required to be filed with any
governmental agency with respect to each Employee Plan have been timely
filed.
(d) There is no material litigation, arbitration, or
administrative proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its ERISA Affiliates or, to the
knowledge of the Company, any plan fiduciary by the Internal Revenue
Service, the U.S. Department of Labor, the Pension Benefit Guaranty
Corporation, or any participant or beneficiary with respect to any
Employee Plan as of the date of this Agreement. Neither the Company nor
any of its ERISA Affiliates nor, to the knowledge of the Company, any
plan fiduciary of any Pension or Welfare Plan has engaged in any
transaction in violation of Section 406(a) or (b) of ERISA for which no
exemption exists under Section 408 of ERISA or any "prohibited
transaction" (as defined in Section 4975(c)(1) of the Code) for which no
exemption exists under Section 4975(c)(2) or 4975(d) of the Code, or is
subject to any excise tax imposed by the Code or ERISA with respect to
any Employee Plan.
(e) Neither the Company nor any of its ERISA Affiliates
currently maintains, nor at any time in the previous six calendar years
maintained or had an obligation to
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contribute to, any defined benefit pension plan subject to Title IV of
ERISA, or any "multiemployer plan" as defined in Section 3(37) of ERISA.
(f) No Employee Plan provides health, dental, life insurance, or
similar welfare benefits to any employee of the Company or any ERISA
Affiliate, or any dependent of such employee, following termination of
the employee's employment, except as may be required by Code Section
4980B or any similar state law.
(g) No representation has been made to any employee with respect
to any Employee Plan that would entitle the employee to benefits greater
than or in addition to the benefits provided by the actual terms of the
Employee Plan, including representations as to post-retirement health or
death benefits. No representation or promise has been made to any such
employee that any new Employee Plan is to be established.
(h) No employee of the Company or any of its ERISA Affiliates is
a party to any employment or other agreement that entitles him or her to
compensation, severance pay, or other consideration upon the acquisition
by any person of control of the Company, or to benefits or increased
benefits under any Employee Plan covering such employee as a result of
such acquisition of control. The consummation of the transactions
contemplated by this Agreement (alone or together with any other event)
will not entitle any person to, accelerate the time of payment or
vesting of, or increase the amount of, any compensation or any benefit
under any Employee Plan.
(i) For purposes of this Section 6.15, "ERISA Affiliate" means
(1) any trade or business with which the Company is under common control
within the meaning of Section 4001(b) of ERISA, (2) any corporation with
which the Company is a member of a controlled group of corporations
within the meaning of Section 414(b) of the Code, (3) any entity with
which the Company is under common control within the meaning of Section
414(c) of the Code, (4) any entity with which the Company is a member of
an affiliated service group within the meaning of Section 414(m) of the
Code, and (5) any entity with which the Company is aggregated under
Section 414(o) of the Code.
6.16 Environmental Matters. Except as set forth in the SEC Reports or on
Schedule 6.16:
(a) (1) to the knowledge of the Company, except for
noncompliance that would not have, individually or in the aggregate, a
Material Adverse Effect, each of the Company and the Subsidiaries is
and, at all times has been, in compliance with all applicable federal,
state, local, and foreign laws, rules, regulations, ordinances, orders,
decrees, and other legal requirements relating to pollution,
compensation for damage or injury caused by pollution, or protection of
the environment (including indoor air, ambient air, surface water,
groundwater, land surface, subsurface strata, or plant or animal
species), human health, or natural resources (collectively,
"Environmental Laws");
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(2) to the knowledge of the Company, except for noncompliance
that would not have, individually or in the aggregate, a Material
Adverse Effect, each of the Company and the Subsidiaries holds all
permits, licenses, registrations, exemptions, and other filings with or
authorizations by any governmental authority under any Environmental Law
(collectively, "Environmental Permits"), each of which is in full force
and effect, required for any of its current operations and for any
property owned, leased, or otherwise operated by it, and each of the
Company and the Subsidiaries is, and within the period of all applicable
statutes of limitation has been, in compliance with all such
Environmental Permits;
(3) to the Company's knowledge, no review by, or approval of,
any governmental authority or other person is required under any
Environmental Law in connection with the execution or delivery of this
Agreement or in connection with the consummation of the transactions
contemplated hereby;
(4) there is no Environmental Claim (as defined in paragraph (b)
below) pending or, to the knowledge of the Company, threatened against
the Company or the Subsidiaries; and
(5) to the knowledge of the Company, except for Environmental
Conditions (defined below) that would not have, individually or in the
aggregate, a Material Adverse Effect, there are no past or present
actions, activities, circumstances, conditions, events, or incidents
(collectively "Environmental Conditions") that could form the basis of
any Environmental Claim against the Company or any Subsidiary or against
any person whose liability for such Environmental Claim any of them has
or may have retained or assumed either contractually or by operation of
law.
(b) As used in this Section 6.16, an "Environmental Claim" means
any written claim, demand, action, suit, complaint, proceeding,
directive, investigation, lien, demand letter, or notice by any person
alleging noncompliance, violation, or potential liability (including
liability or potential liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, natural resource damages,
property damage, personal injury, fines, or penalties) arising out of,
relating to, based on, or resulting from (1) the presence, discharge,
emission, release, or threatened release of any Hazardous Substances (as
defined in paragraph (d) below) at any location, whether or not owned by
the Company or the Subsidiaries, (2) any violation or alleged violation
of any Environmental Law or Environmental Permit, or (3) otherwise
relating to obligations or liabilities under any Environmental Law.
(c) Without limiting the generality of Section 6.16(a), to the
knowledge of the Company, except for noncompliance that would not have,
individually or in the aggregate, a Material Adverse Effect, (1) all
on-site and off-site locations where the Company or any Subsidiary has
stored, disposed, or arranged for the disposal of Hazardous Substances
are identified on Schedule 6.16(c); (2) all underground and
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aboveground storage tanks or other containment facilities, and the
capacity and contents of such tanks or facilities, currently or formerly
located on, in or under any real property owned, leased or operated by
the Company or any Subsidiary (the "Real Property") are identified on
Schedule 6.16(c); (3) all xxxxx or other borings located on the Real
Property are identified on Schedule 6.16(c); (4) there is no asbestos
contained in or forming a part of any building, building component,
structure, or office space on the Real Property; and (5) no
polychlorinated biphenyls (PCBs) are used or stored at the Real Property
or contained in any personal property at the Real Property.
(d) To the knowledge of the Company, except for noncompliance
that would not have, individually or in the aggregate, a Material
Adverse Effect, there are not present in, on, or under the Real Property
or, to the knowledge of the Company, in, on, or under real property
formerly owned or leased by the Company or any Subsidiary ("Former Real
Property") any Hazardous Substances. As used in this Section 6.16,
"Hazardous Substances" means pollutants, contaminants, hazardous or
toxic substances, hazardous or toxic wastes, petroleum (including crude
oil or any fraction thereof), petroleum products, asbestos,
asbestos-containing materials, radioactive substances, and all other
chemicals, wastes, substances, and materials, whether or not defined as
such, listed in, regulated by, or identified in any Environmental Law in
such form or quantities as to create any liability or obligation under
any Environmental Law or any other liability for the Company, any
Subsidiary, or the Surviving Organization, or that could result in other
liability under any Environmental Law. However, Hazardous Substances do
not include those substances stored, maintained, handled or used in the
ordinary course of business or other lawful activities conducted at the
Real Property or Former Real Property. None of the Real Property or, to
the knowledge of the Company, Former Real Property is being used, or has
ever been used, in connection with the business of manufacturing,
storing, transporting, handling, disposing, or treating Hazardous
Substances. To the knowledge of the Company, neither the Company nor any
Subsidiary has, in connection with the Real Property or in connection
with Former Real Property, installed, used, generated, treated, disposed
of, or arranged for the disposal of any Hazardous Substances in any
manner so as to create any liability or obligation under any
Environmental Law or any other liability for the Company, any
Subsidiary, or the Surviving Organization.
(e) To the knowledge of the Company, none of the Real Property
or the Former Real Property is or ever has been listed on the National
Priorities List, the Comprehensive Environmental Response, Compensation
and Liability Information System, or any similar federal, state, or
local list, schedule, log, inventory, or database.
(f) The Company has delivered to Buyer all reports,
authorizations, disclosures, and other documents of which it is aware
relating in any way to the status
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of any of the Leased Real Property or otherwise relating to the business
of the Company and its Subsidiaries with respect to any Environmental
Law.
6.17 Business Relationships.
(a) There are no outstanding material disputes with any of the
20 largest (by dollar volume) customers and vendors of the Company and
its Subsidiaries, taken as a whole, during the most recently completed
fiscal year. No such customer or vendor has refused to continue to do
business with the Company or its Subsidiaries or has stated its
intention not to continue to do business with the Company or its
Subsidiaries or to materially reduce the amount of such business.
(b) No current independent distributor, sales representative, or
agent has stated any intention to terminate or materially change the
terms of its relationship with the Company or its Subsidiaries which
would have a Material Adverse Effect.
6.18 Labor Disputes. There are no strikes, work stoppages, or slowdowns
or labor disputes or claims of unfair labor practices against the Company or any
Subsidiary pending or, to the knowledge of the Company, threatened. No employees
are represented by a collective bargaining representative or otherwise subject
to any union or association contract. To the knowledge of the Company, no union
or association organizing or election activities involving any employees of the
Company or its Subsidiaries are in progress or have been threatened since
January 1, 1998.
6.19 Inventories. The inventory of, and holdings of consigned products
and materials by, the Company and its Subsidiaries are maintained at levels
adequate for the continuation of the conduct of their businesses as presently
being conducted. Except for forward-purchase and hedging contracts listed on
Schedule 6.10, neither the Company nor any Subsidiary has any arrangements for
the purchase of inventory at a price in excess of the market price of such
inventory at the time of the entry into the arrangement to purchase such
inventory.
6.20 Accounts Receivable. All accounts receivable of the Company and its
Subsidiaries are valid, genuine, and subsisting and arose out of bona fide
transactions in the ordinary course of business. All of the prepaid expenses of
the Company and its Subsidiaries have been incurred in the ordinary course of
business.
6.21 Insurance. Schedule 6.21 sets forth a list and summary description
of all policies of insurance relating to the business of the Company and the
Subsidiaries that are currently in force. All required premiums have been paid
with respect to such insurance policies. Copies of all such insurance policies
have been provided to Buyer.
6.22 Opinion of Financial Adviser. The Company's Board of Directors has
received the opinion of Houlihan, Lokey, Xxxxxx & Zukin to the effect that, as
of the date of this Agreement, the consideration to be received by the Company's
stockholders in the Merger is fair to such stockholders from a financial point
of view.
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6.23 Anti-Takeover Statutes. All necessary approvals have been granted
by the Board of Directors of the Company under Section 203 of the DGCL so that
neither the execution and delivery of the Voting Agreement nor the granting of
the Irrevocable Proxy will limit, delay, or impair the consummation of the
Merger or any other transaction by the Company, Buyer Subsidiary, or Buyer under
Section 203 of the DGCL.
6.24 Stockholder Voting Requirement. The only stockholder vote necessary
to consummate the Merger under the DGCL, any other applicable law, and the
Company's Certificate of Incorporation and Bylaws is the affirmative vote of the
holders of a majority of the Company Common Stock.
6.25 Stock Options. All Options remaining outstanding immediately after
the Effective Time, if any, shall represent upon exercise thereof only the right
to receive the Merger Consideration for each share subject to the Option.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF
BUYER AND BUYER SUBSIDIARY
Buyer and Buyer Subsidiary represent and warrant to the Company as
follows:
7.1 Organization. Each of Buyer and Buyer Subsidiary is a limited
liability company duly organized, validly existing, and in good standing under
the LLC Act.
7.2 Authority. Each of Buyer and Buyer Subsidiary has the power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement by Buyer have been duly authorized by the Management Board and
the Members of Buyer, and no further action of Buyer is necessary to consummate
the transactions contemplated hereby. The execution, delivery, and performance
of this Agreement by Buyer Subsidiary have been duly authorized by the sole
Member of Buyer Subsidiary, and no further action of Buyer Subsidiary, other
than the filing of the Certificate of Merger with the Delaware Secretary of
State, is necessary to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and Buyer Subsidiary and
constitutes the legal, valid, and binding obligation of Buyer and Buyer
Subsidiary, enforceable against each of them in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a court of law or
equity).
7.3 No Conflicts. Neither the execution and delivery of this Agreement
by Buyer and Buyer Subsidiary nor the consummation by Buyer and Buyer Subsidiary
of the transactions contemplated hereby, will (a) conflict with or result in a
breach of the organizational documents, as currently in effect, of Buyer or
Buyer Subsidiary, (b) except for the requirements under the HSR Act, compliance
with the Exchange Act, and the filing of the Certificate of Merger with the
Delaware Secretary of State, require any filing with, or consent or approval of,
any governmental
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authority having jurisdiction over any of the business or assets of Buyer or
Buyer Subsidiary, (c) violate any statute, law, ordinance, rule, or regulation
applicable to Buyer or Buyer Subsidiary or any injunction, judgment, order,
writ, or decree to which Buyer or Buyer Subsidiary has been specifically
identified as subject, or (d) result in a breach of, or constitute a default or
an event that, with the passage of time or the giving of notice, or both, would
constitute a default, give rise to a right of termination, cancellation, or
acceleration, create any entitlement of any third party to any material payment
or benefit, require notice to, or the consent of, any third party, or result in
the creation of any lien on the assets of Buyer or Buyer Subsidiary (excluding
any breach, default, right, entitlement, notice or consent requirement, or lien
that would not reasonably be likely to impair Buyer or Buyer Subsidiary's
ability to consummate the Merger).
7.4 Financing Commitments.
(a) With respect to senior bank financing, Buyer has delivered
to the Company a true and complete copy of a commitment of Bank of
America, N.A. and a commitment of Sovereign Bank (the "Senior
Commitments"). The Senior Commitments are in full force and effect, and
neither Buyer nor Buyer Subsidiary has any reason to expect that the
conditions included in the Senior Commitments will not be satisfied
before the Effective Time.
(b) With respect to mezzanine financing, Buyer has delivered to
the Company a true and complete copy of a commitment of Toronto Dominion
Investment LLC (the "Mezzanine Commitment"). The Mezzanine Commitment is
in full force and effect, and neither Buyer nor Buyer Subsidiary has any
reason to expect that the conditions included in the Mezzanine
Commitment will not be satisfied before the Effective Time.
(c) With respect to equity financing, Buyer has delivered to the
Company a commitment letters of Xxxxxxx Xxxxx and Norwest Equity
Partners VII. Such commitments are in full force and effect, and neither
Buyer nor Buyer Subsidiary has any reason to expect that the conditions
included therein will not be satisfied before the Effective Time.
(d) The financings described in paragraphs (a) through (c)
above, taken together with the available cash of Buyer, Buyer
Subsidiary, and the Company, are in an amount sufficient to enable Buyer
to pay when due, pursuant to the terms hereof, the Merger Consideration
for each share of Company Common Stock, to make all other necessary
payments by Buyer, Buyer Subsidiary, and the Surviving Organization in
connection with the Merger (including the repayment of indebtedness of
the Surviving Corporation as contemplated by the such financing
commitments and the payment of any amounts payable in respect of
Dissenting Shares), to provide a reasonable amount of working capital
financing, and to pay related fees and expenses.
7.5 Proxy Statement. None of the information to be supplied in writing
by Buyer or Buyer Subsidiary specifically for inclusion in the Proxy Statement
will, at the time the Proxy Statement is mailed, contain any untrue statement of
a material fact or omit to state any material
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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 and will not, at the time of the meeting of stockholders to which the
Proxy Statement, as then amended or supplemented, relates omit to state any
material fact necessary to correct any statement that has become false or
misleading in any earlier communication with respect to the solicitation of any
proxy for such meeting.
7.6 Solvency. As of the date of this Agreement, before giving effect to
the Merger or any portion of the financing for the Merger, the sum of the assets
of Buyer, both at a fair valuation and at present fair salable value, exceeds
its liabilities, including contingent liabilities, and, after giving effect to
the Merger and the financing for the Merger, the sum of the assets of Buyer,
both at a fair valuation and at present fair salable value, will exceed its
liabilities, including contingent liabilities, measured on a going-concern
basis. Buyer has sufficient capital with which to conduct its business as
presently conducted and as proposed to be conducted after the Merger, and Buyer
has not incurred debts, and does not intend to incur debts, beyond its ability
to pay such debts as they mature. For purposes of this Section, "debt" means any
liability on a claim, and "claim" means (a) a right to payment, whether or not
such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured, or (b) a right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured. For purposes of the foregoing, contingent
liabilities are computed at the amount that, in light of all the facts and
circumstances existing at the time, represents the amount that can reasonably be
expected to become an actual or matured liability.
7.7 Brokers. Buyer and Buyer Subsidiary have not, and no person acting
on their behalf has, engaged any broker, finder, or intermediary in connection
with the transactions contemplated by this Agreement, as a result of which the
Company or any Subsidiary will have any legal responsibility.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Expenses. All expenses incurred in connection with this Agreement
and the consummation of the transactions contemplated hereby shall be paid by
the party incurring such expenses. Any such expenses incurred by the Company and
not paid before the Effective Time shall be liabilities of the Surviving
Organization; provided, however, that if the Merger is consummated, to the
extent that the Company's costs and expenses incurred from and including January
1, 2001 with respect to legal, accounting, investment banking, financial
advisory, and other professional fees and expenses of such persons specifically
associated with the transactions contemplated by this Agreement (excluding costs
and expenses relating to litigation) exceeds $1.5 million (with any such excess
being referred to as the "Excess"), then the Merger Consideration shall be
decreased by an amount determined by dividing the Excess by the number of shares
of Company Common Stock outstanding immediately before the Effective Time
together with the number of shares covered by then outstanding in-the-money
stock options of the Company (the "Excess Expense Amount").
8.2 Termination of Representations and Warranties. The representations
and warranties of the parties set forth in this Agreement (including those set
forth in the Schedules hereto) or in any certificate furnished under this
Agreement shall not survive the Effective Time.
8.3 Amendment and Modification. To the extent permitted by applicable
law, this Agreement may be amended, modified, or supplemented only by written
agreement of the parties hereto at any time before the Effective Time with
respect to any of the terms contained herein, except that after the meeting of
stockholders contemplated by Section 2.2 hereof, the amount or form of the
Merger Consideration shall not be modified.
8.4 Waiver of Compliance; Consents. Any failure of Buyer or Buyer
Subsidiary, on the one hand, or the Company, on the other hand, to comply with
any obligation, covenant, agreement, or condition herein may be waived in
writing by the Company or by Buyer and Buyer Subsidiary, respectively, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing.
8.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, effective when
delivered, or if delivered by express delivery service, effective when
delivered, or if mailed by registered or certified mail (return receipt
requested), effective three business days after mailing, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Buyer or Buyer Subsidiary, to it at:
Xxxxxxx X. Xxxxx
Aurafin LLC
0000 Xxx Xxxx Xxxx
00
00
Xxxxxxx, Xxxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxx
Faegre & Xxxxxx LLP
2200 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
(b) If to the Company, to it at:
Xxx Xxxxxxxx
OroAmerica, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxxxxx
Xxxxx, Xxxxx & Xxxxxx LLP
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
8.6 Assignment. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties (except that Buyer Subsidiary may assign to
any other direct or indirect subsidiary of Buyer any rights of Buyer Subsidiary
under this Agreement, provided that any such assignment will not relieve Buyer
from any of its obligations under this Agreement). Except for the provisions of
Section 2.12, this Agreement is not intended to confer upon any other person
except the parties hereto any rights or remedies hereunder.
8.7 Rules of Interpretation. As used in this Agreement,
(a) "including" means "including without limitation";
(b) "person" includes an individual, a partnership, a limited
liability company, a joint venture, a corporation, a trust, an
incorporated organization, and a government or any department or agency
thereof;
(c) "affiliate" has the meaning set forth in Rule 12b-2
promulgated under the Exchange Act;
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(d) "business day" means any day other than a Saturday, Sunday
or a day that is a statutory holiday under the laws of the United States
or the States of California and Florida;
(e) all dollar amounts are expressed in United States funds;
(f) the phrase "to the knowledge of the Company" or any similar
phrase means the actual knowledge of one or more of the executive
officers of the Company; and
(g) all references to statutes or regulations are deemed to
refer to such statutes and regulations as amended from time to time or
as superseded by comparable successor statutory provisions.
8.8 Governing Law. This Agreement shall be governed by the laws of the
State of Delaware without giving effect to conflict-of-laws principles.
8.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
8.10 Headings; Internal References. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, and are not
part of the agreement of the parties and shall not affect in any way the meaning
or interpretation of this Agreement.
8.11 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto and the Confidentiality Agreement embody the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein, and supersede all prior agreements and understandings among
the parties with respect to such subject matter. There are no restrictions,
promises, representations, warranties (express or implied), covenants, or
undertakings of the parties, other than those expressly set forth or referred to
in this Agreement (including the Schedules and Exhibits hereto) or the
Confidentiality Agreement.
8.12 Severability. If any term of this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remainder of
the terms hereof will continue in full force and effect and will in no way be
affected, impaired, or invalidated.
8.13 Equitable Remedies. The parties agree that money damages or another
remedy at law would not be a sufficient or adequate remedy for any breach or
violation of, or default under, this Agreement by them and that in addition to
all other remedies available to them, each of them shall be entitled, to the
fullest extent permitted by law, to an injunction restraining such breach,
violation, or default or threatened breach, violation, or default and to any
other equitable relief, including specific performance, without bond or other
security being required.
8.14 Attorneys' Fees. In any litigation or arbitration relating to this
Agreement between the parties, including that with respect to any instrument,
document, or agreement made under or in connection with this Agreement, the
prevailing party (as determined by the court or
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the arbitration panel) shall be entitled to recover its out-of-pocket costs and
reasonable attorneys' fees.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective duly authorized persons on the date first written above.
OROAMERICA, INC.
By
----------------------------------
Its
------------------------------
AURAFIN LLC
By
----------------------------------
Its
------------------------------
BENTLEY ACQUISITION LLC
By
----------------------------------
Its
------------------------------
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EXHIBIT A
VOTING AGREEMENT
This Voting Agreement is dated as of April 24, 2001, between Aurafin
LLC, a Delaware limited liability company ("Buyer"), and Xxx Xxxxxxxx, a
stockholder (the "Stockholder") of OroAmerica, Inc., a Delaware corporation (the
"Company").
RECITALS
The Company, Buyer, and Bentley Acquisition LLC, a wholly owned
subsidiary of Buyer ("Buyer Subsidiary"), are entering to an Agreement and Plan
of Merger dated as of the date hereof (the "Merger Agreement"), pursuant to
which the Company shall merge with and into Buyer Subsidiary (as set forth in
the Merger Agreement) and the existing stockholders of the Company shall receive
cash in exchange for their shares of common stock of the Company.
The Stockholder is a director, executive officer, and significant
stockholder of the Company.
The execution and delivery of this Agreement is a condition precedent to
Buyer and Buyer Subsidiary entering into the Merger Agreement.
AGREEMENT
Now, therefore, the parties hereby agree as follows:
1. Voting; Proxy.
(a) At each meeting of the Company's stockholders convened to
consider and vote upon the adoption of the Merger Agreement, the
Stockholder shall vote all shares of common stock of the Company owned
of record by him at the record date for the vote (excluding any shares
for which the Stockholder's sole voting power results from his having
been named as proxy pursuant to the proxy solicitation conducted by the
Company in connection with the meeting, but including any other shares
of common stock of the Company over which the Stockholder otherwise has
voting power, by contract or otherwise) in favor of the adoption of the
Merger Agreement.
(b) Concurrently herewith, the Stockholder has executed and
delivered to Buyer an irrevocable proxy in the form of Annex A hereto.
2. No Solicitation.
(a) Subject to Section 3 hereof, the Stockholder may not,
directly or indirectly:
(1) take any action to seek, initiate, or solicit any
offer from any person or group regarding a Third-Party
Acquisition Offer; or
50
(2) except to the extent allowed under Section 2.3(b) of
the Merger Agreement, engage in discussions concerning, or
provide any non-public information or access to, any person or
group that he has any reason to believe may be considering a
Third-Party Acquisition Offer.
(b) The Stockholder shall immediately cease and cause to be
terminated all existing discussions and negotiations, if any, with any
parties conducted heretofore with respect to any Third-Party Acquisition
Offer.
3. Stockholder Capacity. The Stockholder shall not be deemed to have
made any agreement or understanding herein in his or her capacity as a director
or officer of the Company and no action taken by the Stockholder in his capacity
as an officer or director of the Company shall be deemed a breach of this
Agreement. The Stockholder executes this Agreement solely in his capacity as the
beneficial owner of the Stockholder's Company Common Stock.
4. No Transfer. The Stockholder may not sell, pledge, assign, or
otherwise transfer, or authorize, propose, or agree to the sale, pledge,
assignment, or other transfer of, any of his shares of common stock of the
Company. Notwithstanding the preceding sentence, the Stockholder may sell,
pledge, assign, or otherwise transfer any of his shares of common stock of the
Company if (a) at least five business days' written notice thereof (stating the
identity of the intended recipient and the number of shares subject thereto) is
provided to Buyer and (b) the intended transferee agrees in writing to be bound
by this Agreement.
5. Reasonable Efforts; Additional Agreements. Subject to the terms of
this Agreement and the Merger Agreement, the Stockholder, in his capacity as a
stockholder of the Company, and not in his capacity as an officer or director of
the Company, shall use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things reasonably necessary, proper,
or advisable that can be taken by a stockholder in accordance with applicable
law to consummate the transactions contemplated by this Agreement and the Merger
Agreement. Buyer agrees to execute and deliver or cause to be executed and
delivered to Stockholder the Employment Agreement, as defined in the Merger
Agreement, at the closing for such transactions.
6. Representations and Warranties. The Stockholder represents and
warrants to Buyer and Buyer Subsidiary as follows:
(a) Authority. He has the requisite power and authority to enter
into this Agreement, to perform his obligations hereunder, and to
consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Stockholder and constitutes his valid
and binding obligation, enforceable in accordance with its terms, except
as the enforceability hereof may be limited by bankruptcy, insolvency,
moratorium, or similar laws affecting the enforcement of creditors'
rights generally, and except for judicial limitations on the enforcement
of the remedy of specific performance and other equitable remedies.
2
51
(b) Title; Authority to Vote Shares. The Stockholder owns of
record and has voting power over 3,400,000 shares of common stock of the
Company; such shares are held by the Stockholder free and clear of all
liens, charges, pledges, restrictions, and encumbrances (other than
those created by this Agreement and the Pledge Agreement, dated
September 5, 2000, between the Stockholder and Xxxxxxx Xxxxxxxxx
Xxxxxxxx).
(c) Noncontravention. Neither the execution and delivery of this
Agreement, nor the consummation of any of the transactions contemplated
hereby, nor compliance with any of the provisions hereof by the
Stockholder, will violate, conflict with, or result in a breach of, or
constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or
suspension of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any lien upon any of the properties or assets of the Stockholder under,
any agreement or instrument to which he is a party or any statute, rule,
regulation, judgment, order, decree, or other legal requirement
applicable to the Stockholder.
(d) Litigation. There is no claim, action, proceeding, or
investigation pending or, to the best knowledge of the Stockholder,
threatened against or relating to the Stockholder before any court or
governmental or regulatory authority or body (including the National
Association of Securities Dealers, Inc.), and the Stockholder is not
subject to any outstanding order, writ, injunction, or decree that, if
determined adversely, would prohibit the Stockholder from performing his
obligations hereunder.
7. Termination. This Agreement shall terminate at the earlier of (a) the
Effective Time or (b) upon termination of the Merger Agreement pursuant to
Section 5.1 thereof. In the event of a termination of this Agreement pursuant to
this Section 7, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of any party; provided, however, that
nothing herein shall release any party from any liability for any breach of this
Agreement. If this Agreement is terminated, the proxy of the Stockholder
delivered under Section 1(b) hereof shall also terminate and be of no further
force or effect, and Buyer shall promptly return the proxy to the Stockholder.
8. Miscellaneous.
(a) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered in person or
by messenger, cable, telegram, facsimile transmission, or by a reputable
overnight delivery service that provides for evidence of receipt, to the
parties as follows (or at such other address as a party may specify by
like notice):
3
52
If to the Stockholder at:
Xxx Xxxxxxxx
OroAmerica, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
If to Buyer to:
Xxxxxxx X. Xxxxx
Aurafin LLC
0000 Xxx Xxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
(b) Interpretation. The headings contained in this Agreement are
for reference purposes only and do not affect the interpretation of this
Agreement.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered the same agreement.
(d) Entire Agreement. This Agreement (including the documents
and instruments referred to herein, and the Merger Agreement),
constitutes the entire agreement and supersedes all prior and
contemporaneous agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(e) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement. Whenever
possible, each provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law.
(f) Governing Law. This Agreement shall be governed by Delaware
law, without regard to the principles of conflicts of law.
(g) Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by any party,
whether by operation of law or otherwise, without the express written
consent of the other party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective successors, heirs, legal
representatives, and permitted assigns. The representations, agreements,
and obligations of the Stockholder contained herein shall survive the
death or incapacity of the Stockholder and shall be binding upon the
heirs, personal representatives, successors, and assigns of the
Stockholder.
(h) Remedies. In addition to all other remedies available, the
parties agree that, in the event of a breach by a party of any of its
obligations hereunder, the non-breaching party shall be entitled to
specific performance or injunctive relief.
4
53
(i) Defined Terms. All capitalized terms used but not defined
herein have the meanings given them in the Merger Agreement.
5
54
IN WITNESS WHEREOF, each of the parties have signed this Agreement as of
the date first written above.
AURAFIN LLC
By
----------------------------------
Its
-------------------------------
------------------------------------
Xxx Xxxxxxxx
6
55
ANNEX A
IRREVOCABLE PROXY
The undersigned, revoking any proxy heretofore given, hereby constitutes
and appoints each of Xxxxxxx X. Xxxxx and Xxxxxx X. Xxxxxx the true and lawful
attorney, with full power of substitution, for and in the name of the
undersigned to vote all shares of common stock of OroAmerica, Inc., a Delaware
corporation (the "Company"), owned of record by him at the record date for the
vote (excluding any shares for which the Stockholder's sole voting power results
from his having been named as proxy pursuant to the proxy solicitation conducted
by the Company in connection with the meeting, but including any other shares of
common stock of the Company over which the Stockholder otherwise has voting
power, by contract or otherwise), in favor of adoption of the Agreement and Plan
of Merger among the Company, Aurafin LLC, a Delaware limited liability company
("Buyer"), and Bentley Acquisition LLC, a wholly owned subsidiary of Buyer,
dated as of April 24, 2001 (the "Agreement"). This Proxy is given to induce
Buyer to enter into the Agreement, is coupled with an interest, and is
irrevocable.
The undersigned hereby ratifies and confirms all that the proxies named
herein may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this
24th day of April, 2001.
-----------------------------------------
Xxx Xxxxxxxx
In Presence of:
-----------------------------------
56
EXHIBIT B
ESCROW AGREEMENT
AMONG
OROAMERICA, INC.
AURAFIN LLC,
AND
XXXXX FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
dated as of April 24, 2001
57
TABLE OF CONTENTS
1. Defined Terms............................................................................1
2. Appointment of the Escrow Agent..........................................................1
3. Further Provisions Concerning the Escrow Agent...........................................1
4. Establishment of Escrow Fund.............................................................2
5. Purpose..................................................................................3
6. Termination of Escrow; Disbursement of Funds.............................................3
7. Investment of Escrow Fund................................................................3
8. No Set-Off...............................................................................3
9. Written Instructions to the Escrow Agent.................................................4
10. Disputed Claims........................................................................4
11. Successor and Assigns..................................................................4
12. Notices................................................................................4
13. Amendment..............................................................................5
14. Entire Agreement.......................................................................5
15. Section Headings.......................................................................5
16. Severability...........................................................................5
17. Governing Law..........................................................................6
18. Counterparts...........................................................................6
SCHEDULE
SCHEDULE A Escrow Fee Schedule
58
ESCROW AGREEMENT
THIS AGREEMENT is made and entered into as of the 24th day of April,
2001, by and among OROAMERICA, INC., a Delaware corporation (the "Company"),
AURAFIN LLC, a Delaware limited liability company ("Buyer"), and XXXXX FARGO
BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association (the
"Escrow Agent").
RECITALS:
WHEREAS, the Company, Buyer and Bentley Acquisition LLC, a Delaware
limited liability company and wholly owned subsidiary of Buyer ("Buyer
Subsidiary"), have entered into an Agreement and Plan of Merger dated as of
April 24, 2001 (the "Merger Agreement"), pursuant to which the Company shall be
merged with and into Buyer Subsidiary.
WHEREAS, the Company and Buyer desire to enter into this Escrow
Agreement with the Escrow Agent; and
WHEREAS, the Merger Agreement contemplates that concurrently with the
execution and delivery of the Merger Agreement, the Company, Buyer and the
Escrow Agent shall execute and deliver an Escrow Agreement in the form hereof
and that Buyer shall deliver (or will deliver, no later than one day after the
date hereof) to the Escrow Agent pursuant to the terms of this Escrow Agreement
$3,000,000 (Three Million Dollars) in immediately available funds (the "Escrow
Amount") for the purpose of ensuring payment of the termination fee, if any,
payable by Buyer to the Company pursuant to Section 5.3(a) of the Merger
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein and in the Merger Agreement, it is hereby agreed as follows:
1. Defined Terms. Except as otherwise provided herein, capitalized terms
used herein shall have the same meaning assigned to them in the Merger
Agreement.
2. Appointment of the Escrow Agent. The Escrow Agent is hereby appointed
by the Company and Buyer as escrow agent under this Escrow Agreement, and the
Escrow Agent hereby accepts such appointment and agrees to act in accordance
with the terms and conditions of this Escrow Agreement and instructions given
pursuant hereto.
3. Further Provisions Concerning the Escrow Agent.
(a) If the Escrow Agent desires to resign from its appointment and the
performance of its duties hereunder, it shall give fifteen (15) days' prior
written notice thereof to the Company and Buyer whereupon a successor shall be
selected by mutual agreement between the Company and Buyer within sixty (60)
days of their receipt of such notice. If a successor escrow agent is not
appointed within the sixty day period following
59
such notice, Escrow Agent may petition a court of competent jurisdiction to name
a successor escrow agent. Such successor shall, upon acceptance of appointment
as the escrow agent, be entitled to all the rights, powers and indemnities and
be subject to all the obligations and duties of the Escrow Agent hereunder as if
originally named as the escrow agent herein.
(b) The Escrow Agent (i) shall have no duty or obligation hereunder
other than to take such specific action as required of it from time to time
pursuant to the terms and provisions hereof, (ii) shall be entitled to rely on
any written direction or other instrument provided to it in accordance with the
terms and provisions hereof and believed by it to be signed by individuals
authorized by the Company and Buyer, and (iii) shall not be liable to the
Company or Buyer for any act or omission on its part pursuant to this Escrow
Agreement or pursuant to such written direction unless such act or omission
involves gross negligence or willful misconduct.
(c) The Escrow Agent may (but shall not be required to) apply to any
court of competent jurisdiction for instructions regarding its duties hereunder.
(d) For its services under this Escrow Agreement, the Escrow Agent shall
be entitled to receive a reasonable and customary fee as set forth on the fee
schedule attached as Schedule A hereto. The Company and Buyer, jointly and
severally, agree to defend, indemnify and hold the Escrow Agent harmless from
and against any claim, loss, liability or expense incurred by the Escrow Agent
and arising out of or in connection with its services hereunder, including the
costs and expenses of defending itself against any such claim or liability so
incurred and arising; provided, however, that the Escrow Agent shall not be so
defended, indemnified or held harmless from and against any claim, loss,
liability or expense arising from the Escrow Agent's breach of this Escrow
Agreement (including, without limitation, violation of instructions given in
accordance with this Escrow Agreement), gross negligence, dishonesty, fraud or
bad faith.
(e) All reasonable and customary fees of and expenses incurred by the
Escrow Agent in the execution of this Escrow Agreement, as set forth on the Fee
Schedule attached as Schedule A, and the performance of its duties hereunder
shall be borne 50% by the Company and 50% by Buyer. Fees and expenses in excess
of those set forth in Schedule A (including, without limitation, fees and
expenses of any counsel engaged by the Escrow Agent and all costs of any court
proceedings to which the Escrow Agent may be a party on account hereof) shall be
reimbursed to the Escrow Agent and shall be borne by the Company and Buyer,
jointly and severally.
4. Establishment of Escrow Fund. The Escrow Agent shall acknowledge
receipt from Buyer of the wire transfer of the amount evidencing the Escrow
Amount. The Escrow Amount, and any income earned with respect thereto, from time
to time held by the Escrow Agent pursuant to the terms of this Escrow Agreement,
is referred to herein as the "Escrow Fund". The Escrow Fund shall be held,
invested, reinvested and disposed of by the Escrow Agent in accordance with the
terms and conditions of this Escrow Agreement.
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60
5. Purpose. The Company and Buyer acknowledge and agree that the Escrow
Amount shall be deposited with, and the Escrow Fund is to be held by, the Escrow
Agent hereunder solely for the purpose of satisfying the termination fee, if
any, payable by Buyer to the Company pursuant to Section 5.3(a) of the Merger
Agreement.
6. Termination of Escrow; Disbursement of Funds.
(a) The escrow created by this Escrow Agreement shall terminate upon the
disbursement of all contents of the Escrow Fund by the Escrow Agent according to
the terms of this Escrow Agreement.
(b) If the Merger Agreement is terminated by Buyer or Buyer Subsidiary
under Section 5.1(b) or Section 5.1(c)(1) of the Merger Agreement or by the
Company under Section 5.1(b) of the Merger Agreement, and, in either case, (1)
the condition to consummating the Merger set forth in Section 3.1(g) of the
Merger Agreement has not been satisfied, and (2) the conditions set forth in the
other subsections of Section 3.1 of the Merger Agreement have been satisfied or
are deemed satisfied as of the date of termination (in accordance with Section
5.3(a) of the Merger Agreement), then Buyer and the Company shall jointly
instruct the Escrow Agent to pay, within two business days after the notice of
such termination, (i) $3,000,000 from the Escrow Fund to the Company, and (ii)
all amounts in excess of $3,000,000 in the Escrow Fund to Buyer.
(c) If the Merger Agreement is terminated prior to consummation of the
transactions contemplated thereby for any reason other than that identified in
Section 6(b) hereof, then the Company and Buyer shall jointly instruct the
Escrow Agent to disburse, within two business days of the notice of such
termination, all contents of the Escrow Fund to Buyer.
(d) If the parties to the Merger Agreement consummate the transactions
contemplated thereby, then concurrently with the consummation of such
transactions, the Company and Buyer shall jointly instruct the Escrow Agent to
immediately disburse all contents of the Escrow Fund to the Disbursing Agent (as
defined in the Merger Agreement) on behalf of Buyer pursuant to Section 1.8(a)
of the Merger Agreement.
7. Investment of Escrow Fund. The Escrow Amount and any other cash in
the Escrow Fund shall be invested by the Escrow Agent in one of the following
money market funds, each of which is available through the Escrow Agent,
pursuant to written instructions given by Buyer alone (without the consent of
the Company) to the Escrow Agent: Xxxxx Fargo Cash Investment Money Market
Service Class Fund; Xxxxx Fargo Government Money Market Service Class Fund;
Xxxxx Fargo 100% Treasury Money Market Fund; or Xxxxx Fargo National Tax-Free
Institutional Money Market Service Class Fund.
8. No Set-Off. Amounts payable to Buyer hereunder shall not be subject
to set-off for any liability or claim that the Company may assert against Buyer
or Buyer Subsidiary.
-3-
61
Amounts payable to the Company hereunder shall not be subject to set-off for any
liability or claim that Buyer or Buyer Subsidiary may assert against the
Company.
9. Written Instructions to the Escrow Agent. Notwithstanding anything
herein to the contrary, the Escrow Agent may act upon any written instructions
given by the Company and Buyer jointly (an "Order").
10. Disputed Claims. The Company and Buyer agree to attempt in good
faith to negotiate a resolution of any dispute arising under this Escrow
Agreement with respect to disbursements from the Escrow Fund. If the Company and
Buyer are unable to resolve any such dispute and, as a result of such dispute,
shall have failed to deliver joint instructions to the Escrow Agent to disburse
the Escrow Fund within five (5) days of the occurrence of any of the events set
forth in Sections 6(b), 6(c) or 6(d) hereof, then the Company and Buyer shall
refer their dispute to binding arbitration. The arbitration shall be conducted
by a single arbitrator in Miami, Florida and shall be pursuant to the Commercial
Arbitration Rules of the American Arbitration Association then in effect.
Judgment upon any resulting arbitration award may be entered in any court of
competent jurisdiction. As part of such award, the arbitrator shall establish
its fees and expenses in connection therewith and allocate such fees and
expenses between the parties, who shall promptly pay their allocable share. The
prevailing party (as determined by the arbitrator) shall be entitled to recover
its reasonable attorneys' fees.
11. Successor and Assigns. This Escrow Agreement shall bind and inure
to the benefit of the Company, Buyer and the Escrow Agent, as escrow agent, and
their respective heirs, representatives, successors and assigns. This Escrow
Agreement may not be assigned by any of the parties hereto without the prior
written consent of the other parties hereto.
12. Notices. Any notice, demand, Order or other communication that may
be or is required to be given or delivered hereunder or with respect hereto
shall be delivered in person or mailed by first class registered or certified
mail, postage prepaid, to the following persons:
(a) If to the Company:
Xxxxxxx X. Xxxxx
Aurafin LLC
0000 Xxx Xxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxx
Faegre & Xxxxxx LLP
2200 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
-0-
00
Xxxxxxxxxxx, Xxxxxxxxx 00000
(b) If to Buyer:
Xxx Xxxxxxxx
OroAmerica, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxxxxx
Xxxxx, Xxxxx & Xxxxxx LLP
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
(c) If to the Escrow Agent:
Xxxxx Fargo Bank Minnesota, National Association
Corporate Trust Department
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
or to such other address with respect to a party as such party shall notify the
others in writing.
13. Amendment. This Escrow Agreement may be amended only by a written
instrument executed by the Company, Buyer and the Escrow Agent.
14. Entire Agreement. This Escrow Agreement contains the entire
understanding among the parties hereto with respect to the escrow contemplated
hereby and supersedes and replaces all prior and contemporaneous agreements and
understandings, oral or written, with regard to such escrow.
15. Section Headings. The section headings in this Escrow Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Escrow Agreement.
16. Severability. In the event that any part of this Escrow Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Escrow Agreement shall remain
in full force and effect.
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63
17. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware without
application of its conflict of law rules.
18. Counterparts. This Escrow Agreement may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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64
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
BUYER:
AURAFIN LLC
By
------------------------------------------
Its
--------------------------------------
THE COMPANY:
OROAMERICA, INC.
By
------------------------------------------
Its
--------------------------------------
ESCROW AGENT:
XXXXX FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION
By
------------------------------------------
Its
--------------------------------------
-7-
65
EXHIBIT A
ESCROW FEE SCHEDULE
ACCEPTANCE FEE: $2,000.00
For initial services including examination of the Escrow Agreement and all
supporting documents this is a one-time fee payable upon the opening of the
account.
ADMINISTRATION FEE: $2,000.00*
An annual charge or any portion of a 12-month period thereof. This fee is
payable upon the opening of the account and annually thereafter. This charge is
not prorated for the first year. THERE IS AN ADDITIONAL $250 ANNUAL CHARGE FOR
EACH SUB ACCOUNT OPENED.
*Plus mailing expenses.
TRANSACTION FEE:
Wire transfer of funds $25.00
Other transfer of funds (ie. checks, internal account transfers) $15.00
Asset transactions (purchases/sales/calls/deposit/withdrawals, etc.) $20.00
No charge for Xxxxx Fargo Fund transactions other than those disclosed in the
Fund Prospectus.
EXTRAORDINARY SERVICES:
For any services other than those covered by the aforementioned, a special per
hour charge will be made commensurate with the character of the service, time
required and responsibility involved. Such services include but are not limited
to excessive administrative time, attendance at closings, specialized reports
(eg. tax reporting) and record-keeping, unusual certifications, etc.
1099-Tax reporting $5.00 per report
Other Tax reporting per hour charge
FEE SCHEDULE IS SUBJECT TO ANNUAL REVIEW AND ADJUSTMENT.
66
EXHIBIT C
NON-COMPETITION AGREEMENT
This Non-Competition Agreement is entered into as of the ____ day of
_____________, 2001, among Xxx Xxxxxxxx (the "Principal Stockholder"), Aurafin
LLC, a Delaware limited liability company ("Buyer"), and Bentley Acquisition
LLC, a Delaware limited liability company and wholly owned subsidiary of Buyer
("Buyer Subsidiary").
RECITALS
OroAmerica, Inc., a Delaware corporation (the "Company"), Buyer, and
Buyer Subsidiary are entering to an Agreement and Plan of Merger dated as of
April 24, 2001 (the "Merger Agreement"), pursuant to which the Company shall
merge (the "Merger") with and into Buyer Subsidiary (as set forth in the Merger
Agreement) as of the date hereof.
The Principal Stockholder is a director, executive officer, and
significant stockholder of the Company and has extensive knowledge of its
business and affairs and of the industry in which the Company and its
subsidiaries compete.
The Principal Stockholder will receive substantial benefits from the
consummation of the Merger.
The execution and delivery of this Agreement is a condition precedent to
Buyer and Buyer Subsidiary consummating the Merger.
AGREEMENT
Now, therefore, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereby agree as follows:
1. Non-Competition and Non-Solicitation; Confidentiality.
(a)(1) Buyer, Buyer Subsidiary, and the Principal Stockholder
hereby acknowledge that the Principal Stockholder has had access to
confidential information concerning the business, operations, and future
plans of the Company, Buyer, and the Surviving Organization (as defined
in the Merger Agreement), and this knowledge, together with business
contacts made by the Principal Stockholder before the date of the Merger
puts the Principal Stockholder into a position where he could cause
serious and irreparable harm to Buyer and the Surviving Organization by
engaging in competition or seizing for himself or others business
opportunities available to Buyer or the Surviving Organization. In
recognition of this risk, and as a material element of this Agreement,
the Principal Stockholder has agreed to certain restrictions on the
Principal Stockholder's activities, as specified below, during the
Non-Competition Period (as defined below).
(2) The restrictions in this Section 1 apply to activities of
the Principal Stockholder (and of any entity that he may now or
hereafter control) in or directed to any place in the United States and
its territories and possessions and Canada.
(3) As used herein, the term "Non-Competition Period" means the
period commencing on the date hereof and terminating on _____________,
2005.
67
(4) The Principal Stockholder hereby agrees, on his own behalf
and on behalf of any entity that he may now or hereafter control, for
the Non-Competition Period, that the Principal Stockholder will not,
either directly or indirectly:
(A) engage (except on behalf of the Surviving
Organization Affiliates, as defined below) or establish or
acquire any ownership or financial interest in any entity that
engages, in whole or in part, in the sale (on a wholesale basis)
to any customer, including wholesalers and retailers, of any
line of karat gold or sterling silver jewelry without stones in
which, at any time on or before the date hereof, any Surviving
Corporation Affiliate engaged in ("Competitive Business
Activity"); provided, however, that "Competitive Business
Activity" shall not include the sale of watches or branded or
luxury jewelry; provided further that the Principal Stockholder
may acquire or retain, solely as a passive investment, up to an
aggregate of 4.9% of the outstanding equity securities of any
class of any entity engaged in a Competitive Business Activity
if such equity securities are publicly traded on a nationally
recognized securities exchange or inter-dealer automated
quotation system;
(B) solicit or induce, or attempt to solicit or induce,
any employees (on the date hereof) of the Company, Buyer, or any
of their affiliates (all of which entities, together with the
Surviving Organization, are collectively referred to as the
"Surviving Corporation Affiliates") to terminate their
employment with any Surviving Organization Affiliate or to
become employed by any employer engaged in a Competitive
Business Activity;
(C) contact any customer, vendor, or supplier having an
existing business relationship with any Surviving Organization
Affiliate on, or within three years prior to, the date hereof in
a manner intended to result in any such person or entity
adversely modifying his or its business relationship with any
Surviving Organization Affiliate; or
(D) serve on the board of directors of, become employed
as an employee by, or become hired as a consultant or
independent contractor to, any person or entity that is engaged
in a Competitive Business Activity, regardless of whether the
Competitive Business Activity constitutes all or only a part of
the business activities of such person or entity; provided,
however, if the Competitive Business Activity accounts for less
than 5% of the total revenues of such person or entity for the
12-month period preceding the initiation of such relationship,
then the Principal Stockholder may (i) serve on the board of
directors thereof and (ii) become employed by, or serve as a
consultant or independent contractor to, such person or entity
so long as the services performed by the Principal Stockholder
for such person or entity do not relate to any Competitive
Business Activity. Furthermore, the Principal Stockholder may
serve as a director, consultant, or employee of any jewelry
retailer other than Kmart Corporation, Wal-Mart Stores Inc.,
Target Corporation, QVC, Inc., Home Shopping Network, and
ValueVision International, Inc.
(5) If any of these restrictions are found by a court to be
overly broad in duration or territorial scope, the court shall have the
authority to reform this Agreement and to enforce the restrictions to
the fullest extent found by the court to be reasonable in light of all
of the circumstances. If a part of this subsection (a) is found to be
invalid or unenforceable for any reason, the remaining provisions shall
not be void, but shall remain in effect and shall be fully
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enforceable without regard to the portions found to be invalid.
(b) The Principal Stockholder hereby agrees that all
confidential and proprietary business information belonging to the
Company or the Surviving Organization, of whatsoever character shall be
maintained in strictest confidence by the Principal Stockholder and
shall not be disclosed to any third party without the consent of the
Company, except as may be required by law or under compulsion of legal
process; provided that such confidential and proprietary information
shall not include information that (i) is or becomes generally available
to the public other than as a result of a disclosure by the Principal
Stockholder or his representatives, or (ii) is or becomes available to
the Principal Stockholder on a non-confidential basis from a source
other any Surviving Organization Affiliate or any of their
representatives, provided that such source is not bound by a
confidentiality agreement with, or by other contractual, legal, or
fiduciary obligation to of confidentiality to, any person with respect
to such information. The Principal Stockholder further agrees not to
make any use, directly or indirectly, of such confidential information
for his own purposes or for the benefit of any other person or entity
unless expressly authorized to do so by the Surviving Organization, and
to take no action that in any way is detrimental to the interests of the
Surviving Organization or any of its affiliates in respect of such
information or otherwise.
(c) The Principal Stockholder may not, at any time after the
date hereof, directly or indirectly, use or cause any affiliate or agent
to use any name, xxxx, or logo that is confusingly similar to those used
currently or in the past by the Company, whether or not competitive with
the Surviving Organization.
(d) The Principal Stockholder hereby agrees that these
restrictions are reasonable in terms of their duration and geographical
scope, and that the restrictions will not unreasonably restrict his
ability to provide for his livelihood and dependents.
(e) The Principal Stockholder acknowledges and agrees that the
legal remedies available for breach of this Section 1 would not be
adequate, and that, in addition to any other remedies available at law,
these provisions may be specifically enforced by temporary or permanent
injunctive or other equitable relief.
2. Consideration. In addition to the consideration set forth in the
Recitals to this Agreement, the Surviving Organization shall pay to the
Principal Stockholder an aggregate payment of $1 million. Such payment shall be
made in four equal installments on the first through fourth anniversaries of the
date hereof.
3. General Provisions.
(a) Benefits and Binding Effect. This Agreement shall be binding
upon, and shall inure to the benefit of, each of the parties and their
respective heirs, personal representatives, successors, and assigns.
(b) Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provisions were omitted.
(c) Governing Law. This Agreement and its validity,
construction, administration,
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and all rights hereunder, shall be governed by the laws of the State of
California, without giving effect to its conflicts-of-laws provisions.
(d) Notices. Whenever provision is made in this Agreement for
the giving, service, or delivery of any notice, such notice shall be in
writing and shall be deemed to have been duly given, served, or
delivered if delivered by hand or by overnight courier, or if mailed by
United States registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
To Buyer or Buyer Subsidiary:
Xxxxxxx X. Xxxxx
Aurafin LLC
0000 Xxx Xxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
With a copy to:
Xxxxxxx X. Xxxx
Faegre & Xxxxxx LLP
2200 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
To the Principal Stockholder:
Xxx Xxxxxxxx
----------------------------------
----------------------------------
----------------------------------
With a copy to:
Such notice shall be effective three days after mailing or when
received, whichever is earlier. Any party named above may change the
address for service of notice upon it by a notice, in writing, to the
other parties hereto.
(e) Counterparts. This Agreement may be executed and delivered
in any number of counterparts, all of which, when so executed and
delivered, shall have the force and effect of an original, but all of
such counterparts, together, shall constitute one and the same
instrument.
(f) Captions. The captions utilized in this Agreement are
intended for the purposes of convenience alone and shall not in any way
limit or affect the interpretation of the provisions hereof.
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(g) Entire Agreement; Amendment. Together with the Merger
Agreement, this Agreement embodies the entire agreement and
understanding between the parties, superseding and terminating all prior
agreements and understandings relating to the subject matter hereof.
This Agreement shall not be subject to amendment or modification other
than by an instrument in writing duly executed by the parties hereto.
(h) Legal Counsel. The Principal Stockholder acknowledges that
he has been advised to discuss this Agreement with his own legal counsel
and has been afforded the opportunity to do so.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PRINCIPAL STOCKHOLDER
------------------------------------
Xxx Xxxxxxxx
AURAFIN LLC
By:
---------------------------------
Its:
-----------------------------
BENTLEY ACQUISITION LLC
By:
---------------------------------
Its:
-----------------------------
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Exhibit D
Terms of Employment Agreement
- at-will employment; serving in the role of President at the discretion
of the Management Board of the Surviving Organization
- compensation of $250,000 per year
- terminable by either party on 30 days' prior notice; salary and all
other obligations of the Surviving Organization terminate at time of
termination
- provide for termination of the Employment Agreement dated June 10, 1993
between Xx. Xxxxxxxx and the Company
- provide for termination of the Tax Indemnification Agreement dated June
10, 1993 between Xx. Xxxxxxxx and the Company
- continued participation in benefits plans of the Surviving Organization
- mutual general releases between Xx. Xxxxxxxx and the Surviving
Organization (as successor to the Company) for the period prior to the
Effective Time
- an assignment of inventions from Xx. Xxxxxxxx to the Company