AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of April 23, 2002,
among Core-Xxxx International, Inc., a Delaware corporation (the "Company"),
Xxxxxxx Companies, Inc., an Oklahoma corporation ("Buyer"), Platform
Corporation, a Delaware corporation and a wholly owned subsidiary of Buyer
("Buyer Sub") and all of the Company's stockholders as set forth on the
signature pages hereto (each an "Indemnifying Stockholder" and collectively the
"Indemnifying Stockholders").
WHEREAS, the respective boards of directors of Buyer, Buyer Sub and the
Company, and the stockholders of Buyer Sub and the Company, have approved this
Agreement and have determined that the merger of Buyer Sub with and into the
Company on the terms and subject to the conditions set forth in this Agreement
(the "Merger"), with the Company surviving as a wholly owned subsidiary of
Buyer, is advisable and in the best interests of their respective corporations
and stockholders.
WHEREAS, concurrently with the execution of this Agreement, all
stockholders of the Company are entering into non-compete agreements with Buyer
and the Company in the forms attached hereto as Exhibits A-1 and A-2 (the
"Non-Compete Agreements").
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and other agreements of Buyer, Buyer Sub, the Company and Indemnifying
Stockholders contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions.
(a) The following terms, whenever used herein, shall have the following
meanings for all purposes of this Agreement.
"Acquired Company" means each of the Company and the Subsidiaries
(collectively, the "Acquired Companies").
"Agreement" has the meaning set forth in the preamble to this Agreement.
"Ancillary Agreements" means the Certificate of Merger, the Escrow
Agreement, the Non-Compete Agreements and other agreements, certificates and
documents required hereunder to consummate the Closing.
"Antitrust Law" means any law of the United States or Canada governing
competition, monopolies or restrictive trade practices, including without
limitation, the Xxxxxxx Act, the Xxxxxxx Act, the Federal Trade Commission Act,
the HSR Act and the Competition Act, in each case including any rules and
regulations thereunder.
"ARC" means written confirmation from the Commissioner of Competition
pursuant to section 102 of the Competition Act stating that he would not have
sufficient grounds on which to apply to the Competition Tribunal for an order in
respect of the transactions contemplated herein.
"Balance Sheet" means the audited consolidated balance sheet of the Company
and the Subsidiaries as at December 31, 2001.
"Balance Sheet Date" means December 31, 2001.
"Books and Records" has the meaning set forth in Section 4.24 of this
Agreement.
"Broker" has the meaning set forth in Section 4.18 of this Agreement.
"Brokerage Fee" has the meaning set forth in Section 4.18 of this
Agreement.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which banking institutions in New York, New York are authorized or required by
law or executive order to close.
"Buyer" has the meaning set forth in the preamble to this Agreement.
"Buyer Confidentiality Agreement" has the meaning set forth in Section
7.2(b) of this Agreement.
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"Buyer Sub" has the meaning set forth in the preamble to this Agreement.
"Buyer Sub Common Stock" has the meaning set forth in Section 3.1(b) of
this Agreement.
"Buyer's knowledge" means the actual knowledge of any of the directors or
executive officers of the Buyer or Buyer Sub and the knowledge that such
directors or officers should have had after reasonable inquiry.
"Canadian Business" has the meaning set forth in Section 4.16(e) of this
Agreement.
"Canadian Employee Plans" means all the employee benefit, fringe benefit,
supplemental unemployment benefit, bonus, incentive, profit sharing,
termination, change of control, pension, retirement, stock option, stock
purchase, stock appreciation, health, welfare, medical, dental, disability, life
insurance and similar plans, programs, arrangements or practices relating to
current or former Canadian employees maintained by the Company and which plan is
not subject to ERISA or the Code.
"Canadian Investment Review Authority" means the Investment Review Division
of the Department of Industry Canada, including its staff, and the Minister.
"Cash" means cash and cash equivalents held by the Acquired Companies at
the Effective Time.
"Certificate of Merger" has the meaning set forth in Section 2.2 of this
Agreement.
"Certificates" has the meaning set forth in Section 3.1(a) of this
Agreement.
"Claim" has the meaning set forth in Section 11.3(a) of this Agreement.
"Claim Notice" has the meaning set forth in Section 11.3(a) of this
Agreement.
"Closing" has the meaning set forth in Section 2.3 of this Agreement.
"Closing Consideration" has the meaning set forth in Section 3.1(a) of this
Agreement.
"Closing Date" has the meaning set forth in Section 2.3 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commissioner" has the meaning set forth in Section 8.4(b)(ii)
of this Agreement.
"Common Stock" means the voting common stock, par value $.01 per share, of
the Company.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company SEC Documents" has the meaning set forth in Section 4.9 to this
Agreement.
"Company's knowledge" means the actual knowledge of any of the directors or
officers of the Company identified on Schedule 1.1 and the knowledge that such
directors and officers should have had after reasonable inquiry.
"Competition Act" means the Competition Act (Canada), R.S.C. 1985 c.C-34,
as amended, and the rules and regulations thereunder.
"Covered Person" has the meaning set forth in Section 7.5(a) of this
Agreement.
"date hereof" and "date of this Agreement" means April 23, 2002.
"Deutsche Bank" has the meaning set forth in Section 6.5 of this Agreement.
"DGCL" has the meaning set forth in Section 2.1 of this Agreement.
"Dispute Notice" has the meaning set forth in Section 11.3(b) of this
Agreement.
"Effective Time" has the meaning set forth in Section 2.2 of this
Agreement.
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"Encumbrance" means any claim, lien (statutory or otherwise), judgment,
pledge, escrow, option, liability, charge, easement, restrictive covenant,
security interest, assignment, deed of trust, right of first refusal, mortgage,
hypothecation, right-of-way, encroachment, building or use restriction,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law or any other arrangement or condition which, in
substance, secures payment or performance of an obligation, and includes,
without limitation, any agreement to give any of the foregoing in the future,
and any contingent or conditional sales agreement or other title retention
agreement or arrangement or lease in the nature thereof or the filing of, or
agreement to give any financing statement, under the laws of any jurisdiction.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notice of
noncompliance or violation, investigations or proceedings arising under any
Environmental Law.
"Environmental Laws" means any United States, Canadian or other applicable
jurisdiction's federal, state, provincial, local, municipal or foreign statute,
law, rule, regulation, ordinance, code, policy or rule of common law and any
judicial or administrative interpretation thereof including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or any chemical, material or substance, exposure to which is
prohibited, limited or regulated by any Governmental Authority.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 4.17(b) of this
Agreement.
"Escrow Account" has the meaning set forth in Section 3.7 of this
Agreement.
"Escrow Agent" has the meaning set forth in Section 3.7 of this Agreement.
"Escrow Agreement" has the meaning set forth in Section 3.7 of this
Agreement.
"Escrow Amount" has the meaning set forth in Section 3.7 of
this Agreement.
"Escrow Assets" has the meaning set forth in Section 11.2(b) of this
Agreement.
"Escrow Recipients" has the meaning set forth in Section 3.7 of this
Agreement.
"Exchange Act" has the meaning set forth in Section 4.9 of this Agreement.
"Financial Statements" means the consolidated balance sheet of the Company
and the Subsidiaries as at December 31, 2001, and the related consolidated
statements of income, common stockholders' equity (deficit) and cash flow for
the year ended December 31, 2001, in each case certified by Deloitte & Touche
LLP, independent certified public accountants, whose opinion thereon is included
therewith, together with the notes and schedules thereto.
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means any nation or government, any state,
province or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including the Securities and Exchange Commission
("SEC") or any other government authority, agency, department, board, commission
or instrumentality of the United States or Canada, any other foreign government,
any state of the United States or province of Canada or any political
subdivision thereof, and any court tribunal or arbitrator(s) of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority.
"Government Antitrust Authority" means the United States Federal Trade
Commission, the Assistant Attorney General in charge of the Antitrust Division
of the United States Department of Justice, the Canadian Competition Bureau or
any other domestic or Canadian or other foreign government or governmental
agency or its staff, with jurisdiction under any Antitrust Law over Buyer, Buyer
Sub, the Company, any Subsidiary or the transactions contemplated in this
Agreement.
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"Handling" means the production, use, generation, emission, storage,
treatment, transportation, recycling, disposal, discharge, release, or other
handling or disposition of any kind of any Substance.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"ICA" means the Investment Canada Act, R.S.C. 1985, c.28 (1st supp.) and
the rules and regulations thereunder.
"Indebtedness" means all indebtedness of any Acquired Company for borrowed
money, whether current, short-term, or long-term, secured or unsecured,
including without limitation, the Notes and all capitalized leases.
"Indemnified Persons" has the meaning set forth in Section 11.1 of this
Agreement.
"Indemnifying Stockholder" has the meaning set forth in the preamble to
this Agreement.
"Indemnitor" has the meaning set forth in Section 11.3(a) of this
Agreement.
"Indenture" has the meaning set forth in Section 7.6 of this Agreement.
"Insurance Policies" has the meaning set forth in Section 4.21 of this
Agreement. "Intellectual Property Rights" has the meaning set forth in Section
4.8(b)(i) of this Agreement.
"Inventory" means all items of food and grocery products including, without
limitation, bread and dairy products; frozen and refrigerated food and beverage
products; fresh and prepared meats and poultry; produce, including fresh fruits
and vegetables; shelf stable food and beverage products, including canned and
other types of packaged products; staple foods, which include salt, sugar,
flour, sauces, spices, coffee and tea; sundry other grocery products; non-food
items such as soaps, detergents, paper goods and other household products;
health and beauty aids and general merchandise; supplies; tobacco products;
candy products; automobile products; and other convenience store products.
"IRS" means the United States Internal Revenue Service.
"Lazard" has the meaning set forth in Section 4.18 of this Agreement.
"Lease Estoppels" has the meaning set forth in Section 7.11 of this
Agreement.
"Leased Properties" has the meaning set forth in Section 4.22 of this
Agreement.
"Losses" has the meaning set forth in Section 11.1 of this Agreement.
"Material Adverse Effect" means any condition or change having, or which
would reasonably be expected to have, (a) a material adverse effect upon the
assets, business, prospects, financial condition or results of operations of the
Company and its Subsidiaries taken as a whole or (b) a material adverse effect
on the consummation of the transactions contemplated by this Agreement;
provided, however, that "Material Adverse Effect" shall not include any change,
effect, condition, event or circumstance arising out of or attributable to (i)
changes, effects, conditions, events or circumstances that generally affect the
industries in which the Acquired Companies operate (including legal and
regulatory changes) or (ii) general economic conditions.
"Material Contracts" has the meaning set forth in Section 4.12 of this
Agreement.
"Merger" has the meaning set forth in the preamble to this Agreement.
"Minister" means such member of the Queen's Privy Council for Canada as is
designated by the Governor in Council as the Minister for purposes of the ICA.
"Non-Compete Agreements" has the meaning set forth in the preamble to this
Agreement.
"Notes" means any of the issued and outstanding 11-3/8% Senior Subordinated
Notes of the Company, due September 15, 2003.
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"Note Holder" means any holder of a Note as of the time of redemption of
such Note.
"Operating Site" means any property owned, leased or used at any time by
the Company or any Subsidiary (or an affiliate of the Company), including
offsite disposal facilities.
"Options" means the outstanding options issued by the Company to purchase
shares of Common Stock under the Company's Stock Option Plan.
"Option Consideration" has the meaning set forth in Section 3.6 of this
Agreement.
"PCBs" has the meaning set forth in the definition of Substance.
"Pension Plan" means each "employee pension benefit plan," as defined in
Section 3(2) of ERISA, which is sponsored by the Company or any Subsidiary with
respect to employees, directors or any other service providers, past and/or
present, of the Company or any Subsidiary.
"Permits" has the meaning set forth in Section 4.15 of this Agreement.
"Permitted Liens" has the meaning set forth in Section 4.7 to this
Agreement.
"Person" means any person or entity, whether an individual, trustee,
corporation, partnership, limited partnership, limited liability company, trust,
unincorporated organization, business association, firm, joint venture, or
Governmental Authority.
"Pre-Closing Periods" has the meaning set forth in Section
11.5(a) of this Agreement.
"Proposed Competing Transactions" has the meaning set forth in Section 7.8
of this Agreement.
"Purchase Consideration" means (i) if the Closing Date occurs on or before
June 30, 2002, $295,000,000 (two hundred ninety-five million dollars) minus the
total value of all transaction fees and expenses incurred by the Company for the
transactions contemplated by this Agreement whether paid or unpaid as of the
Closing Date (the "Transaction Fees") or (ii) if the Closing Date occurs after
June 30, 2002, $302,000,000 (three hundred two million dollars) minus
Transaction Fees.
"Receivables Facility" means the facility entered into by the Company on
April 1, 1998 as amended, to securitize its U.S. trade accounts receivable
portfolio.
"Resolved Dispute Notice" has the meaning set forth in Section 11.3(c) of
this Agreement.
"SEC" has the meaning set forth in the definition of Governmental
Authority.
"Securities Act" has the meaning set forth in Section 4.9 to this
Agreement.
"Shares" means collectively, the Common Stock, representing 100% of the
outstanding capital stock of the Company.
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"Stockholder Representative" has the meaning set forth in Section 3.8(a) of
this Agreement.
"Straddle Period" has the meaning set forth in Section 11.5(b) of this
Agreement.
"Subsidiary" means an entity which the Company directly or indirectly owns
or has the power to vote shares of any capital stock or other ownership
interests having voting power to elect a majority of the directors of such
corporation, or other persons performing similar functions of such entity, as
the case may be.
"Substance" means any "contaminant," "dangerous good," "deleterious
substance," "hazardous material," "hazardous substance," "hazardous waste,"
"pollutant," "special waste" or "toxic substance," as defined by the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Resources Conservation and Recovery Act, 42 U.S.C.
Section 6901 et. seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the
Clean Air Act, 42 U.S.C. Section 7401 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., the Canadian Environmental Protection Act
(Canada), the Fisheries Act (Canada), the Transportation of Dangerous Goods Act,
1992 (Canada), the Waste Management Act (British Columbia), the Transport of
Dangerous Goods Act (British Columbia), the Environmental Protection and
Enhancement Act (Alberta), the Dangerous Goods and Transportation Act (Alberta),
the Contaminated Sites Remediation Act (Manitoba), the Dangerous Goods Handling
and Transportation Act (Manitoba) or the Environment Act (Manitoba) and
regulations promulgated thereunder (or any analogous state, provincial and local
laws and regulations), petroleum and petroleum products, polychlorinated
biphenyls ("PCBs") or asbestos.
"Surviving Corporation" has the meaning set forth in Section 2.1 of this
Agreement.
"Surviving Corporation By-laws" has the meaning set forth in Section 2.6 of
this Agreement.
"Surviving Corporation Certificate" has the meaning set forth in Section
2.5 of this Agreement.
"Surviving Corporation Common Stock" has the meaning set forth in Section
3.1(b) of this Agreement.
"Tax" or "Taxes" means any federal, state, provincial, local or foreign
income, gross receipts, license, payroll, employment, excise, goods and
services, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Reserves" has the meaning set forth in Section 11.5(a) of this
Agreement.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Transaction Fees" has the meaning set forth in the definition of Purchase
Consideration.
"Welfare Plan" means (i) each "employee welfare benefit plan," as defined
in Section 3(1) of ERISA; (ii) any stock option, incentive, or deferred
compensation or bonus plan or arrangement; and (iii) any severance plan or
arrangement, in each case which is sponsored by the Company or any Subsidiary
with respect to employees, directors or any other service providers, past and/or
present, of the Company or any Subsidiary.
(b) All references herein to dollars or "$" shall be to United States dollars.
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ARTICLE II.
THE MERGER
Section 2.1 Merger. Upon the terms and subject to the conditions set forth in
this Agreement and in accordance with the General Corporation Law of the State
of Delaware (the "DGCL"), at the Effective Time, Buyer Sub shall be merged with
and into the Company, whereupon the Company shall continue as the surviving
corporation (sometimes referred to herein as the "Surviving Corporation") and
the separate corporate existence of Buyer Sub shall cease.
Section 2.2 Effective Time. Upon the terms and subject to the conditions hereof,
a certificate of merger (the "Certificate of Merger") shall be duly prepared,
executed and acknowledged by the Surviving Corporation and thereafter filed with
the Secretary of State of the State of Delaware on the Closing Date (as defined
in Section 2.3). The Merger shall become effective as of the date and at such
time as the Certificate of Merger, pursuant to Section 251 of the DGCL, and any
other documents necessary to effect the Merger in accordance with the DGCL are
duly filed with the Secretary of State of the State of Delaware or at such
subsequent date or time as shall be agreed by the Company and the Buyer and
specified in the Certificate of Merger and in accordance with the DGCL (the time
the Merger becomes effective pursuant to the DGCL being referred to herein as
the "Effective Time").
Section 2.3 Closing. Subject to the satisfaction or waiver of all of the
conditions to closing contained in Articles VIII and IX hereof, the closing of
the Merger (the "Closing") will take place at 10:00 a.m., San Francisco time, on
the second Business Day (as defined below) after the satisfaction or waiver of
the conditions to Closing contained in Articles VIII and IX (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the fulfillment or waiver of those conditions), at the offices of Xxxxxx &
Xxxxxxx, 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, unless another date
or place is agreed to in writing by the parties hereto; provided, however, that
Buyer, at its sole discretion, may extend at any time and from time to time the
date of Closing to a date up to and including September 16, 2002 to fulfill its
financial capability obligations set forth in Section 7.10 but not later than
twenty Business Days after Buyer has received funding of at least (i)
$150,000,000 through a private or public sale of equity securities, or (ii)
$500,000,000 through any combination of the incurrence of new debt and a private
or public sale of equity securities. The date and time at which the Closing
occurs is referred to herein as the "Closing Date."
Section 2.4 Effects of the Merger. The Merger shall have the effects set forth
in the DGCL, including Section 259 of the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all properties,
rights, privileges, powers and franchises of the Company and Buyer Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Buyer Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 2.5 Certificate of Incorporation. The Certificate of Incorporation of
the Company in effect immediately prior to the Effective Time shall be amended
and restated in its entirety at the Effective Time to read as set forth in
Exhibit B, and as so amended and restated shall be the Certificate of
Incorporation of the Surviving Corporation (the "Surviving Corporation
Certificate"), until amended in accordance with the terms thereof and with
applicable law.
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Section 2.6 By-laws. The By-laws of the Buyer Sub in effect immediately prior to
the Effective Time shall be amended and restated in their entirety at the
Effective Time to read as set forth in Exhibit C, and as so amended and restated
shall be the By-laws of the Surviving Corporation (the "Surviving Corporation
By-laws") unless and until altered, amended or repealed as provided by law, the
Surviving Corporation Certificate or the Surviving Corporation By-laws.
Section 2.7 Officers and Directors. The officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
until their successors shall have been duly elected and qualified, or as
otherwise provided in the Surviving Corporation By-laws. The directors of the
Buyer Sub immediately prior to the Effective Time shall be the directors of
Surviving Corporation until their successors shall have been duly elected and
qualified, or as otherwise provided in the Surviving Corporation Certificate,
the Surviving Corporation By-laws or as otherwise provided by applicable law.
ARTICLE III.
CONVERSION
Section 3.1 Conversion. As of the Effective Time, by virtue of the Merger and
without any action on the part of the holder of any share of Common Stock or of
the holder of any share of capital stock of the Buyer Sub:
(a) Each share of the Common Stock issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive an amount in
cash equal to the Closing Consideration. The "Closing Consideration" shall be
the amount determined by dividing (a) the sum of (i) the Purchase Consideration
plus (ii) the aggregate exercise price of all Options outstanding as of the
Effective Time by (b) the sum of the number of shares of Common Stock
outstanding as of the Effective Time and the number of shares of Common Stock
subject to Options as of the Effective Time. All certificates or other
instruments representing shares of Common Stock issued and outstanding
immediately prior to the Effective Time ("Certificates") shall, by virtue of the
Merger, cease to have any rights with respect to such Certificates except the
right to receive, upon surrender thereof, their portion of the Purchase
Consideration. At the Effective Time, each share of Common Stock issued and
outstanding prior to the Effective Time (all of which shares will be converted
into the right to receive the Purchase Consideration) shall be canceled and
retired and shall cease to exist.
(b) At the Effective Time, each share of common stock, par value $.01 per share,
of Buyer Sub (the "Buyer Sub Common Stock"), issued and outstanding immediately
prior to the Effective Time, shall be converted into, and become the right to
receive, one (1) share of the common stock, par value $.01 per share, of the
Surviving Corporation (the "Surviving Corporation Common Stock"). Immediately
upon such conversion into shares of Surviving Corporation Common Stock, each
share of Buyer Sub Common Stock shall be canceled and retired and shall cease to
exist.
(c) Each share of Common Stock which shall be held in the treasury of the
Company, at the Effective Time, shall be canceled and retired and shall cease to
exist.
(d) As of the Effective Time, the stock transfer books of the Company shall be
closed.
Section 3.2 Exchange of Certificates. As of the Effective Time, Buyer shall be
responsible for the payment of the Closing Consideration, for the benefit of the
holders of shares of Common Stock, all in cash in immediately available same day
funds, and for the payment of the Option Consideration (as defined in Section
3.6), for the benefit of the holders of the Options, by certified cashiers
check.
Section 3.3 Exchange Procedures. Immediately after the Effective Time, each
holder of any outstanding Certificate which, prior thereto, represented shares
of Common Stock and each holder of an Option shall, upon surrender and delivery
to the Buyer of such Certificate, in the case of Common Stock, and properly
executed exercise and sale notice, in the case of an Option, be entitled to
receive on the day of surrender (if surrendered on the day of the Effective
Time) or the next Business Day following surrender (if surrendered after the day
of the Effective Time) the Closing Consideration (less the portion thereof
delivered to the Escrow Agent) for each share of Common Stock represented by
such Certificate so surrendered, and the Option Consideration in the case of
each Option with respect to which an exercise and sale notice is so delivered.
If the Closing Consideration is to be paid to any Person other than the Person
in whose name the Certificate surrendered in exchange therefor is registered, it
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shall be a condition to such exchange that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such exchange shall pay to the Buyer any transfer or other
taxes required by reason of the payment of such consideration to a Person other
than the registered holder of the Certificate surrendered, or shall establish to
the reasonable satisfaction of the Buyer that such tax has been paid or is not
applicable. Subsequent to the Effective Time, there shall be no further transfer
on the records of the Company of Certificates and, if Certificates are presented
to the Company for transfer, they shall be canceled against delivery of the
Closing Consideration as provided for herein. Until surrendered as contemplated
by this Section 3.3, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Closing Consideration, as contemplated by Section 3.1(a). No interest will be
paid or will accrue on any cash payable as Closing Consideration or Option
Consideration.
Section 3.4 Letter of Transmittal. Prior to the Effective Time (but in no event
less than ten (10) days prior thereto), the Company shall mail to each record
holder of Certificates and Options (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Buyer and
shall be in such form and have such customary provisions as Buyer may reasonably
specify) and (ii) instructions for use in surrendering such certificates or
delivering an exercise and sale notice, as the case may be, and receiving the
consideration to which such holder shall be entitled therefor pursuant to the
terms thereof or Section(s) 3.1, and 3.6, as the case may be.
Section 3.5 No Further Ownership Rights in Common Stock. The Closing
Consideration paid upon the surrender of Certificates and the Option
Consideration paid upon delivery to the Company of the exercise notices relating
thereto in accordance with the terms of this Article III, shall be deemed to be
full satisfaction of all rights pertaining to the shares of Common Stock
theretofore represented by such Certificates and Options.
Section 3.6 Options and Related Matters. At the Effective Time, and without any
further action by the Company, the Buyer or the Surviving Corporation, as the
case may be, each unvested Option shall automatically vest and each holder of an
Option that is so vested or is otherwise outstanding, vested and exercisable
immediately prior to the Effective Time shall be entitled to receive, for each
share of Common Stock issuable upon exercise of such Option, an amount in cash
(the "Option Consideration") equal to the excess, if any, of the Closing
Consideration over the per share exercise price of such Option, without
interest. The amounts payable pursuant to this Section 3.6 shall be subject to
all applicable withholding of taxes. After the Effective Time, no holder of an
Option shall have any rights except as set forth above.
Section 3.7 Escrow.
(a) At the Closing, Buyer shall deliver an aggregate of $15,000,000 (fifteen
million dollars) of the Purchase Consideration (the "Escrow Amount") to an
escrow account (the "Escrow Account") with an escrow agent (the "Escrow Agent")
on behalf of the holders of Common Stock (pro rata on the basis of the number of
shares of Common Stock held by each such holder). The Escrow Amount shall be
held by the Escrow Agent pursuant to the terms of an escrow agreement,
substantially in the form attached as Exhibit D to this Agreement (the "Escrow
Agreement"), for the satisfaction of claims for indemnification made by the
Buyer pursuant to Article XI of this Agreement. Upon receipt by the Escrow Agent
of any interest or other amounts received on the Escrow Amount, the Escrow Agent
shall distribute such amounts as follows: (i) ninety-five percent to the
Indemnifying Stockholders of the Company (the "Escrow Recipients") pro rata in
accordance with their interests in the Escrow Amount; and (ii) five percent to
Buyer.
(b) Release of the Escrow Fund.
(i) Promptly following the first anniversary of the Closing Date (the "Release
Date"), the Escrow Agent shall distribute to each Indemnifying Stockholder such
Indemnifying Stockholder's pro rata share of the Escrow Amount plus any
additional amounts paid into the Escrow Account pursuant to Section 11.5(c)
hereof less the amount of Claims which have been made by or on behalf of one or
more Indemnified Persons for indemnification pursuant to Section 11.1 hereof
which have been determined to be valid pursuant to Section 11.3 hereof (the
"Resolved Claims"), and the amount of any Claims made by or on behalf of
Indemnified Persons on or prior to the Release Date for indemnification pursuant
to Section 11.1 hereof which have not yet been determined to be invalid pursuant
to Section 11.3 hereof (the "Unresolved Claims"). Buyer shall be entitled to all
amounts by which the Escrow Amount and distributions from the Escrow Amount are
reduced on account of Resolved Claims.
9
In the event an Unresolved Claim is determined to be valid pursuant to Section
11.3 hereof, Buyer shall be entitled to all amounts by which the distributions
from the Escrow Amount were reduced on account of such Unresolved Claim. In the
event an Unresolved Claim is determined to be invalid pursuant to Section 11.3
hereof following the first anniversary of the Closing Date, Buyer shall
distribute the amount by which the distributions from the Escrow Amount were
reduced on account of such Unresolved Claim to the Indemnifying Stockholders who
would have received such amount if distributions from the Escrow Amount had not
been so reduced.
Section 3.8 Stockholder Representative.
(a) Jupiter Partners L.P. is hereby appointed and constituted the "Stockholder
Representative" under this Agreement, and as such shall serve as agent for and
have all powers as attorney-in-fact of each Indemnifying Stockholder, for and on
behalf of each Indemnifying Stockholder, to take the following actions in
connection with the negotiation, settlement and compromise of indemnification
claims pursuant to Article XI of this Agreement and the release of any Escrow
Amount in connection therewith: to give and receive notices of communications;
to agree to, negotiate or enter into settlements and compromises of and comply
with orders of courts with respect to any disputes involving any claims made by
Buyer, the Surviving Company or the Indemnifying Stockholders under this
Agreement; to sign receipts, consents or other documents; and to take all
actions necessary or appropriate in the judgment of the Stockholder
Representative in connection with the foregoing.
(b) If the Stockholder Representative elects to resign as Stockholder
Representative for any reason, the Stockholder Representative shall notify Buyer
of its intent to resign, and the Indemnifying Stockholders representing an
ownership interest in a majority of the Escrow Amount shall, by written notice
to Buyer, appoint a successor Stockholder Representative within five (5)
business days thereafter.
(c) Notice or communications to or from the Stockholder Representative pursuant
to this Section 3.8 (with a copy of any notices to the Indemnifying
Stockholders) shall constitute notice to or from each of the Indemnifying
Stockholders.
(d) A decision, act, consent or instruction of the Stockholder Representative
pursuant to this Section 3.8 shall constitute a decision, act, consent or
instruction of each and all of the Indemnifying Stockholders, and shall be
final, binding and conclusive upon each and all of the Indemnifying
Stockholders, and each of Buyer and the Surviving Corporation shall be entitled
to rely upon any decision, act, consent or instruction of the Stockholder
Representative as being the decision, act, consent or instruction of each and
all of the Stockholders, and each of Buyer and the Surviving Corporation shall
be relieved from any liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction.
(e) The Stockholder Representative shall not be liable for any act done or
omitted hereunder as Stockholder Representative except for the commission of
actual fraud or willful misconduct. The Indemnifying Stockholders on whose
behalf the Escrow Amount was deposited into the Escrow Account shall severally
indemnify the Stockholder Representative and hold the Stockholder Representative
harmless against any damages or expenses incurred without bad faith on the part
of the Stockholder Representative and arising out of or in connection with the
acceptance or administration of the Stockholder Representative's duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Stockholder Representative.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer and Buyer Sub as follows:
Section 4.1 Organization and Qualification. Each of the Acquired Companies is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, with all corporate or other power and
authority necessary to own, lease and operate its properties and carry on its
business as currently owned or conducted. Each of the Acquired Companies is in
good standing as a foreign corporation and is duly licensed or qualified to
transact business in each jurisdiction in which the ownership of property or the
conduct of its business requires such qualification or license, except where the
failure to be so licensed or qualified would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has made available to
Buyer complete and correct copies of the certificate of incorporation and
by-laws, or other equivalent organizational documents, each as currently in
effect, of the Company and each Subsidiary. None of the Acquired Companies is in
violation of any of its respective organizational documents.
10
Section 4.2 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of the
Company consists of 10,000,000 shares of Common Stock, of which 5,500,000 shares
are issued and outstanding. The outstanding shares of Common Stock are owned of
record by the Company stockholders and in the respective amounts set forth on
Schedule 4.2(a). No additional shares of capital stock of the Company will be
issued after the date hereof except for shares of Common Stock issuable upon the
exercise of Options outstanding on the date hereof. There are no shares of
Common Stock or other capital stock or equity securities of the Company issued,
reserved for issuance or outstanding and no outstanding options, warrants,
convertible or exchangeable securities, subscriptions, rights (including any
preemptive rights), Indebtedness, stock appreciation rights, calls or
commitments of any character whatsoever to which the Company is a party or may
be bound requiring the issuance or sale of shares of any capital stock of the
Company except for the obligation of the Company to issue 267,500 shares of
Common Stock upon exercise of Options. Schedule 4.2(a) sets forth for each
outstanding Option (i) the name of the holder, (ii) the number of shares of
capital stock issuable upon exercise of such Option and (iii) the exercise
price.
(b) All of the issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and non-assessable,
and are free of any preemptive rights in respect thereto. All outstanding
Company securities have been issued in compliance with the applicable state,
provincial and federal securities laws. The stock ledgers and related records
provided by the Company to the Buyer are complete and accurate in all material
respects. Except as set forth on Schedule 4.2(b), there are no outstanding
contractual obligations of the Company (i) restricting the transfer of, (ii)
affecting the voting rights of, (iii) requiring the repurchase, redemption or
disposition of, or containing any right of first refusal with respect to, (iv)
requiring the registration or sale of, or (v) granting any preemptive or
antidilutive right with respect to, any shares of Common Stock or any capital
stock of, or other equity interests in, the Company.
Section 4.3 Subsidiaries. The Company's only direct or indirect Subsidiaries are
listed in Schedule 4.3(a). The outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable and are, except as set forth on Schedule 4.3(b), owned by the
Company, directly or through one or more Subsidiaries, free and clear of any
lien, charge, encumbrance, claim, pledge, option, right of first refusal,
agreement, limitation on the Company's or other Subsidiary's voting rights, or
other security interest. There are no shares of capital stock or other equity
securities of any Subsidiary issued, reserved for issuance or outstanding and no
outstanding options, warrants, convertible or exchangeable securities,
subscriptions, rights (including any preemptive rights), Indebtedness, stock
appreciation rights, calls or commitments of any character whatsoever to which
the Company on any Subsidiary is a party or may be bound requiring the issuance
or sale of shares of any capital stock of any Subsidiary.
Section 4.4 Binding Obligation. The Company has all necessary corporate power
and authority to execute this Agreement and the Ancillary Agreements, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. This Agreement and
the Ancillary Agreements have been duly and validly authorized by all required
corporate action on the part of the Company and its stockholders and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or the Ancillary Agreements and to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. This Agreement and
the Ancillary Agreements have been duly executed and delivered by the Company
and, assuming that this Agreement constitutes a valid and binding obligation of
Buyer and Buyer Sub, 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 thereof may be limited by: (i) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws from time to time in effect affecting generally the enforcement of
creditors' rights and remedies; and (ii) general principles of equity.
Section 4.5 No Defaults or Conflicts. The execution and delivery of this
Agreement and the Ancillary Agreements by the Company, performance by the
Company of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby: (i) do not result in any violation
of the certificate of incorporation or by-laws, or other equivalent
organizational document, of any Acquired Company; and (ii) except as set forth
in Schedule 4.5, as of the Effective Time, do not require any consent or
approval under, do not conflict with, or result in a breach of any of the terms
or provisions of or any loss of benefit under, or constitute a default under, or
give to others any right of termination, vesting, amendment, acceleration or
cancellation of, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of any Acquired Company under: (A) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit or
other instrument or obligation to which such Acquired Company is a party or by
11
which it may be bound or to which a portion of its respective properties may be
subject; or (B) any existing applicable law, rule, regulation, judgment, order
or decree of any Governmental Authority having jurisdiction over such Acquired
Company or any of its respective properties or assets; provided, however, that
no representation or warranty is made in the foregoing clause (ii) with respect
to matters that, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect.
Section 4.6 No Governmental Authorization or Consent Required. Except for
expiration or termination of the applicable waiting periods under, or receipt of
approval under, the HSR Act, the Competition Act and the ICA, and except as set
forth in Schedule 4.6, no consent, order, authorization or approval or other
action by, and no notice or disclosure to or filing with, any Governmental
Authority or Government Antitrust Authority will be required to be obtained or
made by the Company or any of the Subsidiaries in connection with the due
execution and delivery by the Company of this Agreement and the Ancillary
Agreements and the consummation by the Company of the transactions contemplated
hereby; provided, however, that no representation and warranty is made with
respect to authorizations, approvals, notices or filings with any Governmental
Authority, Government Antitrust Authority or Canadian Investment Review
Authority that, if not obtained or made, would not, individually or in the
aggregate, result in a Material Adverse Effect.
Section 4.6A. ICA. The Company or any of its Subsidiaries does not engage in, or
provide any services related to, any of the activities specified in subsection
14.1(5) of the ICA.
Section 4.7 Title to Properties; Liens. The Company or a Subsidiary has good and
valid title to or a valid and binding leasehold interest in the property and
assets reflected on the balance sheet included in the Financial Statements
(other than (x) the Intellectual Property Rights referred to in Section 4.8, (y)
the Real Property referred to in Section 4.22 and (z) property and assets
disposed of, or subject to purchase or sales orders, in the ordinary course of
business since December 31, 2001) free and clear of all liens or encumbrances,
except: (i) as set forth on Schedule 4.7; (ii) any liens or encumbrances
disclosed in the Financial Statements; (iii) liens or encumbrances for taxes,
assessments and other governmental charges not yet due and payable or due but
not delinquent or being contested in good faith by appropriate proceedings; (iv)
mechanics', workmen's, repairmen's, warehousemen's, carriers' or other like
liens or encumbrances arising or incurred in the ordinary course of business,
and equipment leases with third parties entered into in the ordinary course of
business (all items included in (i) through (iv) are referred to collectively
herein as the "Permitted Liens"). Except for Permitted Liens, all such
properties and assets are free and clear of liens or encumbrances of any kind.
All equipment of the Company used in connection with the operation of its
business is in good operating condition and repair, ordinary wear and tear
excepted, and not in need of repair, other than ordinary and routine repairs.
The assets of Company are sufficient in all material respects for the operation
of the business of Company as presently conducted.
Section 4.8 Intellectual Property.
(a) Schedule 4.8(a) sets forth all Intellectual Property Rights (as defined
below) filed by, or issued or registered to, the Acquired Companies and all
material intellectual property license agreements to which any of the Acquired
Companies is a party.
(b) (i) Except as set forth on Schedule 4.8(b), the Acquired Companies own, or
possess licenses or other valid rights to use, all United States and Canadian
patents, trademarks (registered or unregistered), trade names, service marks,
copyrights and applications and registrations therefor, trade secrets and other
intellectual property, whether or not subject to statutory registration or
protection, which are material to the conduct of the business of the Acquired
Companies taken as a whole (the "Intellectual Property Rights"), (ii) the
validity of the Intellectual Property Rights and the title or rights to use
thereof of the Acquired Companies is not being challenged in any action, claim,
investigation, arbitration, litigation or other proceeding to which any of the
Acquired Companies is a party, nor to the Company's knowledge, is any such
action, claim, investigation, arbitration, litigation or other proceeding
threatened, (iii) to the Company's knowledge, no Person is materially infringing
upon or violating any of the Intellectual Property Rights, (iv) there have been
no written claims or assertions made by others that the Company or any of its
Subsidiaries has infringed any intellectual property rights of others in the
preceding three year period and, to the Company's knowledge, there have been no
infringements by the Company or its Subsidiaries during this period, and (v) the
12
execution, delivery and performance of this Agreement and the Ancillary
Agreements by the Company and the consummation of the transactions contemplated
hereby and thereby will not breach, violate or conflict with any instrument or
agreement concerning the Intellectual Property Rights, will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any Intellectual Property Rights or impair the right of Buyer or Buyer Sub to
make, use, sell, license or dispose of, or to bring any action for the
infringement of, any Intellectual Property Rights.
Section 4.9 SEC Filings. The Company has timely filed all registration
statements, prospectuses, forms, reports, definitive proxy statements, schedules
and documents required to be filed by it under the Securities Act of 1933 (the
"Securities Act") or the Securities Exchange Act of 1934 (the "Exchange Act"),
as the case may be (collectively, the "Company SEC Documents"). The Company has
made available to Buyer a complete copy of any amendments or modifications which
have not yet been filed with the SEC or any documents which previously had been
filed by the Company with the SEC pursuant to the Securities Act or the Exchange
Act. As of their respective filing dates, the Company SEC Documents complied in
all material respects with the requirements of the Exchange Act and the
Securities Act and none of the Company SEC Documents, as of their respective
filing dates, contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading.
Section 4.10 Financial Statements. The consolidated balance sheets included in
the Financial Statements (copies of which have been provided to Buyer), fairly
present, in all material respects, the consolidated financial position of the
Acquired Companies as of their respective dates, and the other related
statements included in the Financial Statements fairly present, in all material
respects, the results of their consolidated operations and cash flows for the
periods indicated, in each case in accordance with GAAP applied on a consistent
basis, with only such deviations from such accounting principles and/or their
consistent application as are referred to in the notes to the Financial
Statements. Except as and to the extent set forth on the consolidated balance
sheets of the Acquired Companies, including the notes thereto, none of the
Acquired Companies has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for liabilities or obligations incurred in the ordinary course of
business since December 31, 2001 that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 4.11 Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date, except as disclosed on Schedule 4.11(a), there
has not been any condition, event or occurrence that, individually or in the
aggregate, has resulted in a Material Adverse Effect.
(b) Except as disclosed on Schedule 4.11(b) and except for the transactions
contemplated by this Agreement, since the Balance Sheet Date, the Acquired
Companies have not:
(i) created, incurred, assumed or guaranteed any Indebtedness or become subject
to any liabilities of a type required to be disclosed on a balance sheet
prepared in accordance with GAAP, except Indebtedness incurred in the ordinary
course of business under the Company's existing credit facilities and other
liabilities incurred in the ordinary course of business;
(ii) subjected any of its assets to any lien or encumbrance except Permitted
Liens outside the ordinary course of business;
(iii) with respect to the business of the Acquired Companies taken as a whole,
conducted business in any material respects outside the ordinary course of
business;
(iv) sold, assigned or transferred any amount of assets except for (x) accounts
receivable sold pursuant to the Receivables Facility, (y) the sale in the
ordinary course of business of inventory, and (z) the sale in the ordinary
course of business of equipment or other personal property no longer necessary
for the business;
13
(v) suffered any extraordinary losses not covered by insurance material to the
Acquired Companies, taken as a whole, or forgiven or canceled any claims
material to the Acquired Companies, taken as a whole;
(vi) increased the compensation, bonuses, or benefits payable or to become
payable by the Acquired Companies to any of their directors, officers or
employees, except for increases in the ordinary course of business or as
required under any existing employment agreements or established any new
employee benefit plans;
(vii) suffered any work stoppage or labor dispute material to any of the
Acquired Companies' distribution centers;
(viii) declared or paid any dividends or made any distributions with respect to
the shares of capital stock of the Company and no such shares have been redeemed
or repurchased by the Company;
(ix) changed in any material respects any of the accounting principles followed
by them or the methods of applying such principles, unless such change was
required by a change in GAAP;
(x) other than in the ordinary course of business, failed to (i) replace or
replenish inventory as such inventory may have been depleted from time to time,
(ii) collect accounts receivable, (iii) pay accounts payable, or (iv) otherwise
manage its working capital accounts consistent with past practice; or
(xi) entered into any agreement or commitment to do any of the foregoing.
Section 4.12 Contracts. Schedule 4.12(a) lists or describes all material
contracts or arrangements ("Material Contracts") to which any Acquired Company
is a party or to which its assets, property or business are bound or subject as
of the date hereof, including: (i) any obligation by such Acquired Company
involving an amount or value of more than $250,000 in any year, excluding
customer or supplier obligations, incentives, rebates, marketing, promotional or
other payments to customers or suppliers made in the ordinary course of
business; (ii) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K); (iii) any contract which involves an amount or
value in excess of $250,000 and is not cancelable in 30 days without penalty,
excluding customer or supplier contracts related to incentives, rebates,
marketing, promotional or other arrangements with customers or suppliers made in
the ordinary course of business; (iv) any contract containing any non-compete or
exclusivity provision with respect to any line of business or geographic area
with respect to any Acquired Company; (v) any contract not made in the ordinary
course of business; (vi) any loan agreement, promissory note issued by the
Company, guarantee, subordination or similar type of agreement; (vii) any
agreement or contract with any stockholder, officer, director, employee, member,
consultant or agent of any Acquired Company (other than employment agreements
covered by Section 4.16 below); (viii) any contract with a customer listed on
Schedule 4.28 hereto; and (viii) any leases for real property. Except as set
forth on Schedule 4.12(b), each Material Contract is valid and binding on the
Acquired Company party thereto and, to the Company's knowledge, each other party
thereto, and is in full force and effect, and, to the Company's knowledge, none
of the Acquired Companies is in breach thereof or default thereunder and there
does not exist under any thereof any event which, with the giving of notice or
the lapse of time, would constitute such a breach or default, except for such
breaches, defaults and events as to which requisite waivers or consents have
14
been obtained and which would not reasonably be expected, in the aggregate, to
have a Material Adverse Effect. To the Company's knowledge, no party with whom
any Acquired Company has entered into a Material Contract is in default
thereunder, other than those defaults which in the aggregate have no reasonable
likelihood of having a Material Adverse Effect. Except as disclosed on Schedule
4.12(b), no consent is required of any party with whom any Acquired Company has
an agreement required to be listed on Schedule 4.12(a) to perform the
obligations under the Agreement and the Ancillary Agreements or to consummate
the transactions contemplated hereby and thereby and, upon consummation of the
transactions contemplated hereby and thereby, each agreement listed on Schedule
4.12(a) will continue to entitle the Acquired Companies to the rights and
benefits specified in such agreements, except as set forth on Schedule 4.12(c).
Section 4.13 Litigation. Except as set forth in Schedule 4.13(a), there are no
claims, actions or legal proceedings pending, or to the Company's knowledge,
threatened against the Acquired Companies or any of their properties or assets
before any Governmental Authority against or involving any Acquired Company, or
for which any Acquired Company is obligated to indemnify a third party that,
individually or in the aggregate, could be reasonably expected to result in a
Material Adverse Effect. The Company has not received any written notice that
the Acquired Companies or any of their properties or assets are subject to any
order, judgment, injunction or decree of any Governmental Authority, except for
such notices that, individually or in the aggregate, would not result in a
Material Adverse Effect. Schedule 4.13(b) sets forth a list of all claims,
actions or legal proceedings pending, or to the Company's knowledge, threatened
against the Acquired Companies or any of their properties or assets before any
Governmental Authority against or involving any Acquired Company, or for which
any Acquired Company is obligated to indemnify a third party.
Section 4.14 Tax Matters. Except as set forth on Schedule 4.14:
(a) all United States federal income Tax Returns of or with respect to each of
the Acquired Companies required by law to be filed have been duly and timely
filed, and all such Tax Returns are complete and accurate, except insofar as the
lack of completeness and accuracy would not result in a Material Adverse Effect;
(b) all other Tax Returns of or with respect to each of the Acquired Companies
required to be filed pursuant to applicable federal, foreign, state, provincial,
local or other law have been duly and timely filed, and all such Tax Returns are
complete and accurate, except insofar as either the failure to file such Tax
Returns or the lack of completeness and accuracy would not result in a Material
Adverse Effect;
(c) all Taxes due and payable by the Acquired Companies (whether or not shown on
any Tax Return) have been paid, except for (i) such Taxes as to which adequate
reserves have been provided in accordance with GAAP and (ii), in the case of
amounts that have been challenged by a Tax authority, such Taxes as are being
contested in good faith;
(d) the unpaid Taxes of the Acquired Companies (i) did not, as of the Balance
Sheet Date, exceed the reserves for Tax liability (excluding any reserves for
deferred Taxes to the extent such reserves are established to reflect timing
differences between book and Tax income) set forth on the face of the Balance
Sheet (rather than in any notes thereto) and (ii) will not, as of the close of
business on the Closing Date, exceed such reserves as adjusted for operations
through the Closing Date in accordance with the Acquired Companies' past custom
and practice; provided, however, that for purposes of clause (ii) hereof, the
unpaid Taxes of the Acquired Companies as of the close of business on the
Closing Date shall not include any Taxes attributable to LIFO recapture income;
(e) no material deficiencies for Taxes have been claimed, proposed or assessed
by any taxing or other governmental authority against any of the Acquired
Companies, and there are no pending or, to the knowledge of any of the Acquired
Companies or the Company Stockholders, threatened audits, investigations,
disputes or claims or other actions for or relating to any material liability in
respect of Taxes of any of the Acquired Companies;
(f) the Acquired Companies have previously delivered or made available to Buyer
complete and accurate copies of (i) all federal income Tax Returns for the years
ended December 31, 1998, 1999 and 2000, (ii) all income Tax Returns for the
years ended December 31, 1997, 1998, 1999 and 2000 for the states of California,
Colorado, New Mexico, Oregon and Utah, (iii) all Canadian federal and provincial
income Tax Returns for the years ended December 31, 1998, 1999 and 2000 and (iv)
all examination reports and statements of deficiencies relating to Taxes
assessed against or agreed to by any of the Acquired Companies since December
31, 1997;
15
(g) no Acquired Company has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency which waiver or extension remains in effect;
(h) there are no material liens for Taxes (other than for Taxes not yet due and
payable) upon any of the assets of the Acquired Companies;
(i) the Company has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code; and
(j) none of the Acquired Companies have liability for the Taxes of any other
Person (other than with respect to other members of the affiliated group of
which the Company is the common parent) (i) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, provincial, local or foreign law),
(ii) as a transferee or successor, (iii) by contract or (iv) otherwise.
Section 4.15 Permits; Compliance with Laws.
(a) The Acquired Companies have in full force and effect all material federal,
state, local and foreign governmental approvals, consents, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
(collectively, "Permits"), necessary to the conduct of the business of the
Acquired Companies taken as a whole, and there has occurred no default under any
such Permit which individually, or in the aggregate, would materially affect the
business of any Acquired Company.
(b) The business of the Acquired Companies is not being conducted in violation
of any applicable federal, state, county, local, or foreign laws, ordinances or
regulations, except for such violations which, individually or in the aggregate,
would not result in a Material Adverse Effect.
Section 4.16 Employment Matters.
(a) Schedule 4.16(a)(i) lists or describes all material employment, severance,
consulting, indemnification or similar contracts to which any Acquired Company
is a party or by which any of them is bound. None of the Acquired Companies is
in material breach of or material default under such contracts and there does
not exist under any such contract any event that, with the giving of notice or
the lapse of time, would constitute such a breach or default by any Acquired
Company, except for any breach or default, which individually or in the
aggregate, would not result in a material liability. Except as set forth on
Schedule 4.16(a)(ii), no employee of the Acquired Companies who is employed in
Canada has any agreement as to length of notice or severance payment required to
terminate his or her employment, other than as such results by law from the
employment of an employee without an agreement as to notice or severance.
(b) Except as set forth on Schedule 4.16(b), no collective bargaining agreement
covers (nor has any, in the past five years, covered), any employees of the
Company, nor is any collective bargaining agreement currently being negotiated
by the Company and, to the Company's knowledge, no attempt to organize any group
or all of the employees of the Company has been made or proposed and is
currently outstanding. For purposes of Section 4.16 and Section 4.17, the term
"collective bargaining agreement" includes any labor contracts between any of
the Acquired Companies and any Canadian "employee association" (within the
meaning of applicable Canadian labor standards legislation).
(c) There are no strikes, slowdowns or labor disputes against any Acquired
Company pending, or to the Company's knowledge, threatened, and no such action
has occurred within the last two years.
(d) The Company is in material compliance with all applicable laws relating to
the employment of labor, including those related to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by the appropriate Governmental Authority and has withheld and paid to the
appropriate Governmental Authority or is holding for payment not yet due to such
Governmental Authority all retained amounts required to be withheld from
employees of the Company and is not liable for any material arrears of wages,
taxes, penalties or other sums for failure to comply with any of the foregoing.
To the Company's knowledge, the Company is in compliance in all material
respects with the terms of any collective bargaining agreement or other labor
contract covering any employees of the Company.
16
(e) Except for current assessments and charges not yet payable, (i) there are no
outstanding assessments, penalties, fines, liens, charges, surcharges or other
amounts due or owing pursuant to any workers' compensation legislation in
respect of that part of the Company's business carried on in Canada (the
"Canadian Business") and to the Company's knowledge, no audit of the Canadian
Business is currently being performed pursuant to applicable workers'
compensation legislation and (ii) the Company has provided to the Buyer all
orders and inspection reports under applicable occupational health and safety
legislation relating to the Canadian Business, the Company has complied in all
material respects with any orders issued under applicable occupational health
and safety legislation in respect of the Canadian Business, and there are no
appeals of any orders currently outstanding.
Section 4.17 Employee Benefit Plans.
(a) Schedule 4.17(a) lists or describes, and Buyer has been furnished access to,
all Pension Plans and Welfare Plans. None of the Acquired Companies has any
actual or contingent liability with respect to any employee benefit plan or
arrangement other than the Pension Plans and Welfare Plans listed on Schedule
4.17(a). Each Pension Plan and Welfare Plan is in substantial compliance with
all applicable provisions of law, including the Code (and the regulations issued
thereunder) and ERISA (and the regulations issued thereunder). All Pension Plans
and Welfare Plans have been administered in substantial compliance with their
terms. Except as set forth on Schedule 4.17(a), each Pension Plan that is
intended to be qualified under Section 401(a) of the Code has been determined by
the IRS to be so qualified, and each trust related to such Pension Plan has been
determined to be exempt from federal taxation under Section 501(a) of the Code
and no such Pension Plan has been amended since it has been determined to be
qualified in a manner that would adversely affect its qualification.
(b) Neither the Company, nor any other Person that, together with the Company as
of the relevant measuring date under ERISA, is required to be treated as a
single employer under Section 414 of the Code (an "ERISA Affiliate"), has, at
any time, withdrawn from a "multiemployer plan" (as defined in Section 3(37) or
4001(a)(3) of ERISA) in a "complete withdrawal" or a "partial withdrawal" as
defined in Sections 4203 and 4205 of ERISA, respectively, so as to result in a
liability, contingent or otherwise (including without limitation the obligations
pursuant to an agreement entered into in accordance with Section 4204 of ERISA),
of the Company or any ERISA Affiliate which remains unsatisfied as of the date
hereof. Neither the Company nor any ERISA Affiliate has engaged in, or is a
successor or parent corporation to an entity that has engaged in, a transaction
described in Section 4212(c) of ERISA. All contributions required to be made by
the Company or any ERISA Affiliate to each multiemployer plan have been made
when due.
(c) The funding method used in connection with each Pension Plan which is
subject to the minimum funding requirements of ERISA is legally permissible and
the actuarial assumptions used in connection with funding each such plan have
been determined to be reasonable by the Company's enrolled actuary. As of
December 31,2001, for the purpose of providing a statement of the funded status
of each Pension Plan, for the Company's Form 10-K as filed with the SEC on March
27, 2002, the benefit obligations of each Pension Plan did not exceed the value
of the assets of such Pension Plan by an amount greater than $3,009,000. No
"accumulated funding deficiency" (for which an excise tax is due or would be due
in the absence of a waiver) as defined in Section 412 of the Code or as defined
in Section 302(a)(2) of ERISA, whichever may apply, has been incurred with
respect to any Pension Plan with respect to any plan year, whether or not
waived. Neither the Company nor any ERISA Affiliate has failed to pay when due
any "required installment," within the meaning of Section 412(m) of the Code and
Section 302(e) of ERISA, whichever may apply, with respect to any Pension Plan.
Neither the Company nor any ERISA Affiliate is subject to any lien imposed under
Section 412(n) of the Code or Section 302(f) of ERISA, whichever may apply, with
respect to any Pension Plan.
(d) Except as set forth on Schedule 4.17(d) or as required by applicable law,
neither the Company, any ERISA Affiliate nor any Welfare Plan has any present or
future obligation to make any payment to, or with respect to any present or
former employee of the Company or any ERISA Affiliate pursuant to, any retiree
medical benefit plan, or other retiree Welfare Plan.
(e) Schedule 4.17(e) lists or describes, and Buyer has been furnished access to,
all Canadian Employee Plans. The Canadian Employee Plans are and have been
established, registered, qualified, invested and administered, in all material
respects, in accordance with their terms and all laws, including all tax laws
where the same is required for preferential tax treatment. No fact or
circumstance exists that could adversely affect the preferential tax treatment
ordinarily accorded to any such Canadian Employee Plan. All contributions or
premiums required to be paid by the Company under the terms of each Canadian
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Employee Plan or by applicable law or by applicable collective bargaining
agreement have been made in a timely fashion in accordance with such law,
collective bargaining agreement and the terms of the Canadian Employee Plans. To
the Company's knowledge, all material obligations regarding the Canadian
Employee Plans have been satisfied and no material taxes, fees or penalties are
owing under or in respect of any Canadian Employee Plan. No commitments to
improve any Canadian Employee Plan have been made except as required by
applicable law or collective bargaining agreement. None of the Canadian Employee
Plans (other than the registered retirement savings plan sponsored by the
Company) provide benefits to retired employees or to the beneficiaries or
dependants of retired employees. Except as disclosed in Schedule 4.17(e), none
of the Canadian Employee Plans is a "pension plan" as defined in applicable
provincial pension legislation.
(f) Except as disclosed in Schedule 4.17(f), the consummation of the
transactions contemplated by this Agreement will not result in (i) any increase
in the payment to any employee of any money, benefits or other property pursuant
to any Pension Plan, Welfare Plan or Canadian Employee Plan; (ii) any
accelerated or increased funding requirement for any such Pension Plan, Welfare
Plan or Canadian Employee Plan; or (iii) the acceleration or provision of any
other increased rights or benefits to any employee.
(g) To Company's knowledge, the Company has not made and will not make any
actions or commitments that are inconsistent with the right of the Company to
amend or terminate any severance policy sponsored by the Company in its sole
discretion, at any time and from time to time, with or without notice.
Section 4.18 Brokers. Other than Lazard Freres & Co. LLC ("Lazard"), no broker,
finder or similar intermediary (each, a "Broker") has acted for or on behalf of
the Company in connection with this Agreement or the transactions contemplated
hereby, and other than Lazard, no Broker is entitled to any broker's, finder's
or similar fee or other commission (each, a "Brokerage Fee") in connection
therewith based on any agreement, arrangement or understanding with the Company
or any action taken by it.
Section 4.19 Environmental Matters. Except as set forth on Schedule 4.19,
(a) (i) there is and has been no Handling of Substances by any Acquired Company
at, on, or from any Operating Site in material violation of any applicable
Environmental Law or that could reasonably be expected to result in material
liability to any Acquired Company under any Environmental Law, and (ii) to the
Company's knowledge, there is and has been no Handling of Substances at, on,
from any Operating Site, by any other Person that could reasonably be expected
to result in material liability to any Acquired Company under any Environmental
Law;
(b) (i) no underground tanks are or have been owned or operated by any Acquired
Company, (ii) to the Company's knowledge, no underground storage tanks are or
have been located on, in or under any Leased Property, and (iii) no PCBs or
asbestos-containing materials are located on, in or under any Leased Property in
a condition that is not in compliance with Environmental Laws;
(c) (i) no Acquired Company or any Stockholder has received written notice of
any assertion by any Governmental Authority or other Person that any of them may
be a potentially responsible party in connection with any Substance disposal
site, and (ii) no Acquired Company or any Stockholder has received written
notice of any pending or threatened claims by any Person against any Acquired
Company under any Environmental Law;
(d) no Encumbrances have been, or are, imposed on any Acquired Company or any of
the assets of any Acquired Company under any Environmental Law;
(e) each Acquired Company is in material compliance with all applicable
Environmental Laws (which compliance includes, but is not limited to, the
possession by each Acquired Company of all Permits and other government
authorizations required under any Environmental Law, and compliance with the
terms and conditions thereof);
(f) no Acquired Company has entered into an agreement with any Person pursuant
to which any Acquired Company has assumed responsibility for, either directly or
indirectly (as guarantor or surety), or otherwise agreed to contribute to, the
investigation, assessment or remediation of any conditions arising from or
relating to the Handling of any Substance or Substances;
(g) to the Company's knowledge, there are no events, conditions or circumstances
that would reasonably be expected to result in liability to any Acquired Company
under any Environmental Law, except for such events, conditions or circumstance
as would not, individually or in the aggregate, have a Material Adverse Effect;
and
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(h) the Company has delivered or otherwise made available for inspection to
Buyer true, complete and correct copies and results of any material reports,
studies, analyses, tests or monitoring possessed by any Acquired Company
pertaining to Substances, on, in or under any Operating Site or regarding
compliance with applicable Environmental Laws by any Acquired Company.
Section 4.20 Employee Relations. To Company's knowledge, the employer-employee
relations of each Acquired Company are satisfactory in all material respects.
The employment practices of each Acquired Company have complied with all
applicable plant closing and anti-discrimination laws including, without
limitation, the Workers Adjustment and Retraining Notification Act, the Age
Discrimination in Employment Act and the Americans with Disabilities Act and any
similar laws of other applicable jurisdictions, other than such non-compliance
that would not, individually or in the aggregate, result in a material
liability. Schedule 4.20 sets forth a list of all legal proceedings or material
claims (other than claims for benefits in the ordinary course or claims for
benefits that are either reflected on the Balance Sheet or have been otherwise
reserved on the Balance Sheet), actions or grievances pending between any
Acquired Company and any director, officer, employee or agent of any Acquired
Company.
Section 4.21 Insurance. All material insurance policies (the "Insurance
Policies") with respect to the property, assets, or business of the Acquired
Companies are in full force and effect and all premiums due and payable thereon
have been paid in full. Schedule 4.21 sets forth a list (including the name of
the insurer, coverage and expiration date) of all such Insurance Policies.
Except as disclosed on Schedule 4.21, there are no pending material claims under
any Insurance Policy as to which the respective insurers have denied coverage.
Except as disclosed on Schedule 4.21, the Company has not received a written
notice of cancellation or non-renewal of any Insurance Policy.
Section 4.22 Real Property. None of the Acquired Companies owns any real
property. The Acquired Companies have leasehold interests in the real property
specified on Schedule 4.22 (the "Leased Properties"). The Company and each of
its Subsidiaries has valid leasehold interests in, all of its Leased Properties
subject only to liens and encumbrances set forth on Schedule 4.22(a) and any
other liens and encumbrances that, individually or in the aggregate, would not
result in a Material Adverse Effect. The Company and each of its Subsidiaries
have complied with the terms of all leases with respect to Leased Properties to
which it is a party that are material to the conduct of the business of the
Acquired Companies taken as a whole and under which it is in occupancy, except
for such noncompliance that, individually or in the aggregate, would not result
in a Material Adverse Effect, and all such leases are in full force and effect,
except those leases the lapse of which, individually or in the aggregate, would
not result in a Material Adverse Effect. Except as disclosed on Schedule
4.22(b), no consent is required of any landlord or other third party to any
lease to consummate the transactions contemplated by the Agreement or any
Ancillary Agreement, and upon consummation of the transactions contemplated
hereby and thereby, each lease will continue to entitle the Company to the use
and possession of the real property specified in such lease and for the purposes
for which such real property is now being used by the Company. Except as would
not result in a Material Adverse Effect, with respect to each of the Leased
Properties: (a) each is in compliance with all applicable zoning ordinances,
building codes, and other laws and regulations, including, without limitation,
19
those relating to human health and the environment; (b) all mechanical systems
(including without limitation, electrical, heating, air conditioning, and
ventilation, plumbing and sewage) are in good condition and repair; (c) each has
adequate public sanitary and storm sewers, public water facilities, electrical
facilities, and gas facilities (collectively, the "Utilities") necessary to the
operation of the Leased Properties; all such Utilities can be used without any
special hook up charge; and all Utilities enter the Leased Properties either
through adjoining public streets or within valid public or private easements;
and (d) the Company has disclosed to the Buyer any defects known to them with
respect to the physical condition and maintenance of the Leased Properties, and
to their knowledge there are no facts or circumstances that adversely affect the
Leased Properties or any portion thereof that has not been disclosed to the
Buyer.
Section 4.23 Transactions with Affiliates. Except as set forth in Schedule 4.23
hereto or any other Schedule to this Agreement, and except for any employee or
expense reimbursement related arrangements, there are no agreements, contracts
or other arrangements between the Company or any Subsidiary, on the one hand,
and any stockholder or any affiliate of any stockholder on the other hand, and
neither the Company nor any Subsidiary will have any liability under any of such
items after the Effective Time.
Section 4.24 Books and Records. The Company has made and kept (and made
available to the Buyer) its true, correct and complete books and records and
accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company (the "Books and Records"). The minute books of the
Company made available to the Buyer accurately and adequately reflect all action
previously taken by the Company stockholders, board of directors and committees
of the board of directors of the Company. The copies of the stock book records
of the Company made available to the Buyer in connection with the Buyer's due
diligence are true, correct and complete, and accurately reflect all
transactions effected in the Company's equity securities through and including
the date hereof. The Company has not engaged in any transaction, maintained any
bank account or used any corporate funds except for transactions, bank accounts
and funds which have been and are reflected in the Company's Books and Records.
Section 4.25 Material Misstatements or Omissions. To the Company's knowledge, no
representations or warranties by the Company in this Agreement, nor any
document, exhibit, statement, certificate or schedule heretofore or hereafter
furnished to Buyer pursuant hereto, or in connection with the transactions
contemplated hereby, including without limitation the Schedules, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary to make the statements or facts contained
therein not misleading.
Section 4.26 Inventory. The Inventory of the Company is of a quality and
quantity usable, salable or returnable in the ordinary course of Business
without discount or reduction except in the ordinary course of Business
consistent with past practices (excluding year-end inventory build-up related to
LIFO recapture income). The quantities of the Company's Inventory are reasonable
and warranted in the present and anticipated circumstances of its business. The
values at which all Inventories are carried on the Balance Sheet reflect the
historical Inventory valuation policy of the Company of stating such Inventories
at the lower of cost or market on a LIFO basis, other than Inventories for the
Company's Canadian distribution centers which are stated on a FIFO basis. The
Company is not under any obligation or liability with respect to accepting
returns of Inventory in the possession of its customers other than in the
ordinary course of business consistent with past practice. No clearance or
extraordinary sale of the Inventories has been conducted since the Balance Sheet
Date, other than in the ordinary course of business consistent with past
practice. The Company has not acquired or committed to acquire Inventory for
sale which is not of a quality and quantity usable in the ordinary course of
business within a reasonable period of time and consistent with past practice,
nor has the Company changed the price of any Inventory except for (i) price
reductions to reflect any reduction in the cost thereof to the Company, (ii)
reductions and increases responsive to normal competitive conditions and
consistent with the Company's past sales practices and (iii) increases to
reflect any increase in the cost thereof to the Company.
20
Section 4.27 Receivables. Except as reserved for on the Balance Sheet or set
forth on Schedule 4.27, all receivables reflected on the Balance Sheet arose
from, the sale of Inventory or services to Persons not affiliated with the
Company and, to the Company's knowledge as of the date of this Agreement, are
collectible in the ordinary course of business of the Company. Except as
reserved against on the Balance Sheet, the receivables referred to in the
preceding sentence as of the dates of such balance sheet constitute or will
constitute, as the case may be, valid receivables, and are not subject to valid
claims of set-off or other defenses or counterclaims other than normal cash
discounts or credits for product returns in the ordinary course of business
consistent with past practice.
Section 4.28 Customers. Schedule 4.28 sets forth a list of the current top 20
customers of the Acquired Companies based on actual or projected annual
revenues.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF INDEMNIFYING STOCKHOLDERS
Each Indemnifying Stockholder severally, and not jointly, represents and
warrants as of the date hereof and as of the Closing Date to Buyer and Buyer Sub
as follows:
Section 5.1 Authorization of Transaction; No Violation. The Indemnifying
Stockholder has full power and authority to execute and deliver this Agreement
and the Ancillary Agreements, as applicable, and to perform the Indemnifying
Stockholder's obligations hereunder and thereunder. The Indemnifying Stockholder
has the absolute and unrestricted right, power and authority to vote, sell,
transfer and assign the Indemnifying Stockholder's shares of Common Stock.
Neither the execution and delivery of this Agreement or the Ancillary Agreements
by the Indemnifying Stockholder nor the consummation of the transactions
contemplated hereby or thereby, nor compliance by the Indemnifying Stockholder
with any of the terms or provisions hereof or thereof, will (i) violate,
conflict with, or result or constitute a default under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, any of the terms, conditions or provisions
of any agreement to which the Indemnifying Stockholder is a party or by which
the Indemnifying Stockholder's property is bound, or (ii) impose any encumbrance
on the shares of Common Stock owned by the Indemnifying Stockholder as set forth
on Schedule 4.2(a).
Section 5.2 Validity of Agreement. This Agreement and the Ancillary Agreements
constitute a valid and binding obligation of the Indemnifying Stockholder and
are enforceable against the Indemnifying Stockholder in accordance with their
terms, except to the extent that enforcement thereof may be limited by or
subject to applicable bankruptcy, insolvency, reorganization, moratorium, or
other similar laws now or hereafter in effect affecting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in equity or at law).
Section 5.3 Ownership and Delivery of Shares. The Indemnifying Stockholder is
the sole beneficial holder and record holder of the shares of Common Stock owned
by the Indemnifying Stockholder as set forth on Schedule 4.2(a) and has good and
marketable title to such shares, free and clear of any and all covenants,
conditions, restrictions, liens, security interests and claims, and has the sole
and unrestricted right to vote such shares in respect of any matter submitted to
the holders of such shares for a vote, including a vote to approve the
transactions contemplated by this Agreement.
Section 5.4 Brokerage. Other than by Lazard, there is no basis for any claim
against the Company for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of such Indemnifying
Stockholder.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Buyer Sub represent and warrant to the Company as follows:
Section 6.1 Organization. Each of Buyer and Buyer Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of its state
of incorporation, each with corporate power and authority to own its properties
and carry on its business in all material respects as currently owned or
conducted.
21
Section 6.2 Binding Obligation. This Agreement has been duly and validly
authorized by all required corporate action on the part of Buyer, Buyer Sub and
their respective stockholders, and no other corporate proceedings on the part of
Buyer or Buyer Sub are necessary to authorize this Agreement. This Agreement has
been duly executed and delivered by Buyer and Buyer Sub and, assuming this
Agreement constitutes a valid and binding obligation of the Company, constitutes
the legal, valid and binding obligation of Buyer and Buyer Sub, enforceable
against Buyer and Buyer Sub in accordance with its terms, except to the extent
that the enforceability thereof may be limited by: (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
from time to time in effect affecting generally the enforcement of creditors'
rights and remedies; and (ii) general principles of equity.
Section 6.3 No Defaults or Conflicts. The execution and delivery of this
Agreement by Buyer and Buyer Sub and performance by Buyer and Buyer Sub of their
respective obligations hereunder: (i) do not and, at the Effective Time, will
not result in any violation of the charter of by-laws or other constituent
documents of Buyer or Buyer Sub; and (ii) at the Effective Time, will not
conflict with, or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of Buyer or Buyer Sub (except
for such conflicts, breaches or defaults or liens, charges or encumbrances that
would not adversely affect the consummation of the Merger) under: (A) any
indenture, mortgage or loan or any other agreement or instrument to which the
Buyer or Buyer Sub is party or by which either of them may be bound or to which
any of their respective properties may be subject (excluding any agreement which
limits the operations of Buyer or the Company after the Closing Date); or (B)
any existing applicable law, rule, regulation, judgment, order or decree or any
Governmental Authority having jurisdiction over Buyer or Buyer Sub or any of
their respective properties, other than filings, authorizations, consents or
approvals whose failure to make or obtain would not adversely affect the
consummation of the Merger.
Section 6.4 No Governmental Authorization or Consents Required. Except for
expiration or termination of the applicable waiting periods under, or receipt of
approval under, the HSR Act, the Competition Act and the ICA and no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority or Government Antitrust Authority is required to be
obtained or made by Buyer or Buyer Sub in connection with the due execution and
delivery by Buyer and Buyer Sub of this Agreement and the consummation by Buyer
and Buyer Sub of the Merger as contemplated hereby; provided, however, that no
representation or warranty is made with respect to authorizations, approvals,
notices or filings with any Governmental Authority, Government Antitrust
Authority or Canadian Investment Review Authority that, if not obtained or made,
would not, individually or in the aggregate result in a Material Adverse Effect.
22
Section 6.5 Brokers. Other than Deutsche Bank Securities Inc. ("Deutsche Bank"),
no Broker has acted for or on behalf of Buyer or Buyer Sub in connection with
this Agreement or the transactions contemplated hereby, and other than Deutsche
Bank, no Broker is entitled to any Brokerage Fee in connection therewith based
on any agreement, arrangement or understanding with Buyer or Buyer Sub or any
action taken by Buyer or Buyer Sub.
Section 6.6 Litigation. There is no claim, action, or legal proceeding pending
or, to the Buyer's knowledge, threatened against Buyer or Buyer Sub before any
Governmental Authority which questions the validity or legality of this
Agreement or the transactions contemplated hereby or which seeks to prevent the
consummation of the transactions contemplated hereby.
ARTICLE VII.
COVENANTS
Section 7.1 Conduct of Business of any Acquired Company. From the date of this
Agreement up to and including the Effective Time (unless this Agreement is
terminated pursuant to Article X), the parties hereto covenant and agree as
follows:
(a) Affirmative Covenants. Except as contemplated by this Agreement or as set
forth on Schedule 7.1, during the period commencing on the date hereof and
ending at the Effective Time, the Company shall and shall cause each of its
Subsidiaries to:
(i) continue to conduct operations in the ordinary and usual course of business;
(ii) use reasonable commercial efforts to maintain its assets in customary
repair, order and condition;
(iii) maintain its books, accounts and records consistent with past practice and
in accordance with the principles used in the preparation of the Financial
Statements;
(iv) continue its historical practices with respect to the maintenance and
protection of Intellectual Property Rights;
(v) maintain commercially reasonable insurance coverage with respect to its
assets and properties and with respect to the conduct of its business;
(vi) use reasonable best efforts to keep available the services of current
officers, key employees and consultants of the Company and each Subsidiary; and
(vii) use reasonable best efforts to preserve the current relationships of the
Company and each Subsidiary with such of the customers, suppliers and other
Persons with which the Company or any Subsidiary has significant business
relations as is reasonably necessary to preserve substantially intact its
business organization.
(b) Negative Covenants. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement, the Company agrees
that prior to the Effective Time the Company will not and will not permit any
Subsidiary to (without the prior written consent of the Buyer):
23
(i) amend its certificate of incorporation or by-laws or other equivalent
organizational document;
(ii) authorize for issuance, issue, sell, pledge, deliver or agree or commit to
issue, sell, pledge or deliver (whether through the issuance or granting of any
options, warrants, calls, subscriptions, stock appreciation rights or other
rights or other agreements) any of its capital stock or any securities
convertible into or exchangeable for shares of its capital stock;
(iii) split, combine or reclassify any shares of its capital stock, declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or
purchase, prepay, redeem or otherwise acquire any shares of its own capital
stock or any Indebtedness or debt security;
(iv) increase in any manner the compensation payable or to become payable to any
of its respective directors or officers, other than in the ordinary course of
business or as required under any existing employment agreement, or adopt any
new severance or termination payment policies for directors, officers or
employees, or enter into any employment or severance agreement with or make any
severance or termination payment to any director, officer or employee of the
Company or a Subsidiary, other than as consistent with past practice;
(v) acquire any interest in any business or any corporation, partnership, joint
venture, association or other business organization or division thereof for
consideration in excess of $200,000 (two hundred thousand dollars);
(vi) change the accounting methods or practices of the Company, except insofar
as required by changes in law or GAAP;
(vii) sell, assign, transfer, mortgage or otherwise encumber or subject to any
lien (other than Permitted Liens) or otherwise dispose of any of the properties
or assets that are material to the Company and its Subsidiaries, taken as a
whole, except in the ordinary course of business;
(viii) except with respect to Indebtedness incurred in the ordinary course of
business under the Company's existing credit facilities, incur any Indebtedness
for borrowed money or guarantee any such Indebtedness of another Person;
(ix) enter into any new Material Contract, or amend, cancel or terminate any
Material Contract, other than in the ordinary course of business;
(x) waive or release any rights that are material to the Acquired Companies,
taken as a whole;
(xi) terminate or amend any Pension Plan, Welfare Plan or Canadian Employee Plan
listed on Schedule 4.17 or create any new Pension Plan, Welfare Plan or Canadian
Employee Plan;
(xii) merge or consolidate with any other corporation, association, partnership
or joint venture, except in connection with a transaction permitted by Section
7.1(b)(iv);
24
(xiii) enter into any contract with a customer of the Company obligating the
Company to provide a loan, payment of cash (other than rack allowance payments
not to exceed $2,500 per store per year) or the equivalent or guarantee of
Indebtedness of such customer;
(xiv) enter into any loan, advance or guarantee of Indebtedness with any
director, officer, employee or stockholder of the Company, except advances for
travel and expenses made in the ordinary course of business;
(xv) maintain inventory at levels or with product mixes materially different
than historical levels and mixes;
(xvi) make or change any election in respect of Taxes, adopt or change any
material accounting method in respect of Taxes, enter into any tax allocation
agreement, tax sharing agreement, tax indemnity agreement or closing agreement,
settle or compromise any claim, notice, audit report or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period applicable
to any claim or assessment in respect of Taxes;
(xvii) take any action that is likely to have a Material Adverse Effect or delay
materially the consummation of the transactions contemplated by the Agreement or
the Ancillary Agreements;
(xviii) knowingly take or cause to be taken, or fail to take or cause to be
taken, any action that would cause the conditions to the obligations of the
Buyer or the Buyer Sub to consummate the transactions contemplated hereby to
fail to be satisfied or fulfilled, including, without limitation, by taking or
causing to be taken, or failing to take or cause to be taken, any action that
would cause the representations and warranties made by the Company in Article IV
hereof to fail to be true and correct as of the Closing;
(xix) fail to disclose promptly to Buyer in writing any information set forth in
the Schedules hereto which no longer is correct and any information of the
nature of that set forth in the Schedules which arises after the date hereof and
which would have been required to be included in the Schedules if such
information had been obtained on the date hereof; or
(xx) agree or commit to do any of the foregoing.
Section 7.2 Access to Information: Confidentiality.
(a) From the date hereof to the Effective Time, the Company shall, and shall
cause each Subsidiary and each of their respective directors, officers,
employees, accountants, consultants, legal counsel, advisors, agents and other
representatives, during regular business hours and upon reasonable written
request, to give Buyer and its authorized representatives, including counsel,
consultants, accountants, auditors and agents, reasonable access to all books,
records, offices and other facilities and properties of the Company and each
Subsidiary and will cause its officers and those of the Subsidiaries to furnish
promptly such information concerning the business, properties, contracts,
assets, liabilities, personnel and other aspects of the Company or any
Subsidiary as Buyer may from time to time reasonably request; provided, however,
that any such access shall not interfere with the businesses or operations of
the Company or any Subsidiary and that all contacts with the Company's employees
will be initially coordinated with the Company's Chief Executive Officer or
Chief Financial Officer.
(b) Any information provided to or obtained by Buyer pursuant to paragraph (a)
above shall be "Confidential Information" under the Confidentiality Agreement,
dated December 20, 2001, between the Company and Buyer (the "Buyer
Confidentiality Agreement"), and shall be held by Buyer in accordance with and
be subject to the terms of the Confidentiality Agreement, which terms shall be
incorporated herein by reference.
(c) Except as may be required by applicable law or the rules of the applicable
stock exchange, at any time from the date of this Agreement until and including
the Effective Time, none of the parties hereto shall issue a press release or
public announcement or otherwise make any disclosure concerning this Agreement
or the transactions contemplated hereby or the business and financial affairs of
the Company, without prior written approval by the other party hereto. If any
public announcement is required by
25
law or the rules of the applicable stock exchange to be made by any party hereto
with respect to the Company or the transactions contemplated hereby at any time
from the date of this Agreement until and including the Effective Time, prior to
making such announcement such party will deliver a draft of such announcement to
the other party and shall give the other party reasonable opportunity to comment
thereon; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such public announcement as may be
required by law or the rules of the applicable stock exchange if it has used its
reasonable best efforts to consult with the other party and to obtain the other
party's consent but has been unable to do so in a timely manner.
(d) At Buyer's sole discretion and expense, Buyer and its representatives shall
be entitled to conduct Phase I environmental assessments of each of the
Company's facilities. To facilitate these assessments, the Company shall provide
to Buyer and its representatives access to each of its facilities at all
reasonable times. At Buyer's sole discretion and expense, Buyer and its
representatives shall be entitled to conduct sampling of the soil, groundwater
and surface water at the Operating Sites set forth on Schedule 7.2(d); provided
that such sampling shall be completed, and a final report on the sampling
provided to the Company, by June 1, 2002; and provided, further, that, to the
extent any breach of the Company's representations and warranties in Article IV
is identified in connection with such sampling, the Company shall have the right
to cure such breach prior to Closing or to commit to cure such breach in a
timely fashion after Closing.
Section 7.3 Filings and Authorizations.
(a) Each of the parties hereto within five (5) Business Days of the date hereof,
shall file or supply, or cause to be filed or supplied, all notifications and
information required to be filed or supplied pursuant to the HSR Act in
connection with the Merger and consummation of the other transactions
contemplated hereby. Within five (5) Business Days of the date hereof, the
Company shall provide Buyer with information reasonably requested by Buyer to
identify any notifications and filings that Buyer may need, or considers
appropriate or advisable, at Buyer's discretion, to make with a Government
Antitrust Authority in Canada or Canadian Investment Review Authority in respect
of any transaction contemplated by this Agreement. The Company shall provide
Buyer, as promptly as reasonably practical, with any information that Buyer
subsequently requests for the purposes of providing or complying with the
requirements of any notification or filings or in connection with obtaining any
authorizations, approvals, consents, rulings and waivers that Buyer may make
with a Government Antitrust Authority in Canada or Canadian Investment Review
Agency. Buyer and the Company shall, within thirteen (13) Business Days of the
date hereof or such other period as Buyer and the Company may agree, promptly
submit the appropriate notifications and filings required to be made by them, or
which Buyer reasonably deems appropriate or advisable to make, with a Government
Antitrust Authority in Canada or Canadian Investment Review Authority. Where
Buyer elects to file a request for an ARC to the Government Antitrust Authority
in Canada, Buyer may elect to subsequently file a notification in accordance
with Part IX of the Competition Act (a "Notification") to such Authority at
Buyer's sole discretion, and the Company shall file its portion of the
Notification to such Authority within five (5) Business Days of being notified
by Buyer of its decision to file the Notification.
(b) Each of the parties hereto, as promptly as practicable, shall
(i) make, or cause to be made, all such other filings (including any filings
required by the SEC) and submissions under laws, rules and regulations
applicable to it, or to its subsidiaries and affiliates, as may be required for
it to consummate the Merger and other transactions contemplated hereby in
accordance with the terms of this Agreement;
26
(ii) use commercially reasonable efforts to obtain, or cause to be obtained, all
authorizations, approvals, consents and waivers from all Persons and
Governmental Authorities necessary to be obtained by it, or its subsidiaries or
affiliates, in order for it so to consummate such transactions; and
(iii) use commercially reasonable efforts to take, or cause to be taken, all
other actions necessary, proper or advisable in order for it to fulfill its
obligations under this Agreement.
Notwithstanding the foregoing or any provision of this Agreement to the
contrary, in no event shall any party hereto be obligated to (A) agree to, or
proffer to, divest or hold separate, or enter into any licensing or similar
arrangement with respect to, any assets (whether tangible or intangible) or any
portion of the business of Buyer, the Company or any of their respective
Subsidiaries, or (B) litigate any suit, claim, action, investigation or
proceeding, whether judicial or administrative, (1) challenging or seeking to
restrain or prohibit the consummation of the Merger; (2) seeking to prohibit or
limit in any respect the ownership or operation by Buyer, the Company, or any of
their respective affiliates of a material portion of the Company's business, or
to require any such Person to dispose of or hold separate any portion of the
Company's business as a result of the Merger; or (3) seeking to prohibit Buyer
or any of its affiliates from effectively controlling in any respect all or any
portion of the Company's business. Furthermore, notwithstanding the foregoing or
any other provision of this Agreement to the contrary, Buyer shall have the sole
discretion as to whether to enter into and, if so, the contents of, any
undertaking(s) with the Minister under the ICA. The parties hereto shall
coordinate and cooperate with one another in exchanging such information and
supplying such reasonable assistance as may be reasonably requested by each in
connection with the foregoing and each party will keep the other parties hereto
apprised of the status of matters relating to completion of the transactions
contemplated by the Agreement and the Ancillary Agreements.
(c) Each of Buyer and the Company agrees to share equally any fee required by a
Governmental Authority (including a Government Antitrust Authority) in
connection with a notification or filing, or in connection with obtaining any
authorizations, approvals, consents, rulings and waivers.
Section 7.4 [Intentionally Omitted]
Section 7.5 Indemnification and Insurance.
(a) From and after the Effective Time, the Buyer shall cause the Surviving
Corporation to and the Surviving Corporation shall indemnify, defend and hold
harmless the present and former officers, directors, employees and agents of the
Company and each Subsidiary (each a "Covered Person") to the same extent, and
under the same terms under which, such Covered Persons are indemnified as of the
date of this Agreement by the Company pursuant to the Company's certificate of
incorporation, Company bylaws and indemnification agreements, if any, in
existence on the date of this Agreement with any officers, directors, employees
or agents for acts or omissions occurring prior to the Effective Time.
(b) The Buyer shall cause the Surviving Corporation to keep in effect provisions
in its certificate of incorporation and bylaws providing for exculpation of
director liability, advancement of expenses prior to disposition of any Claim
and indemnification of the Covered Persons, in each case to the fullest extent
permitted under the DGCL, which provisions shall not be amended except as
required by applicable law or except to make changes permitted by law that would
enlarge the right of indemnification of the Covered Persons. In addition, from
and after the Effective Time, the Surviving Corporation shall comply with all
indemnification agreements set forth on Schedule 4.15.
27
(c) For a period of exactly six (6) years after the Effective Time, the Buyer
shall cause the Surviving Corporation to maintain in effect the current policies
of directors and officers liability insurance maintained by the Company covering
persons who are currently covered by the Company's directors and officers
liability insurance policies with respect to actions or omissions occurring at
or prior to the Effective Time; provided, that policies of at least the same
coverage containing terms and conditions and the dollar value of coverage
covering exclusively the persons who are currently covered by the Company's
directors and officers liability insurance policies which are no less
advantageous to the insureds may be substituted therefor; provided further,
however, that the Surviving Corporation shall not be required to pay an annual
insurance premium therefor in excess of 300% of the last annual premium paid
prior to the date of this Agreement. In any case, there shall be no gap in
coverage by directors and officers liability insurance at the Effective Time.
(d) The provisions of this Section 7.5 shall survive the consummation of the
Merger and expressly are intended to benefit each of the Covered Persons.
Section 7.6 Change of Control Put With Respect to the Notes. Within 30 days
following the Effective Time, Buyer shall cause the Company to mail a notice to
each holder of a Note advising such holder of its right to require the Company
to repurchase all or a portion of such holder's Note at a price in cash equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of the repurchase, as required under the terms and conditions of the
Indenture, dated September 27, 1996 between the Company and Bankers Trust
Company, as Trustee (the "Indenture"). The Company will otherwise take all other
actions required by the Indenture.
Section 7.7 Financial Certificate. At the Effective Time, the Company shall
deliver to Buyer a certificate, signed by an officer of the Company on behalf of
the Company, setting forth the amount of the Transactions Fees. Such certificate
shall be accurate in all respects.
Section 7.8 No Solicitation. The Company shall not (and the Company will cause
its officers, directors, employees, agents, affiliates and representatives,
including investment bankers and attorneys, not to) directly or indirectly
solicit or initiate any discussions or negotiations with, provide any
information to, respond to any inquiries or proposals by or otherwise cooperate
in any other way with, any Person, other than Buyer and its representatives,
employees and agents, concerning a sale of all or a significant portion of the
assets of the Company or any of its subsidiaries, or of any shares of capital
stock of the Company or any merger, consolidation, liquidation, dissolution or
similar transaction involving the Company or any subsidiary of the Company, or
any sale, assignment, license or other transfer of the Company's intellectual
property rights or any other transaction that could have the effect of
precluding or inhibiting the consummation of the Merger (all such transactions
being referred to herein as "Proposed Competing Transactions"). The Company will
immediately notify Buyer if any discussions or negotiations are sought to be
initiated, any inquiry or proposal is made, or any information is requested with
respect to any Proposed Competing Transaction and communicate to Buyer the
identity of the prospective purchaser or soliciting party and the terms of any
such inquiry or proposal.
28
Section 7.9 FIRPTA Certificate. At or prior to the Closing, the Company shall
have delivered to Buyer, as agent for the Company, a form of notice to the
Internal Revenue Service in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2) and in form and substance reasonably acceptable
to Buyer along with written authorization for Buyer to deliver such notice form
to the Internal Revenue Service on behalf of the Company upon the Closing of the
Merger. If the Company fails to comply with this Section 7.9, Buyer's sole
remedy for such noncompliance will be to withhold tax in accordance with Section
1445(a) of the Code from payments to any Stockholder that does not provide a
certificate, in a form that satisfies the requirements of Treasury Regulation
Section 1.1445-2(b), stating that such Stockholder is not a "foreign person".
Section 7.10 Financial Capability. In no event later than September 16, 2002,
and at the Effective Time, the Buyer will have sufficient funds on hand to pay
the Purchase Consideration and to repurchase the Notes, and will deliver a
certificate to the Company to such effect, unless the failure to obtain
sufficient funds is primarily caused by or results from (i) the failure of any
of the conditions precedent to the obligations of Buyer and Buyer Sub as set
forth in Article VIII, or (ii) the termination of this Agreement pursuant to
Section 10.1(a)(i), (iii) or (vi).
Section 7.11 Best Efforts.
(a) Upon the terms and subject to the conditions set forth in this Agreement,
each of the Company and the Buyer agrees to use its commercially reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other party in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, this Agreement, the Ancillary Agreements and the
transactions contemplated by this Agreement. The Company and the Buyer will use
their commercially reasonable best efforts and cooperate with one another (i) in
promptly determining whether any filings are required to be made or consents,
approvals, waivers, Permits, or authorizations are required to be obtained (or,
which if not obtained, would result in an event of default, termination or
acceleration of any agreement or any "put" right under any agreement) under any
applicable Law or from any Governmental Authority or Person, including parties
to loan agreements or other debt instruments, in connection with this Agreement,
the Ancillary Agreements and the transactions contemplated by this Agreement,
and (ii) in promptly making any such filings, in furnishing information required
in connection therewith and in timely seeking to obtain any such consents,
approvals, Permits or authorizations. The Company shall use its commercially
reasonable best efforts to cause the landlords of the Leased Properties to
deliver to Buyer estoppel and non-disturbance agreements in substantially the
form attached hereto as Exhibit E (the "Lease Estoppels") or in a form customary
to the location of the Leased Property which (i) states the amount of rent and
term of the lease, (ii) represents that all rent and other payments due and
payable to the landlord have been paid, (iii) represents that there is no
default or event of default, (iv) represents that the landlord is not aware of
any third party, environmental or other claims against the Company or the
property, and, if necessary, (v) consents to any assignment or transfer of the
lease pursuant to this Agreement or waives any default caused by the
transactions contemplated by this Agreement. In the event that the Company does
not obtain Lease Estoppels for any of the Leased Properties, the Indemnifying
Stockholders shall indemnify Buyer for any Loss to Buyer or the Company as a
result of any fact or condition related to clauses (i), (ii) or (iii) of the
preceding sentence which should have been disclosed as an exception in such
Lease Estoppel if it had been obtained (provided, however, that such
indemnification obligation shall not be subject to the $1 million limit
contained in Section 11.2(a)).
(b) The Company agrees to provide, and will cause its Subsidiaries and its and
their respective officers and employees to provide, and will use its
commercially reasonable best efforts to cause its accountants, attorneys and
other representatives to provide, all necessary cooperation in connection with
the arrangement of any financing to be consummated contemporaneous with the
Closing, including financing in respect of this Agreement, the Ancillary
Agreements and the transactions contemplated by this Agreement, including
participation in meetings, due diligence sessions, road shows, the preparation
of offering memoranda, private placement memoranda, prospectuses and similar
documents, the execution and delivery of any commitment letters, underwriting or
placement agreements, pledge and security documents, other definitive financing
documents, or other requested certificates or documents, including comfort
letters and consents of accountants and legal opinions customarily delivered in
connection with comparable financings, in each case as may be requested by the
Buyer. Notwithstanding anything to the contrary in this Agreement, expenses
incurred by the Company to fulfill its obligations set forth in this Section
7.11(b) shall not be Transaction Fees for purposes of any Purchase Consideration
adjustment.
29
(c) The Buyer agrees to provide, and will cause its officers and employees to
provide, all necessary cooperation to the Company in connection with the renewal
or replacement of any insurance or bonds of the Company, including providing
such financial information as the insurers or bond providers may require.
Section 7.12 Books and Records. For a period of five (5) years from the Closing,
the Buyer shall, and shall cause the Surviving Corporation to, provide to any
former holder of Common Stock for the sole purposes of addressing tax issues
relating to such holder's ownership of any securities of the Company and
addressing indemnification claims made pursuant to Article XI, access to the
books and records of the Company (only to the extent such books and records
relate to the period prior to the Effective Time). Each such access to the books
and records of the Company shall be given only upon reasonable advance written
notice during regular business hours for the sole purpose of obtaining
information for use as aforesaid and will permit such holder to make such
extracts and copies thereof as may be necessary. Such holder of Common Stock
shall reimburse the Company for the reasonable out-of-pocket expenses incurred
by any of them in performing the covenants contained in this Section 7.12.
Section 7.13 Fulfillment of Conditions by Buyer. Buyer shall not (i) knowingly
take or cause to be taken, or fail to take or cause to be taken, any action that
would cause the conditions to the obligations of the Company to consummate the
transactions contemplated hereby to fail to be satisfied or fulfilled,
including, without limitation, by taking or causing to be taken, or failing to
take or cause to be taken, any action that would cause the representations and
warranties made by Buyer in Article VI hereof to fail to be true and correct as
of the Closing, or (ii) take any action that is likely to delay materially the
consummation of the transactions contemplated by the Agreement or any Ancillary
Agreement.
Section 7.14 Execution of the Escrow Agreement. Buyer, Company and each of the
Indemnifying Stockholders shall execute and deliver to each other on or before
the Closing Date an Escrow Agreement in the form attached hereto as Exhibit D.
ARTICLE VIII.
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYER AND BUYER SUB
The obligation of Buyer and Buyer Sub under this Agreement to consummate
the Merger shall be subject to the satisfaction, at or prior to the Effective
Time, of all of the following conditions, any one or more of which may be waived
by Buyer and Buyer Sub:
Section 8.1 Representations and Warranties Accurate. All representations and
warranties of the Company and the Indemnifying Stockholders contained in Article
IV and Article V shall be true and correct in all material respects (except
those representations and warranties which are qualified by materiality or
Material Adverse Effect, which shall be true and correct in all respects) on and
as of the Effective Time with the same force and effect as though made on and as
of the Effective Time.
30
Section 8.2 Performance. The Company shall have performed and complied in all
material respects with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by it prior to or on the Effective
Time.
Section 8.3 Certificates. Buyer or Buyer Sub shall have received (i) a
certificate, dated as of the Effective Time, signed by an officer of the Company
on behalf of the Company to the effect that the conditions set forth in Sections
8.1 and 8.2 have been satisfied and (ii) a certificate in the form attached
hereto as Exhibit H dated as of the Effective Time, signed by the secretary of
the Company on behalf of the Company.
Section 8.4 HSR Act, Competition Act and ICA: Authorizations; Legal Prohibition.
(a) With respect to the transactions contemplated hereby, all applicable waiting
periods under the HSR Act and the Canada Competition Act shall have expired or
been terminated.
(b) Buyer shall have obtained all authorizations, approvals, consents, rulings
and waivers, the lack of which prior to the Effective Time, under any applicable
law, rule or regulation, would render illegal or prohibit the transactions
contemplated by this Agreement, including, but not limited to, having received
the following:
(i) provided that Buyer has submitted an application for review under and in
accordance with the ICA, the Minister responsible for the ICA has, or is deemed
within the meaning of the ICA to have, provided notice that he is of the view
that the transactions contemplated by this Agreement are "likely to be of net
benefit to Canada" (a "net benefit ruling") under Sections 21 to 23 of and for
the purposes of the ICA; and
(ii) either (x) Buyer shall have received an ARC or (y) the Commissioner of
Competition (the "Commissioner") shall have waived the obligation to notify and
supply information pursuant to paragraph 113(c) of the Competition Act or Buyer
and Company shall each have filed all notices and information required under
Part IX of the Competition Act, and the applicable waiting period shall have
expired, and in respect of (y) above, the Commissioner shall have confirmed in
writing, on terms satisfactory to Buyer in its sole discretion, that his review
of any transactions contemplated by this Agreement has been completed and that
he has no grounds on which to apply for an order under Section 92 or Section 100
of the Competition Act and no investigation or inquiry shall be ongoing nor
shall the Commissioner have threatened or otherwise indicated that he will
commence an investigation or inquiry under Section 10 of the Competition Act.
(c) The Company shall have obtained or made all governmental authorizations,
approvals, consents, waivers and filings, the lack of which prior to the
Effective Time, under any applicable law, rule or regulation, would render
illegal or otherwise prohibit the consummation of the Merger by the Company.
(d) At the Effective Time, there shall exist no injunction or other order issued
by a court of competent jurisdiction which would prohibit the consummation of
the Merger or the other transactions contemplated by this Agreement.
(e) No Governmental Authority shall have commenced or threatened in writing to
commence any action seeking to restrain or prohibit, or to obtain damages in
connection with the transactions contemplated by this Agreement or the Ancillary
Agreements.
Section 8.5 Escrow Agreement. The Company shall have delivered to Buyer the
Escrow Agreement executed by the Company and each Indemnifying Stockholder bound
by the Escrow Agreement.
Section 8.6 Opinion of Counsel. The Company shall deliver executed copies of
opinions of the Company's legal counsel, Xxxx, Weiss, Rifkind, Xxxxxxx &
Xxxxxxxx and Xxxxxx, Xxxxx & Xxxxx, dated as of the Closing Date, substantially
the forms attached hereto as Exhibits F and G.
31
Section 8.7 Consents. The Company shall have obtained (a) all consents required
to be obtained under Sections 4.5 and 4.12 (other than the Leased Properties) as
set forth on Schedule 4.5 and 4.12(b) and (b) consents to assignment or change
of control (if necessary) for each of the Leased Properties used for
distribution centers by the Company.
Section 8.8 Bonds. The Company shall have purchased bonds with a term on the
date that the bond is purchased equal to or greater than one year covering the
State of California Cigarette and Tobacco Products Tax Bond requirement.
Section 8.9 Deliveries. The Company shall have delivered executed copies of all
Ancillary Agreements to which it is party and such other documents and items
that Buyer may reasonably request (including, but not limited to, resignations
executed by each of the Company's directors effective as of the Closing Date) .
ARTICLE IX.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligation of the Company to consummate the Merger shall be subject to
the satisfaction, at or prior to the Effective Time, of all of the following
conditions, any one or more of which may be waived by the Company:
Section 9.1 Representations and Warranties Accurate. All representations and
warranties of Buyer and Buyer Sub contained in Article VI shall be true and
correct in all material respects (except those representations and warranties
which are qualified by materiality or Material Adverse Effect, which shall be
true and correct in all respects) on and as of the Effective Time with the same
force and effect as though made on and as of the Effective Time.
Section 9.2 Performance by Others. Buyer and Buyer Sub shall have performed and
complied in all material respects with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by either of them
prior to or on the Effective Time.
Section 9.3 Certificate. The Company shall have received a certificate, dated
the date of the Effective Time, signed by an officer of Buyer on behalf of the
Buyer, to the effect that the conditions set forth in Sections 9.1 and 9.2 have
been satisfied.
Section 9.4 HSR Act, Competition Act and ICA: Authorization; Legal Prohibition.
(a) With respect to the transactions contemplated hereby, all applicable waiting
periods under the HSR Act and the Canada Competition Act shall have expired or
been terminated.
(b) Buyer shall have obtained all authorizations, approvals, consents, rulings
and waivers, the lack of which prior to the Effective Time, under any applicable
law, rule or regulation, would render illegal or prohibit the transactions
contemplated by this Agreement, including, but not limited to, having received
the following:
(i) provided that Buyer has submitted an application for review under and in
accordance with the ICA, the Minister responsible for the ICA has, or is deemed
within the meaning of the ICA to have, provided notice that he is of the view
that the transactions contemplated by this Agreement are "likely to be of net
benefit to Canada" (a "net benefit ruling") under Sections 21 and 23 of and for
the purposes of the ICA; and
32
(ii) either (x) Buyer shall have received an ARC or (y) the Commissioner shall
have waived the obligation to notify and supply information pursuant to
paragraph 113(c) of the Competition Act or Buyer and the Company shall each have
filed all notices and information required under Part IX of the Competition Act,
and the applicable waiting period shall have expired, and in respect of (y)
above, the Commissioner shall have confirmed in writing, on terms satisfactory
to Buyer in its sole discretion, that his review of any transactions
contemplated by this Agreement has been completed and that he has no grounds on
which to apply for an order under Section 92 or Section 100 of the Competition
Act and no investigation or inquiry shall be ongoing nor shall the Commissioner
have threatened or otherwise indicated that he will commence an investigation or
inquiry under Section 10 of the Competition Act.
(c) The Company shall have obtained or made all governmental authorizations,
approvals, consents, waivers and filings, the lack of which prior to the
Effective Time, under any applicable law, rule or regulation, would render
illegal or otherwise prohibit the consummation of the Merger by the Company.
(d) At the Effective Time, there shall exist no injunction or other order issued
by a court of competent jurisdiction which would prohibit consummation of the
Merger.
ARTICLE X.
TERMINATION
Section 10.1 Termination.
(a) This Agreement may be terminated on or prior to the Effective Time as
follows:
(i) by the mutual written consent of Buyer and the Company;
(ii) by the Company, if the Buyer or Buyer Sub has breached any material
representation, warranty, covenant or agreement contained in this Agreement,
which breach cannot reasonably be, or is not, cured by the Effective Time;
(iii) by the Buyer, if the Company has breached any material representation,
warranty, covenant or agreement contained in this Agreement which would have a
Material Adverse Effect, and which breach cannot reasonably be, or is not, cured
by the Effective Time;
(iv) by the Company, if the Closing Date shall not have occurred on or before
September 18, 2002, for any reason other than the failure of the Company to
perform its obligations hereunder;
(v) by the Buyer, if the Closing Date shall not have occurred on or before
September 18, 2002, for any reason other than the failure of Buyer or Buyer Sub
to perform their respective obligations hereunder; or
(vi) by the Buyer or the Company if any Governmental Authority shall have issued
an order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties shall have used their reasonable efforts to
resist, resolve or lift, as applicable) permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have become final and nonappealable.
(b) The termination of this Agreement shall be effectuated by the delivery by
the party terminating this Agreement to the other party of a written notice of
such termination. If this Agreement so terminates, it shall become null and void
and have no further force or effect, except as provided in Section 10.2.
Section 10.2 Survival After Termination. If this Agreement is terminated in
accordance with Section 10.1 hereof and the transactions contemplated hereby are
not consummated, this Agreement shall become null and void and of no further
force and effect, and none of the parties hereto shall have any liability in
respect of a termination of this Agreement, except to the extent that failure to
satisfy the conditions of Articles VIII or IX results from the violation by such
party of this Agreement or the provisions of any agreement made or to be made
pursuant to this Agreement; provided, however, that Sections 7.2(b) and (c)
hereof and Section 12.2 hereof shall survive the termination of this Agreement.
33
ARTICLE XI.
INDEMNIFICATION AND TAX MATTERS
Section 11.1 Obligations to Indemnify. The Indemnifying Stockholders shall
indemnify and hold harmless Buyer and Buyer Sub and their respective directors,
officers, employees, affiliates, successors and assigns (collectively, the
"Indemnified Persons") from and against any and all losses, lawsuits,
liabilities, damages, deficiencies, demands, claims, actions, judgments or
causes of action, assessments, costs, all amounts paid in investigation, defense
or settlement of any of the foregoing and expenses (including, without
limitation, interest and reasonable attorneys' fees and disbursements)
(collectively, "Losses") based upon or arising out of any inaccuracy in, or any
breach of, any representation, warranty, covenant or agreement of the Company or
the Indemnifying Stockholders (it being agreed that for purposes of such right
to indemnification, the representations and warranties of the Company and the
Indemnifying Stockholders shall be deemed not qualified by any reference therein
to materiality generally or whether or not any breach could result or could
reasonably be expected to result in a Material Adverse Effect), contained in the
Merger Agreement or in any document or other papers delivered by or on behalf of
the Company pursuant thereto.
Section 11.2 Limitations. The indemnification provided for in this Article XI
shall be subject to the following limitations, each of which shall be effective
independently of the others:
(a) the Indemnifying Stockholders shall have no liability and no obligation to
indemnify the Buyer or Buyer Sub for any Losses unless and until the
Indemnifying Stockholders' aggregate indemnity obligations hereunder with
respect to the Losses shall exceed $1,000,000 (one million dollars), whereupon
the Buyer or the Buyer Sub shall be entitled to receive indemnification for the
amount of Losses in excess of $1,000,000 and provided that the maximum amount
the Buyer and the Buyer Sub may recover, in the aggregate, for Losses is
$15,000,000;
(b) during the Escrow Period (as defined in the Escrow Agreement attached as
Exhibit D hereto) the Buyer's and Buyer Sub's sole recourse with respect to
recovery of any amounts payable hereunder or otherwise for Losses, and the
Indemnifying Stockholders' sole liability therefor, shall be limited to the
assets in the Escrow Account ("Escrow Assets") and any such recovery shall be
made in accordance with the procedures set forth in the Form of Escrow
Agreement, attached to this Agreement as Exhibit D;
(c) if at any time during the Escrow Period the amount of any payment required
to be made by the Escrow Agent to the Buyer or Buyer Sub exceeds the Escrow
Assets, the Escrow Agent shall distribute to the Buyer or Buyer Sub, all of the
remaining Escrow Assets;
(d) after termination of the Escrow Period, the Indemnifying Stockholders shall
have no liability and no obligation to indemnify the Buyer or Buyer Sub for any
Losses; and
(e) notwithstanding the provisions of Section 11.2(a), (b), (c) or (d), there
shall be no limit on the recovery of Losses by Buyer or Merger Sub for (i)
common law claims of fraud or (ii) breaches of the representations and
warranties set forth in Section 4.2(a) (Capitalization), Section 5.1
(Authorization of the Transaction) and 5.3 (Ownership and Delivery of Shares),
provided, however, that each Indemnifying Stockholder shall not be liable for
amounts in excess of that portion of the Purchase Consideration paid or payable
to such Indemnifying Shareholder.
Section 11.3 Notice of Claims; Valid Claims.
(a) Any Indemnified Person seeking indemnification hereunder shall, within the
relevant limitation period provided for in Section 12.4, give to the Stockholder
Representative (the "Indemnitor") with a copy to each Indemnifying Stockholder
and a copy to the Escrow Agent, a notice (a "Claim Notice") describing in
reasonable detail the facts giving rise to a claim for indemnification (a
"Claim") hereunder and shall include in such Claim Notice (if then known) the
amount or the method of computation of the amount of such claim, and a reference
34
to the provision of this Agreement or any agreement, certificate or instrument
executed pursuant hereto or in connection herewith upon which such claim is
based; provided, that a Claim Notice in respect of any action at law or suit in
equity by or against a third Person as to which indemnification will be sought
shall be given promptly after the action or suit is commenced; and provided
further, that failure to give such notice shall not relieve the Indemnitor of
its obligations hereunder except to the extent it shall have been prejudiced by
such failure.
(b) The Indemnitor shall have thirty (30) days after the giving of any Claim
Notice pursuant hereto to (i) agree to the amount set forth in the Claim Notice
and to direct the Escrow Agent to pay such amount from the Escrow Amount
(subject to the limitations set forth in Section 11.2) to such Indemnified
Person in immediately available funds, or (ii) to provide such Indemnified
Person and the Escrow Agent with notice that it disagrees with the Claim or the
amount or method of determination set forth in the Claim Notice (the "Dispute
Notice"). Within fifteen (15) days after the giving of the Dispute Notice,
representatives of Indemnitor and such Indemnified Person shall negotiate in a
bona fide attempt to resolve the matter. In the event that the controversy is
not resolved within thirty (30) days of the giving of the Dispute Notice, the
Indemnified Person may pursue its Claim by any means allowed by law.
(c) A Claim shall be determined to be valid (i) if the Indemnitor agrees to the
amount set forth in the Claim Notice; (ii) if the Indemnified Person and the
Escrow Agent do not timely receive a Dispute Notice from the Indemnitor; (iii)
if the Indemnitor and Indemnified Person mutually agree upon an amount to settle
the Claim; or (iv) upon the Escrow Agent's receipt of a final, non-appealable
judgment, order or decree of the court or other judicial body or arbitrator or
panel of arbitrators of competent jurisdiction that decided the underlying claim
with respect to such amount that indicates whether the Indemnified Person is
entitled indemnification with regard to such Claim. Once a Claim is determined
to be valid, the Indemnified Person shall provide written notice (the "Resolved
Dispute Notice") to the Escrow Agent and the Indemnitor. Within five (5)
Business Days after receipt of the Resolved Dispute Notice, the Escrow Agent
shall distribute to the Indemnified Person an amount in cash equal to the Claim
(subject to the limitations set forth in Section 11.2).
Section 11.4 Third Person Claims. If a claim (including a claim by a
Governmental Authority with respect to Taxes) by a third Person is made against
an Indemnified Person, and if such party intends to seek indemnity with respect
thereto under this Article XI, such Indemnified Person shall promptly notify the
Indemnitor and the Escrow Agent in writing of such claims, setting forth such
claims in reasonable detail and, in the case of Taxes, including copies of any
notice or other document received from any Tax authority in respect of such
asserted Tax liability. The Indemnitor shall have thirty (30) days after receipt
of such notice to undertake, conduct and control, through counsel of its own
choosing and at its own expense, the settlement or defense thereof, and the
Indemnified Person shall cooperate with it in connection therewith; provided
that the Indemnified Person may participate in such settlement or defense
through counsel chosen by such Indemnified Person and paid at its own expense
and provided further that, if in the opinion of counsel for such Indemnified
Person there is a reasonable likelihood of a conflict of interest between the
Indemnitor and the Indemnified Person, the Indemnitor shall be responsible for
reasonable fees and expenses of one counsel to such Indemnified Person in
connection with such defense. So long as the Indemnitor is reasonably contesting
any such claim in good faith, the Indemnified Person shall not pay or settle any
such claim without the consent of the Indemnitor. If the Indemnitor does not
notify the Indemnified Person within thirty (30) days after receipt of the
Indemnified Person's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the Indemnified Person shall have the right to
undertake, at Indemnitor's cost, risk and expense, the defense, compromise or
35
settlement of the claim but shall not thereby waive any right to indemnity
therefore pursuant to this Agreement. The Indemnitor shall not, except with the
consent of the Indemnified Person, enter into any settlement that does not
include as an unconditional term thereof the giving by the Person or Persons
asserting such claim to all Indemnified Persons of an unconditional release from
all liability with respect to such claim or consent to entry of any judgment
Section 11.5 Tax Matters.
(a) Pre-Closing Periods. Buyer shall prepare or cause to be prepared (on a basis
consistent with past practice) and file or cause to be filed all Tax Returns for
the Acquired Companies for all Tax periods ending on or prior to the Closing
Date ("Pre-Closing Periods") which are filed after the Closing Date. To the
extent that the Indemnifying Stockholders may have liability with respect to
such Returns, Buyer (i) shall deliver all such Tax Returns to the Stockholder
Representative for a review at least fifteen (15) days prior to the filing date
of any such Tax Return (in cases involving Tax Returns not relating to income
taxes, if it is impracticable to deliver such Tax Returns 15 days prior to the
filing thereof, such Tax Returns shall be delivered to the Stockholder
Representative as far prior to the filing thereof as is practicable); (ii) shall
permit the Stockholder Representative to review and comment on each such Tax
Return described in the preceding sentence prior to filing; and (iii) shall make
such revisions to such Tax Returns as are reasonably requested by the
Stockholder Representative. Buyer shall be reimbursed out of the Escrow Assets
for any Taxes of the Acquired Companies with respect to such periods within
fifteen (15) days after payment by the Buyer or any of the Acquired Companies of
such Taxes, except to the extent that such Taxes are reflected in the reserves
for Tax Liability (excluding any reserves for deferred Taxes to the extent such
reserves are established to reflect timing differences between book and Tax
income) shown on the face of the Balance Sheet (rather than in any notes
thereto) as adjusted for operations through the Closing Date in accordance with
the Acquired Companies' past custom and practice (the "Tax Reserves"); provided,
however, that the reimbursement provided for in this Section 11.5(a) shall be
treated as a Loss and shall be subject to the limitations set forth in Section
11.2 and to the relevant limitation period provided for in Section 12.4; and
provided, further, that with respect to Taxes of the Acquired Companies for the
taxable year that ends on the Closing Date, Buyer shall not be reimbursed for
any Taxes attributable to LIFO recapture income.
(b) Straddle Periods. Buyer shall prepare or cause to be prepared (on a basis
consistent with past practice) and file or cause to be filed any Tax Returns of
the Acquired Companies with respect to any period beginning before the Closing
Date and ending after the Closing Date (a "Straddle Period"), and shall pay or
cause to be paid all Taxes due with respect to such Tax Returns. To the extent
that the Indemnifying Stockholders may have liability with respect to such
Returns, Buyer (i) shall deliver each such Tax Return to the Stockholder
Representative for review at least fifteen (15) days prior to the filing date of
any such Tax Return (in cases involving Tax Returns not relating to income
taxes, if it is impracticable to deliver such Tax Returns 15 days prior to the
filing thereof, such Tax Returns shall be delivered to the Stockholder
Representative as far prior to the filing thereof as is practicable); (ii) shall
permit the Stockholder Representative to review and comment on each such Tax
Return described in the preceding sentence prior to filing; and (iii) shall make
such revisions to such Tax Returns as are reasonably requested by the
Stockholder Representative, provided that such revisions relate to the portion
of the Straddle Period that ends on the Closing Date. Buyer shall be reimbursed
out of the Escrow Assets within fifteen (15) days after the date on which Taxes
are paid with respect to such periods an amount equal to the portion of such
Taxes which relates to the portion of such Straddle Period ending on the Closing
Date, except to the extent such Taxes are reflected in the Tax Reserves;
provided, however, that the reimbursement provided for in this Section 11.5(a)
shall be treated as a Loss and shall be subject to the limitations set forth in
Section 11.2 and to the relevant limitation period provided for in Section 12.4.
For purposes of the preceding sentence, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Straddle Period, the portion
36
of such Tax that relates to the portion of such Straddle Period ending on the
Closing Date shall: (i) in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such Tax for the
entire Straddle Period multiplied by a fraction the numerator of which is the
number of days in the portion of the Straddle Period ending on the Closing Date
and the denominator of which is the number of days in the Straddle Period, and
(ii) in the case of any Tax based upon or related to income or receipts, be
deemed equal to the amount which would be payable if the relevant Straddle
Period ended on the Closing Date; and provided, further, that with respect to
Taxes of the Acquired Companies for a Straddle Period, Buyer shall not be
reimbursed for any Taxes attributable to LIFO recapture income.
(c) Tax Refunds. The Buyer shall pay into the Escrow Account all refunds or
credits of Taxes received by the Buyer or the Acquired Companies after the
Closing Date and prior to one year after the Effective Time, but only to the
extent that such refunds or credits are both (i) attributable to Taxes for a
Pre-Closing Period or the portion of a Straddle Period that ends on the Closing
Date and (ii) not attributable to any Taxes related to LIFO recapture income for
either a Straddle Period or the taxable year that ends on the Closing Date.
(d) Cooperation on Tax Matters.
(i) Buyer, the Company, and the Indemnifying Stockholders shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Agreement and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The parties agree (A) to retain all books and records with respect to
Tax matters pertinent to the Company relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Buyer or the Stockholder Representative, any
extensions thereof) of the respective Taxable periods, and to abide by all
record retention agreements entered into with any Taxing authority, and (B) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
the non-requesting party shall allow the other party to take possession of such
books and records, excluding for all such purposes under this Section 11.5 any
personal Tax Returns and personal financial records.
(ii) Buyer and the Indemnifying Stockholders further agree, upon reasonable
request of the other party, to use their commercially reasonable best efforts to
obtain any certificate or other document from any Governmental Authority or any
other Person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
37
(e) Tax Treatment of Indemnity Payments. It is the intention of the parties
hereto that any payment under Section 11.1 or 11.5 shall be treated as an
adjustment to the Purchase Price for federal, state, provincial, local and
foreign income tax purposes and the parties agree to file their Tax Returns
accordingly.
ARTICLE XII.
MISCELLANEOUS
Section 12.1 Expenses. Except as otherwise specifically provided herein, if the
Merger is not consummated, Buyer and Buyer Sub, on the one hand, and the
Company, on the other hand, shall each bear their respective direct and indirect
expenses and fees incurred in connection with the negotiation and preparation of
this Agreement and the consummation of the transactions contemplated hereby,
including, but not limited to, expenses and fees incurred in connection with
legal counsel, accountants and financial advisors, except that any filing fees
payable pursuant to the HSR Act shall be paid 50% by the Indemnifying
Stockholders on the one hand and 50% by Buyer on the other hand.
Section 12.2 Liquidated Damages. In the event this Agreement is terminated by
the Company pursuant to Section 10.1(a)(ii), and provided that at the time of
such termination the Buyer shall not otherwise be entitled to terminate this
Agreement pursuant to Section 10.1, then the Buyer shall promptly, but in no
event later than two days after the date of such termination or failure to
close, pay the Company a fee of $18,000,000 (eighteen million dollars) by wire
transfer of same day funds to an account designated in writing by the Company to
the Buyer. The parties agree that such fee shall represent liquidated damages
and not a penalty. The parties further agree that the agreements contained in
this Section 12.2 are an integral part of the transactions contemplated by this
Agreement and are an inducement to the Company to enter into this Agreement. The
parties also acknowledge that the precise damages to the Company in such an
event would be difficult or impossible to calculate and expressly agree that
$18,000,000 is a fair and reasonable estimate of those damages. The Company
shall have no right to any other remedy for any breach of any representation,
warranty or covenant by Buyer or Buyer Sub contained in this Agreement.
Section 12.3 Amendment. This Agreement shall not be amended or modified except
by a writing duly executed by all of the parties hereto.
Section 12.4 Survival of Covenants and Representations and Warranties. All
representations, warranties, covenants and agreements contained in this
Agreement or in any certificate or instrument delivered pursuant to this
Agreement shall terminate exactly one year after the Effective Time, provided,
however, that (a) the representations and warranties set forth in Section 4.2(a)
(Capitalization), Section 5.1 (Authorization of the Transaction) and 5.3
(Ownership and Delivery of Shares) shall survive in perpetuity, and provided
further that those with respect to claims by any third party beneficiary under
Section 7.5 hereof shall terminate upon the completed performance by the Buyer,
Buyer Sub and the Surviving Corporation of all of their respective obligations
under such provision. If written notice of a claim has been given to an
indemnifying party prior to the expiration of the applicable representation,
warranty, covenant or agreement by a party in whose favor such representation,
warranty, covenant or agreement was made, the relevant representation, warranty,
covenant or agreement shall survive as to such claim, until the claim has been
finally resolved.
38
Section 12.5 Entire Agreement. This Agreement including the Schedules attached
hereto which are deemed for all purposes to be part of this Agreement, the
Exhibits hereto and the other documents delivered pursuant to this Agreement,
and the Buyer Confidentiality Agreement and the Company Confidentiality
Agreement, contain all of the terms, conditions and representations and
warranties agreed upon or made by the parties relating to the subject matter of
this Agreement and the businesses and operations of the Company and its
Subsidiaries and supersede all prior and contemporaneous agreements,
negotiations, correspondence, undertakings and communications of the parties or
their representatives, oral or written, respecting such subject matter.
Section 12.6 Headings. The headings contained in this Agreement are intended
solely for convenience and shall not affect the rights of the parties to this
Agreement.
Section 12.7 Interpretation. Any statute, regulation, or other law defined or
referred to herein (or in any agreement or instrument that is referred to
herein) means such statute, regulation or other law as, from time to time, may
be amended, modified or supplemented, including (in the case of statutes) by
succession of comparable successor statutes. References to a person are also
references to its predecessors and permitted successors and assigns.
Section 12.8 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been delivered when
delivered by hand or sent by facsimile (with receipt confirmed), or if delivered
by courier shall be deemed given on the close of business on the second Business
Day following the day when deposited with an overnight courier or the close of
business on the fifth Business Day when deposited in the United States mail,
postage prepaid, certified or registered addressed to the party at the address
set forth below, with copies sent to the persons indicated:
If to the Buyer or Buyer Sub, to it at:
Xxxxxxx Companies, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Facsimile Number: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile Number: (000) 000-0000
If to the Company, to it at:
Core-Xxxx International, Inc.
000 Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx &
Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile Number: (000) 000-0000
39
If to Jupiter Partners L.P. or to the
Stockholder Representative, to it at:
Jupiter Partners L.P.
00 Xxxxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx X. Xxxxxxx
Facsimile Number: (000) 000-0000
If to Indemnifying Stockholders, to them at
their address set forth under such
Indemnifying Stockholder's name on the
signature page hereto.
Such addresses may be changed, from time to time, by means of a notice given in
the manner provided in this Section 12.8.
Section 12.9 Severability. If any provision of this Agreement, or the
application thereof to any Person or circumstance, is invalid or unenforceable
in any jurisdiction, (i) a substitute and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable in such jurisdiction, the intent and purpose of the invalid or
unenforceable provision; and (ii) the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability of such provision affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
Section 12.10 Waiver. Waiver of any term or condition of this Agreement by any
party shall only be effective if in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or condition, or a
waiver of any other term or condition of this Agreement.
Section 12.11 Binding Effect; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their permitted
successors and assigns. No party to this Agreement may assign or delegate, by
operation of law or otherwise, all or any portion of its rights, obligations or
liabilities under this Agreement without the prior written consent of the other
parties to this Agreement, which any such party may withhold in its absolute
discretion. Any purported assignment without such prior written consents shall
be void.
Section 12.12 No Third Party Beneficiary. Except as expressly provided in
Section 7.5 (Indemnification and Insurance), nothing in this Agreement shall
confer any rights, remedies or claims upon any Person or entity not a party or a
permitted assignee of a party to this Agreement.
Section 12.13 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures to each counterpart were
upon a single instrument, and all such counterparts together shall be deemed an
original of this Agreement.
Section 12.14 Governing Law and Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of California without
giving effect to the principles of conflict of laws thereof, except that the
Merger shall be governed by the DGCL.
40
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
CORE-XXXX INTERNATIONAL, INC.
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: President & CEO
XXXXXXX COMPANIES, INC.
an Oklahoma corporation
By: /s/ Xxxx X. Xxxxx
Name: Xxxx X. Xxxxx
Title: Executive Vice President,
Chief Financial Officer
PLATFORM CORPORATION
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxx
Title: Secretary
41
INDEMNIFYING STOCKHOLDERS:
JUPITER PARTNERS L.P.,
By Ganymede L.P., its General Partner
By Europa L.P., its General Partner
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: General Partner
By: /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
By: /s/ Xxx X. Xxxxxx
Xxx X. Xxxxxx
By: /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
By: /s/ Xxxx X.Xxxxx
Xxxx X. Xxxxx
By: /s/ J. Xxxxxxx Xxxxx
J. Xxxxxxx Xxxxx
By: /s/ Xxx Xxxxxxxx
Xxx Xxxxxxxx
STOCKHOLDER REPRESENTATIVE
JUPITER PARTNERS L.P.,
By Ganymede L.P., its General Partner
By Europa L.P., its General Partner
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: General Partner
42
