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EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
by and among
MS ACQUISITION CORP., the Company,
the STOCKHOLDERS of the Company,
the MANAGEMENT HOLDERS of the Company
and
AETNA HOLDINGS, INC., Buyer,
Dated as of August 13, 1996
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STOCK PURCHASE AGREEMENT
INDEX
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SECTION 1. SALE OF THE COMPANY SHARES AND PURCHASE PRICE........................... 2
1.1 Transfer of Company Shares.............................................. 2
1.2 Purchase Price and Payment.............................................. 3
1.3 Exchange of Options..................................................... 3
1.4 Prepayment of Notes and Deferred Obligations............................ 3
1.5 Stockholders' Representative............................................ 4
1.6 Closing................................................................. 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE REPRESENTING PARTIES.............. 5
2.1 Organization............................................................ 6
2.2 Certificate of Incorporation and By-Laws................................ 6
2.3 Capitalization.......................................................... 6
2.4 Authority Relative to this Agreement.................................... 7
2.5 Consents and Approvals; No Violations................................... 7
2.6 Compliance.............................................................. 8
2.7 Financial Statements and Undisclosed Liabilities........................ 9
2.8 Absence of Certain Changes.............................................. 9
2.9 Environmental Matters................................................... 10
2.10 Litigation.............................................................. 11
2.11 Employee Benefit Plans.................................................. 12
2.12 Trademarks, Patents and Copyrights...................................... 13
2.13 Taxes................................................................... 13
2.14 Labor Matters........................................................... 14
2.15 Real Estate............................................................. 15
2.16 Inventory............................................................... 17
2.17 Accounts Receivable..................................................... 18
2.18 Brokers................................................................. 18
2.19 Contracts and Other Agreements.......................................... 18
2.20 Banking Facilities...................................................... 19
2.21 Insurance............................................................... 20
2.22 Affiliate Transactions.................................................. 20
2.23 Tangible Personal Property.............................................. 20
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS...................... 20
3.1 Company Shares.......................................................... 20
3.2 Authority............................................................... 21
3.3 Consents and Approvals; No Violations................................... 21
(i)
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER................................. 22
4.1 Organization............................................................ 22
4.2 Certificate of Incorporation and By-Laws................................ 22
4.3 Authority Relative to this Agreement.................................... 22
4.4 Consents and Approvals; No Violations................................... 22
4.5 Brokers................................................................. 23
SECTION 5. COVENANTS............................................................... 23
5.1 Indemnification and Insurance........................................... 23
5.2 Conduct of Business of the Company...................................... 24
5.3 No Solicitation......................................................... 25
5.4 Access to Information; Confidentiality.................................. 26
5.5 Public Announcements.................................................... 26
5.6 Agreement Not To Merge.................................................. 26
5.7 Agreement To Issue Shares............................................... 26
SECTION 6. CONDITIONS.............................................................. 27
6.1 Conditions to the Obligations of Buyer.................................. 27
6.2 Conditions to the Obligations of the Stockholders and the Management
Holders................................................................. 28
SECTION 7. INDEMNIFICATION......................................................... 29
7.1 Indemnification by the Stockholders and Management Holders.............. 29
7.2 Limitations on Indemnification by the Stockholders and Management
Holders................................................................. 29
7.3 Indemnification by Buyer................................................ 30
7.4 Limitation on Indemnification by Buyer.................................. 30
7.5 Notice; Defense of Claims............................................... 30
7.6 Satisfaction of Stockholder Indemnification Obligations................. 30
SECTION 8. TERMINATION OF AGREEMENT................................................ 33
8.1 Termination............................................................. 33
8.2 Effect of Termination................................................... 33
8.3 Amendment............................................................... 34
8.4 Extension; Waiver....................................................... 34
SECTION 9. MISCELLANEOUS........................................................... 34
9.1 Fees and Expenses....................................................... 34
9.2 Governing Law........................................................... 34
9.3 Notices................................................................. 34
9.4 Descriptive Headings.................................................... 38
9.5 Counterparts............................................................ 38
9.6 Termination of Other Agreements......................................... 38
(ii)
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9.7 Entire Agreement; Assignment............................................ 38
9.8 Remedies................................................................ 39
9.9 Parties in Interest..................................................... 39
9.10 Severability............................................................ 39
9.11 Indemnification by the Company and Buyer with Respect to Senior Notes... 39
9.12 Further Assurances: Post-Closing Cooperation............................ 39
9.13 Limited Recourse........................................................ 40
9.14 Release of Representing Parties by Stockholders......................... 40
9.15 Certain Definitions..................................................... 40
9.16 Survival of Representations and Warranties.............................. 41
(iii)
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STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of August 13, 1996 (the "Agreement"), by and among MS
ACQUISITION CORP., a Delaware corporation (the "Company"), THE BERKSHIRE FUND, A
Massachusetts limited partnership ("Berkshire"), BERKSHIRE PARTNERS LLC, a
Massachusetts limited liability company ("Berkshire Partners"), as Escrow Agent,
BRADLEY M. BLOOM, J. CHRISTOPHER CLIFFORD, RUSSELL L. EPKER, CARL FERENBACH,
RICHARD K. LUBIN, LEA ANNE S. OTTINGER and KEVIN T. CALLAGHAN (collectively,
together with Berkshire and Berkshire Partners, the "Berkshire Stockholders"),
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey mutual insurance
company ("Prudential"), PRUCO LIFE INSURANCE COMPANY, an Arizona corporation
("Pruco"); STATE TREASURER OF THE STATE OF MICHIGAN, AS CUSTODIAN OF THE PUBLIC
SCHOOL EMPLOYEES' RETIREMENT SYSTEM, STATE EMPLOYEES' RETIREMENT SYSTEM,
MICHIGAN STATE POLICE RETIREMENT SYSTEM, JUDGES' RETIREMENT SYSTEM, AND PROBATE
JUDGES' RETIREMENT SYSTEM (collectively "Michigan"); and JEROME SINGER, DOUGLAS
A. THAL, ROBERT J. KLEIN, and STEVEN SINGER (the "Former Management
Stockholders"), who are all the holders of the Company's capital stock (herein
collectively referred to as the "Stockholders" and individually as a
"Stockholder"); UELI SPRING, HAROLD BROWN and GARY EASTERLY (for purposes of
Section 2, the "Representing Parties"); EDWARD LAWSON, DANIEL PIERCE, DAVID THAL
and RALPH BREDENBECK (herein collectively referred to, together with the
Representing Parties, as the "Management Holders" and each of the Management
Holders is individually referred to as a "Management Holder"); and AETNA
HOLDINGS, INC., a Delaware corporation ("Buyer").
WITNESSETH
WHEREAS, the Stockholders own of record and beneficially all of the issued
and outstanding capital stock of the Company, consisting of the shares of the
Company's Class A Common Stock, par value $.01 per share ("Old Class A Common
Stock") and Class B Common Stock, par value $.01 per share ("Old Class B Common
Stock" and, together with the Old Class A Common Stock, the "Old Common Stock")
and the shares of the Company's Series A Participating Preferred Stock, par
value $.01 per share ("Old Series A Preferred Stock") and Series B Participating
Preferred Stock, par value $.01 per share ("Old Series B Preferred Stock" and,
together with the Old Series A Preferred Stock, the "Old Preferred Stock"; the
Old Common Stock and the Old Preferred Stock are hereinafter collectively
referred to as the "Old Stock"), as set forth on Exhibit A to the
Recapitalization and Stock Purchase Agreement (as defined below); and
WHEREAS, Berkshire Partners owns shares of Old Stock as Escrow Agent
pursuant to Escrow Agreements dated as of March 3, 1989 and April 23, 1991, as
amended, by and among Berkshire Partners and certain other Berkshire
Stockholders, Prudential, Pruco and Michigan, as set forth on Exhibit A to the
Recapitalization and Stock Purchase Agreement (as defined below); and
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WHEREAS, the Company, the Stockholders and Citicorp Venture Capital,
Ltd., a New York corporation ("CVC"), have entered into a Recapitalization and
Stock Purchase Agreement dated as of the date hereof (the "Recapitalization and
Stock Purchase Agreement") pursuant to which (i) the Company shall cause a
reclassification of the stock of the Company (the "Recapitalization") whereby
each Stockholder shall receive, in exchange for all of such Stockholder's shares
of Old Stock, shares of the Company's Class A Common Stock, par value $.01 per
share ("New Class A Common Stock"), the Company's Class B Common Stock, par
value $.01 per share ("New Class B Common Stock" and, together with the New
Class A Common Stock, the "New Common Stock") and the Company's Series A
Cumulative Convertible Preferred Stock, par value $.01 per share ("New Series A
Preferred Stock"; the New Common Stock and the New Series A Preferred Stock are
hereinafter collectively referred to as the "New Stock"); and (ii) each
Stockholder will sell a portion of such Stockholder's shares of New Stock to CVC
(the "Stock Purchase") as set forth on Exhibit A to the Recapitalization and
Stock Purchase Agreement; and
WHEREAS, the Company and each Management Holder desires to cancel all of
such Management Holder's options to purchase shares of Old Class A Common Stock
(collectively, "Employee Options") in exchange for shares of New Class A Common
Stock, New Class B Common Stock, New Series A Preferred Stock and certain
deferred obligations of Buyer (the "Deferred Obligations") issued by the Company
on behalf of Buyer on substantially the same terms and conditions as the Notes
(as defined below); and
WHEREAS, each Stockholder also desires to sell a portion of the shares of
New Stock (the "Company Shares") to be held by such Stockholder immediately
after the Recapitalization to Buyer and Buyer desires to acquire the Company
Shares, as set forth on Exhibit A attached hereto.
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. SALE OF THE COMPANY SHARES AND PURCHASE PRICE.
1.1 Transfer of Company Shares. At the Closing (as defined in Section 1.6),
each Stockholder shall deliver or cause to be delivered to Buyer one or more
certificates representing the Company Shares then owned by such Stockholder, as
listed on Exhibit A attached hereto. Such stock certificates shall be duly
endorsed in blank for transfer or shall be presented with stock powers duly
executed in blank to effect a valid transfer of such Company Shares by such
Stockholder, free and clear of any and all liens, security interests, Options
(as defined in Section 2.3), encumbrances, equities, charges or claims of any
kind whatsoever, except as set forth in the Stockholders Agreement to be
executed prior to the Stock Purchase or the Company's Certificate of
Incorporation, as then in effect (collectively, "Liens") and except for any
Liens created by or through Buyer.
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1.2 Purchase Price and Payment. At the Closing, Buyer shall, upon the
surrender by each Stockholder of the certificate(s) representing the Company
Shares and in exchange for the sale by such Stockholder of the Company Shares,
pay $11,080,730, such amount being the aggregate cash amount owing to the
Stockholders hereunder, to an account established by the Company, as agent, on
behalf of the Stockholders and Buyer shall deliver to each Stockholder an amount
of 11% junior subordinated debentures of Buyer, due 2007 in the form of Exhibit
C attached hereto including any Series A or Series B Secondary Notes (as such
terms are defined therein) issued thereon (collectively, the "Notes"), as set
forth following such Stockholder's name on Exhibit A attached hereto. At the
closing, the Company shall pay to each Stockholder (i) the amounts of cash as
set forth following such Stockholder's name under the heading "Consideration to
be Received by Stockholder" on Exhibit A attached hereto and (ii) an additional
amount of cash, if any, as set forth following such Stockholder's name under the
heading "Additional Cash Payment" on Exhibit A attached hereto.
1.3 Exchange of Options. Simultaneously with the Closing, the Company and
each Management Holder agrees that such Management Holder shall surrender to the
Company for cancellation all Employee Options held by such Management Holder
and, in exchange for such surrender, the Company shall issue to such Management
Holder the number of shares of New Class A Common Stock, New Class B Common
Stock and New Series A Preferred Stock, the amount of Deferred Obligations and
cash, each as set forth on Exhibit B attached hereto.
1.4 Prepayment of Notes and Deferred Obligations. On each August 13,
November 13, February 13 and May 13 (each, a "Prepayment Date"), Buyer shall pay
or prepay, as the case may be, principal and interest on the Notes, the Series A
Secondary Notes (as such term is defined in the Notes), the Series B Secondary
Notes (as such term is defined in the Notes) and the Deferred Obligations, in an
aggregate amount equal to the amount permitted to be paid as a dividend by Aetna
Industries, Inc. ("Aetna") on each such Prepayment Date by the terms of the
documents relating to the Senior Debt (as such term is defined in the Notes as
provided for, and subject to the limitations set forth, in this Section 1.4). If
a Prepayment Date is the same as the date on which interest is due and payable
on the Notes and Deferred Obligations, then the amounts to be prepaid on such
Prepayment Date shall be allocated and paid, pro rata among the Notes and
Deferred Obligations, in the following priority: (i) first, to pay all interest
due and payable on the Notes and Deferred Obligations on such Prepayment Date;
(ii) second, to pay any remaining principal on any Series A Secondary Notes or
the corresponding obligations under the Deferred Obligations then outstanding;
and (iii) third, to pay the remaining "Prepayment Principal Amount" (as such
term is defined in the Notes) of any Notes or Deferred Obligations then
outstanding. If a Prepayment Date is not the same as a date on which
interest is due and payable on the Notes and Deferred Obligations, then the
amounts to be prepaid on such Prepayment Date shall be allocated and paid, pro
rata among the Notes and Deferred Obligations, in the following priority: (W)
first, to pay all interest accrued but not yet paid on the Series A Secondary
Notes or the corresponding obligations under the Deferred Obligations; (X)
second, to pay all interest accrued but not yet paid on the remaining Prepayment
Principal Amount or; (Y) third, to pay any remaining principal on any Series A
Secondary Notes or the corresponding obligations under the Deferred Obligations;
and (Z)
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fourth, to pay the remaining Prepayment Principal Amount. The total amount of
all payments pursuant to subsection (iii) and subsection (Z) shall not exceed
$2,500,000.
1.5 Stockholders' Representative.
(a) In order to administer efficiently (i) the implementation of the
Agreement by certain of the Stockholders, (ii) the waiver of any condition to
the obligations of such Stockholders, and (iii) the settlement of any dispute
with respect to the Agreement, the Former Management Stockholders, the
Management Holders and the Berkshire Stockholders, with the exception of
Berkshire and Berkshire Partners, (the "Designating Stockholders") hereby
designate Russell L. Epker as their representative (the "Stockholders'
Representative").
(b) The Designating Stockholders hereby authorize the Stockholders'
Representative (i) to take all action necessary in connection with the
implementation of the Agreement on behalf of the Designating Stockholders and
the settlement of any dispute, (ii) to give and receive all notices required to
be given under the Agreement with respect to the Designating Stockholders and
(iii) to take any and all additional action as is contemplated to be taken by or
on behalf of the Designating Stockholders by the terms of this Agreement,
including without limitation, the execution and delivery of documents to
transfer the Company Shares to Buyer.
(c) Each Designating Stockholder hereby specifically authorizes and
directs the Stockholders' Representative to execute on behalf of such
Designating Stockholder the certificates to be delivered to Buyer by the
Representing Parties and the Stockholders pursuant to Section 6.1 unless such
authorization and direction shall have been revoked by such Designating
Stockholder in writing prior to the Closing.
(d) In the event that the Stockholders' Representative dies, becomes
legally incapacitated or resigns from such position, Robert J. Small shall fill
such vacancy and shall be deemed to be the Stockholders' Representative for all
purposes of this Agreement unless otherwise determined by the Designating
Stockholders owning a majority of the shares of New Stock held (on a fully
diluted basis) by all Designating Stockholders; however, no change in the
Stockholders' Representative shall be effective until Buyer is given notice of
such change by one or more of the Designating Stockholders.
(e) All decisions and actions by the Stockholders' Representative in
accordance with this Agreement shall be binding upon all of the Designating
Stockholders, and no Designating Stockholder shall have the right to object,
dissent, protest or otherwise contest the same.
(f) By their execution of this Agreement, the Designating Stockholders
agree that:
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(i) Buyer shall be able to rely conclusively on the instructions
and decisions of the Stockholders' Representative as to any actions
required or permitted to be taken by the Designating Stockholders or the
Stockholders' Representative hereunder, and no party hereunder shall
have any cause of action against Buyer for any action taken by Buyer in
reliance upon the instructions or decisions of the Stockholders'
Representative;
(ii) all actions, decisions and instructions of the Stockholders'
Representative shall be conclusive and binding upon all of the
Designating Stockholders and no Designating Stockholder shall have any
cause of action against the Stockholders' Representative for any action
taken, decision made or instruction given by the Stockholders'
Representative under this Agreement, except for fraud or willful breach
of this Agreement by the Stockholders' Representative;
(iii) remedies available at law for any breach of the provisions of
this Section 1.5 are inadequate; therefore, Buyer shall be entitled to
temporary and permanent injunctive relief without the necessity of
proving damages if Buyer brings an action to enforce the provisions of
this Section 1.5; and
(iv) the provisions of this Section 1.5 are independent and
severable, shall constitute an irrevocable power of attorney, coupled
with an interest and surviving death, granted by the Designating
Stockholders to the Stockholders' Representative and shall be binding
upon the executors, heirs, legal representatives and successors of each
Designating Stockholder.
(g) All fees and expenses incurred by the Stockholders' Representative
shall be paid pro rata by the Designating Stockholders in accordance with their
ownership of New Common Stock.
1.6 Closing. The closing of the purchase and sale of the Company Shares
(the "Closing") shall take place at the offices of Morgan Lewis & Bockius LLP,
101 Park Avenue, New York, New York 10178 on the same day as and promptly after
the Stock Purchase Closing (as defined in the Recapitalization and Stock
Purchase Agreement) contemplated by the Recapitalization and Stock Purchase
Agreement (or at such other time, date and place as the parties may agree).
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE REPRESENTING PARTIES
The Representing Parties, jointly and severally, represent and warrant to
Buyer that except as set forth in the disclosure letter to be delivered to Buyer
prior to the Closing (the "Disclosure Letter"):
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2.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Aetna is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Michigan. Aetna Export Sales Corp. ("Export") is a
corporation duly organized, validly existing and in good standing under the laws
of the United States Virgin Islands. Aetna and Export are the only subsidiaries
of the Company. The Company and each of its subsidiaries have the requisite
corporate power and authority to own, lease and operate their properties and to
conduct their businesses as currently conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification necessary, except
where the failure to be so qualified would not have a Company Material Adverse
Effect (as defined below). The term "Company Material Adverse Effect" means any
change or effect that is or would be materially adverse to the business, assets,
results of operations or financial condition of the Company and its subsidiaries
taken as a whole. Except for its ownership of the subsidiaries, the Company does
not directly or indirectly own any equity or similar interest in, or any
interest convertible, exchangeable or exercisable for or into, any equity or
similar interest in any person.
2.2 Certificate of Incorporation and By-Laws. The Company has previously
delivered to Buyer a true, complete and correct copy of the Certificate of
Incorporation and By-Laws (or equivalent organizational documents), each as
amended to date, of the Company and each of its subsidiaries. Such Certificates
of Incorporation and By-Laws (and equivalent organizational documents) are in
full force and effect. Neither the Company nor any of its subsidiaries is in
violation of any provision of its Certificate of Incorporation or By-Laws (or
equivalent organizational documents).
2.3 Capitalization. The authorized capital stock of the Company consists
solely of (i) 1,040,000 shares of Old Class A Common Stock, (ii) 1,040,000
shares of Old Class B Common Stock, (iii) 80,168 shares of Old Series A
Preferred Stock and (iv) 250,000 shares of Old Series B Preferred Stock. As of
the date of this Agreement, (i) 525,000 shares of Old Class A Common Stock are
issued and outstanding, (ii) 400,000 shares of Old Class B Common Stock are
issued and outstanding, (iii) 80,168 shares of Old Series A Preferred Stock are
issued and outstanding and (iv) 84,485 shares of Old Series B Preferred Stock
are issued and outstanding. Upon the Recapitalization, the authorized capital
stock of the company will consist solely of (i) 5,000,000 shares of New Class A
Common Stock, (ii) 5,000,000 shares of New Class B Common Stock, (iii)
293,123.320 shares of New Series A Preferred Stock and (iv) 2,000,000 shares of
a class of preferred stock, par value $.01 per share. All of the outstanding
shares of Old Stock have been duly authorized and validly issued and are fully
paid and non-assessable and free of preemptive rights. Neither the Company nor
any of its subsidiaries has any outstanding options, warrants, subscriptions or
other rights (including without limitation any "phantom" stock rights),
agreements, arrangements or commitments of any character (collectively,
"Options") relating to the issued or unissued capital stock of the Company or
any of its subsidiaries, or obligating the Company or any of its subsidiaries
to issue or sell any shares of capital stock of, or other equity interests in,
the Company or any of
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its subsidiaries, or entitling any person other than the holder of shares
of capital stock or Options, if any, to receive from the Company or any of
its subsidiaries any benefits or rights similar to benefits or rights enjoyed
by or accruing to a holder of shares of capital stock. The Company owns all of
the outstanding shares of capital stock of Aetna (consisting of 1,000 shares of
common stock) and Aetna owns all of the outstanding shares of capital stock of
Export (consisting of 1,000 shares of common stock), and all such shares are
duly authorized, validly issued, fully paid and non-assessable, and free and
clear of all preemptive rights and all Liens. There are no agreements or
understandings to which the Company or any subsidiary of the Company is a party
with respect to the voting of, or other interest in any shares of Old Stock or
which restrict the transfer of any such shares. There are no outstanding
contractual obligations of the Company or any subsidiary of the Company to
repurchase, redeem or otherwise acquire any shares of capital stock or Option of
the Company or any subsidiary of the Company, or to make any investment in any
subsidiary or any other person. Neither the Company nor any subsidiary of the
Company is under any obligation, contingent or otherwise, by reason of any
agreement to register any of its securities under the Securities Act of 1933, as
amended (the "Securities Act").
2.4 Authority Relative to this Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and the
Stockholders Agreement and Registration Rights Agreement to be executed and
delivered in connection with this Agreement (collectively, the "Operative
Documents"), and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of the Operative Documents by the Company and the
consummation by the Company of the transactions contemplated thereby have been
duly and validly authorized by the Board of Directors of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize the Operative Documents, and to consummate the transactions
contemplated thereby. The Operative Documents have been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the other parties thereto, constitute the valid and
binding agreement of the Company, enforceable against the Company in accordance
with their respective terms.
2.5 Consents and Approvals; No Violations.
(a) The execution and delivery of the Operative Documents by the
Company does not, and the performance of the transactions contemplated by the
Operative Documents by the Company will not, except for agreements to be
terminated at the Closing pursuant to Section 9.6, require any filing with or
notification to, or any consent, approval, authorization or permit from, any
governmental or regulatory authority (a "Governmental Entity") or any other
person except for where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications,
individually or in the aggregate, (X) would not prevent or delay consummation
of the transactions contemplated by this Agreement, (Y) would not otherwise
prevent or delay the Company from performing its obligations under this
Agreement and (Z) would not have a Company Material Adverse Effect.
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(b) The execution and delivery of the Operative Documents by the Company
does not, and the performance of the transactions contemplated by the Operative
Documents by the Company will not, (i) conflict with or violate the Certificate
of Incorporation or By-Laws (or equivalent documents) of the Company, (ii)
violate any order, writ, injunction, decree, statute, treaty, law, rule or
regulation applicable to the Company or any of its subsidiaries, or (iii) result
in a violation or any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under any note, bond,
mortgage, indenture, contract, agreement (except for agreements which will be
terminated at the Closing pursuant to Section 9.6), lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of their respective assets is bound or
(iv) result in the creation or imposition of any Lien upon the Company or any of
its subsidiaries or any of their respective assets, except for any such
conflicts, violations, breaches, defaults or other occurrences which,
individually or in the aggregate, (X) would not prevent or delay consummation of
the transactions contemplated by this Agreement, (Y) would not otherwise prevent
or delay in any material respect the Company from performing its obligations
under this Agreement and (Z) would not have a Company Material Adverse Effect.
2.6 Compliance.
(a) The Company and its subsidiaries have all licenses, permits,
franchises, orders or approvals of any federal, state, local or foreign
governmental or regulatory body or other Governmental Entity material to the
conduct of their businesses on a consolidated basis (collectively, "Company
Permits"), and such Company Permits are in full force and effect and no
proceeding is pending or, to the knowledge of the Company, threatened to revoke
or limit any Company Permit except where the failure to have any such Company
Permit would not have a Company Material Adverse Effect.
(b) Neither the Company nor any of its subsidiaries is in default or
violation of (i) any law, rule, ordinance, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or of any Company Permit or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party, except for such defaults or violations which,
individually or in the aggregate, would not have a Company Material Adverse
Effect. Since January 1, 1993, neither the Company nor any of its subsidiaries
has received notice of any investigation or review by any Governmental Entity or
any other person concerning any such possible violations by the Company or any
of its subsidiaries, nor has any Governmental Entity or any other person
notified the Company or any of its subsidiaries in writing of its intention to
conduct the same, in each case other than those the outcome of which would not
have a Company Material Adverse Effect.
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2.7 Financial Statements and Undisclosed Liabilities.
(a) The Company has previously delivered to Buyer a true, complete and
correct copy of its audited consolidated financial statements for the years
ended December 31, 1995 and 1994 (the "Audited Financial Statements") and its
unaudited consolidated balance sheet of the Company and its consolidated
subsidiaries as of June 30, 1996 (the "Current Balance Sheet") and the related
statements of operations and accumulated deficit and cash flows for the
six-month period then ended (collectively with the Current Balance Sheet, the
"Current Financial Statements"). The Audited Financial Statements and the
Current Financial Statements were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods indicated (except as may be otherwise indicated in the notes thereto and
except that the Current Financial Statements do not contain footnotes meeting
the requirements of GAAP) and fairly present the consolidated financial
position, accumulated deficit and results of operations of the Company and its
subsidiaries on a consolidated basis as at the respective dates thereof and for
the respective periods indicated therein (subject, in the case of the Current
Financial Statements, to normal year-end adjustments consistent with past
practice).
(b) Except (i) as set forth in the Current Financial Statements, (ii) as
set forth in or described in this Agreement or the Disclosure Letter, (iii) for
liabilities incurred in the ordinary course of business since December 31, 1995
which would be required to be included as a liability on a consolidated balance
sheet prepared in accordance with GAAP as of the date hereof, or (iv) all other
liabilities or obligations incurred in the ordinary course of business, the
Company and its subsidiaries do not have any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise), except for any
liability or obligation which will not have a Company Material Adverse Effect.
2.8 Absence of Certain Changes. Since June 30, 1996, there has not been
(i) a Company Material Adverse Effect; (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock, or
property or any combination thereof) in respect of any shares of any capital
stock of the Company or any of its subsidiaries, or any direct or indirect
redemption, purchase or other acquisition by the Company or any of its
subsidiaries of any of their respective securities (including any Options),
other than dividends by a subsidiary to the Company; (iii) any entry into any
agreement, commitment or transaction by the Company or any of its subsidiaries
that is material to the Company and its subsidiaries taken as a whole, except
agreements, commitments or transactions in the ordinary course of business; (iv)
any significant change by the Company or any subsidiary in accounting methods,
principles or practices, (v) any acquisition, sale, lease, transfer or
disposition by the Company or its subsidiaries of any material assets or
properties used or held for use in the conduct of their respective businesses,
or any creation or incurrence of a Lien on any such assets or properties, in
each case other than in the ordinary course of business consistent with past
practice; (vi) any authorization, issuance, sale, delivery or other disposition
by the Company or any subsidiary of any shares of capital stock (other than
pursuant to the exercise of any options or conversion rights) of, or any Option
with respect to, the Company or any of its
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subsidiaries, or any modification or amendment of any right of any holder
of any outstanding shares of capital stock of, or any Option with respect
to (except as contemplated by this Agreement), the Company or any of its
subsidiaries; (vii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any property or asset individually or in the
aggregate of the Company or any of its subsidiaries and having a Company
Material Adverse Effect; (viii) except in the ordinary course of business
consistent with past practice or pursuant to working capital credit facilities
in existence on the date of this Agreement, an incurrence of any long-term
indebtedness for borrowed money, a guarantee of any indebtedness, an issuance or
sale of debt securities or warrants or rights to acquire any debt securities, a
guarantee of any debt of others, any loan, advance or capital contribution, any
mortgage, pledge or other encumbrance of any material assets, or the creation of
any material Lien thereupon; (ix) an increase in the compensation payable or to
become payable to the Company's executive officers or employees, except for
increases in the ordinary course of business in accordance with past practice
which do not result in a material increase in benefits or compensation expense
to the Company or its subsidiaries taken as a whole, or the grant of any
severance or termination pay to, any director or executive officer of it or any
of its subsidiaries other than in the ordinary course of business, or the
establishment, adoption, or amendment in any material respect or the
acceleration of any rights or benefits under any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, executive officer or employee except as is provided therein; (x) any
transaction with an affiliate of the Company except in the ordinary course of
business; (xi) any transaction with any Berkshire Stockholder, Prudential, Pruco
or Michigan; or (xii) any agreement (other than this Agreement, the
Recapitalization and Stock Purchase Agreement, and agreements contemplated
hereby or thereby) entered into by the Company to take any of the foregoing
actions.
2.9 Environmental Matters.
(a) The Company and its subsidiaries are in compliance with all
Environmental Laws, except for any noncompliance individually or in the
aggregate that does not have a Company Material Adverse Effect. "Environmental
Laws" shall mean all federal, state and local laws, rules, regulations,
ordinances, common law and orders that purport to regulate the release of
Hazardous Materials (as defined herein) or other materials into the environment,
or impose requirements relating to environmental protection. "Hazardous
Materials" shall mean petroleum and petroleum products, radioactive materials,
pesticides, asbestos and asbestos-containing materials, polychlorinated
biphenyls, and any materials or substances defined as or included in the
definition of "hazardous materials," hazardous wastes," "hazardous substances,"
"toxic substances," "toxic pollutants," "pollutants," "contaminants," "solid
wastes," or "regulated substances" under any applicable Environmental Law. The
Company has previously delivered to Buyer a true and complete copy of
environmental assessment reports prepared by Dames & Moore with respect to
Aetna's facilities (collectively, such reports are referred to as the
"Environmental Reports")
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and any other written reports relating to the environmental condition of
any of the Owned Real Estate, Leased Real Estate, or any properties formerly
owned or leased by the Company or its subsidiaries which are in the possession
of the Company, its subsidiaries or its agents.
(b) To the knowledge of the Company, there are no Hazardous Materials
present and there has been no material release or threat of material release of
any Hazardous Material on, in, under, from or to the Owned Real Estate or Leased
Real Estate (as such terms are defined in Section 2.15) or any property formerly
owned or leased by the Company or its Subsidiaries for which the Company or its
subsidiaries could incur material liability, except is indicated by the
information set forth in the Environmental Reports.
(c) No Lien has been imposed on the Owned Real Estate or, to the
Company's knowledge, Leased Real Estate by any governmental agency at the
federal, state, or local level in connection with the presence of any hazardous
material.
(d) None of the Company or either of its subsidiaries has: (i) entered
into or been subject to any consent decree, compliance order, or administrative
order with respect to environmental matters relating to the Owned Real Estate or
Leased Real Estate or any property formerly owned or leased by the Company or
its subsidiaries, the operations of the Company or its subsidiaries, or any
off-site location to which the Company or its subsidiaries sent Hazardous
Materials for treatment, storage, handling or disposal; (ii) received since
January 1, 1995 written notice under the citizen suit provision of any
Environmental Law in connection with the Owned Real Estate or the Leased Real
Estate, any property formerly owned or leased by the Company or its subsidiaries
or the operations of the Company or its subsidiaries; (iii) received since
January 1, 1995 any written request for information, notice, demand letter,
administrative inquiry, or complaint with respect to environmental matters
relating to the Owned Real Estate or the Leased Real Estate, any property
formerly owned or leased by the Company or its subsidiaries, or any off-site
location to which the Company or its subsidiaries sent Hazardous Materials for
treatment, storage, handling or disposal; or (iv) been subject to any
governmental or citizen enforcement action with respect to environmental matters
relating to the Owned Real Estate or the Leased Real Estate, any property
formerly owned or leased by the Company or its subsidiaries, the operations of
the Company or its subsidiaries or any off-site location to which the Company or
its subsidiaries sent Hazardous Materials for treatment, storage, handling or
disposal.
2.10 Litigation. There is no litigation, suit, action, proceeding, or
complaint pending or, to the knowledge of the Company and its subsidiaries,
threatened against the Company or any of its subsidiaries as to which there is a
reasonable likelihood of an adverse determination and which, if adversely
determined, could reasonably be expected to (i) have a Company Material Adverse
Effect, (ii) materially and adversely affect the Company's ability to perform
its obligations under this Agreement or (iii) prevent the consummation of any of
the transactions contemplated by this Agreement. Prior to the date hereof, the
Company has delivered to Buyer all responses of counsel to the Company or its
subsidiaries to auditor's request for information delivered in connection with
the Audited Financial Statements.
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2.11 Employee Benefit Plans.
(a) Disclosure. Section 2.11 of the Disclosure Letter contains a true
and complete list of all pension, benefit, profit sharing, retirement, stock,
deferred compensation, welfare, insurance, disability, severance pay and other
similar plans, programs and agreements, including all "employee benefit plans"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), currently maintained or contributed to by the
Company or its subsidiaries, covering employees of the Company or any entity (a
"Commonly Controlled Entity") that, together with the Company, would be treated
as a single employer under Section 414(b) or (c) of the Internal Revenue Code of
1986, as amended (the "Code") (each an "Employee Plan"). Neither the Company nor
any subsidiary has any current or future obligation under any plan or
arrangement providing health care benefits or other financial benefits to former
employees (other than pension benefits under the defined benefit plans disclosed
in Section 2.11 of the Disclosure Letter and benefits required to be provided
under part 6 of subtitle B of title I of ERISA).
(b) Prohibited Transactions. With respect to each Employee Plan, there
has been no nonexempt "prohibited transaction," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, in connection with which Buyer
could be subject to a material liability due to either a penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code.
(c) Compliance. All Employee Plans comply in all material respects
with, and have been administered in material compliance with, all laws,
including, but not limited to, ERISA and the Code, applicable to such Employee
Plans. Neither the Company nor Aetna has any liability under Title IV of ERISA,
nor has any event or circumstance occurred which would reasonably be expected
to result in such a liability being asserted by any party, including the
Pension Benefit Guaranty Corporation, with respect to any Employee Plan or any
other plan subject to Title IV of ERISA (other than the payment of annual
premiums). No Employee Plan that is subject to Section 302 of ERISA or Section
412 of the Code, or both, has incurred any "accumulated funding deficiency"
(as defined in such sections), whether or not waived; nor has the Company or
any Commonly Controlled Entity failed to pay any amounts due and owing as
required by the terms of any Employee Plan. If each Employee Plan which is
subject to Title IV of ERISA were terminated in a "standard termination" (as
described in Section 4041(b) of ERISA) as of the Effective Time, the current
value of the assets of such Employee Plan would equal or exceed the "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) of such Employee
Plan as determined on such date. There has been no partial termination of any
Employee Plan that would require full vesting under the terms of such Employee
Plan, the Code, ERISA or any other applicable law or ruling.
(d) Multiemployer Plans. Neither the Company nor Aetna has within six
(6) years prior to the Closing been obligated, nor has any other entity within
six (6) years prior to the Closing been obligated at any time when such entity
was a Commonly Controlled Entity, to contribute to any "multiemployer plan" as
such term is defined in Section 4001(a)(3) of
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ERISA. Neither the Company nor Aetna has any "withdrawal liability," as
computed under Section 4211 of ERISA, with respect to any such plan.
(e) Copies of Employee Plans and Related Documents. Copies of all
Employee Plans which have been reduced to writing, together with copies of
determination letters and annual reports with respect to each qualified Employee
Plan, have been provided to Buyer.
(f) Qualifications. Each Employee Plan which is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) intended to qualify under
Section 401(a) of the Code is, and at all times has been, so qualified and has
been determined by the Internal Revenue Service to so qualify, and each trust
created thereunder has been determined to be exempt from tax under the
provisions of Section 501(a) of the Code, and nothing has since occurred which
would cause the loss of such qualification or exemption.
(g) Claims and Litigation. There are no pending claims, suits or other
proceedings in connection with any Employee Plan by present or former employees
of the Company or its subsidiaries, plan participants, beneficiaries or spouses
of any of the above, other than claims by participants or beneficiaries of such
Employee Plan for ordinary and usual benefits to which such beneficiaries or
participants are entitled under the terms of such Employee Plan.
2.12 Trademarks, Patents and Copyrights. The Company and its
subsidiaries own, or possess adequate licenses or other rights to use, all
patents, trademarks, trade names, copyrights, service marks, trade secrets,
know-how and other proprietary rights used in connection with the business of
the Company and its subsidiaries as currently conducted (the "Company
Proprietary Rights") other than any such Company Proprietary Rights which are
not material to the Company and its subsidiaries, and no assertion or claim has
been made in writing since January 1, 1993 challenging the validity of any of
the Company Proprietary Rights. To the knowledge of the Company, the conduct of
the business of the Company and its subsidiaries as currently conducted does not
conflict with any patent, license, trademark, trade name, or copyright of any
other person. Neither the Company nor any subsidiary is in default (or with the
giving of notice or lapse of time or both, would be in default) under any
license to use Company Proprietary Rights, which default individually or in the
aggregate would cause a Company Material Adverse Effect. The Company has
received no written claim or threat that any such conflict exists, and no
litigation, claim, suit, action, proceeding, or complaint concerning the
foregoing has been filed or is ongoing.
2.13 Taxes. The Company and its subsidiaries have duly and timely filed
all Tax Returns required to be filed by them through the date hereof and have
paid all Taxes shown on such Tax Returns or pursuant to any assessments received
by the Company or its subsidiaries, unless contested in good faith in
appropriate proceedings, and all such Tax Returns are correct and complete in
all material respects. All monies (except for amounts that are not material)
required to be withheld by the Company or its subsidiaries from employees,
independent
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contractors, creditors or other third parties for taxes have been collected
or withheld, and either duly and timely paid to the appropriate Taxing
Authorities or set aside in accounts for such purposes, except where the failure
to do so will not have a Company Material Adverse Effect. The provisions for
current Taxes made on the Current Financial Statements are sufficient for the
payment of all accrued and unpaid Taxes not yet due and payable as of such date,
except where failure to be so will not have a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any agreement
extending, or having the effect of extending, the time within which to file any
Tax Return or the period of assessment or collection of any Taxes. Neither the
Internal Revenue Service nor any other Taxing Authority is now asserting or, to
the knowledge of the Company, threatening to assert against the Company or any
of its subsidiaries any material deficiency or material claim for additional
Taxes or interest thereon or penalties in connection therewith. There are no
liens for Taxes upon the assets of the Company and its subsidiaries. Neither the
Company nor any subsidiary (i) is a party to or is bound by any obligations
under any tax sharing, tax indemnity or similar agreement or arrangement, (ii)
has made or is subject to any election under section 341(f) of the Internal
Revenue Code of 1986, as amended, (iii) has made or is subject to any election
or deemed election under section 338 or section 336(a) of the Code or the
regulations thereunder, (iv) has agreed to make any adjustment under section 481
of the Code (or any comparable provision of state, local or foreign law) by
reason of a change in accounting method or otherwise, or (v) has since January
1, 1990 been a member of any affiliated, consolidated, combined, unitary or
similar group for any Tax purpose (other than a group consisting solely of the
Company and its subsidiaries). Aetna Export made a valid election to be
classified as a "small FSC" within the meaning of section 922(b) of the Code for
its taxable year commencing January 1, 1988, and has qualified as a small FSC
for all of its taxable years commencing on or after January 1, 1988, through the
date of the Closing, except where the failure to do so would not be material to
the Company and its subsidiaries on a consolidated basis. "Taxes" means all
federal, state, local or foreign net or gross income, gross receipts, net
proceeds, sales, use, ad valorem, value added, franchise, withholding, payroll,
employment, excise, sales, use, property, alternative or add-on minimum or other
taxes, whether disputed or not, together with any interest, penalties, additions
to tax or additional amounts with respect thereto. "Tax Returns" means any
returns, reports or statements (including any information returns) required to
be filed for purposes of a particular Tax. "Taxing Authority" means any
governmental agency, board, bureau, body, department or authority of any
federal, state, local or foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
2.14 Labor Matters. There is not currently, and within the last three years
neither the Company nor any subsidiary of the Company has experienced, any
strike, lockout, picketing, boycott, work stoppage or slow down or union
organization activity or demands for recognition. The Company has no knowledge
(i) of any allegation, charge or complaint of unfair labor practice, employment
discrimination or other matter relating to the employment of labor pending or
threatened against the Company or any subsidiary of the Company, (ii) of any
basis for any such allegation, charge or complaint or (iii) that it, or any
subsidiary of the Company, has not complied in all material respects or is not
in material compliance with all
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applicable laws, rules and regulations relating to the employment of labor
except where such practice, discrimination matter or non-compliance will not
have a Company Material Adverse Effect.
2.15 Real Estate.
(a) Owned Real Estate. Section 2.15 of the Disclosure Letter contains
a true, complete and correct list of all real property owned by the Company or
any of its subsidiaries, directly or indirectly (the "Owned Real Estate").
(i) Title to Owned Real Estate. The Company has made available to
Buyer true and complete copies of all owner's policies of title
insurance issued with respect to the Owned Real Estate. To the knowledge
of the Company, there are no liabilities, liens, encumbrances,
easements, restrictions, reservations, agreements or other matters
affecting the Company's title or any subsidiary's title to the Owned
Real Estate except for those listed in such policies of title insurance
or otherwise listed in Section 2.15 of the Disclosure Letter (such
listed matters, the "Permitted Exceptions").
(ii) Condemnation or Eminent Domain Proceedings. There is no
pending, or to the Company's knowledge, threatened condemnation or
eminent domain proceedings with respect to any of the Owned Real Estate.
(iii) Taxes. There are no taxes or betterment assessments other
than ordinary real estate taxes pending or payable against the Owned
Real Estate. To the Company's knowledge, there are no unpaid taxes or
levies, permit fees or connection fees remaining unpaid with respect to
existing curb cuts, sewer hook-ups, water main hook-ups or other
municipal services of a like nature which are due and which if they
remain unpaid will have a Company Material Adverse Effect.
(iv) Utilities. All water, sewer, gas, electric, telephone,
drainage and other utility equipment required by law or necessary for
the current operation of the Owned Real Estate are installed and
connected to the Owned Real Estate and such utilities are available in
sufficient quantities and such connections are adequate to service the
Owned Real Estate as it is currently improved and operated.
(v) Compliance with Law; Governmental Approvals. The Company has
received no notice from any municipal, state, federal or other
governmental authority of any violation of any zoning, building, fire,
water, use, health, environmental or other law, ordinance, code,
regulation, license, permit or authorization issued in respect to any of
the Owned Real Estate, and the Company has no knowledge of any
violations of any such applicable statutes, laws, codes or ordinances or
other governmental regulations, which violation or violations would
reasonably be expected to have a Company Material Adverse Effect.
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(vi) Condition. Substantially all of the buildings, fixtures and
other improvements located on the Owned Real Estate which are
material to the business of the Company or its subsidiaries are in
sufficient condition and repair for the operation of the Owned Real
Estate as presently conducted.
(vii) Flood Hazard Areas. The Owned Real Estate is not located in
any special flood hazard area as designated by any Governmental
Entity having jurisdiction over the Owned Real Estate.
(viii) Leases. None of the Owned Real Estate is leased to any other
person.
(b) Leased Real Estate. Section 2.15 of the Disclosure Letter contains a
complete and correct list of all real property leased by the Company or any of
its subsidiaries or lessor or lessee, directly or indirectly (the "Leased Real
Estate").
(i) Leases. The Company has made available to Buyer true, complete
and accurate copies of all leases or other agreements ("Leases") under
which the Company or any of its subsidiaries leases the Leased Real
Estate, together with all amendments thereto. With respect to each of
the Leases: (a) each of the Leases is in full force and effect on the
terms set forth therein and has not been modified, amended or altered,
in writing or otherwise; (b) all material obligations of the landlord or
lessor under the Leases which have accrued have been performed, and to
the knowledge of the Company, no landlord or lessor is in default under
or in arrears in the payment of any sum or the performance of any
obligation required of it under any Lease, and no circumstance presently
exists which, with notice or the passage, or both, would give rise to a
default by the landlord or lessor under any such Lease; (c) all material
obligations of the Company or its subsidiaries under the Leases which
have accrued have been performed and neither the Company nor any
subsidiary of the Company is in default under or in arrears in the
payment of any sum or in the performance of any material obligation
required under any of the Leases, and no circumstance presently exists
which, with the passage of time or giving of notice, or both would give
rise to such a default by the Company or any of its subsidiaries, and
(d) the Company has obtained the consent of each landlord or lessor
under any Leases whose consent is required in connection with the
transactions contemplated by this Agreement, and the consummation of
such transactions will not give any landlord or lessor under any Lease
any right or remedy, including, without limitation, any right to declare
a default under any Lease.
(ii) Condemnation or Eminent Domain Proceedings. There is no
pending, or, to the Company's knowledge, threatened condemnation or
eminent domain proceedings with respect to any of the Leased Real
Estate.
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(iii) Taxes. Other than ordinary real estate taxes pending or
payable against the Leased Real Estate, there are no taxes or betterment
assessments which if they remain unpaid will have a Company Material
Adverse Effect. There are no taxes or levies, permit fees or connection
fees remaining unpaid with respect to existing curb cuts, sewer
hook-ups, water main hook-ups or other municipal services of a like
nature which are due and which if they remain unpaid will have a Company
Material Adverse Effect.
(iv) Utilities. All water, sewer, gas, electric, telephone,
drainage and other utility equipment required by law or necessary for
the current operation of the Leased Real Estate are installed and
connected to the Leased Real Estate and such utilities are available in
sufficient quantities and such connections are adequate to service the
Leased Real Estate as it is currently improved and operated.
(v) Compliance with Law; Governmental Approvals. The Company has
received no notice from any municipal, state, federal or other
governmental authority of any violation of any zoning, building, fire,
water, use, health, environmental or other law, ordinance, code,
regulation, license, permit or authorization issued in respect to any of
the Leased Real Estate, and the Company has no knowledge of any
violations of any such applicable statutes, laws, codes or ordinances or
other governmental regulations, which violation or violations would
reasonably be expected to have a Company Material Adverse Effect.
(vi) Condition. Substantially all of the buildings, fixtures and
other improvements located on the Leased Real Estate which are material
to the business of the Company or its subsidiaries are in sufficient
condition and repair for the operation of the Leased Real Estate as
presently conducted.
(vii) Flood Hazard Areas. The Leased Real Estate is not located in
any special flood hazard area as designated by any Governmental Entity
having jurisdiction over the Leased Real Estate.
(c) Section 2.15 of the Disclosure Letter contains a list of all real
property owned or leased by the Company or any of its subsidiaries,
directly or indirectly, within the last five (5) years.
2.16 Inventory. The Current Financial Statements set forth as of June 30,
1996, the respective dollar values of raw materials, work in process, finished
goods and tooling inventory of the Company and its subsidiaries (the
"Inventory"). The values at which the Inventory is stated therein reflect the
normal inventory valuation policy of the Company and its subsidiaries of stating
inventory at the lower of cost or market value in accordance with generally
accepted accounting principles. The Inventory consists of items which are usable
or saleable in the ordinary course of business, net of applicable reserves
reflected in the Current Financial Statements.
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2.17 Accounts Receivable.
(a) Section 2.17 of the Disclosure Letter sets forth as of June 30, 1996
a list of the accounts and notes receivable of the Company and its subsidiaries
(the "Accounts Receivable"), including the aging thereof which, to the knowledge
of the Company, is correct and complete in all material respects.
(b) All Accounts Receivable arose out of the bona fide sale of inventory
or services in the ordinary course of business and are payable on ordinary trade
terms.
2.19 Brokers. No broker, finder or investment banker, other than Morgan
Stanley & Co. Incorporated ("Morgan Stanley"), is entitled to any brokerage,
finder's or other fee or commission from the Company in connection with the
transactions contemplated by this Agreement. The amount payable by the Company
to Morgan Stanley in connection with the transactions contemplated hereby is
$1,000,000, which amount shall include expenses reimbursable pursuant to the
Agreement between Morgan Stanley and the Company, a copy of which has previously
been provided to Buyer, and such amount shall be payable by the Company at the
Closing.
2.19 Contracts and Other Agreements. Section 2.19 of the Disclosure Letter
sets forth a correct and complete list of the following contracts and other
agreements to which the Company or any of its subsidiaries is a party or by or
to which they or their assets or properties are bound or subject, except for
those which will not continue in effect after the Closing:
(a) any agreement that individually requires aggregate expenditures by
the Company or any of its subsidiaries in any one year of more than $100,000;
(b) any indenture, trust agreement, loan agreement or note that involves
or evidences outstanding indebtedness, or liabilities for borrowed money (i) in
excess of $50,000 or (ii) in favor of any affiliate of the Company or any of its
subsidiaries (other than the Company or Aetna);
(c) any lease, sublease, installment purchase or similar arrangement for
the purchase, use or occupancy of real or personal property (i) that
individually requires aggregate expenditures by the Company or any of its
subsidiaries in any one year of more than $50,000, or (ii) pursuant to which the
Company or any of its subsidiaries is the lessor of any real property which has
rentals over $50,000 per year, together with the date of termination of such
leases, the name of the other party and the annual rental payments required to
be made under such leases;
(d) any agreement of surety, guarantee or indemnification, other than
(i) an agreement in the ordinary course of business with respect to obligations
in an amount not in
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excess of $50,000, or (ii) indemnification provisions contained in leases not
otherwise required to be disclosed;
(e) any employment agreements, consulting agreements, independent
contractor agreements with respect to the sale of products by the subsidiaries
of the Company, and bonus plans relating to the compensation of (i) officers or
(ii) other employees, consultants earning more than $100,000 per year or $10,000
per month;
(f) any agreement containing covenants of the Company not to compete in
any line of business, in any geographic area or with any person or covenants of
any other person not to compete with the Company or in any line of business of
the Company;
(g) any agreement granting or restricting the right of the Company or
any of its subsidiaries to use a trade name, trade mark, logo or the Company
Proprietary Rights;
(h) any collective bargaining agreements pursuant to which the Company
or any of its subsidiaries has any obligation;
(i) any agreement with any customer or supplier that cannot be
terminated without penalty in excess of $100,000 by the Company or any of its
subsidiaries within one year;
(j) any power-of-attorney or comparable obligation granted by the
Company or any of its subsidiaries to any person other than in the ordinary
course of business; and
(k) any other agreement that is material to the business, assets,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
Complete and correct copies of all of the contracts and other agreements
set forth in Section 2.19 of the Disclosure Letter have been previously made
available to Buyer. All contracts and other agreements set forth in Section 2.19
of the Disclosure Letter are valid, existing, in full force and effect, binding
upon the Company or its subsidiaries, as the case may be, and to the knowledge
of the Company, binding upon the other parties thereto in accordance with their
terms, and the Company and its subsidiaries are not, nor have they received
since January 1, 1995 any written notice that they are about to be in default
under any of them, nor, to the knowledge of the Company, is any other party to
any such contract or other agreement in default thereunder, nor does any
condition exist that with notice or lapse of time or both would constitute a
default thereunder.
2.20 Banking Facilities. Section 2.20 of the Disclosure Letter sets forth a
correct and complete list of (i) each bank, savings and loan or similar
financial institution (and any securities broker) in which the Company or its
subsidiaries has an account or safety deposit box and the numbers of the
accounts or safety deposit boxes maintained by the Company or its
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subsidiaries thereat; and (ii) the names of all persons authorized to draw on
each such account or to have access to any such safety deposit box facility.
2.21 Insurance. Section 2.21 of the Disclosure Letter sets forth a true,
correct and complete list of all fire, theft, casualty, general liability,
workers compensation, automobile and other insurance policies maintained by the
Company or its subsidiaries and of all life insurance policies maintained on the
lives of any of their employees, specifying the type of coverage, the amount of
coverage, the premium, the insurer and the expiration date of each such policy
(collectively, the "Insurance Policies"). True, correct and complete copies of
all Insurance Policies have been made available to Buyer. The Insurance Policies
are in full force and effect. All premiums due on the Insurance Policies or
renewals thereof have been paid, and there is no default by the Company or its
subsidiaries under the Insurance Policies and neither the Company nor any of its
subsidiaries has received notice of impending cancellation or termination in
respect thereof. Neither the Company nor any of its subsidiaries has received
notice that any insurer under any policy referred to in this Section 2.21 is
denying liability or coverage with respect to any material claim thereunder.
Such policies will remain in full force and effect after giving effect to the
transactions contemplated hereby. The Company has had customary insurance
coverage at all times since January 1, 1992.
2.22 Affiliate Transactions. Section 2.22 of the Disclosure Letter sets
forth a complete and correct list of each existing commitment or legally binding
arrangement of the Company or any subsidiary of the Company to engage in the
future in any material transaction involving the transfer of any cash, property
or rights to or from the Company or any subsidiary of the Company from, to or
for the benefit of any affiliate of the Company, any subsidiary of the Company
or any executive officer, director or stockholder of the Company or any of its
subsidiaries (or any of their respective affiliates).
2.23 Tangible Personal Property. The Company has good title to, or has a
valid leasehold interest in or valid rights under contract to use, all tangible
personal property which is used by the Company in the conduct of its business
and is material to the conduct of its business. All of such material personal
property is free and clear of all Liens, other than the Liens disclosed in
Section 2.23 of the Disclosure Letter.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each Stockholder and Management
Holder hereby makes to Buyer each of the representations and warranties set
forth in this Section 3 with respect to such Stockholder or Management Holder.
3.1 Company Shares. Except as set forth in Section 3.1 of the Disclosure
Letter, such Stockholder owns beneficially and of record the number of the
Company Shares set forth opposite such Stockholder's name in EXHIBIT A. Such
Company Shares are, and when
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delivered by such Stockholder to Buyer pursuant to this Agreement will be, free
and clear of any and all Liens. Each Management Holder owns beneficially and
of record the options to purchase the shares of Old Class A Common Stock as set
forth on EXHIBIT B attached hereto (the "Company Options").
3.2 Authority. Such Stockholder or Management Holder has full right,
authority, power and capacity to enter into the Operative Documents and each
agreement, document and instrument to be executed and delivered by or on behalf
of such Stockholder or Management Holder pursuant to the Operative Documents and
to carry out the transactions contemplated thereby. Each Operative Document and
each agreement, document and instrument executed and delivered by such
Stockholder or Management Holder pursuant to the Operative Documents constitutes
a valid and binding obligation of such Stockholder or Management Holder,
enforceable in accordance with its respective terms, and has been duly
authorized by all necessary corporate action of each Stockholder which is a
corporation, and such Stockholder has full power and authority to transfer, sell
and deliver the Company Shares to Buyer pursuant to this Agreement.
3.3 Consents and Approvals; No Violations. The execution, delivery and
performance of the Operative Documents by such Stockholder or Management Holder
and each such agreement, document and instrument contemplated hereby:
(i) does not and will not violate any provision of the
organizational documents of any Stockholder which is not a natural
person, or any laws of the United States or any state or other
jurisdiction applicable to such Stockholder or Management Holder, or
require such Stockholder or Management Holder to obtain any approval,
consent or waiver from, or make any filing with, any Governmental Entity
or any other person that has not been obtained or made; and
(ii) does not and will not, except for agreements which will be
terminated at the Closing pursuant to Section 9.6, result in a breach
of, constitute a default under, accelerate any obligation under, or give
rise to a right of termination of, any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Stockholder or
Management Holder is a party or by which the property of such
Stockholder or Management Holder is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest
or other charge or encumbrance on any assets of the Company or any
subsidiary or on Company Shares owned by such Stockholder or on Company
Options owned by such Management Holder.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to the Company, the Stockholders and
the Management Holders as follows:
4.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. Buyer has the requisite
corporate power and authority to own, lease and operate its properties and to
conduct its business as it is currently conducted. Buyer has not issued or
agreed to issue any shares of its capital stock, except as provided in Section
5.7 hereof. Buyer is duly qualified as a foreign corporation to do business in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification necessary,
except where the failure to be so qualified would not have a Buyer Material
Adverse Effect (as defined below). The term "Buyer Material Adverse Effect"
means any change or effect that is or would be materially adverse to the
business, assets, results of operations or financial condition of Buyer and its
subsidiaries taken as a whole.
4.2 Certificate of Incorporation and By-Laws. Buyer has previously
delivered to the Company a true, complete and correct copy of its Certificate of
Incorporation and By-Laws, each as amended to date. Such Certificate of
Incorporation and By-Laws are in full force and effect. Buyer is not in
violation of any provision of its Certificate of Incorporation or By-Laws.
4.3 Authority Relative to this Agreement. Buyer has all necessary corporate
power and authority to execute and deliver the Operative Documents, and to
consummate the transactions contemplated hereby. Aetna has all necessary
corporate power and authority to execute and deliver the Agreement to Indemnify
described in Section 6.2(d) (the "Agreement to Indemnify"). The execution and
delivery of the Operative Documents by Buyer and the Agreement to Indemnify by
Buyer and the consummation by Buyer and Aetna of the transactions contemplated
by the Operative Documents or the Agreement to Indemnify, respectively, have
been duly and validly authorized by the Board of Directors of Buyer and Aetna,
respectively, and no other corporate proceedings on the part of Buyer and Aetna,
respectively, are necessary to authorize the Operative Documents or the
Agreement to Indemnify, respectively, or to consummate the transactions
contemplated by the Operative Documents or the Agreement to Indemnify,
respectively. The Operative Documents and the Agreement to Indemnify have been
duly and validly executed and delivered by Buyer or Aetna, respectively, and,
assuming the due authorization, execution and delivery by the other parties
thereto, constitute the valid and binding agreement of Buyer or Aetna,
respectively, enforceable against Buyer or Aetna, respectively, in accordance
with their respective terms.
4.4 Consents and Approvals; No Violations.
(a) The execution and delivery of the Operative Documents by Buyer and
the Agreement to Indemnify by Aetna do not, and the performance of the
transactions
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contemplated by the Operative Documents by Buyer and the Agreement to
Indemnify by Aetna will not, require any filing with or notification to, or any
consent, approval, authorization or permit from, any Governmental Entity or any
other person except where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, (X) would
not prevent or delay consummation of the transactions contemplated by this
Agreement, (Y) would not otherwise prevent or delay Buyer from performing its
obligations under this Agreement and (Z) would not have a Buyer Material Adverse
Effect.
(b) The execution and delivery of the Operative Documents and the
Agreement to Indemnify by Buyer or Aetna, respectively, do not, and the
performance of the transactions contemplated by the Operative Documents and the
Agreement to Indemnify by Buyer or Aetna, respectively, will not, (i) conflict
with or violate the Certificate of Incorporation or By-Laws of Buyer or Aetna,
respectively, (ii) violate any order, writ, injunction, decree, statute, treaty,
law, rule or regulation applicable to Buyer or Aetna, respectively, or (iii)
result in a violation or any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Buyer or Aetna,
respectively, is a party except for any such conflicts, violations, breaches,
defaults or other occurrences that would not prevent or delay in any material
respect consummation of the transactions contemplated by this Agreement or
otherwise prevent or delay in any material respect Buyer from performing its
obligations under this Agreement or Aetna from performing its obligations under
the Agreement to Indemnify.
4.5 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission from Buyer in connection with the
transactions contemplated herein by this Agreement.
SECTION 5. COVENANTS
5.1 Indemnification and Insurance.
(a) The Company covenants and agrees that from and after the Closing,
the Certificate of Incorporation and By-Laws of the Company shall contain the
provisions with respect to indemnification and limitations on personal liability
set forth in Exhibit D attached hereto, which provisions shall not be amended,
repealed or otherwise modified for a period of five years after the Closing in
any manner that would adversely affect the rights thereunder of individuals who
are covered thereby (the "Indemnified Parties") in respect of actions or
omissions occurring at or prior to the Closing (including, without limitation,
the transactions contemplated by this Agreement), unless such modification is
required by law.
(b) This Section 5.1 is intended for the irrevocable benefit of, and to
grant third party rights to, the Indemnified Parties and shall be binding on all
successors and assigns
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of Buyer and the Company. Each of the Indemnified Parties shall be entitled to
enforce the covenants contained in this Section 5.1.
(c) In the event the Company or any of its successors or assigns (i)
consolidates with or merges into any other person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person or entity, then, and in each such case, proper provision shall be
made so that the successors and assigns of the Company assume the obligations
set forth in this Section 5.1.
5.2 Conduct of Business of the Company. Except as otherwise provided for in
this Agreement or the Recapitalization and Stock Purchase Agreement or agreed to
by the Company, Buyer and the Stockholders in writing, the Company covenants and
agrees as to itself and each of its subsidiaries that between the date of this
Agreement and the Closing, it shall carry on its respective businesses in the
usual, regular and ordinary course, consistent with past practice. Without
limiting the generality of the foregoing, neither the Company nor either of its
subsidiaries shall, between the date of this Agreement and the Closing, directly
or indirectly, do any of the following without the prior written consent of
Buyer and the Stockholders except as provided for in this Agreement or the
Recapitalization and Stock Purchase Agreement:
(a) (i) Declare, set aside or pay any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
any of its capital stock or make any other payment to a stockholder of the
Company in such person's capacity as a stockholder of the Company, (ii) split,
combine, reclassify or subdivide any of its capital stock or (iii) repurchase,
redeem or otherwise acquire any of its capital stock;
(b) Authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver any shares of stock of any class or any other securities
or equity equivalents, other than the issuance of capital stock pursuant to the
Recapitalization and Stock Purchase Agreement, including in connection with the
exercise of Employee Options outstanding as of the date of this Agreement;
(c) Acquire, sell, lease, transfer or dispose of any assets other than
in the ordinary course of business, except pursuant to obligations or capital
expenditure programs in effect on the date hereof;
(d) Except in the ordinary course of business consistent with past
practice or pursuant to working capital credit facilities in existence on the
date hereof, incur any long-term indebtedness for borrowed money, guarantee any
indebtedness, issue or sell debt securities or warrants or rights to acquire any
debt securities, guarantee (or otherwise become liable or potentially liable
for) any debt of others, make any loans, advances or capital contributions,
mortgage, pledge or otherwise encumber any material assets, or create or suffer
any material Lien thereupon;
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(e) Change any of the accounting principles or practices used by it;
(f) Increase the compensation payable or to become payable to its
executive officers or employees, except for increases in the ordinary course of
business consistent with past practice which do not result in a material
increase in benefits or compensation expense to the Company or its subsidiaries
taken as a whole, or grant any severance or termination pay to, or enter into
any employment or severance agreement with, any director or executive officer of
it or any of its subsidiaries other than in the ordinary course of business, or
establish, adopt, enter into or, except as required by or as provided for in
this Agreement or the Recapitalization and Stock Purchase Agreement (including,
without limitation, the cancellation of Employee Options outstanding as of the
date hereof), amend in any material respect or take action to accelerate any
rights or benefits under any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any director,
executive officer or employee except as is provided therein;
(g) Enter into any transaction with an affiliate of the Company other
than in the ordinary course of business and except for the payment of bonuses to
management in the amount of $350,000 (less any applicable withholding taxes) and
payment of deferred compensation to Jerome Singer in the amount of $225,186
(less any applicable withholding taxes), such amounts to be paid at the Closing;
(h) Enter into any transaction with any Berkshire Stockholder,
Prudential, Pruco or Michigan except as discussed in Section 2.22 of the
Disclosure Letter;
(i) Amend or otherwise change the Company's Certificate of Incorporation
or By-Laws; or
(j) Enter into an agreement to take any of the foregoing actions.
5.3 No Solicitation. Unless this Agreement is terminated in accordance with
its terms, neither the Company nor any of its subsidiaries shall, and the
Company shall use reasonable efforts to ensure that none of its affiliates,
officers, directors, representatives or agents shall, directly or indirectly,
solicit, knowingly encourage or enter into any agreement with respect to or
participate in negotiations with, provide any confidential information to, or
otherwise cooperate in any way in connection with, or enter into any agreement
with respect to, any Third Party (as hereinafter defined) concerning any merger
or any other business combination, sale of a substantial portion of the assets
of the Company and its subsidiaries, or any similar transaction involving the
Company and its subsidiaries (each, a "Business Combination," provided, however,
that no transaction contemplated by this Agreement or the Recapitalization and
Stock Purchase Agreement or involving Buyer or any affiliate thereof shall be a
Business Combination). For purposes of this Agreement, "Third Party" shall mean
any person or persons (other than Buyer, any affiliate of Buyer, or any of
Buyer's directors,
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officers, employees, representatives, and agents.) The Company agrees to
terminate, immediately following the execution of this Agreement, any pending
discussions or negotiations with Third Parties with respect to any possible
Business Combination. If, prior to the earlier of the Closing or the termination
of this Agreement, the Company, any subsidiary of the Company or any Stockholder
shall enter into any agreement with a Third Party relating to any Business
Combination, the Company shall reimburse Buyer for all of the fees and expenses
(including fees and expenses of counsel and accountants) incurred by Buyer in
connection with the transactions contemplated by this Agreement.
5.4 Access to Information; Confidentiality.
(a) From the date hereof to the Closing, the Company shall (and shall
cause its subsidiaries and officers, directors, employees, auditors and agents
to) afford the officers, employees and agents of Buyer (the "Representatives")
reasonable access at mutually convenient times to its officers, employees,
agents, properties, offices, plants and other facilities, books and records, and
shall furnish such Representatives with all financial, operating and other data
and information as may be reasonably requested by Buyer.
(b) All information obtained by Buyer pursuant to this Section 5.4
shall, to the extent required thereby, be kept confidential in accordance with
the terms of the Confidentiality Agreement dated January 13, 1995 between Aetna
and Citicorp Venture Capital Ltd. (the "Confidentiality Agreement").
5.5 Public Announcements. Buyer and the Company shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement or any transaction contemplated herein and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such public statement as may be
required by law if it has used all reasonable efforts to consult with the other
party and to obtain such party's consent but has been unable to do so in a
timely manner.
5.6 Agreement Not To Merge. Buyer agrees that it will not, until the second
anniversary of this Agreement, merge with and into the Company or agree to do
so; provided, however, that Buyer may so merge with the Company on any date
following the first anniversary of the date of this Agreement if, prior to the
date of such merger, there has been a Qualifying Offering of the Company's
common stock.
5.7 Agreement To Issue Shares. Buyer agrees that, immediately prior to the
Closing, it shall issue shares of its common stock to the Company, such shares
to be all of the issued and outstanding capital stock of Buyer, and the Company
agrees that, in return for the issuance of such shares, it will (i) make a
capital contribution to Buyer of all the issued and outstanding shares of
capital stock of Aetna and (ii) simultaneously with the Closing, issue, on
behalf of Buyer, the Deferred Obligations.
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SECTION 6. CONDITIONS
6.1 Conditions to the Obligations of Buyer. The obligations of Buyer to
effect the transactions contemplated by this Agreement are subject to the
satisfaction or waiver of the following conditions:
(a) Representations; Warranties; Covenants. Each of the representations
and warranties of the Representing Parties contained in Section 2 and the
Stockholders contained in Section 3 shall be true and correct in all material
respects as of the date of the Agreement and (except as otherwise specifically
provided for by this Agreement or the Recapitalization and Stock Purchase
Agreement or arising out of or related to the transactions contemplated by this
Agreement or the Recapitalization and Stock Purchase Agreement and except as to
any representation or warranty which specifically relates to an earlier date) as
of the date of the Closing, as though made on and as of the date of the Closing
and the Representing Parties with respect to Section 2 and the Stockholders with
respect to Section 3 shall have delivered a certificate, executed by the
Representing Parties with respect to Section 2 and the Stockholders with respect
to Section 3 (except that the Stockholders' Representative may sign on behalf of
the Designating Stockholders), with respect to such Stockholder, to such effect
to Buyer. The Stockholders shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the date of the Closing and
the Stockholders shall have delivered a certificate, executed by the
Stockholders (except that the Stockholders' Representative may sign on behalf of
the Designating Stockholders), to such effect to Buyer.
(b) Prior Closings. The transactions contemplated by the
Recapitalization and Stock Purchase Agreement shall have been consummated and
the Recapitalization Closing and Stock Purchase Closing (as defined therein)
shall have occurred.
(c) Other Transactions. Immediately subsequent to the effectiveness of
the Amended and Restated Certificate, the Recapitalization Closing and the Stock
Purchase Closing, the following shall have occurred: (i) the execution and
delivery of the Stockholders Agreement by all parties thereto; (ii) the
contribution by the Company to Buyer of all of the issued and outstanding
capital stock of Aetna in exchange for issuance of all of the outstanding
capital stock of Buyer to the Company; (iii) the merger of Aetna with and into
Aetna Industries, Inc., a Delaware corporation which immediately prior to and
after such merger shall be a wholly owned subsidiary of Buyer; (iv) Buyer shall
have obtained debt financing on terms and conditions satisfactory to Buyer
sufficient to provide for the payment and full satisfaction of all obligations
of the Company as contemplated by this Agreement; (v) the dividend to Buyer of
at least $11,080,730 so that Buyer may satisfy its obligations hereunder; and
(vi) the 14% Senior Subordinated Notes due 1999 of Aetna shall have been paid in
full in accordance with the terms of the Securities Purchase Agreements dated as
of March 3, 1989, as amended, and the Senior Subordinated Notes issued
thereunder.
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6.2 Conditions to the Obligations of the Stockholders and the Management
Holders. The obligations of the Stockholders and the Management Holders to
effect the transactions contemplated by this Agreement are subject to the
satisfaction or waiver of the following conditions:
(a) Representations; Warranties; Covenants. Each of the representations
and warranties of Buyer contained in Section 4 shall be true and correct in all
material respects as of the date of the Agreement and (except as otherwise
specifically contemplated by this Agreement or the Recapitalization and Stock
Purchase Agreement or arising out of or related to the transactions contemplated
by this Agreement or the Recapitalization and Stock Purchase Agreement and
except as to any representation or warranty which specifically relates to an
earlier date) as of the date of the Closing as though made on and as of the date
of the Closing, and Buyer shall have delivered a certificate, executed by an
authorized officer of Buyer, to such effect to the Stockholders and the
Management Holders. Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the date of the Closing, and
Buyer shall have delivered a certificate, executed by an authorized officer of
Buyer, to such effect to the Stockholders and the Management Holders.
(b) Prior Closings. The transactions contemplated by the
Recapitalization and Stock Purchase Agreement shall have been consummated and
the Recapitalization Closing and Stock Purchase Closing (as defined therein)
shall have occurred.
(c) Other Transactions. Immediately subsequent to the effectiveness of
the Amended and Restated Certificate, the Recapitalization Closing and the Stock
Purchase Closing, the following shall have occurred: (i) the execution and
delivery of the Stockholders Agreement by all parties thereto; (ii) the
contribution by the Company to Buyer of all of the issued and outstanding
capital stock of Aetna in exchange for issuance of all of the outstanding
capital stock of Buyer to the Company; (iii) the merger of Aetna with and into
Aetna Industries, Inc., a Delaware corporation which immediately prior to and
after such merger shall be a wholly owned subsidiary of Buyer; (iv) Buyer shall
have obtained debt financing on terms and conditions satisfactory to Buyer
sufficient to provide for the payment and full satisfaction of all obligations
of the Company as contemplated by this Agreement; (v) the dividend to Buyer of
at least $11,080,730 so that Buyer may satisfy its obligations hereunder; and
(vi) the 14% Senior Subordinated Notes due 1999 of Aetna shall have been paid in
full in accordance with the terms of the Securities Purchase Agreements dated as
of March 3, 1989, as amended, and the Senior Subordinated Notes issued
thereunder.
(d) Agreement to Indemnify. Buyer shall have caused Aetna to enter into
an agreement with Russell L. Epker, Robert J. Small, James Bakken, Douglas A.
Thal and Jerome Singer whereby Aetna agrees to indemnify such persons on terms
comparable to the terms of Section 9.11 of this Agreement and otherwise
satisfactory to them.
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SECTION 7. INDEMNIFICATION.
7.1 Indemnification by the Stockholders and Management Holders. Each
Stockholder and Management Holder individually with respect to the
representations and warranties made by such Stockholder and Management Holder in
Section 3 and each Stockholder and Management Holder jointly and severally with
respect to the representations and warranties in Section 2, agrees to indemnify
and hold Buyer subject to the provisions of this Section 7, harmless from and
against any damages, liabilities, losses, fines, penalties, costs, and expenses
(including, without limitation, reasonable fees of counsel) of any kind or
nature whatsoever (collectively, "Losses") which may be sustained or suffered by
Buyer arising out of or based upon any breach of any representation or warranty
contained in Section 2 or 3 of this Agreement or of such Stockholder and
Management Holder under or in any certificate delivered by such Stockholder and
Management Holder pursuant hereto or based upon any breach of any covenant or
agreement, required by this Agreement to be performed before the Closing, by
such Stockholder.
7.2 Limitations on Indemnification by the Stockholders and Management
Holders.
(a) Notwithstanding the foregoing and subject to Section 7.6(d), (i)
except for any claim arising out of or based upon a breach of Sections 2.9, 2.11
or 2.13 of this Agreement, no indemnification shall be payable to Buyer with
respect to claims asserted pursuant to Section 7.1 on any date after the first
anniversary of the Closing, (ii) with respect to any claim arising out of or
based upon a breach of Section 2.9 or 2.11 of this Agreement, no indemnification
shall be payable to Buyer with respect to claims asserted pursuant to Section
7.1 on any date after the third anniversary of the Closing, (iii) with respect
to any claim arising out of or based upon a breach of Section 2.13 of this
Agreement, no indemnification shall be payable to Buyer with respect to claims
asserted pursuant to Section 7.1 on any date after the expiration of the statute
of limitations applicable to such claim (each such date being an
"Indemnification Cut-Off Date"), (iv) no Stockholder or Management Holder shall
be liable unless, and only to the extent that, the Losses for which the Buyer is
entitled to be indemnified for hereunder exceed, individually or in the
aggregate, $500,000 (any such excess, the "Indemnifiable Losses") and (v) each
Stockholder's and Management Holder's liabilities under this Section 7 with
respect to the Indemnifiable Losses shall be further limited by and paid only
according to the provisions of Section 7.6(b) and (c).
(b) No Stockholder or Management Holder shall be liable under this
Section 7 for an aggregate amount, for all claims made pursuant to this Section
7, in excess of the Set-Off Percentage (as defined in Section 7.6(a)) applicable
to each Note or Deferred Obligation held by such Stockholder or Management
Holder immediately following the Closing multiplied by five million dollars
($5,000,000).
(c) Notwithstanding any other provision of this Agreement, no
Stockholder or Management Holder shall be liable hereunder with respect to any
individual claim for indemnification for an Indemnifiable Loss unless such
Indemnifiable Loss is greater than
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$15,000, and thereafter the entire amount of such Indemnifiable Loss shall be
recoverable, to the extent provided by and in accordance with the provisions
of, this Section 7.
7.3 Indemnification by Buyer. Buyer agrees to indemnify and hold each of
the Stockholders and Management Holders harmless from and against any Losses
which may be sustained or suffered by any of them arising out of or based upon
any breach of any representation, warranty or covenant made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant hereto.
7.4 Limitation on Indemnification by Buyer. Notwithstanding the foregoing,
no indemnification shall be payable to the Stockholders with respect to claims
asserted pursuant to Section 7.3 above after the fourth anniversary of the
Closing.
7.5 Notice; Defense of Claims. An indemnified party may make claims for
indemnification hereunder by giving written notice thereof to any indemnifying
party within the period in which indemnification claims can be made hereunder;
provided, however, that notice by Buyer to the Designating Stockholders will be
deemed to be given if notice is given by Buyer to the Stockholders'
Representative. If indemnification is sought for a claim or liability asserted
by a third party, the indemnified party shall also give written notice thereof
to the indemnifying party promptly after it receives notice of the claim or
liability being asserted, but the failure to do so shall not relieve the
indemnifying party from any liability except to the extent that it is materially
prejudiced by the failure or delay in giving such notice. Such notice shall
summarize the bases for the claim for indemnification and any claim or liability
being asserted by a third party. The indemnifying party shall be entitled to
direct the defense against a third party claim or liability if it so elects. The
indemnified party shall at all times have the right to fully participate in the
defense of a third party claim or liability at its own expense directly or
through counsel. If the indemnifying party decides not to direct the defense,
the indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party), and to compromise or settle it, exercising
reasonable business judgment. If the third party claim or liability is one that
by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense. If the parties hereto attempt to resolve in
good faith a claim for indemnification hereunder and if such claim is not
resolved within 60 days from the date of such claim, the party making such claim
may bring suit in a court of competent jurisdiction.
7.6 Satisfaction of Stockholder Indemnification Obligations.
(a) Upon providing notice to the Stockholders and Management Holders of
a claim for an Indemnifiable Loss (the "Claimed Amount") pursuant to this
Section 7 within the applicable time periods set forth in Section 7.2(a), Buyer
shall be entitled to withhold payment of a portion of the unpaid principal
amount of each Note and Deferred Obligation that is still outstanding, such
withheld amount to be equal to the Claimed Amount multiplied by a fraction
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(such fraction herein referred to, for each such Note and Deferred Obligation,
as the "Set-Off Percentage"), the numerator of which shall be the principal
amount of each such Note or Deferred Obligation (or such Secondary Note (as such
term is defined in the Notes) or such correspondeing obligation under a Deferred
Obligation) then outstanding, as the case may be, and the denominator of which
shall be a notional amount equal to the sum of (i) the aggregate principal
amount of all then outstanding Notes and Deferred Obligations, (ii) the
aggregate principal amount of Notes and Deferred Obligations which have been
acquired or satisfied by the Company or any affiliate thereof in transactions
which did not constitute pro rata prepayments in accordance with the terms
thereof, (iii) the aggregate principal amount of all Secondary Notes and the
corresponding obligations under the Deferred Obligations which would have been
issued in connection with such acquired Notes or Deferred Obligations (both
directly with respect to such Notes or Deferred Obligations and indirectly with
respect to Notes or Deferred Obligations derivative therefrom) if they had not
been acquired, (iv) the aggregate principal amount of all Notes and Deferred
Obligations converted pursuant to their terms and conditions and (v) the
aggregate principal amount of all Secondary Notes and the corresponding
obligations under the Deferred Obligations which would have been issued in
connection with such converted Notes or Deferred Obligations (either directly
with respect to such Notes or Deferred Obligations or indirectly with respect to
Notes or Deferred Obligations derivative therefrom) if they had not been
converted. Upon a Determination (as defined in paragraph (b)) and the set-off or
reduction by the buyer as provided below, payment of such withheld amounts shall
be made as provided by the terms of the Notes and Deferred Obligations.
(b) Notwithstanding the provisions of paragraph (a) above, Buyer shall
be entitled to indemnification with respect to the amount of or any portion of
the amount of a claim pursuant to Section 7.1 hereof only upon the earlier of
(i) the execution and delivery by Buyer, the Stockholders and Management Holders
of a joint written statement acknowledging the liability for any such amount or
(ii) the final adjudication after all appeals by a court of competent
jurisdiction that Buyer is entitled to indemnification with respect to such
Claimed Amount or for an amount determined pursuant to the provisions of this
Section 7 which such court shall deem proper (each such acknowledgment or
determination, a "Determination" and the amount of the claim so acknowledged or
determined an "Indemnifiable Claim").
(c) Any and all amounts owed to Buyer by any Stockholder or Management
Holder with respect to an Indemnifiable Claim shall be satisfied only by means
of a reduction, by the appropriate Set-Off Percentage, in the principal amount
still outstanding of and accrued but unpaid interest on each Note and Deferred
Obligation held by such Stockholder or Management Holder; provided, however,
that (i) if an Indemnifiable Claim is asserted prior to June 30, 1997, reduction
shall be made first to the Prepayment Principal Amount (as such term is defined
in the Notes) and (ii) if an Indemnifiable Claim is asserted on or after June
30, 1997, such reduction shall be made only to the Remaining Principal Amount
(as such term is defined in the Notes); provided further, if the Indemnifiable
Claim relates to a breach of a representation or warranty in Section 3, the
Indemnifiable Claim may be satisfied (subject to all limitations set forth in
this Section 7) only by means of a reduction in the principal amount
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of and accrued but unpaid interest on the Notes and the Deferred Obligations,
if any, issued on the date of this Agreement to the Stockholder or Management
Holder who made such representation or warranty and to whom such
representation or warranty relates and no other Stockholder or Management Holder
shall be liable for any portion of such Indemnifiable Claim and no other Notes
or Deferred Obligations shall be subject to reduction in principal amount or
accrued interest pursuant to this Section 7. It is agreed and understood that
any reduction to the amounts, if any, due under the Notes or Deferred
Obligations pursuant to this Section 7 shall be in complete satisfaction of any
and all amounts payable to Buyer by such Stockholder or Management Holder with
respect to any Indemnifiable Claim made pursuant to this Section 7, and in no
event shall the aggregate amount payable pursuant to this paragraph (c) by any
Stockholder or Management Holder with respect to all Indemnifiable Claims exceed
the amount set forth in Section 7.2(b).
(d) If any of the Notes or Deferred Obligations are converted, pursuant
to their terms and provisions, into shares of common stock of the Company or are
paid or payable by the Company, Buyer shall have no right to make any further
claims for indemnification pursuant to this Section 7; provided, however, if,
prior to such conversion or prepayment in the case of a prepayment at the option
of Buyer, Buyer has made a claim for indemnification pursuant to this Section 7,
then until the date on which a Determination related to such claim is made, each
Stockholder or Management Holder (or, if the claim relates to a breach of a
representation or warranty contained in Section 3, the Stockholder or Management
Holder who made such representation or warranty and to whom such representation
or warranties relates) shall retain the lesser of (i) all shares of common stock
received by such Stockholder or Management Holder upon such conversion or (ii) a
number of shares of common stock received by such Stockholder or Management
Holder upon such conversion, valued at the closing price of such stock on the
date of the conversion therefor of the underlying Notes or Deferred Obligations,
equal in value to the Set-Off Percentage applicable to the Note or Deferred
Obligation so converted multiplied by the lesser of (X) the amount of such
Indemnifiable Claim or (Y) the "Aggregate Limit Amount," which shall mean the
least of (A) $5,000,000, (B) the amount of such claim or (C) $5,000,000 less the
sum of all Indemnifiable Claims previously satisfied by the Stockholders and
Management Holders and of any other amounts being retained by such Stockholder
or Management Holder pursuant to this sentence. If such retained shares are
subsequently sold or if the Note or Deferred Obligation is prepaid at the option
of Buyer, each Stockholder or Management Holder shall retain an amount in cash
equal to the lesser of (i) the net proceeds (after expenses and taxes) of such
sale or such prepayment amount, as applicable or (ii) the Set-Off Percentage
applicable to the Note or Deferred Obligation converted or prepaid at the option
of Buyer by such Stockholder or Management Holder multiplied by the lesser of
(X) the amount of such Indemnifiable Claim or (Y) the Aggregate Limit Amount.
After a Determination has been made with respect to such claim and the amount of
the Indemnifiable Claim has been determined, Buyer's sole remedy pursuant to
this paragraph (d) with respect to each Stockholder or Management Holder shall
be, at the election of each Stockholder and Management Holder, to receive from
each Stockholder and Management Holder either (i) cash in an amount equal to the
Set-Off Percentage applicable to the Note or Deferred Obligation converted or
prepaid at the option of
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Buyer by such Stockholder or Management Holder multiplied by the lesser of
(x) the amount of such Indemnifiable Claim or (y) the Aggregate Limit Amount
or (ii) a number of shares of common stock of the Company, valued at the closing
price of such stock on the date of the conversion therefor of the underlying
Notes or Deferred Obligations, equal in value to the Set-Off Percentage
applicable to the Note or Deferred Obligation converted by such Stockholder or
Management Holder multiplied by the lesser of (X) the amount of such
Indemnifiable Claim or (Y) the Aggregate Limit Amount. In the event of a
conversion or prepayment at the option of Buyer, the aggregate amount payable by
any Stockholder or Management Holder pursuant to this paragraph (d) shall not
exceed the amount of the least of (i) the amount set forth in Section 7.2(b),
(ii) the value of the shares of common stock of the Company received by such
Stockholder or Management Holder upon conversion or prepayment at the option of
Buyer of the Notes or Deferred Obligations, valued at the closing price of such
stock on the date of such conversion or prepayment or (iii) the net cash
proceeds (after expenses and taxes) of the sale of the common stock received by
such Stockholder or Management Holder upon conversion or from prepayment at the
option of Buyer of the Notes or Deferred Obligations, as the case may be.
SECTION 8. TERMINATION OF AGREEMENT.
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing as follows:
(a) by mutual written consent of all parties hereto;
(b) by any of the parties hereto if any United States federal or state
court of competent jurisdiction or any Government Entity shall have issued an
injunction, order, decree or ruling (an "Injunction") or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and such Injunction or other action shall have become final
and non-appealable; or
(c) by the Company, the Stockholders or Buyer, if (i) the Closing shall
not have occurred on or before August 16, 1996 and such failure is not caused by
breach of this Agreement by the terminating party or (ii) the Recapitalization
and Stock Purchase Agreement has been terminated in accordance with its terms.
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective employees, officers,
directors, agents, representatives or advisors, whether prior to or after the
execution of this Agreement.
8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1 hereof, this Agreement shall forthwith become
void and have no
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effect, without any liability on the part of any party hereof or its
affiliates, directors, officers or stockholders and all rights and
obligations of any party hereto shall cease, other than the provisions of
Section 5.4 and 9.1.
8.3 Amendment. This Agreement may be amended by the parties hereto at any
time prior to the Closing. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Closing, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (ii) waive any inaccuracies in the
representations and warranties of any other party contained herein or in any
documents delivered pursuant hereto and (iii) waive compliance by any other
party with any of the agreements or conditions contained herein. Any agreement
on the party of a party hereto any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party (except that
the Stockholders Representative may sign on behalf of the Designating
Stockholders).
SECTION 9. MISCELLANEOUS.
9.1 Fees and Expenses. Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement; provided, however, that the Company will pay all
costs incurred in connection with the transfer of the Company Shares to Buyer as
contemplated by this Agreement, including without limitation, all transfer taxes
and charges applicable to such transfer, all costs of obtaining permits,
waivers, registrations or consents with respect to any assets, rights or
contracts of the Company or any subsidiary, all legal, accounting or
professional expenses of the Company or Stockholders and all New York state
stock transfer taxes.
9.2 Governing Law. This Agreement shall be construed under and governed by
the internal laws of the State of New York without regard to its conflict of
laws provisions.
9.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
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(a) if to the Company, to
MS Acquisition Corp.
c/o Aetna Industries, Inc.
24331 Sherwood Avenue
Centerline, Michigan 48015-0067
Attention: Ueli Spring
Telephone: (810) 759-2200
Facsimile: (810) 759-2209
with a copy to:
MS Acquisition Corp.
c/o Berkshire Partners LLC
One Boston Place
Boston, Massachusetts 02108
Attention: Russell L. Epker
Telephone: (617) 227-0050
Facsimile: (617) 227-6105
and with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Stephen W. Carr, P.C.
Telephone: (617) 570-1000
Facsimile: (617) 523-1231
(b) if to the Stockholders, to
Berkshire Partners LLC
One Boston Place
Boston, Massachusetts 02108
Attention: Russell L. Epker
Robert J. Small
Telephone: (617) 227-0050
Facsimile: (617) 227-6105
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with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Stephen W. Carr, P.C.
Telephone: (617) 570-1000
Facsimile: (617) 523-1231
and to:
The Prudential Insurance Company of America
Pruco Life Insurance Company
c/o Prudential Financial Restructuring Group
Four Gateway Center, 9th Floor
Newark, New Jersey 07102-4069
Attention: Stephen Haeckel
Telephone: (201) 802-2678
Facsimile: (201) 802-2662
With a copy to:
Prudential Law Department
Four Gateway Center, 6th Floor
Newark, New Jersey 07102-4069
Attention: Jack Pfeilsticker
Telephone: (201) 802-9200
Facsimile: (201) 802-3853
and with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attention: Duncan J. Stewart
Telephone: (212) 821-8271
Facsimile: (212) 821-8111
and to:
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Michigan Department of Treasury
430 West Allegan
Lansing, Michigan 48922
Attention: Thomas Hufnagel
Telephone: (517) 373-4330
Facsimile: (517) 335-3668
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attention: Duncan J. Stewart
Telephone: (212) 821-8271
Facsimile: (212) 821-8111
(c) if to Buyer, to
Aetna Holdings, Inc.
c/o Aetna Industries, Inc.
24331 Sherwood Avenue
Centerline, Michigan 48015-0067
Attention: Ueli Spring
Telephone: (810) 759-2200
Facsimile: (810) 759-2209
with a copy to
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
Attention: Michael Delaney
Telephone: (212) 559-2056
Facsimile: (212) 888-2940
and:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178-0060
Attention: Philip H. Werner
Telephone: (212) 309-6080
Facsimile: (212) 309-6273
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9.4 Descriptive Headings. The descriptive headings herein are inserted
for convenience only and are not intended to be part of or to affect the meaning
or interpretation of this Agreement.
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.6 Termination of Other Agreements. The parties agree that, upon the
Closing, the following agreements shall terminate and from and after the Closing
shall have no further force and effect: the Stock Purchase and Stockholders
Agreement dated as of March 3, 1989 by and among the Company and the Purchasers
(as defined therein), the Parallel Exit Agreement dated as of March 3, 1989 by
and between the Stockholders (as defined therein), the Voting Rights Agreement
dated as of March 3, 1989 by and among the Company, the Berkshire Group (as
defined therein) and the Management Group (as defined therein), the Designated
Shares Agreement dated as of March 3, 1989 by and between the Company and the
Stockholders (as defined therein), the Registration Rights Agreement dated as of
March 3, 1989 by and among MS and the Berkshire Investors (as defined therein),
the Registration Rights Agreement dated as of March 3, 1989 by and between the
Company, Prudential, Pruco and Michigan, and the Management Agreement dated as
of March 3, 1989 by and among the Company, Aetna and Berkshire, each as may have
been amended from time to time, and the parties hereto consent to the
transactions contemplated by this Agreement or the Recapitalization and Stock
Purchase Agreement, whether or not such transactions are consistent with the
terms of the other agreements referred to in this Section 9.6. Each of the
parties hereto further agrees that there shall be no surviving rights or
liabilities or other obligations of any party to the other agreements referred
to in this Section 9.6 and each of the parties hereto releases all other parties
hereto, and their officers, directors, stockholders, partners, agents and
employees from all actions, causes of action, suits, debts, sums of money,
covenants, controversies, agreements, damages, judgments, claims and demands, at
law or in equity, arising out of such other agreements which it may now have or
has ever had on or prior to the date hereof.
9.7 Entire Agreement; Assignment. This Agreement (together with the
Disclosure Letter and the other documents delivered pursuant hereto or thereto)
(a) constitute the entire agreement of the parties and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; including, without limitation, the letter
of intent dated March 27, 1996, as amended, and (b) shall not be assigned by
operation of law or otherwise without the written approval of the other parties
hereto; provided, however, that any party may assign this Agreement to an
affiliate of such party, but such assignment will not relieve such party of its
obligations hereunder; and further provided that the Buyer at the Closing may
assign its rights under Section 7, subject to the provisions thereof, to any
holder of Senior Debt (as such term is defined in the Notes) on the day of the
Closing.
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9.8 Remedies. The remedies of the parties after the Closing with respect to
this Agreement and any transactions contemplated hereby, including without
limitation any breach of a representation or warranty or of any covenant to be
performed prior to the Closing contained herein by any party and any and all
claims, demands, damages, liabilities, expenses, actions and causes of action of
whatever nature, whether at law or in equity, whether or not presently known or
capable of proof as of the date of this Agreement or as of the Closing, arising
out of or relating to this Agreement or the transactions contemplated hereby,
shall be limited to the rights set forth in Section 7.
9.9 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person or
persons any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement, except pursuant to Sections 5.1 and 9.11 hereof.
9.10 Severability. The invalidity or unenforceability of a provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9.11 Indemnification by the Company and Buyer with Respect to Senior
Notes. The Company and Buyer, jointly and severally, agree to indemnify and hold
harmless Russell L. Epker, Robert J. Small, James Bakken, Douglas A. Thal and
Jerome Singer against any and all Losses to which such person may become subject
insofar as such Losses arise out of or are based on or are related to any untrue
statement or alleged untrue statement of any material fact contained in the
Offering Memorandum, or Preliminary Offering Memorandum dated July 25, 1996, or
any amendment or supplement thereto, relating to the Senior Notes due 2006 of
Aetna, or arise out of or are based upon or are related to the omission or
alleged omission to state in any of them a material fact required to be stated
therein or necessary to make the statements in any of them not misleading and
will promptly reimburse each such person for any reasonable legal and other
expenses as such expenses are incurred by such person in connection with
investigating, defending, settling, compromising or paying such Loss; provided,
however, that no indemnification shall be owing to such person pursuant to this
Section 9.11 to the extent such information arises out of or is based on any
untrue statement or omission or alleged omission made in such documents in
reliance upon or in conformity with written information furnished specifically
for use therein to the Company or its representative by or on behalf of such
person.
9.12 Further Assurances: Post-Closing Cooperation. At any time or from time
to time after the Closing, the parties hereto shall execute and deliver to Buyer
such other documents and instruments, provide such materials and information and
take such other actions as any party hereto may reasonably request in order that
the requested party fulfill its obligations under this Agreement which were to
be performed at or prior to the Closing.
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9.13 Limited Recourse. Notwithstanding anything in this Agreement, the
Recapitalization and Stock Purchase Agreement or any other document, agreement
or instrument contemplated hereby or thereby to the contrary, the obligations of
any entity under this Agreement or under the Recapitalization and Stock Purchase
Agreement shall be without recourse to any partner, associate or affiliate of
such entity, or any other of its respective officers, directors, employees or
agents and shall be limited to the assets of such entity.
9.14 Release of Representing Parties by Stockholders. Effective as of
the Closing, each of the Stockholders, on behalf of itself, and its
predecessors, successors, controlling or related entities, affiliates,
executors, administrators, heirs and assigns, and all of their respective past,
present and future representatives, agents, assigns, attorneys, directors,
officers, partners, stockholders and employees, and all other persons in
connection therewith that might claim by, through or under it or them
(collectively, the "Stockholder Releasors"), agrees to and hereby releases and
forever discharges the Representing Parties and their executors, administrators,
heirs and assigns, and all of their respective past, present and future
representatives, agents, assigns, attorneys, partners and employees
(collectively, the "Representing Party Releasees") from and against, and agrees
not to commence any suit or action based upon, any and all claims, demands,
damages, liabilities, expenses, actions and causes of action of whatever nature,
whether at law or in equity, whether presently known or capable of proof as of
the date of this Agreement or as of the Closing, arising out of or relating to
the (i) making of the representations and warranties contained in Section 2
hereof or (y) providing of information contained in the Disclosure Letter, which
any of the Stockholder Releasors has or may have, claimed or asserted against
the Representing Party Releasees; provided, however, that this Section 9.14 will
not cover, and will not release any Representing Party Releasee with respect to,
(i) such claims, demands, damages, liabilities, expenses or causes of action
which arise out of fraud or willful misconduct of or by such Representing Party
or (ii) the Buyer's rights pursuant to Section 7 hereof.
9.15 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" means a person that, directly or indirectly, through one
or more intermediaries, controls, is controlled by or is under common control
with, the first mentioned person;
(b) "associate" means with respect to any person, (i) any corporation or
organization of which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity; and (iii) any relative or spouse of such
person, or any relative of such spouse, who has the same home as such person or
who is a director or officer of such person or any of its parents or
subsidiaries.
(c) "control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor,
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of the power to direct or cause the direction of the management or policies
of a person, whether through the ownership of stock or as trustee or executor,
by contract or credit arrangement or otherwise;
(d) "knowledge of the Company" and similar phrases means the actual
knowledge of Ueli Spring, Harold Brown and Gary Easterly;
(e) "person" means any individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or government or any
agency or political subdivision thereof or any other entity;
(f) "Qualifying Offering" means the consummation of an underwritten
primary or secondary public offering of Common Stock registered under the
Securities Act of 1933, as amended, as the result of which the Company receives
at least $20 million of aggregate gross proceeds; and
(g) "subsidiary" or "subsidiaries" of Buyer or the Company or any other
person means any corporation, partnership, joint venture or other legal entity
of which Buyer or the Company or such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests, the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity, provided,
however, that Buyer shall be deemed not to be a subsidiary of the Company for
the purposes of this Agreement.
9.16 Survival of Representations and Warranties. Each of the
representations, warranties, agreements, covenants and obligations herein or in
any schedule, exhibit, certificate or financial statement delivered by any party
to the other party incident to this Agreement are material, shall be deemed to
have been relied upon by the other parties and shall survive the execution of
this Agreement regardless of any investigation and shall not merge in the
performance of any obligation by any party hereto; provided, however, that such
representations and warranties shall expire on the same dates as and to the
extent that the rights to indemnification with respect thereto under Section 7
shall expire.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
The Company: MS ACQUISITION CORP.
By: /s/ UELI SPRING
---------------------------------
President
The Stockholders: THE BERKSHIRE FUND
A LIMITED PARTNERSHIP
BY: BERKSHIRE CAPITAL ASSOCIATES,
LIMITED PARTNERSHIP
Its General Partner
By: /s/ RUSSELL L. EPKER
---------------------------------
A General Partner
/s/ BRADLEY M. BLOOM
--------------------------------------
Bradley M. Bloom
*
--------------------------------------
J. Christopher Clifford
/s/ RUSSELL L. EPKER
--------------------------------------
Russell L. Epker
/s/ CARL FERENBACH
--------------------------------------
Carl Ferenbach
/s/ RICHARD K. LUBIN
--------------------------------------
Richard K. Lubin
*
--------------------------------------
Lea Anne S. Ottinger
/s/ KEVIN T. CALLAGHAN
--------------------------------------
Kevin T. Callaghan
/s/ RUSSELL L. EPKER
- --------------------------------------
*By Power of Attorney
BERKSHIRE PARTNERS LLC, as Escrow
Agent
By: /s/ RUSSELL EPKER
----------------------------------
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THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ STEPHEN R. HAECKEL
----------------------------------
Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/ B. ROSS SMEAD
----------------------------------
Vice President
STATE TREASURER OF THE STATE OF
MICHIGAN, CUSTODIAN OF THE PUBLIC
SCHOOL EMPLOYEES' RETIREMENT
SYSTEM; STATE EMPLOYEES' RETIREMENT
SYSTEM; MICHIGAN STATE POLICE
RETIREMENT SYSTEM; JUDGES'
RETIREMENT SYSTEM; AND PROBATE
JUDGES' RETIREMENT SYSTEM
By: /s/ PAUL H. RICE
---------------------------------
Title
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/s/ JEROME SINGER
--------------------------------------
Jerome Singer
/s/ DOUGLAS A. THAL
--------------------------------------
Douglas A. Thal
/s/ ROBERT J. KLEIN
--------------------------------------
Robert J. Klein
/s/ STEVEN SINGER
--------------------------------------
Steven Singer
AETNA HOLDINGS, INC.
By: /s/ UELI SPRING
----------------------------------
President
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/s/ UELI SPRING
--------------------------------------
Ueli Spring
/s/ HAROLD BROWN
--------------------------------------
Harold Brown
/s/ GARY EASTERLY
--------------------------------------
Gary Easterly
/s/ EDWARD LAWSON
--------------------------------------
Edward Lawson
/s/ DANIEL PIERCE
--------------------------------------
Daniel Pierce
/s/ DAVID THAL
--------------------------------------
David Thal
/s/ RALPH BREDENBECK
--------------------------------------
Ralph Bredenbeck
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EXHIBIT A
LIST OF STOCKHOLDERS AND STOCKHOLDINGS
THE COMPANY SHARES TO BE SOLD
TO AETNA HOLDINGS
-------------------------------
NEW
CLASS NEW NEW CONSIDERATION TO BE
A CLASS B SERIES A RECEIVED BY STOCKHOLDER ADDITIONAL
COMMON COMMON PREFERRED ------------------------ CASH
NAME OF STOCKHOLDER STOCK STOCK STOCK CASH NOTES PAYMENT
- ------------------------------------ ------ ------- ---------- ---------- ---------- ----------
The Berkshire Fund.................. 0 449,574 57,436.160 $3,567,049 $2,814,747 $15,713.72
Bradley M. Bloom.................... 0 3,601 460.080 $ 28,573 $ 22,548 $ 137.31
J. Christopher Clifford............. 0 3,601 460.080 $ 28,573 $ 22,548 $ 137.31
Russell L. Epker.................... 0 3,601 460.080 $ 28,573 $ 22,548 $ 137.31
Carl Ferenbach...................... 0 3,601 460.080 $ 28,573 $ 22,548 $ 137.31
Richard K. Lubin.................... 0 3,601 460.080 $ 28,573 $ 22,548 $ 137.31
Lea Anne S. Ottinger................ 0 1,633 208.620 $ 12,956 $ 10,224 $ 0
Kevin T. Callaghan.................. 0 876 111.830 $ 6,946 $ 5,481 $ 30.73
The Prudential Insurance Company of
America........................... 0 491,335 62,771.420 $3,898,393 $3,076,208 $ 0
Pruco Life Insurance Company........ 0 36,978 4,724.270 $ 293,398 $ 231,520 $ 0
State Treasurer of the State of
Michigan, as Custodian............ 0 204,126 26,078.570 $1,619,599 $1,278,017 $ 0
Jerome Singer....................... 0 63,988 8,174.890 $ 507,698 $ 400,623 $ 0
Douglas A. Thal..................... 0 63,988 8,174.890 $ 507,698 $ 400,623 $ 0
Robert J. Klein..................... 0 38,393 4,904.930 $ 304,619 $ 240,374 $ 0
Steven Singer....................... 0 25,595 3,269.960 $ 203,079 $ 160,249 $ 0
51
EXHIBIT B
COMPANY OPTIONS AND CONSIDERATION TO BE RECEIVED BY MANAGEMENT HOLDERS
CONSIDERATION TO BE RECEIVED BY
MANAGEMENT HOLDER
-------------------------------------------------------
NEW NEW
COMPANY OPTIONS CLASS CLASS NEW
(TO BE A B SERIES A
EXCHANGED COMMON COMMON PREFERRED DEFERRED
NAME OF STOCKHOLDER AND CANCELED STOCK STOCK STOCK CASH OBLIGATIONS
- ------------------------------------ --------------- ------ ------ --------- ------- -----------
Ueli Spring......................... 30,000 5,093 0 650.270 $93,450 $ 240,374
Harold Brown........................ 10,800 1,834 0 234.100 $33,642 $ 86,535
Gary Easterly....................... 5,800 984 0 125.720 $18,067 $ 46,472
Edward Lawson....................... 5,800 984 0 125.720 $18,067 $ 46,472
Daniel Pierce....................... 5,800 984 0 125.720 $18,067 $ 46,472
David Thal.......................... 2,750 467 0 59.610 $ 8,566 $ 22,034
Ralph Bredenbeck.................... 1,250 212 0 27.090 $ 3,894 $ 10,016
52
EXHIBIT C
FORM OF JUNIOR SUBORDINATED DEBENTURE
53
EXHIBIT D
[ATTACH ARTICLE IV OF BY-LAWS AND ARTICLE NINTH OF CERTIFICATE OF INCORPORATION]