EXHIBIT 2(b)
AGREEMENT AND PLAN OF MERGER
among
COMMERCIAL METALS COMPANY,
LAI ACQUISITION COMPANY,
LOFLAND ACQUISITION, INC.,
THE LOFLAND COMPANY,
E. F. PRIVATE EQUITY PARTNERS (AMERICAS) L.P.,
and
THE TEXAS GROWTH FUND - 1995 TRUST
Dated as of December 23, 2003
TABLE OF CONTENTS
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Page
ARTICLE I THE MERGER......................................................................................1
SECTION 1.1. The Merger..........................................................................1
SECTION 1.2. Effect of the Merger................................................................2
SECTION 1.3. Certificate of Incorporation of the Surviving Corporation...........................2
SECTION 1.4. Bylaws of the Surviving Corporation.................................................2
SECTION 1.5. Board of Directors and Officers of the Surviving Corporation........................2
SECTION 1.6. Effective Time of the Merger........................................................2
ARTICLE II CONVERSION OF SHARES...........................................................................2
SECTION 2.1. Conversion of Capital Stock.........................................................2
SECTION 2.2. Dissenting Shares...................................................................5
SECTION 2.3. Purchase Price Adjustment...........................................................5
SECTION 2.4. No Further Ownership Rights in LAI.................................................10
SECTION 2.5. Exchange of Certificates...........................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LAI AND TLC................................................11
SECTION 3.1. Organization and Qualification.....................................................11
SECTION 3.2. Authorization......................................................................12
SECTION 3.3. No Violation.......................................................................12
SECTION 3.4. Capitalization of LAI..............................................................13
SECTION 3.5. Subsidiaries and Equity Investments................................................14
SECTION 3.6. Consents and Approvals of Governmental Authorities and Other Persons...............15
SECTION 3.7. Financial Statements; Other Financial Matters......................................15
SECTION 3.8. Internal Controls..................................................................16
SECTION 3.9. April 2000 Dividend................................................................17
SECTION 3.10. Accounts and Notes Receivable.....................................................17
SECTION 3.11. Inventory.........................................................................18
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SECTION 3.12. Customers, Suppliers and Employees................................................18
SECTION 3.13. Absence of Undisclosed Liabilities................................................19
SECTION 3.14. Absence of Certain Changes........................................................19
SECTION 3.15. Product Quality, Warranty Claims, Product Liability...............................21
SECTION 3.16. Litigation........................................................................21
SECTION 3.17. Liens.............................................................................22
SECTION 3.18. Real Estate.......................................................................22
SECTION 3.19. Condition of Assets; Title to Personal Property...................................23
SECTION 3.20. Location and Sufficiency of Assets................................................23
SECTION 3.21. Condemnations.....................................................................23
SECTION 3.22. Claims............................................................................23
SECTION 3.23. Certain Agreements................................................................24
SECTION 3.24. Compensation; Employment and Other Agreements.....................................25
SECTION 3.25. Employee Benefit Plans............................................................26
SECTION 3.26. Labor Relations...................................................................31
SECTION 3.27. Taxes.............................................................................31
SECTION 3.28. Compliance with Applicable Law....................................................34
SECTION 3.29. Brokers' Fees and Commissions.....................................................34
SECTION 3.30. Proprietary Rights................................................................34
SECTION 3.31. Insurance.........................................................................36
SECTION 3.32. Environmental Matters.............................................................36
SECTION 3.33. Books and Records.................................................................40
SECTION 3.34. Information.......................................................................41
SECTION 3.35. Certain Business Practices and Regulations; Potential Conflicts of Interest.......41
SECTION 3.36. No Material Adverse Effect........................................................41
SECTION 3.37. Agreements with Churchill and Other Debtholders...................................42
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDERS..................................42
SECTION 4.1. Ownership of Shares................................................................42
SECTION 4.2. Authorization......................................................................42
SECTION 4.3. No Violation.......................................................................43
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SECTION 4.4. Brokers and Finders................................................................43
ARTICLE V REPRESENTATIONS AND WARRANTIES OF CMC AND SUB..................................................43
SECTION 5.1. Organization.......................................................................43
SECTION 5.2. Authorization......................................................................44
SECTION 5.3. No Violation.......................................................................44
SECTION 5.4. Consents and Approvals.............................................................44
SECTION 5.5. Brokers and Finders................................................................44
ARTICLE VI COVENANTS.....................................................................................45
SECTION 6.1. Conduct of Business of each of the LAI Companies Prior to the Effective Time.......45
SECTION 6.2. Access to Information..............................................................48
SECTION 6.3. All Reasonable Efforts.............................................................48
SECTION 6.4. Consents and Approvals.............................................................48
SECTION 6.5. Public Announcements...............................................................48
SECTION 6.6. Notice of Breaches.................................................................49
SECTION 6.7. Exclusivity Agreement..............................................................49
SECTION 6.8. Escrow Agreement...................................................................51
SECTION 6.9. Waiver of Restrictions on Transfer.................................................51
SECTION 6.10. Delivery of Financial Statements..................................................52
SECTION 6.11. Tax Matters.......................................................................52
SECTION 6.12. Stockholder Approval..............................................................54
SECTION 6.13. Payment of Indebtedness by Related Persons........................................54
SECTION 6.14. 401(k) Plan.......................................................................54
SECTION 6.15. Environmental Insurance Policy; D&O Insurance Policy..............................55
SECTION 6.16. Accounts Receivable Collection....................................................55
SECTION 6.17. Opinions. Each of TGF and EFPE agrees to use its commercially
reasonable efforts to deliver to CMC within 15 days after the
Closing an opinion of its counsel in form reasonably satisfactory
to CMC and TGF or EFPE, as the case may be...................................55
ARTICLE VII CLOSING CONDITIONS...........................................................................55
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SECTION 7.1. Conditions to Each Party's Obligations under this Agreement........................55
SECTION 7.2. Conditions to the Obligations of CMC and Sub under this Agreement..................56
SECTION 7.3. Conditions to the Obligations of the Sellers under this Agreement..................59
ARTICLE VIII CLOSING.....................................................................................60
SECTION 8.1. Closing............................................................................60
ARTICLE IX TERMINATION AND ABANDONMENT...................................................................62
SECTION 9.1. Termination........................................................................62
SECTION 9.2. Procedure and Effect of Termination................................................63
ARTICLE X INDEMNIFICATION; REMEDIES......................................................................64
SECTION 10.1. Survival; Right to Indemnification Not Affected by Knowledge......................64
SECTION 10.2. Indemnification and Payment of Damages by the Sellers.............................64
SECTION 10.3. Indemnification and Payment of Damages by CMC and Sub.............................65
SECTION 10.4. Limitations of Liability..........................................................65
SECTION 10.5. Environmental Indemnification and Payment of Damages by the Sellers...............67
SECTION 10.6. Recourse Limited to Escrow Fund...................................................68
SECTION 10.7. Procedure for Indemnification--Third Party Claims.................................68
SECTION 10.8. Procedure for Indemnification--Other Claims.......................................70
SECTION 10.9. Exclusive Remedy..................................................................70
SECTION 10.10. Indemnification in Case of Strict Liability or Indemnitee Negligence.............70
ARTICLE XI MISCELLANEOUS PROVISIONS......................................................................70
SECTION 11.1. Amendment and Modification........................................................70
SECTION 11.2. Waiver of Compliance..............................................................70
SECTION 11.3. Validity..........................................................................71
SECTION 11.4. Fees and Obligations..............................................................71
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SECTION 11.5. Parties in Interest...............................................................71
SECTION 11.6. Notices...........................................................................71
SECTION 11.7. Governing Law.....................................................................74
SECTION 11.8. Counterparts......................................................................74
SECTION 11.9. Headings..........................................................................74
SECTION 11.10. Entire Agreement.................................................................74
SECTION 11.11. Assignment.......................................................................74
SECTION 11.12. Jurisdiction and Venue...........................................................74
SECTION 11.13. Disclosure of Tax Treatment......................................................75
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Exhibits:
Exhibit A: Certain Definitions
Exhibit B: Form of Certificate of Merger
Exhibit C: Form of Tangible Net Operating Assets Calculation
Exhibit D: Form of Escrow Agreement
Exhibit E: Form of Andrews Kurth, LLP Legal Opinion
Exhibit F: Form of Haynes and Boone, LLP Legal Opinion
Exhibit G: Form of Release
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
December 23, 2003, is made by and among Commercial Metals Company, a Delaware
corporation ("CMC"), LAI Acquisition Company, a Delaware corporation and a
wholly-owned subsidiary of CMC ("SUB"), Lofland Acquisition, Inc., a Delaware
corporation ("LAI"), The Lofland Company, a Delaware corporation and
wholly-owned subsidiary of LAI ("TLC"), EF Private Equity Partners (Americas)
L.P. ("EFPE"), and The Texas Growth Fund - 1995 Trust, a trust established by
the Constitution of the State of Texas ("TGF," and together with EFPE, the
"PRINCIPAL STOCKHOLDERS"). LAI and Sub are sometimes herein together referred to
as the "CONSTITUENT CORPORATIONS." LAI, TLC and the Principal Stockholders are
sometimes herein collectively referred to as the "SELLERS." Capitalized terms
have the meanings given to such terms on Exhibit A hereto.
RECITALS:
WHEREAS, CMC desires to acquire all of the issued and outstanding
shares of LAI's capital stock by means of a merger ("MERGER") of Sub into LAI,
pursuant to which (i) the stockholders of LAI shall receive cash payments in the
amounts set forth below, and (ii) CMC will become the sole stockholder of the
Surviving Corporation;
WHEREAS, the respective boards of directors of CMC, Sub, LAI and TLC,
the sole stockholder of Sub, and the stockholders of LAI, have approved this
Agreement, the Merger and the transactions contemplated hereby on the terms and
conditions set forth herein and in accordance with the General Corporation Law
of the State of Delaware ("DGCL"); and
WHEREAS, the Board of Directors of LAI has (i) determined that the
consideration to be paid to the stockholders of LAI for each share held by them
of capital stock of LAI in the Merger is fair to and in the best interests of
such stockholders, (ii) approved this Agreement and the transactions
contemplated hereby and (iii) recommended to such stockholders that they approve
the Merger and this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the applicable provisions of the DGCL, Sub shall
be merged with and into LAI as of the Effective Time. Following the Merger, the
separate existence of Sub shall cease, and LAI shall continue as the surviving
corporation in the Merger (the "SURVIVING CORPORATION") under the name "Lofland
Fabricators, Inc.".
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SECTION 1.2. Effect of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in the Certificate of Merger attached
hereto as Exhibit B (the "CERTIFICATE OF MERGER") and the applicable provisions
of the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of Sub and LAI shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Sub and LAI
shall become the debts, liabilities and duties of the Surviving Corporation.
From and after the Effective Time, the Surviving Corporation shall be a
wholly-owned subsidiary of CMC.
SECTION 1.3. Certificate of Incorporation of the Surviving Corporation.
At the Effective Time and without any further action on the part of the
Constituent Corporations, the Certificate of Incorporation of LAI will be
amended and restated in the form attached as Appendix A to the Certificate of
Merger until duly further amended.
SECTION 1.4. Bylaws of the Surviving Corporation. At the Effective Time
and without any further action on the part of the Constituent Corporations, the
Bylaws of Sub shall be the Bylaws of the Surviving Corporation until duly
further amended.
SECTION 1.5. Board of Directors and Officers of the Surviving
Corporation. At the Effective Time, the directors of Sub and the officers of Sub
immediately prior to the Effective Time shall be the directors and initial
officers of the Surviving Corporation, respectively, each of such directors and
officers to hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
SECTION 1.6. Effective Time of the Merger. The Constituent Corporations
will cause the Certificate of Merger and such other documents as are required by
the DGCL to be duly filed with the Secretary of State of the State of Delaware
as early as practicable on the Closing Date. The Merger shall become effective
upon the filing of and acceptance by the Delaware Secretary of State of the
Certificate of Merger and such other documents as are required by the DGCL to be
filed (the time of such acceptance being the "EFFECTIVE TIME").
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1. Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of the
capital stock of the Constituent Corporations:
(a) Sub Common Stock. Each issued and outstanding share of common
stock, $.001 par value per share, of Sub (i) shall be converted into one share
of common stock of the Surviving Corporation and remain outstanding after the
Effective Time, (ii) shall continue to be owned by CMC, and (iii) shall
represent all of issued and outstanding capital stock of the Surviving
Corporation.
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(b) Cancellation of Treasury Stock. All shares of common stock,
$0.001 par value per share, of LAI ("LAI COMMON STOCK"), all shares of Series A
Preferred Stock, $0.001 par value per share, of LAI ("LAI SERIES A PREFERRED
STOCK"), all shares of Series B Preferred Stock, $0.001 par value per share, of
LAI ("LAI SERIES B PREFERRED STOCK"), and all shares of Series C Preferred
Stock, $0.001 par value per share, of LAI ("LAI SERIES C PREFERRED STOCK," and,
collectively with LAI Series A Preferred Stock and LAI Series B Preferred Stock,
the "LAI PREFERRED STOCK," and, LAI Preferred Stock together with LAI Common
Stock, "LAI CAPITAL STOCK") that are owned directly or indirectly by LAI or by
any Subsidiary (collectively, the "TREASURY SHARES") shall be cancelled and no
consideration shall be delivered in exchange therefor.
(c) Conversion of LAI Capital Stock. Subject to SECTION 2.2
(Dissenting Shares):
(i) LAI Common Stock. Each share of LAI Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Treasury Shares and any Dissenting Shares) shall be automatically cancelled in
the Merger and will automatically be converted into the right to receive the
Common Per Share Amount;
(ii) LAI Series A Preferred Stock. Each share of LAI
Series A Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than Treasury Shares and any Dissenting Shares) shall be
automatically cancelled in the Merger and will automatically be converted into
the right to receive the Series A Per Share Amount;
(iii) LAI Series B Preferred Stock. Each share of LAI
Series B Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than Treasury Shares and any Dissenting Shares) shall be
automatically cancelled in the Merger and will automatically be converted into
the right to receive the Series B Per Share Amount;
(iv) LAI Series C Preferred Stock. Each share of LAI
Series C Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than Treasury Shares and any Dissenting Shares) shall be
automatically cancelled in the Merger and will automatically be converted into
the right to receive the Series C Per Share Amount (the Common Per Share Amount,
Series A Per Share Amount, Series B Per Share Amount, and Series C Per Share
Amount are sometimes each generally referred to as the "PER SHARE AMOUNT").
(d) Purchase Price; Merger Consideration. For purposes of this
Agreement, "PURCHASE PRICE" shall mean $46,961,435, subject to adjustment
pursuant to SECTION 2.3. The Purchase Price shall equal the sum of (i) the Debt
Payoff Amount plus (ii) the Merger Consideration. For purposes of this
Agreement, the following terms shall have the following meanings:
(i) "CHURCHILL CLOSING PAYMENT AMOUNT" means the
difference between (i) the Churchill Payoff Amount minus (ii) the Escrow Fund
Amount.
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(ii) "CHURCHILL HOLDBACK AMOUNT" means $2,000,000, as
adjusted pursuant to SECTION 2.3(b)(v).
(iii) "CHURCHILL ESCROW FUND PAYMENT AMOUNT" means
$7,000,000.
(iv) "CHURCHILL PAYOFF AMOUNT" means the aggregate dollar
amount necessary to (1) pay in full and indefeasibly extinguish all promissory
notes and other evidences of indebtedness and amounts outstanding under the
Churchill Loan Agreement, and under all agreements and instruments related
thereto, and (2) release all Liens on the properties or assets of the LAI
Companies and any capital stock of any of the LAI Companies held by or on behalf
of Churchill. The Churchill Payoff Amount shall equal the sum of (1) the Escrow
Fund Amount plus (2) the Churchill Closing Payment Amount and shall also equal
the difference between (1) the Debt Payoff Amount minus (2) the Senior
Obligations Payoff Amount. The Churchill Payoff Amount shall not exceed the
difference between (x) the Payoff Cap minus (y) the Senior Obligations Payoff
Amount.
(v) "DEBT PAYOFF AMOUNT" means the aggregate dollar
amount necessary to (1) pay in full and indefeasibly extinguish all promissory
notes and other evidences of indebtedness and amounts outstanding under the
Senior Loan Agreement and the Churchill Loan Agreement, and under all agreements
and instruments related thereto, and (2) release all Liens on the properties or
assets of the LAI Companies and any capital stock of any of the LAI Companies.
The Debt Payoff Amount shall be equal to the sum of (1) the Senior Obligations
Payoff Amount plus (2) the Churchill Payoff Amount and shall also be equal to
the difference between (1) the Purchase Price, minus (2) the Merger
Consideration.
(vi) "ESCROW FUND AMOUNT" means the sum of (1) the
Churchill Escrow Fund Payment Amount plus (2) the Churchill Holdback Amount.
(vii) "IRS PAYMENT AMOUNT" means $1,538,565.
(viii) "MERGER CONSIDERATION" means the aggregate amount
paid to the holders of LAI Capital Stock under SECTION 2.1(c).
(ix) "PAYOFF CAP" means the difference between (1) the
Purchase Price, as adjusted, minus (2) the Merger Consideration.
(x) "SENIOR OBLIGATIONS PAYOFF AMOUNT" means the
aggregate dollar amount necessary to (1) pay in full and indefeasibly extinguish
all promissory notes and other evidences of indebtedness and amounts outstanding
under the Senior Loan Agreement, and under all agreements and instruments
related thereto, and (2) release all Liens on the properties or assets of the
LAI Companies and any capital stock of any of the LAI Companies held by or on
behalf of the Senior Lenders, which shall be equal to the amount set forth in
the certificate described in SECTION 2.1(f). The Senior Obligations Payoff
Amount shall be equal to the difference between (1) the Debt Payoff Amount minus
(2) the Churchill Payoff Amount.
4
(e) Adjustment of Merger Consideration as a Result of
Reclassification, Etc. If, between the date of this Agreement and the Effective
Time (other than as contemplated hereby), the outstanding shares of LAI Common
Stock or LAI Preferred Stock (or any series thereof) shall have been changed
into a different number of shares or a different class or series by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or a stock dividend thereon shall be declared with a
record date within such period, the Per Share Amount to be received pursuant to
SECTION 2.1(c) for such class and/or series shall be adjusted as appropriate.
(f) Payoff Amounts. Immediately prior to the Effective Time, LAI
shall deliver to CMC a certificate or instrument, satisfactory in form and
substance to CMC, executed by a duly authorized representative of the Senior
Lenders that sets forth the Senior Obligations Payoff Amount. At the Effective
Time, Sub, and immediately upon consummation of the Merger, Surviving
Corporation shall be capitalized by CMC with cash equal to the sum of (a) the
Senior Obligations Payoff Amount plus (b) the Churchill Payoff Amount.
Simultaneously with and as part of the Closing, the Surviving Corporation shall
remit (x) to the Senior Lenders by wire transfer in immediately available funds
the Senior Obligations Payoff Amount, (y) to the Escrow Agent into the Escrow
Fund the Escrow Fund Amount, and (z) to Churchill by wire transfer in
immediately available funds an amount equal to the Churchill Closing Payment
Amount. CMC shall cause the Surviving Corporation to make the foregoing
remissions and deposits.
SECTION 2.2. Dissenting Shares. Shares of LAI Capital Stock issued and
outstanding immediately prior to the Effective Time that (a) have not been voted
for approval of this Agreement and the Merger or consented in writing thereto
pursuant to Section 228 of the DGCL and (b) with respect to which appraisal
rights have been properly perfected in accordance with Section 262 of the DGCL
(the "DISSENTING SHARES") shall not be converted into the right to receive the
applicable Per Share Amount for such class and/or series of shares of LAI
Capital Stock in accordance with this Agreement at or after the Effective Time,
unless and until the holder of such Dissenting Shares withdraws such holder's
demand for such appraisal in accordance with Section 262(k) of the DGCL or
becomes ineligible for such appraisal. If a holder of Dissenting Shares shall
withdraw in accordance with Section 262(k) of the DGCL or such holder's demand
for such appraisal shall become ineligible, then as of the later of the
Effective Time or the occurrence of such event, such holder's Dissenting Shares
shall cease to be Dissenting Shares and shall be converted into the right to
receive the applicable Per Share Amount for such class and/or series for each
share of LAI Capital Stock pursuant to SECTION 2.1(c) of this Agreement.
SECTION 2.3. Purchase Price Adjustment.
(a) Pre-Closing Statement.
(i) Accounting Principles. At least two (2) business days
prior to the Closing Date, LAI shall furnish to CMC and Sub the following
(collectively, the "PRE-CLOSING STATEMENT"): (A) a consolidated balance sheet of
LAI, prepared in accordance with GAAP applied in a manner consistent with the
1/31/03 Financial Statements as of the end of the most recently completed month
prior to the Closing Date (the "PRE-CLOSING BALANCE SHEET"); (B) a
5
listing of the adjustment amounts to each of the line items on the Pre-Closing
Balance Sheet that are necessary to estimate in good faith such Pre-Closing
Balance Sheet line items immediately prior to Closing; and (C) LAI's good faith
estimate, based on the Pre-Closing Balance Sheet and such adjustments, of the
Tangible Net Operating Assets immediately prior to the Closing (the "TANGIBLE
NET OPERATING ASSETS ESTIMATE") in the form attached hereto as Exhibit C;
provided, however, that (A) the aggregate amount of the fees and expenses of the
LAI Companies incurred at or prior to the Closing in connection with this
Agreement and the consummation of the transactions contemplated hereby,
including without limitation, fees, costs and commissions of the Escrow Agent,
any investment banking, brokers, finders, accounting or legal fees, costs or
commissions, or transfer taxes, conveyance and recording fees, documentary stamp
taxes and all other similar charges shall be fully reflected or estimated as a
liability in the Tangible Net Operating Assets Estimate on the Pre-Closing
Statement, but only to the extent they have not been paid prior to the Closing
(the "LAI EXPENSES"), (B) no prepaid expense related to any LAI Expense shall be
reflected as an asset in the Tangible Net Operating Assets Estimate on the
Pre-Closing Statement, (C) the gross amount of any Change of Control Payments
(without regard to taxes or other withholdings) shall be reflected as a
liability in the Tangible Net Operating Assets Estimate on the Pre-Closing
Statement to the extent they have not been paid by LAI prior to the Closing, (D)
all interest, charges, fees, expenses and penalties, including prepayment
penalties on or which become due as a result of any voluntary payments made by
LAI under SECTION 2.1(f) or in contemplation of or in connection with the
Closing on any Debt, shall be reflected as a liability in the Tangible Net
Operating Assets Estimate on the Pre-Closing Statement to the extent any of the
foregoing have not been paid by LAI prior to the Closing, (E) all costs,
including all premium costs, of the Environmental Insurance Policy and the D&O
Insurance Policy shall be reflected as a liability in the Tangible Net Operating
Assets Adjustment on the Pre-Closing Statement, but only to the extent they have
not been paid prior to the Closing, (F) the following amount shall be reflected
as a liability in the Tangible Net Operating Assets Estimate on the Pre-Closing
Statement (the "CANCELLATION OF INDEBTEDNESS TAX"): the product of (x) 38%
multiplied by (y) the dollar amount of Tax attributes other than LAI net
operating losses incurred prior to the Effective Time, including without
limitation the Tax basis in the properties of and capital stock held by the LAI
Companies and CMC and its direct and indirect subsidiaries, that are reduced due
to the amount of cancellation of indebtedness income that is not recognized by
the LAI Companies pursuant to Code Section 108(a)(1), after giving full effect
to all reductions, if any, in the Purchase Price pursuant to SECTION 2.3, (G)
the aggregate amount of unpaid Taxes of the LAI Companies with respect to any
Pre-Effective Time Periods (except for the IRS Payment Amount), shall be
reflected as liabilities in the Tangible Net Operating Assets Estimate on the
Pre-Closing Statement, (H) the amount of any Debt of any of the LAI Companies
(other than the Debt being extinguished pursuant to SECTION 2.1(f)) shall be
reflected as a liability in the Tangible Net Operating Assets Estimate on the
Pre-Closing Statement to the extent any such Debt has not been fully and
indefeasibly paid and extinguished by LAI prior to the Closing, (I) the
aggregate amount of any unpaid withdrawal liability of the LAI Companies in
connection with any multiemployer plan described in SECTION 3.25(d) shall be
reflected as a liability in the Tangible Net Operating Assets Estimate on the
Pre-Closing Statement, and (J) the amount of Inventory on the Pre-Closing
Statement shall be adjusted to equal the Inventory Value determined under
SECTION 2.3(a)(ii) (items (A) through (J) are hereinafter referred to as
"ADJUSTED ACCOUNTING PRINCIPLES").
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(ii) Adjustment for Inventory.
(A) Inspection and Valuation. LAI and CMC agree and
covenant that after the close of business on the Friday prior to the Closing
Date and until Closing (provided such Closing occurs on the following Monday),
no inventory of any of the LAI Companies ("INVENTORY") shall be added to or
removed from any Current Facility. Commencing immediately after the close of
business on the Friday prior to Closing and continuing for so long as may be
necessary, but no longer than two (2) days, representatives of LAI and CMC shall
conduct a joint inspection and appraisal of the Inventory. LAI shall make
available such personnel and equipment as may be necessary to move and count the
Inventory in order to assure LAI and CMC that an accurate and complete physical
inventory has been taken in order to properly value the Inventory. Following the
joint inspection and appraisal, LAI and CMC shall endeavor to agree upon a
mutually acceptable value for the Inventory, which shall be the lower of average
cost or market, including freight, and determined in a manner consistent with
the 1/31/03 Financial Statements. For purposes of this Agreement, the market
value shall be the market value of such Inventory as held by the LAI Companies.
The value of such Inventory as determined in accordance with this SECTION
2.3(a)(ii)(A) or SECTION 2.3(a)(ii)(B) below is referred to as the "INVENTORY
VALUE." The Inventory Value shall be used in the calculation of Tangible Net
Operating Assets pursuant to this SECTION 2.3.
(B) Resolution of Inventory Valuation Disputes. In
the event LAI and CMC are unable to agree upon a mutually acceptable price and
quantity for all or any part of the Inventory prior to Closing (provided,
however, that the resolution of Inventory valuation disputes shall not delay
Closing), either such party may notify the other of that party's desire to
submit the valuation of the Inventory items in dispute to a neutral third party
familiar with the business of LAI chosen by CMC and reasonably acceptable to LAI
(the "ARBITRATOR"). In the event LAI and CMC do not agree on an Arbitrator, LAI
and CMC together shall contact the president of the Concrete Reinforcing Steel
Institute (the "CRSI") and instruct the president of the CRSI to appoint an
Arbitrator within one (1) business day of the contact by LAI and CMC. The
Arbitrator shall, within forty-eight (48) hours after designation, together with
a representative of each party, inspect the Inventory items in dispute. Prior to
the Arbitrator's inspection, representatives of LAI and CMC shall inform the
Arbitrator and each other in writing of the quantity and value placed on the
disputed Inventory items by that party. Within twenty-four (24) hours of the
inspection, the Arbitrator shall determine the valuation of the Inventory items
and advise the parties in writing of its determination. The valuation determined
by the Arbitrator shall be the valuation of the Inventory items of either LAI or
CMC, which in the sole opinion of the Arbitrator most closely approximates the
lower of the average cost or market value of the disputed Inventory items. The
valuation of the party selected by the Arbitrator shall be the valuation that
shall be used in the calculation of the Tangible Net Operating Assets pursuant
to this SECTION 2.3. All travel, out-of-pocket expenses and charges of the
Arbitrator shall be borne by LAI and shall be reflected as LAI Expenses to the
extent they are not paid prior to the Closing. If (i) an Arbitrator has been
chosen to value Inventory items, (ii) the Arbitrator has not completed the
valuation of the Inventory prior to the Closing, and (iii) all conditions to
Closing have been satisfied or waived, then CMC's valuation of the disputed
Inventory shall be used by LAI for purposes of the Pre-Closing Statement, and
the Arbitrator's valuation of the disputed Inventory items under this SECTION
2.3(a)(ii)(B) shall be used by CMC for purposes
7
of the Post-Closing Statement. For purposes of this SECTION 2.3(a)(ii)(B), after
the Closing the Principal Stockholders shall act on behalf of LAI.
(iii) Purchase Price Adjustment. Based on the Pre-Closing
Statement, if the amount equal to the Tangible Net Operating Assets Estimate
minus $15,713,298 (the "TANGIBLE OPERATING ASSETS ADJUSTMENT") is a positive
number, then the Purchase Price shall be increased by such amount; provided,
however, that in no event shall the Purchase Price be increased by an amount in
excess of $1,000,000. If the Tangible Net Operating Assets Adjustment is a
negative number, the Purchase Price shall be reduced by such amount.
(b) Post-Closing Statement.
(i) As soon as practicable, but in no event more than 100
days after the Closing Date, the Surviving Corporation shall furnish Churchill
and the Principal Stockholders, as representatives of Churchill, a statement
(the "POST-CLOSING STATEMENT") reflecting the Tangible Net Operating Assets of
LAI and its consolidated Subsidiaries immediately prior to the Closing (the
"CLOSING TANGIBLE NET OPERATING ASSETS AMOUNT"), with the line items included in
the Closing Tangible Net Operating Assets Amount being determined in accordance
with GAAP applied in a manner consistent with the 1/31/03 Financial Statements
and the Adjusted Accounting Principles (except as otherwise provided herein,
references in the Adjusted Accounting Principles to the Pre-Closing Statement
shall be deemed references to the Post-Closing Statement for purposes of
calculating the Closing Tangible Net Operating Assets Amount). The Principal
Stockholders shall have the authority to take all actions and exercise all such
discretion on behalf of Churchill as may be necessary or advisable pursuant to
this SECTION 2.3(b).
(ii) "CLOSING DIFFERENTIAL" as used herein shall mean the
Proposed Closing Differential with such revisions, adjustments and changes
thereto, if any, as shall be effected pursuant to this SECTION 2.3(b). "PROPOSED
CLOSING DIFFERENTIAL" as used herein shall mean, as reflected in the
Post-Closing Statement, the amount (whether a positive or negative number) equal
to the difference between (1) the Closing Tangible Net Operating Assets Amount
minus (2) the Tangible Net Operating Assets Estimate.
(iii) Within 30 days after the delivery of the
Post-Closing Statement to the Principal Stockholders and Churchill, the
Principal Stockholders shall either accept the amount of the Proposed Closing
Differential as reflected on the Post-Closing Statement as correct or object to
the Proposed Closing Differential, specifying in reasonable detail in writing
the nature of their objection(s). The Principal Stockholders shall not be
entitled to object to the Inventory Value used in the calculation of Tangible
Net Operating Assets as finally determined pursuant to SECTION 2.3(a)(ii) or to
the impact of the Inventory Value as so determined on the Closing Differential.
In the event the Principal Stockholders do not object to the Proposed Closing
Differential within said 30-day period, the Principal Stockholders shall
conclusively be deemed to have accepted the Proposed Closing Differential as the
Closing Differential, and the Proposed Closing Differential shall be, absent
manifest error, final and binding on the parties. In the event either Principal
Stockholder objects to the Proposed Closing Differential, then, during a 15-day
period subsequent to the receipt by the Surviving Corporation of notice of such
8
objection(s), the Surviving Corporation and the objecting Principal
Stockholder(s) shall attempt in good faith to resolve the differences respecting
such Proposed Closing Differential. In the event the Surviving Corporation and
the objecting Principal Stockholder(s) are unable to resolve their differences
within said 15-day period, the Surviving Corporation shall select a firm of
certified public accountants reasonably acceptable to the objecting Principal
Stockholder(s) (which shall be one of KPMG LLP, Grant Thornton LLP or BDO
Seidman, LLP) to determine the Closing Differential pursuant to this SECTION
2.3, whose determination shall be, absent manifest error, final and binding on
the parties. If, as a result of such arbitration, it is determined that the
Closing Differential differs from the Proposed Closing Differential by an
aggregate amount greater than twelve and one-half percent (12.5%) of such
Closing Differential, CMC shall pay the cost of arbitration. Otherwise, the
Principal Stockholders shall be severally obligated to pay their proportionate
share of the cost of the arbitration. During the period from the date of
delivery of the Post-Closing Statement to the Principal Stockholders and
Churchill through the date of resolution of any dispute regarding the Proposed
Closing Differential as contemplated by this SECTION 2.3(b)(ii), CMC shall cause
the Surviving Corporation and each Subsidiary to provide the Principal
Stockholders and their agents and representatives reasonable access to the
books, records (including any work papers, supplemental schedules and other
materials prepared or used by the Surviving Corporation or auditing firm in
connection with preparation of the Post-Closing Statement and the Closing
Tangible Net Operating Assets Amount), facilities and employees of the Surviving
Corporation and each Subsidiary for purposes relevant to the review of such
Post-Closing Statement and the resolution of any related dispute.
(iv) Based on the Post-Closing Statement, within three
(3) days after the final determination of the Closing Differential, if the
amount of the Closing Differential is a positive amount or zero, then (x) the
Purchase Price shall be increased by the amount of any positive Closing
Differential, subject to the limitation in SECTION 2.3(a)(iii), (y) CMC or the
Surviving Corporation shall remit to Churchill an amount equal to any positive
Closing Differential, and (z) CMC and Churchill shall instruct the Escrow Agent
to remit to Churchill the Churchill Holdback Amount. CMC and Churchill agree to
give all notices and instructions to the Escrow Agent necessary to effect the
provisions of this SECTION 2.3(b)(iv).
(v) Based on the Post-Closing Statement, within three (3)
days after the final determination of the Closing Differential, if the amount of
the Closing Differential is a negative amount, then (x) the Purchase Price shall
be decreased by the amount of the Closing Differential pursuant to SECTION
2.3(a)(iii), and (y) CMC and Churchill shall instruct the Escrow Agent to pay to
CMC, out of the Churchill Holdback Amount, an amount equal to the Closing
Differential and to remit to Churchill the balance, if any, of the Churchill
Holdback Amount. In the event that the amount of the Closing Differential
exceeds the amount of the Churchill Holdback Amount, as adjusted pursuant to
this SECTION 2.3(b)(v), Churchill shall remit to CMC the difference between the
Closing Differential and the Churchill Holdback Amount, as adjusted; provided,
however, in no event shall Churchill be required to remit an amount greater than
the Churchill Closing Payment Amount; and provided further, that in the event
the Closing Differential exceeds the sum of the Churchill Holdback Amount plus
the Churchill Closing Payment Amount, then CMC and Churchill shall instruct the
Escrow Agent to pay to CMC, out of the Churchill Escrow Fund Payment Amount, an
amount equal to the excess
9
of the Closing Differential above the sum of the Churchill Holdback Amount and
the Churchill Closing Payment Amount. CMC and Churchill agree to give all
notices and instructions to the Escrow Agent necessary to effect the provisions
of this SECTION 2.3(b)(v). The parties hereby further agree that, if the Closing
Differential exceeds the Churchill Holdback Amount and Churchill shall fail to
remit to CMC the difference between the Closing Differential and the Churchill
Holdback Amount, then CMC shall be entitled to make a claim and recover such
amount out of the Churchill Escrow Fund Payment Amount pursuant to ARTICLE X.
SECTION 2.4. No Further Ownership Rights in LAI. At and after the
Effective Time, each holder of shares of LAI Common Stock and LAI Preferred
Stock immediately prior to the Effective Time shall cease to have any rights as
a stockholder of LAI, except for the right to surrender such stockholder's stock
certificate(s) in exchange for receipt of the Merger Consideration described in
SECTION 2.1(c), or otherwise provided by Law including any rights with respect
to the holders of Dissenting Shares. Any certificates presented after the
Effective Time for transfer shall be cancelled and exchanged for the appropriate
Merger Consideration. CMC shall have no obligation to deliver to stockholders of
LAI their portion of the Merger Consideration except to the extent that such
stockholders have caused certificates representing LAI Capital Stock (or
affidavits of lost certificate in form and substance reasonably acceptable to
CMC, if applicable and, if requested as provided below, the posting of a bond),
to be tendered to CMC.
SECTION 2.5. Exchange of Certificates.
(a) Establishment of Escrow Fund. As of the Effective Time, CMC
shall create a fund (the "ESCROW FUND") and CMC and, pursuant to SECTION 2.1(f),
the Surviving Corporation shall deposit or shall cause to be deposited with a
bank or trust company designated by the parties as the escrow agent ("ESCROW
AGENT") into the Escrow Fund, an amount equal to the Escrow Fund Amount, which
amount shall be held and subsequently distributed pursuant to the provisions of
SECTION 2.3(b) and the Escrow Agreement in substantially the form attached
hereto as Exhibit D (the "ESCROW AGREEMENT").
(b) Exchange Procedures. No later than three (3) business days
after the Effective Time, CMC shall mail or cause to be mailed to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of LAI Capital Stock (the "CERTIFICATES")
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to CMC and shall be in customary form) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the applicable Merger Consideration. Upon surrender of a
Certificate for cancellation to CMC together with such letter of transmittal,
properly completed and duly executed, and such other documents as may be
reasonably required pursuant to such instructions, the holder of such
Certificate shall, subject to SECTION 2.1(b) and SECTION 2.2, be entitled to
receive the applicable Merger Consideration which such holder has the right to
receive in respect of the shares of LAI Capital Stock formerly represented by
such Certificate, and the Certificate so surrendered shall forthwith be
cancelled. In no event will interest be paid or accrued on any portion of the
Merger Consideration payable to holders of Certificates.
10
(c) Unregistered Transfer of LAI Capital Stock. In the event of a
transfer of ownership of LAI Capital Stock prior to the Effective Time which is
not registered in the transfer records of LAI, the appropriate Merger
Consideration may be issued to a transferee if the Certificate representing such
LAI Capital Stock is presented to CMC, accompanied by all documents reasonably
required by CMC, including (i) documents to evidence and effect such transfer
and by evidence that any applicable stock transfer taxes have been paid and (ii)
documents evidencing transferee's representations or warranties of ownership to
CMC.
(d) Stock Transfer Books. At the Effective Time, the stock
transfer books of LAI shall be closed, and thereafter there shall be no further
registration of transfer of shares of LAI Capital Stock theretofore outstanding
on the records of LAI.
(e) Withholding Rights. CMC shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of LAI Capital Stock such amounts as CMC is required to
deduct and withhold with respect to the making of such payment under the Code or
any other Law. To the extent that amounts are so withheld by CMC, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to such holder in respect of which such deduction and withholding was made by
CMC.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF LAI AND TLC
LAI and TLC, jointly and severally, warrant to each of CMC and Sub as
set forth below except as set forth in the Disclosure Schedule delivered by LAI
to CMC and Sub as of the date hereof (the "DISCLOSURE SCHEDULE"). The Disclosure
Schedule and all representations and warranties in any certificates delivered by
any of the LAI Companies to CMC or Sub pursuant to this Agreement are hereby
incorporated by reference into this ARTICLE III and shall be deemed to be
representations and warranties made in this ARTICLE III. Nothing in the
Disclosure Schedule shall be deemed to disclose an exception to a representation
or warranty made herein unless the Disclosure Schedule identifies the specific
representation or warranty by reference to the Section number in this Agreement
to which the exception applies. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
without further explanatory disclosure shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty relates to the existence of the document or other
item itself). The Disclosure Schedule will be arranged in sections according to
the numbered and lettered sections contained in this Article.
SECTION 3.1. Organization and Qualification. Each of LAI and its
respective Subsidiaries (collectively, the "LAI COMPANIES") is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with all requisite corporate power and authority
to own, operate and lease its properties and to carry on its
11
business as it is now being conducted, and is qualified or licensed to do
business and is in good standing in every jurisdiction where the nature of the
business conducted by it or the properties owned or leased by it requires
qualification. The jurisdictions in which the LAI Companies are qualified to
transact business are set forth in SECTION 3.1 of the Disclosure Schedule. Each
of the LAI Companies has delivered to CMC complete and correct copies of its
Certificate or Articles of Incorporation and Bylaws as amended to date (the
"CHARTER DOCUMENTS"). The Charter Documents are in full force and effect and
have not been amended, modified, revoked, terminated or canceled or in any other
manner varied from the copies delivered to CMC. LAI has delivered to CMC true,
complete and correct copies of the minute books of the LAI Companies, and the
copies thereof delivered to CMC are complete and accurate copies of all
materials included therein for the periods covered thereby. None of the LAI
Companies is in violation of any provision of its respective Charter Documents.
SECTION 3.1 of the Disclosure Schedule lists all assumed names that any of the
LAI Companies holds or uses.
SECTION 3.2. Authorization. LAI and TLC have full corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which they are a party and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which they are a party by LAI and TLC, the performance by LAI and
TLC of their respective obligations hereunder and thereunder, and the
consummation by them of the transactions contemplated hereby and thereby, have
been duly and validly authorized by their respective boards of directors. The
affirmative vote of holders of a majority of the outstanding shares of LAI
Common Stock, voting together with the Series A Preferred Stock, and the holders
of sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
each voting as a separate class, at a meeting of such holders, or by means of
written consents in lieu of a meeting, to adopt this Agreement (the "STOCKHOLDER
APPROVAL") has been obtained and is the only vote of the holders of any class or
series of capital stock of LAI necessary to adopt this Agreement and approve the
transactions contemplated hereby. No other corporate action on the part of LAI
and TLC is necessary to authorize the execution and delivery of this Agreement,
the Ancillary Agreements to which either of them is a party or the consummation
of the transactions contemplated hereby or thereby. The Board of Directors of
LAI has duly recommended to the stockholders of LAI that they approve this
Agreement, the Merger and all of the transactions contemplated hereby. This
Agreement has been and as of the Closing Date, the Ancillary Agreements to which
LAI and TLC are a party will have been duly and validly executed and delivered
by LAI and TLC and, assuming this Agreement and the Ancillary Agreements
constitute the valid and binding obligations of CMC, Sub and any other party
thereto other than LAI and TLC, constitute legal, valid and binding obligations
of LAI and TLC, enforceable against each of them in accordance with its terms.
SECTION 3.3. No Violation. Except as set forth in SECTION 3.3 of the
Disclosure Schedule, neither the execution and delivery of this Agreement and
the Ancillary Agreements to which they are a party by LAI and TLC and the
performance by LAI and TLC of their respective obligations hereunder and
thereunder, nor the consummation by LAI and TLC of the transactions contemplated
hereby and thereby will, directly or indirectly:
12
(a) violate, conflict with or result in any breach of (with or
without due notice or lapse of time or both) any provision of the Charter
Documents of any of the LAI Companies or be inconsistent with any resolution
adopted by the board of directors or stockholders of any of the LAI Companies
currently in effect;
(b) violate, conflict with or result in a violation or breach of,
or constitute a default (with or without due notice or lapse of time or both)
under, or permit the termination of, or require the consent of any other party
to, or result in the acceleration of, or entitle any party to accelerate
(whether as a result of a change in control of any of the LAI Companies or
otherwise) any of the terms, conditions or provisions of any Material Contract
to which any of the LAI Companies is a party, or result in the loss of any
benefit, or give rise to the creation of any Lien upon the capital stock or any
of the properties or assets of any of the LAI Companies;
(c) violate any Order of any court or Governmental Authority
applicable to any of the LAI Companies or any of their respective properties or
assets currently in effect;
(d) violate any requirement of Law applicable to the LAI
Companies,
(e) contravene, conflict with, violate or breach any of the terms
or requirements of, or give any Governmental Authority the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Permit; or
(f) cause CMC, the Sub, the Surviving Corporation or any of the
LAI Companies to become subject to, or to become liable for the payment of, any
Tax or cause any of the assets or properties of any of the LAI Companies to be
reassessed or revalued by any Taxing authority or other Governmental Authority.
SECTION 3.4. Capitalization of LAI. The authorized capital stock of LAI
consists of 20,000 shares of Common Stock and 19,500 shares of Preferred Stock,
of which 8,620 shares have been designated Series A Preferred Stock, 3,100
shares have been designated Series B Preferred Stock, 7,000 shares have been
designated Series C Preferred Stock, and 780 shares remain undesignated. As of
the date hereof, LAI has, in the aggregate, 6,099 shares of Common Stock
(including 38 Treasury Shares), 8,580 shares of Series A Preferred Stock
(including -0- Treasury Shares), 2,752 shares of Series B Preferred Stock
(including -0- Treasury Shares), and 6,007 shares of Series C Preferred Stock
(including -0- Treasury Shares) issued and outstanding, all of which have been
duly authorized, validly issued, are fully paid and non-assessable, and were
issued in accordance with the registration or qualification provisions of the
Securities Act of 1933, as amended (the "SECURITIES ACT") and applicable state
securities Laws or pursuant to valid exemptions therefrom. The Merger will not
entitle the LAI Preferred Stockholders to receive any liquidation preference,
preferential payment or other payment or distribution and will not entitle any
LAI Preferred Stockholder to require LAI to repurchase or redeem any shares of
LAI Preferred Stock. All preemptive rights, rights of first refusal and any
similar rights governing or binding on LAI or its Subsidiaries that may have
been applicable to the issuance of such shares were duly and validly complied
with or waived in compliance with all applicable Laws and any agreements
governing such rights. Except as set forth in SECTION 3.4 of the Disclosure
Schedule or as set forth in its Certificate of Incorporation, as amended, LAI
has no
13
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution with respect thereof. SECTION 3.4 of the Disclosure
Schedule sets forth a complete and accurate listing of all holders of record of
LAI Common Stock and LAI Preferred Stock and the number of shares owned. Except
as set forth in SECTION 3.4 of the Disclosure Schedule, there are no options,
warrants, calls, subscriptions, conversion or other rights, agreements or
commitments obligating LAI to issue any additional shares of LAI Capital Stock
or any other securities convertible into, exchangeable for or evidencing the
right to subscribe for any shares of LAI Capital Stock. Immediately prior to the
Closing, no such options, warrants, calls, subscriptions, conversion or other
rights, agreements or commitments shall exist or be outstanding.
SECTION 3.5. Subsidiaries and Equity Investments.
(a) SECTION 3.5(a) of the Disclosure Schedule sets forth (i) the
name of each corporation of which LAI directly or indirectly owns shares of
capital stock having in the aggregate 50% or more of the total combined voting
power of the issued and outstanding shares of capital stock entitled to vote
generally in the election of directors of such corporation (individually, a
"SUBSIDIARY" and collectively, the "SUBSIDIARIES"); (ii) the name of each
corporation, partnership, joint venture or other entity (other than the
Subsidiaries) in which any of the LAI Companies have, or pursuant to any
agreement have the right to acquire at any time by any means, an equity interest
or investment; (iii) in the case of each of the Subsidiaries and such other
corporations described in the foregoing clause (i), (A) the jurisdiction of
incorporation and (B) the complete capitalization thereof and the percentage of
each class of voting stock owned by any of the LAI Companies on the date hereof;
and (iv) in the case of each of such unincorporated entities, the equivalent of
the information provided pursuant to the preceding clause (iii) with regard to
corporate entities.
(b) All of the outstanding shares of capital stock of each
Subsidiary have been duly authorized, validly issued, are fully paid and
non-assessable, and were issued in accordance with the registration or
qualification provisions of the Securities Act and applicable state securities
Laws or pursuant to valid exemptions therefrom. All preemptive rights, rights of
first refusal and any similar rights that may have been applicable to the
issuance of such shares were duly and validly complied with or waived in
compliance with all applicable Laws and any agreements governing such rights.
None of the LAI Companies has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution with respect
thereof. Except as set forth in SECTION 3.5(b) of the Disclosure Schedule, all
of the shares of capital stock of each subsidiary are owned of record and
beneficially, directly or indirectly, by LAI, free and clear of any Liens.
(c) There are no options, warrants, calls, subscriptions,
conversion or other rights, agreements or commitments obligating any of the
Subsidiaries to issue any additional shares of capital stock of such Subsidiary
or any other securities convertible into, exchangeable for or evidencing the
right to subscribe for any shares of such capital stock.
14
SECTION 3.6. Consents and Approvals of Governmental Authorities and
Other Persons. Except as set forth in SECTION 3.6 of the Disclosure Schedule and
for any required consents, approvals, filings or registrations under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and the filing of the Certificate of Merger with the Delaware Secretary
of State pursuant to the DGCL, no filing or registration with, no notice to, and
no Permit or consent of any Governmental Authority or other person is necessary
in connection with the execution, delivery and performance of this Agreement and
the Ancillary Agreements by LAI and TLC, or the consummation by LAI and TLC of
the transactions contemplated hereby and thereby.
SECTION 3.7. Financial Statements; Other Financial Matters. LAI has
delivered to CMC (i) copies of the audited consolidated balance sheets of LAI
and its consolidated Subsidiaries as of January 31, 1999, January 31, 2000,
January 31, 2001, January 31, 2002 and January 31, 2003, together with the
related audited consolidated statements of income, stockholders' equity and
changes in cash flow for the fiscal years ended (eight months in the case of the
financial statements accompanying the January 31, 1999 balance sheet) on such
dates, and the notes thereto, accompanied by the reports thereon of the
applicable firm of independent public accountants (the "AUDITED FINANCIAL
STATEMENTS"), and (ii) copies of the unaudited consolidated balance sheet of LAI
as of November 30, 2003, together with the related unaudited consolidated
statements of income, stockholders' equity and changes in cash flow for the
eleven-month period ended on such date, certified by the chief financial officer
of LAI (the "INTERIM FINANCIAL STATEMENTS") (such Audited Financial Statements
and Interim Financial Statements being hereinafter referred to as the "FINANCIAL
STATEMENTS"). The Financial Statements referred to in this SECTION 3.7 reflect
and will reflect the consistent application of such accounting principles
throughout the periods involved, except as disclosed in the notes to such
Financial Statements or SECTION 3.7 of the Disclosure Schedule. Except as set
forth in SECTION 3.7 of the Disclosure Schedule, the Financial Statements,
including the notes thereto, (a) were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods covered thereby, (b) present fairly, in all material respects, the
consolidated financial position, results of operations and changes in
stockholders' equity and cash flows of LAI and its consolidated Subsidiaries as
of such dates and for the periods then ended (subject, in the case of the
Interim Financial Statements, to normal year end audit adjustments consistent
with prior periods that would not be material, individually or in the
aggregate), and (c) in the case of the Audited Financial Statements, have been
audited in accordance with U. S. generally accepted auditing standards. SECTION
3.7 of the Disclosure Schedule lists all assets of the LAI Companies (other than
assets having a value less than $5,000 individually) not reflected in the
Interim Financial Statements or that have not been sold in the ordinary course
of business. Neither LAI nor any of its Subsidiaries has entered into any
securitization transactions or off-balance sheet arrangements (as defined in
Item 303(c) of Regulation S-K promulgated by the Securities and Exchange
Commission). The Pre-Closing Statement reflects all liabilities of the LAI
Companies required by GAAP applied on a consistent basis (as modified by the
Adjusted Accounting Principles) to be reflected on LAI's consolidated financial
statements, except for the accounts excluded by Exhibit C-2. The Pre-Closing
Statement delivered by LAI will accurately reflect all of the following items as
liabilities, to the extent that they have not been paid by LAI prior to the
Closing: (i) all LAI Expenses, (ii) the gross amount of all Change in Control
Payments (without regard to taxes or other withholdings),
15
(iii) all interest, charges, fees, expenses and penalties, including prepayment
penalties on or which become due as a result of any voluntary payments made by
LAI on the Closing Date or in contemplation of the Closing on any Debt, (iv) all
costs, including all premium costs, of the Environmental Insurance Policy and
the D&O Insurance Policy, (v) the Cancellation of Indebtedness Tax, (vi) the
amount of all Debt of the LAI Companies other than (A) the Debt being
extinguished pursuant to SECTION 2.1(f) and (B) the negative account balances
included in the cash component of the Tangible Net Operating Assets Estimate and
(vii) the aggregate amount of any outstanding withdrawal liability of the LAI
Companies under any multiemployer plan described in SECTION 3.25. As of March
31, 2003, the dollar amount of Tangible Net Operating Assets was $15,713,298,
and the aggregate dollar amount of Debt of the LAI Companies was $54,486,688.
The Pre-Closing Statement delivered by LAI accurately reflects the book value of
all of the assets of the LAI Companies in accordance with GAAP applied on a
consistent basis (as modified by the Adjusted Accounting Principles) except for
accounts excluded on Exhibit C-1. As of the date of this Agreement, the
aggregate dollar amount of Debt of the LAI Companies was $58,145,035. SECTION
3.7 of the Disclosure Schedule lists the identity of each person to whom any LAI
Company owes any Debt, the respective amount of Debt owed to each such person
and the name(s) of the LAI Company or LAI Companies that are obligor(s) or
guarantor(s) with respect to such Debt; provided, however, that with respect to
negative cash balances, only the amount(s) of such balance(s) are set forth in
SECTION 3.7 of the Disclosure Schedule. The LAI Companies do not have any Debt
outstanding except for (i) Debt outstanding under the Senior Loan Agreement and
the Churchill Loan Agreement and (ii) Debt reflected as a current or long-term
liability on the Interim Financial Statements.
SECTION 3.8. Internal Controls.
(a) LAI maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP, to maintain asset accountability and to
provide reasonable assurance regarding the reliability of financial reporting,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions are taken with respect to any differences. There are no material
weaknesses in the design or operation of internal controls over financial
reporting that are reasonably likely to adversely affect LAI's ability to
record, process, summarize and report financial information.
(b) Since January 31, 2002 no LAI Company, no officer or employee
(including any employee director) of any LAI Company, and, to the Knowledge of
the LAI Companies, no non-employee director, auditor, accountant, attorney or
representative of any of the LAI Companies has received or otherwise had or
obtained Knowledge of (i) any written complaint, allegation, assertion or claim
regarding the accounting or auditing practices, procedures, methodologies, or
methods of any of the LAI Companies or their respective internal accounting
controls, including any complaint, allegation, assertion or claim that any of
the LAI Companies has engaged in questionable accounting or auditing practices,
or (ii) any fraud, whether or not material, that involves management or other
employees of any LAI Company who have a significant role in such LAI Company's
internal controls.
16
(c) No attorney representing any of the LAI Companies, whether or
not employed by any of the LAI Companies, has reported evidence of a violation
of securities laws, breach of fiduciary duty or similar violation by any of the
LAI Companies or any of their officers, directors, employees or agents.
SECTION 3.9. April 2000 Dividend. The $20,000,000 dividend declared by
LAI's Board of Directors on April 10, 2000 and funded on April 14, 2000 (the
"Dividend") did not violate Section 154, 170, 173, 174 or 244 of the DGCL. At
the time of the Dividend, the "surplus" of LAI (as such term is defined in and
determined under Section 154 of the DGCL) equaled or exceeded the amount of the
Dividend. Churchill and each of LAI's Senior Lenders under the Senior Loan
Agreement specifically consented, in writing, to the payment of the Dividend. No
claim, assertion or statement by any creditor of LAI or any other person has
ever been made (whether orally or in writing) to any LAI Company to the effect
that the Dividend (i) was an impermissible dividend under the DGCL, (ii)
constituted a fraudulent conveyance or a fraud on LAI's creditors or (iii) was
improper or illegal in any manner. The Dividend, at the time it was declared and
paid, did not render LAI insolvent.
SECTION 3.10. Accounts and Notes Receivable.
(a) All accounts receivable of the LAI Companies that are
reflected either on the Interim Financial Statements or on the accounting
records of the LAI Companies provided to CMC as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the LAI Companies' ordinary course of business and, in the case of Accounts
Receivable exceeding $10,000 due with respect to any one Contract of the LAI
Companies, pursuant to validly executed sales Contracts or validly executed and
approved change orders. SECTION 3.10(a) of the Disclosure Schedule separately
lists and identifies each amount of any account receivable of any LAI Company in
excess of $10,000 with respect to any one Contract of the LAI Companies that (i)
constitutes a proposed change order that has not been executed, approved and
accepted by all parties to the related Contract, or (ii) represents an advance
billing for goods or services for which revenue has not yet been recognized in
accordance with GAAP applied on a consistent basis. The respective reserves
shown on the Interim Financial Statements or on the accounting records of the
LAI Companies provided to CMC as of the Closing Date are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a lesser percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the Interim Financial Statements
represented of the Accounts Receivable reflected therein and will not represent
a material adverse change in the composition of such Accounts Receivable in
terms of aging.
(b) Each of the Accounts Receivable set forth in SECTION 3.10(b)
of the Disclosure Schedule either has been or will be collected in full, without
any set-off, within fifteen (15) months after the Closing Date.
(c) Except as set forth in SECTION 3.10(c) of the Disclosure
Schedule or for which reserves have been established in the Financial Statements
or accounting records in
17
accordance with GAAP, there is no outstanding contest, claim, or right of
set-off, other than returns or exchanges in the ordinary course of business,
under any Contract with any obligor of an Accounts Receivable relating to the
amount or validity of such Accounts Receivable, where the amount contested,
claimed or set-off exceeds $15,000 individually. SECTION 3.10(c) of the
Disclosure Schedule contains a complete and accurate list of all Accounts
Receivable as of the date of the Interim Financial Statements, which list sets
forth the aging of such Accounts Receivable, showing amounts due in 30-day aging
categories.
(d) Each of the LAI Companies has taken all necessary action,
including, without limitation, the execution and filing of all necessary
documents with appropriate Governmental Authorities, in a timely manner to
attach and fully perfect all mechanics, materialmen's or similar Liens to secure
all Accounts Receivable of the LAI Companies where the operation of applicable
Law allows the creation of such statutory Liens and the creation of such Liens
was economically beneficial and meaningful to the LAI Companies.
SECTION 3.11. Inventory. All inventory of the LAI Companies, whether or
not reflected in the Financial Statements, consists of a quality and quantity
usable and salable in the ordinary course of business consistent with past
practice, except for obsolete, slow-moving or non-marketable items, items whose
recommended use dates have expired, and items of below-standard quality, all of
which have been written off or written down to net realizable value in the
Interim Financial Statements or with respect to which adequate reserves have
been established in the Interim Financial Statements. All inventories not
written off have been priced at the lower of cost or market. Except as set forth
in SECTION 3.11 of the Disclosure Schedule, the LAI Companies are not in
possession of any inventory that is not owned by them, including goods already
sold. The quantities of each class of inventory (whether such class is
considered to be a component of raw materials, work-in-process, or finished
goods) are not excessive, but are reasonable in the present circumstances of the
LAI Companies and consistent with past practice.
SECTION 3.12. Customers, Suppliers and Employees. Since January 1, 2002
there has not been any material adverse change in the business relationship of
any of the LAI Companies with any material customer or supplier, and no LAI
Company has any Knowledge that there will be any such adverse change in the
future as a result of the consummation of the transactions contemplated by this
Agreement or otherwise. None of the LAI Companies has any Knowledge that any
employee material to the business of any of the LAI Companies will resign his
employment with any of the LAI Companies as a result of the consummation of the
transactions contemplated by this Agreement. SECTION 3.12 of the Disclosure
Schedule contains a complete and accurate list of the five (5) suppliers and
five (5) customers of each of the LAI Companies that accounted for the greatest
amount of such LAI Companies' purchases and sales (measured in dollars),
respectively, (i) during each of the fiscal years ending January 31, 2002 (with
respect to customers and suppliers) and December 31, 2002 (with respect to
suppliers) and during the twelve months ended January 31, 2003 (with respect to
customers), and (ii) for the current fiscal year through October 31, 2003 (with
respect to customers and suppliers) and the aggregate dollar amount of such
purchases or sales for each such supplier or customer, respectively, for such
periods.
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SECTION 3.13. Absence of Undisclosed Liabilities. Except for matters
relating to the transactions contemplated by the Agreement, there are no
liabilities or financial obligations of any of the LAI Companies of any kind
whatsoever (whether absolute, accrued, contingent or otherwise, and whether due
or to become due) other than liabilities and obligations: (a) accrued, provided
for or reserved against or reflected in the Interim Financial Statements, (b) of
a short-term nature (i.e., becoming due in one year or less from the date of
incurrence) arising after the date of the Interim Financial Statements in the
ordinary course of business consistent with past experience, (c) not exceeding
$25,000 individually or $150,000 in the aggregate, (d) disclosed in SECTION 3.13
of the Disclosure Schedule or (e) arising under the executory portion of the
Contracts listed on SECTION 3.23(b) of the Disclosure Schedule, provided that
all breaches and defaults of the LAI Companies and events which, after the
giving of notice or lapse of time or both, would constitute such a breach or
default under such Contracts are specifically listed on SECTION 3.23(c) of the
Disclosure Schedule.
SECTION 3.14. Absence of Certain Changes. Except as disclosed in
SECTION 3.14 of the Disclosure Schedule, and except for matters relating to the
transactions contemplated by this Agreement and the Ancillary Agreements, since
the date of the 1/31/03 Financial Statements, each of the LAI Companies has
conducted its respective business only in the ordinary course, and there has not
occurred:
(a) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
equity interests of any the LAI Companies,
(b) any forgiveness, cancellation or waiver by any of the LAI
Companies of Debts in excess of $10,000, individually or in the aggregate, owed
to any of the LAI Companies or material claims or rights of any of the LAI
Companies against others, or any discharge by any of the LAI Companies of any
Lien in favor of the LAI Companies other than in connection with the receipt of
payment or payment by any of the LAI Companies of any liability or obligation,
other than, as relates to all of the foregoing, in the ordinary course of
business,
(c) any grant of credit to any customer or distributor on terms
materially more favorable than the terms on which credit has been extended to
such customer or distributor in the past, nor any material change in the credit
practices of any of the LAI Companies,
(d) (i) any increase in the rate or terms of compensation
(including termination and severance pay) payable or to become payable by any of
the LAI Companies to any of their directors, officers or employees, or any
increase in the rate or terms of any bonus, insurance, pension or other employee
benefit plan, program or arrangement made to, for or with any such directors,
officers or employees, except, in each case, increases occurring in the ordinary
course of business or as required by applicable Law, and (ii) any entry by any
of the LAI Companies into any employment, severance or termination agreement
with any such person,
(e) any entry into any Material Contract by any of the LAI
Companies, except Contracts entered into in the ordinary course of business
consistent with past practice,
19
(f) any damage, destruction or theft or other casualty loss to the
properties or assets owned or leased by any of the LAI Companies with a book or
replacement value of $25,000 or more individually or $100,000 in the aggregate,
whether or not covered by insurance (other than damage, destruction or theft or
other casualty loss to any property or assets which property or assets have been
repaired or replaced and the cost of such repair or replacement has been
expensed by LAI),
(g) any change by any of the LAI Companies in their financial or
tax accounting principles or methods, except insofar as may be required by a
change in GAAP, applicable Law or circumstances which did not exist as of the
date of the 1/31/03 Financial Statements,
(h) any change made or authorized in the Charter Documents of any
of the LAI Companies, except in connection with the transactions contemplated
hereby,
(i) any purchase, redemption, issue, sale or other acquisition or
disposition by any of the LAI Companies of any shares of capital stock or other
equity securities of any of the LAI Companies, or the grant of any options,
warrants or other rights to purchase, or convert any obligation into, shares of
capital stock or any evidence of indebtedness or other securities of any of the
LAI Companies,
(j) any sale, lease, license or disposition by any of the LAI
Companies of any of its assets having a value of $10,000 or more individually or
$50,000 or more in the aggregate which is not in the ordinary course of
business,
(k) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of any of the LAI Companies or requiring consent of any party to the
transfer and assignment of any such assets, property or rights other than in the
ordinary course of business;
(l) any breach, amendment, termination or nonrenewal of any
Contract described or required to be described in SECTION 3.23 of the Disclosure
Schedule;
(m) any capital expenditure or commitment by any of the LAI
Companies, of $50,000 or more individually or $200,000 in the aggregate;
(n) any creation or assumption by any of the LAI Companies of any
Lien on any LAI Company asset except (a) Permitted Liens, and (b) Liens
identified in the Financial Statements (which have not been discharged);
(o) any change in any election made by any of the LAI Companies
with respect to any Tax Return;
(p) revaluation (other than by means of normal depreciation taken
in the ordinary course of business in accordance with GAAP consistently
applied), by any LAI Company of any
20
of its assets, including without limitation, writing off notes or accounts
receivable or inventory in any case in excess of reserves; or
(q) any agreement by any of the LAI Companies or, to the Knowledge
of any LAI Company, any officer or employee thereof to do any of the things
described in the preceding clauses (a) through (p).
SECTION 3.15. Product Quality, Warranty Claims, Product Liability.
Except as set forth in SECTION 3.15 of the Disclosure Schedule, all products and
services sold, rented, leased, provided or delivered by any of the LAI Companies
to its customers on or prior to the date hereof conformed to applicable
contractual commitments, express and implied warranties, product and service
specifications and quality standards other than for products manufactured by
third parties and resold by any LAI Company, and none of the LAI Companies has
any liability in excess of $10,000 individually or $50,000 in the aggregate for
replacement or repair thereof or other damages in connection therewith, except
to the extent reserved against in the Financial Statements. Except as set forth
in SECTION 3.15 of the Disclosure Schedule, no product or service sold, leased,
rented, provided, fabricated or delivered by the LAI Companies to any of their
respective customers on or prior to the date hereof is subject to any guaranty,
warranty or other indemnity (i) with any obligation that would extend beyond
twelve (12) months after the Closing, or (ii) that is not documented by a
validly executed Contract, a copy of which has been provided or made available
for CMC's review. Except as set forth in SECTION 3.15 of the Disclosure
Schedule, none of the LAI Companies has any liability (and to the Knowledge of
any Seller, no basis exists for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against any of the
LAI Companies which reasonably could be expected to give rise to any liability)
arising out of any injury to a person or property as a result of the ownership,
possession, provision or use of any equipment, product or service sold, rented,
leased, provided, fabricated or delivered by the LAI Companies on or prior to
the Closing Date. Each product liability claim that has resulted in or
reasonably could be expected to result in damages in excess of $10,000 that has
been asserted against any of the LAI Companies since January 1, 1999, whether
covered by insurance or not and whether litigation has resulted or not, is
listed and summarized on SECTION 3.15 of the Disclosure Schedule.
SECTION 3.16. Litigation. Except as set forth in SECTION 3.16 of the
Disclosure Schedule, there is no action, suit, inquiry, judicial or
administrative proceeding, arbitration or investigation ("LITIGATION") pending
or, to the Sellers' Knowledge, threatened against any of the LAI Companies or
any of their respective properties, assets or rights before any court arbitrator
or administrative or Governmental Authority, nor is there any Order of any court
outstanding against any of the LAI Companies. Except as set forth in SECTION
3.16 of the Disclosure Schedule, all of the Damages that are incurred by the LAI
Companies in connection with the Litigation described in SECTION 3.16 of the
Disclosure Schedule will be fully covered by the insurance policies listed in
SECTION 3.31 of the Disclosure Schedule, subject only to the deductibles listed
in SECTION 3.31 of the Disclosure Schedule. Without limiting the generality of
the foregoing, there is no Litigation pending or, to the Sellers' Knowledge,
threatened, nor has any contest or claim (including without limitation claims
for rights of set-off or against any escrow or similar fund) been asserted or to
the Knowledge of any Seller, threatened, against any of the LAI Companies,
attributable to or arising out of any acquisition or divestiture of any assets
21
or capital stock, or other ownership interest, of any of the LAI Companies or
any entity formerly owned by any LAI Company, nor to the Knowledge of any
Seller, is there any reasonable basis for such Litigation, contest or claim, and
all liability and obligations whatsoever of the LAI Companies under such
acquisition or divestiture agreements have terminated in each case, except as
set forth on SECTION 3.16 of the Disclosure Schedule. LAI has provided or made
available to CMC true, correct and complete copies of all material documents
prepared or received by any LAI Company that relate to any matter disclosed in
SECTION 3.16 of the Disclosure Schedule (including without limitation copies of
all pleadings and other documents in the official record relating to such matter
and all material correspondence between (i) LAI Companies and their counsel and
(ii) the adverse parties or their counsel, on the one hand, and the LAI
Companies and their counsel on the other hand). All disputes and claims made by
or against Ambassador Steel Corporation and its Affiliates in connection with,
arising out of or related to the sale of assets of Lofland Company Midwest have
been fully and finally discharged and settled. None of the LAI Companies has any
further liability to Ambassador Steel Corporation and its Affiliates.
SECTION 3.17. Liens. All properties and assets owned by each of the LAI
Companies are free and clear of all liens, pledges, claims, charges, security
interests, restrictions, mortgages, tenancies and other possessory interests,
conditional sale or other title retention agreements, assessments, easements,
rights of way, covenants, restrictions, rights of first refusal, defects in
title, encroachments and other burdens, options or encumbrances of any kind,
whether arising by contract or under law (collectively, "LIENS") except (a)
statutory Liens not yet delinquent or the validity of which are being contested
in good faith by appropriate actions, (b) purchase money Liens arising in the
ordinary course, (c) Liens for taxes not yet delinquent and (d) Liens
specifically identified in SECTION 3.17 of the Disclosure Schedule (such Liens
in clauses (a), (b), (c) and (d) being collectively referred to as "PERMITTED
LIENS"). Except as set forth on SECTION 3.17 of the Disclosure Schedule, all of
the property, plant and equipment of each of the LAI Companies are owned or
leased by each of the LAI Companies and are in satisfactory condition to conduct
the business of the LAI Companies as presently conducted.
SECTION 3.18. Real Estate. Except as set forth in SECTION 3.18 of the
Disclosure Schedule, each of the LAI Companies has good and indefeasible title
in fee simple to all real properties owned by it and valid leaseholds in all
real estate leased by it, in each case, under valid and enforceable leases.
Except (a) as disclosed in SECTION 3.18 of the Disclosure Schedule or (b) in any
Title Policy (as defined below) listed in SECTION 3.18 of the Disclosure
Schedule, none of such real properties is subject to any easements, rights of
way, licenses, grants, building or use restrictions, exceptions, reservations,
limitations or other impediments which materially and adversely affect the value
thereof or which interfere with or impair the present and continued use in the
usual and normal conduct of the business of each of LAI Companies. SECTION 3.18
of the Disclosure Schedule lists (i) the street address of each parcel of real
property owned by each of the LAI Companies (the "OWNED REAL PROPERTY") and (ii)
as to each parcel of Owned Real Property, the number of the title policy, if
any, and the name of the company issuing such policy, insuring that LAI or a
Subsidiary is the fee owner of such parcel (each such policy or title commitment
listed in SECTION 3.18 of the Disclosure Schedule being referred to herein as a
"TITLE POLICY" and the insured under each such policy being referred to herein
as an "INSURED"). Except as set forth in SECTION 3.18 of the Disclosure
Schedule, the LAI Companies have delivered to CMC true and complete copies of
(a) each Title Policy and (b)
22
as to each parcel of Owned Real Property, the recorded deed whereby the Insured
acquired title to such parcel. Each Title Policy is valid and binding on the
relevant insurer(s) in accordance with its terms and is in full force and
effect, and the consummation of the transactions contemplated by this Agreement
will not affect the interest of the Insured in any Title Policy.
SECTION 3.19. Condition of Assets; Title to Personal Property. Except
as set forth in SECTION 3.19 of the Disclosure Schedule, the buildings, plants,
structures, and equipment of the LAI Companies are structurally sound, are in
good operating condition and repair, ordinary wear and tear excepted and are
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. The buildings, plants, structures, and equipment of the LAI Companies are
sufficient for the continued conduct of the LAI Companies' businesses after the
Closing in substantially the same manner as such business has been conducted
prior to the Closing. Except as set forth in SECTION 3.19 of the Disclosure
Schedule, each of the LAI Companies owns and has good and indefeasible title to
all the machinery, equipment, furniture, fixtures, inventory, receivables and
other tangible or intangible personal property reflected on the latest balance
sheets included in the Financial Statements and all such property acquired since
the date thereof, except in each case for sales and other dispositions made in
the ordinary course of business consistent with past practices since such date.
SECTION 3.20. Location and Sufficiency of Assets. The LAI Companies
own, lease, or license all of the rights, and properties and other assets used
in, or reasonably necessary for, the conduct of their respective businesses in
each case, in the manner and to the extent currently conducted by them. Such
assets will be adequate to enable the Surviving Corporation and its Subsidiaries
to continue to conduct their businesses in the manner and to the extent
currently conducted by the LAI Companies. All real estate and the improvements
thereon owned or leased by any of the LAI Companies are adequately served by all
necessary utilities including, without limitation, storm water systems, sanitary
sewer, water, electricity, telephone, gas and other utility services necessary
to operate such real estate and all improvements thereon in the manner and to
the extent currently operated by the LAI Companies. There are no defects or
deficiencies in or to the fixtures, improvements and structures situated or
constructed upon such real estate or fixtures of such real estate. There is no
dry rot, termite infestation or other wood destroying organisms present in any
real estate owned or leased by any of the LAI Companies. The plumbing,
electrical, mechanical or other systems of such real estate and improvements
constructed thereon are not in need of repair and are in good working order,
ordinary wear and tear excepted.
SECTION 3.21. Condemnations. The LAI Companies have not been served
with or received notice of any condemnation proceeding or similar action
affecting any real estate or the improvements thereon owned or leased by any of
the LAI Companies, nor, to the Knowledge of any LAI Company, is there any
proceeding or similar action pending or threatened.
SECTION 3.22. Claims. Except as set forth in the Interim Financial
Statements, neither any officer or director of any of the LAI Companies nor any
Affiliate has any claim or interest in, or any Lien on, any property or asset
owned, leased or licensed by any of the LAI Companies with respect to the
conduct of their respective businesses.
23
SECTION 3.23. Certain Agreements.
(a) Except as described in SECTION 3.23(a) of the Disclosure
Schedule, none of the LAI Companies is a party to any oral or written agreement,
plan or arrangement with any officer, director or employee of any of the LAI
Companies (i) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of any of the transactions contemplated
by this Agreement or that contain Change in Control Payment provisions; (ii)
providing severance benefits or other benefits after the termination of
employment regardless of the reason for such termination of employment; (iii)
under which any person may receive payments subject to the tax imposed by
Section 4999 of the Code; (iv) limiting the rights of any of the LAI Companies
to terminate at will such officer, director or employee; (v) regarding services
to be rendered, including collective bargaining agreements; or (vi) any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the amount payable or other benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement. No LAI
Company has any obligation to repurchase any shares of LAI Capital Stock under
any Stock Restriction Agreement.
(b) All Material Contracts to which any of the LAI Companies is a
party or by which any of their assets are bound are listed on SECTION 3.23(b) of
the Disclosure Schedule. A "MATERIAL CONTRACT" means a Contract (i) the term of
which extends beyond the one-year anniversary date of this Agreement or with
respect to which any penalty, fee or damages in excess of $10,000 would result
from the termination of such Contract by such LAI Company; (ii) that provides
for $100,000 or more in expenditures or receipt of revenues of $200,000 or more
in each case in a 12-month period; (iii) with any current or former officer,
director, employee, consultant, agent or other representative of any of the LAI
Companies not previously terminated or expired and with respect to which there
is no continuing liability or obligation; (iv) with any labor union or
association representing any employees of the LAI Companies; (v) relating to any
joint venture or similar arrangement of which any LAI Company is a partner,
venturer or owner; (vi) pursuant to which any of the LAI Companies agrees to
indemnify any person; (vii) relating to any Debt; (viii) that imposes
restrictions on the business activities in which the LAI Companies may engage or
the geographic areas in which the LAI Companies may conduct operations; (ix) a
breach of which would cause a Material Adverse Effect, or; (x) that constitutes
a bid bond, payment bond or performance bond related to any Contract described
above in this Section.
(c) Except as set forth in SECTION 3.23(c) of the Disclosure
Schedule, each Material Contract is in full force and effect and is the valid
and binding obligation of LAI (and/or the Subsidiary or Subsidiaries that are
parties to such contract) and, to the Knowledge of the respective LAI Companies
that are parties to such Material Contract, all other persons that are a party
thereto. Except with respect to Accounts Receivable, which shall be covered
exclusively by the representations in SECTION 3.10, none of the LAI Companies
are, and to the Knowledge of the LAI Companies, no other party to any Material
Contract is, in breach of or in default under the terms of any Material
Contract, and, to the Knowledge of the LAI Companies, no event has occurred
which, after the giving of notice or lapse of time or both, would constitute
such a
24
breach or default by any party to any Material Contract. Except as described in
SECTION 3.23(c) of the Disclosure Schedule or for which a reserve has been made
on the Financial Statements, no contest, claim, right of set-off or deductive
change order individually exceeding $15,000 has been asserted or to the
Knowledge of any LAI Company threatened against any LAI Company under any
Material Contract, and no reasonable basis exists therefor. LAI and TLC have
provided CMC with true, complete and correct copies of or access to all written
Material Contracts and all extensions, amendments and schedules thereto, and a
written description of all Material Contracts that are not in writing. All bonds
referenced in subsection (b)(x) above are in good standing, and none of the LAI
Companies has violated, breached, or defaulted (with or without due notice or
lapse of time or both), or permitted the termination of, or acceleration of, or
entitled any party to accelerate any obligation under any of the terms,
conditions or provisions of any such payment or performance bond.
(d) SECTION 3.23(d) of the Disclosure Schedule sets forth a
correct and complete list of all executory Material Contracts whereby any of the
LAI Companies is obligated to provide products or services to its customers
("MATERIAL CUSTOMER CONTRACTS"). SECTION 3.23(d) of the Disclosure Schedule,
which sets forth by Subsidiary the revenue recognition calculations with respect
to each such Material Customer Contract, is correct and complete in all
respects. The LAI Companies have no Knowledge that any of the LAI Companies is
likely to incur a net loss on any such Material Customer Contract; provided that
this representation shall not be construed to be a guarantee of any level of
profit on any such Material Customer Contract.
(e) None of the LAI Companies is a party to any Material Contract
with a Governmental Authority subject to a contractual right to re-determine or
negotiate.
(f) The Penske Agreements are in full force and effect and are the
valid and binding obligations of TLC, and to the Knowledge of TLC, all other
persons that are a party thereto. TLC is not in breach of or in default under
the terms of the Penske Agreements, and, to the Knowledge of TLC, no other party
to the Penske Agreements is in breach of or default under, and no event has
occurred which, after the giving of notice or lapse of time or both, would
constitute such a breach or default by any party to the Penske Agreements. The
"Purchase Price" (as defined in the Penske Purchase Agreement), does not exceed
$210,000. No "Sale Notice" or "Repurchase Notice" (as such terms are defined in
the Penske Purchase Agreement) has been given under the Penske Purchase
Agreement, and no party to the Penske Purchase Agreement has indicated in
writing that it intends to give such a Sale Notice or Repurchase Notice. The
Penske Lease Agreement has a remaining term of at least one year from the date
of this Agreement or is renewable for a term that ends at least one year from
the date of this Agreement and is not terminable by the party thereto other than
TLC prior to the end of such term. SECTION 3.23(f) of the Disclosure Schedule
contains a fair and accurate summary of the circumstances under which TLC may
terminate the Penske Lease Agreement. SECTION 3.23(f) of the Disclosure Schedule
lists all of the vehicles covered by the Penske Lease Agreement.
SECTION 3.24. Compensation; Employment and Other Agreements. SECTION
3.24 of the Disclosure Schedule sets forth an accurate list of all officers,
directors, employees, sales agents, purchasing agents and consultants of or used
by the LAI Companies, as of the date hereof, all agreements currently in effect
with such persons and the rate of compensation (and the
25
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (a) the date of the Interim
Financial Statements and (b) the date hereof. SECTION 3.24 of the Disclosure
Schedule sets forth (i) the name, and the current salary (or rate of pay) of and
the bonus paid during the last fiscal year and any subsequent period to each
current employee of each of the LAI Companies (which for all purposes shall
include employees leased by any of the LAI Companies from a third party only
where the aggregate amount paid to the leasing agency exceeds $25,000 for the
last fiscal year or current year to date period); (ii) any increase to become
effective or payable after the date of this Agreement in the total compensation
or rate of total compensation payable by any of the LAI Companies to each such
person; (iii) any increase to become payable after the date of this Agreement to
employees other than those specified in clause (i) above; (iv) all presently
outstanding loans and advances made by any of the LAI Companies to any of their
directors, officers, or employees as of the date of this Agreement, to be
updated as of Closing; and (v) all accrued but unpaid vacation pay owing to the
employees of the LAI Companies as of the date of the Interim Financial
Statements, to be updated as of Closing. LAI and TLC have provided or made
available to CMC true, complete and correct copies of all employment,
management, consulting, agency, severance and other compensation or benefit
Contracts with persons listed on SECTION 3.24 of the Disclosure Schedule. To the
Knowledge of any LAI Company, no employee or director of any of the LAI
Companies or any sales agent, purchasing agent or consultant utilized by any of
the LAI Companies, is a party to, or is otherwise bound by, any Contract,
including without limitation any confidentiality, noncompetition, or proprietary
rights agreement, between such person and any other person ("PROPRIETARY RIGHTS
AGREEMENT") that in any way adversely affects or will affect (i) the performance
of his duties to the Surviving Corporation or any of the LAI Companies, or (ii)
the ability of any of the LAI Companies to conduct their respective businesses,
including without limitation any Proprietary Rights Agreement that restricts the
LAI Companies' respective businesses in any particular geographic area or with
respect to any particular product. All Contracts under which Change of Control
Payments may be made will have been terminated prior to Closing without any
liability or obligation of any LAI Company except for those Change in Control
Payments that are reflected in the Pre-Closing Statement.
SECTION 3.25. Employee Benefit Plans.
(a) SECTION 3.25(a) of the Disclosure Schedule includes a true and
complete list as of the date hereof of: (i) all "employee benefit plans" (as
defined in Section 3(3) of ERISA), all specified fringe employee benefit plans
as defined in Section 6039D of the Code, and all other bonus, incentive
compensation, deferred compensation, profit sharing, stock option, stock
appreciation right, stock bonus, stock purchase, restricted stock, phantom
stock, employee stock ownership, savings, severance, supplemental unemployment,
layoff, worker's compensation, salary continuation, retirement, pension, health,
life insurance, dental, disability, accident, group insurance, vacation,
holiday, sick leave, fringe benefit or welfare plan, and any other employee
compensation or employee benefit plan, agreement, policy, practice, commitment,
contract or understanding (whether qualified or nonqualified, written or oral,
including any post-retirement insurance, compensation or benefits) and any
trust, escrow or other agreement related thereto (including, without limitation,
any "voluntary employees' beneficiary association," as defined in Section
501(c)(9) of the Code, annuity contract or other funding instrument), which is
currently sponsored, established, maintained or contributed to or required to be
contributed to by any of
26
the LAI Companies, or for which any of the LAI Companies have any liability,
contingent or otherwise, and (ii) all "multiemployer plans" (as defined in
Section 4001 of ERISA) and all "employee benefit plans" (as defined in Section
3(3) of ERISA) that are subject to Title IV of ERISA or Section 412 of the Code
which any of the LAI Companies or any other corporation or trade or business
(whether or not incorporated) that is, or at any relevant time was, controlled
by, controlling or under common control with any of the LAI Companies (within
the meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of
ERISA)("ERISA AFFILIATE") has maintained or contributed to or been required to
contribute to at any time within the six (6) years immediately preceding the
Closing Date, or with respect to which, any of the LAI Companies or any ERISA
Affiliate has any liability (collectively, the "EMPLOYEE BENEFIT PLANS").
(b) None of the LAI Companies maintains or is obligated to provide
benefits under any life, medical or health plan (other than as an incidental
benefit under any Employee Benefit Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code ("QUALIFIED PLAN") which provides benefits
to retirees or other terminated employees other than benefit continuation rights
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"). An estimate of the liabilities of the LAI Companies and any ERISA
Affiliates for providing retiree life, medical and health benefits coverage has
been made and is reflected on the appropriate balance sheet and books and
records according to Statement of Financial Accounting Standards No. 106. The
LAI Companies have the right to modify and terminate benefits as to retirees
(other than pensions) with respect to both retired and active employees.
(c) Neither any of the LAI Companies nor any ERISA Affiliate
currently maintains any "employee pension benefit plan," as defined in Section
3(2) of ERISA that is "top-heavy" within the meaning of Section 416 of the Code.
(d) Except as set forth in SECTION 3.25(d) of the Disclosure
Schedule, none of the LAI Companies nor any ERISA Affiliate currently maintains,
contributes to, has any obligation to contribute to or has any liability
(contingent or otherwise) to or on or at any time within the six (6) years
immediately preceding the Closing Date has maintained, contributed to, had any
obligation to contribute to or had any liability (contingent or otherwise) to
any "multiemployer plan," as such term is defined in Section 3(37) or Section
4001(a)(3) of ERISA, or any single-employer Employee Benefit Plans subject to
Title IV of ERISA or Section 412 of the Code. The aggregate withdrawal liability
of the LAI Companies in connection with the multiemployer pension plan
identified in SECTION 3.25(d) of the Disclosure Schedule will not exceed
$63,500, which amount has been reserved against on the Interim Financial
Statements and will be reflected as a liability on the Pre-Closing Statement.
(e) Each Qualified Plan has received a current, favorable opinion
letter from the IRS that considers the Uruguay Round Agreements Act, the
Uniformed Services Employment and Reemployment Rights Act of 1994, the Small
Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the
Internal Revenue Service Restructuring and Reform Act of 1998, and the Community
Renewal Tax Relief Act of 2000 (collectively referred to as "GUST AMENDMENTS"),
and each Qualified Plan is qualified in form and operation under Section 401(a)
of the Code, and each related trust, annuity contract or other funding
instrument of each such
27
Qualified Plan is exempt from federal income tax under Section 501(a) of the
Code, and no event has occurred or circumstance exists that gives rise to
disqualification or loss of tax exempt status of any such Qualified Plan or
trust, annuity contract or other funding instrument.
(f) Except as set forth in SECTION 3.25(f) of the Disclosure
Schedule, each of the Employee Benefit Plans and its administration is currently
in compliance, in form and operation, with ERISA and the Code and all other
applicable Laws, with any applicable collective bargaining agreement in all
respects, and with its terms, and no statement, either written or oral, has been
made by any of the LAI Companies or, to the Knowledge of the LAI Companies, any
person with regard to any Employee Benefit Plan that is not in accordance with
the terms of such plan.
(g) No Employee Benefit Plan that is an "employee welfare benefit
plan," as defined in Section 3(1) of ERISA, constitutes a self-insured "multiple
employer welfare arrangement," as such term is defined in Section 3(40) of
ERISA.
(h) Except as disclosed in SECTION 3.25(h) of the Disclosure
Schedule, no action, suit, inquiry, judicial or administrative proceeding,
arbitration or investigation relating to any Employee Benefit Plan, including,
without limitation, any audit or investigation by the IRS or the DOL (other than
claims for benefits for which the plan administrative procedures have not been
exhausted and "qualified domestic relations orders" as defined in Section 414(p)
of the Code) is pending or, to the Knowledge of any LAI Company, threatened
against any of the LAI Companies, or any Employee Benefit Plan before any court,
arbitrator or administrative or Governmental Authority.
(i) The LAI Companies have performed all of their obligations
under all Employee Benefit Plans, except with respect to the payment of pending
claims by Employee Benefit Plan participants made in the ordinary course of
administration of the Employee Benefit Plans, and all contributions and other
payments required to be made by the LAI Companies to any Employee Benefit Plan
with respect to any period ending before or at or including the Closing Date
have been made or reserves adequate for such contributions or other payments
have been or will be set aside therefor prior to the Closing Date and have been
or will be reflected in the LAI Companies' financial statements in accordance
with GAAP. With respect to contributions and other payments required to be made
by the LAI Companies to any Employee Benefit Plan after the Closing Date, but
attributable to periods ending before, at or including the Closing Date, the LAI
Companies have made or reserved for a pro rata contribution or payment to each
such plan for the applicable portion of the plan year or other period that
precedes the Closing Date in accordance with GAAP. Such pro rata contribution or
payment shall be determined by multiplying the liability for the entire plan
year or other period by a fraction, the numerator of which is the number of days
of such plan year or other period preceding the Closing Date, and the
denominator of which is the number of days in such plan year or other period, as
applicable.
(j) The LAI Companies have delivered or made available to CMC true
and complete copies of the following:
28
(i) all documents that set forth the terms of each
Employee Benefit Plan and of any related trust, annuity contract or other
funding instrument as in effect immediately prior to the Closing Date (together
with all amendments thereto that will become effective at a later date),
including (A) all plan descriptions and summary plan descriptions of Employee
Benefit Plans for which the LAI Companies are required to prepare, file, and
distribute plan descriptions and summary plan descriptions, and (B) all
summaries and descriptions furnished to participants and beneficiaries regarding
Employee Benefit Plans for which a plan description or summary plan description
is not required;
(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all collective bargaining agreements pursuant to
which contributions have been made or obligations incurred (including both
pension and welfare benefits) by the LAI Companies and its ERISA Affiliates, and
all collective bargaining agreements pursuant to which contributions are being
made or obligations are owed by such entities;
(iv) all insurance policies which were purchased by or to
provide benefits under any Employee Benefit Plan currently in force or for which
any of the LAI Companies currently has any liability (contingent or otherwise);
(v) all Contracts with third party administrators,
actuaries, investment managers, consultants, and other independent contractors
that relate to any Employee Benefit Plan currently in force or for which any of
the LAI Companies currently has any liability (contingent or otherwise),
including any business associate agreements contemplated under HIPAA;
(vi) all reports, including all discrimination testing
reports, submitted within the three years preceding the date hereof by third
party administrators, investment managers, consultants, or other independent
contractors with respect to any Employee Benefit Plan currently in force or for
which any of the LAI Companies currently has any liability (contingent or
otherwise);
(vii) the form of notice used by each Employee Benefits
Plan that is a Group Health Plan (as defined in Section 607(1) of ERISA) during
the four years preceding the date hereof to employees of their rights under
Section 601 et seq. of ERISA, Section 4980B of the Code, Section 9801 et seq. of
the Code, and under all other applicable federal and state laws regulating the
notice requirements of Group Health Plans (as defined in Section 607(1) of
ERISA);
(viii) with respect to each Employee Benefit Plan that is
a "health plan," as defined in Section 160.103 of HIPAA, the form of privacy
notice utilized by such Employee Benefit Plan for purposes of compliance with
Section 164.520 of HIPAA, except to the extent an exemption exists with respect
to such plan and a statement is provided to that effect;
29
(ix) the Forms 5500 filed in each of the most recent
three plan years with respect to each Employee Benefit Plan that is subject to
such filing requirement, including all schedules thereto and the opinions of
independent accountants;
(x) all notices or reports that were given by any of the
LAI Companies, any ERISA Affiliate, or any Employee Benefit Plan to the IRS, the
PBGC or the DOL, pursuant to statute, within the three years preceding the date
hereof;
(xi) all notices that were given by the IRS, the PBGC, or
the DOL to the LAI Companies, any ERISA Affiliate, or any Employee Benefit Plan
within the three years preceding the date hereof;
(xii) with respect to Employee Benefit Plans that are
Qualified Plans, the most recent favorable opinion letter for each such Plan;
and
(xiii) to the extent permitted by law, with respect to
each Employee Benefit Plan that is a "group health plan" (as defined in Section
4980B(g) of the Code), a list of the names and contact information for each
individual who: (1) is currently receiving health care continuation coverage
under COBRA, (2) is eligible to receive health care continuation coverage under
COBRA and with respect to whom the "election period" (as defined in Section
4980B(f)(5)(A) of the Code) has not expired, or (3) will otherwise be an "M&A
Qualified Beneficiary" (as such phrase is defined in Section 54.5980B-9, Q&A-4
of the Income Tax Regulations) in connection with the transactions contemplated
by this Agreement.
(k) None of the LAI Companies, any ERISA Affiliate nor any
Principal Stockholder has engaged in or permitted to occur and, no other party
has engaged in or permitted to occur any transaction prohibited by Section 406
of ERISA or that constitutes a "prohibited transaction" under Section 4975(c) of
the Code with respect to any Employee Benefit Plan, except for any transactions
which are exempt under Section 408 of ERISA or Section 4975 of the Code. None of
the LAI Companies, ERISA Affiliates, administrators, nor any of their
predecessors, nor any fiduciary of any Employee Benefit Plan (or agent of any of
the foregoing) has engaged in any transaction or acted or failed to act in a
manner which is likely to subject any of the LAI Companies to any liability for
a breach of fiduciary or other duty under ERISA or any other applicable Law,
including any unpaid civil penalty under Section 502(1) of ERISA. The
transactions contemplated by this Agreement will not constitute or cause such a
prohibited transaction or breach of fiduciary duty;
(l) No Qualified Plan has applied to the IRS for correction of any
defect under the Employee Plans Compliance Resolution System or any predecessor
or similar program, and no Employee Benefit Plan has applied to the DOL for
correction under the Voluntary Fiduciary Correction Program or any similar
program;
(m) Except as disclosed in SECTION 3.25(m) of the Disclosure
Schedule, each Employee Benefit Plan can be terminated without payment of any
additional contribution or amount and, except for any vesting of benefits of a
Qualified Plan, without the vesting or acceleration of any benefits promised by
such plan;
30
(n) No event has occurred or circumstance exists relating
specifically to any of the LAI Companies (and excluding general inflationary
increases in health and welfare costs that do not relate specifically to any
circumstances at any LAI Company) that could result in an increase in premium
costs of any Employee Benefit Plan that is insured, or an increase in benefit
costs of any Employee Benefit Plan that is self-insured;
(o) Except as disclosed in SECTION 3.25(o) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not result in the payment (whether of separation pay or otherwise),
vesting, acceleration or increase in the amount of any benefit under any
Employee Benefit Plan, except to the extent that an employee incurs a
termination of employment or reduction in hours, or an Employee Benefit Plan is
terminated, in connection with the transactions contemplated by this Agreement.
SECTION 3.26. Labor Relations. Except as listed or described on SECTION
3.26 of the Disclosure Schedule, each of the LAI Companies (a) are, and have
been for the past three years, in compliance with all applicable Laws regarding
employment and employment practices, terms and conditions of employment, wages
and hours, and plant closing, occupational safety and health and workers'
compensation and are not engaged in any unfair labor practices, (b) have no, and
have not had in the past three years any, unfair labor practice charges or
complaints pending or, to the Knowledge of LAI and TLC, threatened against any
of them before the National Labor Relations Board, (c) have no, and have not had
in the past three years any, internal contractual grievances pending or
threatened against them and (d) have no, and have not had in the past three
years any, charges pending before the Equal Employment Opportunity Commission,
the DOL, the Office of Federal Contract Compliance, the Department of Justice or
any state or local agency responsible for the prevention of unlawful employment
practices. There is no labor strike, slowdown, work stoppage or lockout actually
pending or, to the Knowledge of LAI and TLC, threatened against or affecting any
of the LAI Companies. No union organizational campaign or representation
petition is currently pending with respect to the employees of the LAI
Companies.
SECTION 3.27. Taxes. Except in each case as set forth in SECTION 3.27
of the Disclosure Schedule:
(a) The LAI Companies have timely filed with the appropriate
federal, state, local or foreign taxing or Governmental Authority all Tax
Returns required to be filed on behalf of the LAI Companies. All such Tax
Returns are true, correct and complete. The LAI Companies have timely paid in
full all Taxes required to have been paid. The LAI Companies have complied in
all respects with all applicable Laws, rules and regulations relating to the
filing of Tax Returns and the payment and withholding of Taxes, and have, within
the time and in the manner prescribed by law, withheld and timely paid to the
proper taxing or Governmental Authority all amounts required to be so withheld
and paid under applicable Laws. The LAI Companies have accrued or made adequate
provision for all Taxes not yet due or paid, and such accruals and reserves for
Taxes are adequate in accordance with GAAP to cover all Taxes accrued or
accruable through the Effective Time, and all such accruals and reserves will be
reflected on the Pre-Closing Statement.
31
(b) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of any of the LAI Companies, and none of the
LAI Companies has received a notice of any pending or proposed claims, audits or
proceedings with respect to Taxes. None of the LAI Companies has received any
notice of deficiency or assessment from any taxing or Governmental Authority for
any amount of Tax that has not been fully settled or satisfied, and, to the
Knowledge of the LAI Companies, no such deficiency or assessment has been
proposed or threatened. No claim has been made by any taxing or Governmental
Authority in a jurisdiction in which any of the LAI Companies has not filed Tax
Returns that any of such entities are, or may be, subject to taxation in such
jurisdiction. None of the LAI Companies has filed a Form 8275 or other form with
any Tax Return disclosing any positions taken therein that could result in a
substantial understatement of Taxes within the meaning of Code Section 6662 or
any similar statute or regulation under state, local and foreign Laws. There are
no Liens for Taxes upon any property or assets of the LAI Companies, except for
Liens for Taxes not yet due and payable. None of the LAI Companies has requested
an extension of time within which to file any Tax Return that has not since been
filed and no currently effective waivers, extensions, or comparable consents
regarding the application of the statute of limitations with respect to Taxes or
Tax Returns have been given by or on behalf of any of the LAI Companies. None of
the LAI Companies is a party to any agreement or understanding providing for the
allocation or sharing of Taxes. None of the LAI Companies has granted in writing
any power of attorney which is currently in force with respect to any Taxes or
Tax Returns.
(c) None of the LAI Companies has constituted a "distributing
corporation" or a "controlled corporation" (within the meaning of Code Section
355(a)(1)(A)) in a distribution of stock to which Code Section 355 (or so much
of Code Section 356 as relates to Code Section 355) applies and which occurred
within two years of the date of this Agreement. Except as set forth in the
Financial Statements, none of the LAI Companies has agreed, or is required, to
make any adjustment under Code Section 481 affecting any taxable year ending on
or after January 1, 2000. None of the LAI Companies will be required to include
any amount in income for any taxable period (or portion thereof) ending after
the Effective Time as a result of a change in the method of accounting for a
taxable period ending prior to the Effective Time. None of the LAI Companies has
made any payments, is obligated to make any payments or is a party to any
agreement that under certain circumstances would reasonably be expected to
obligate it to make any payments that will not be deductible under Code Sections
280G or 162(m). None of the LAI Companies has made, within two years of the date
of this Agreement, any (i) redemptions, (ii) transfers or other dispositions of
property for which any of the LAI Companies did not receive adequate
consideration, or (iii) distributions to the holders of stock of any of the LAI
Companies with respect to stock other than distributions of cash in the ordinary
course of business. None of the LAI Companies has made an election under Code
Section 341(f). None of the LAI Companies has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). None of the LAI
Companies has been included in any "consolidated," "unitary" or "combined" Tax
Return (other than Tax Returns which include only LAI and any of its
Subsidiaries) provided for under the laws of the United States, any foreign
jurisdiction or any state or locality with respect to Taxes for any taxable year
since January 9, 1998. None of the LAI Companies
32
has assets subject to a lease to a "tax exempt entity" within the meaning of
Code Section 168(h)(2). None of the LAI Companies has Tax attributes that are
subject to the limitations of Code Sections 382, 383 or 384 or Treasury
Regulation Sections 1.1502-15 or 1.1502-21(c). None of the LAI Companies is a
partner in any joint venture, partnership or other arrangement or contract that
would be treated as a partnership for federal income Tax purposes. None of the
LAI Companies is, or has been, a personal holding company within the meaning of
Code Section 542. None of the LAI Companies is a foreign person, as such term is
referred to in Code Section 1445(f)(3) and Treasury Regulation Section 1.1445-2.
None of the LAI Companies has at any time participated in or cooperated with any
international boycott as defined in Code Section 999.
(d) Each of the LAI Companies has made available to CMC correct
and complete copies of (i) all of its Tax Returns filed within the past four
years and for all years that remain open to audit or with respect to which any
LAI Company has entered into any waivers of statutes of limitation or agreements
extending the period for assessment or collection of any Taxes, (ii) all audit
reports, letter rulings, technical advice memoranda and similar documents issued
by a taxing or Governmental Authority within the past five years relating to the
federal, state, local or foreign Taxes due from or with respect to it, and (iii)
any closing letters or agreements entered into by it with any taxing or
Governmental Authority within the past five years with respect to Taxes. No
outside tax accountant or auditor of any of the LAI Companies has withdrawn from
representing any LAI Company or been terminated in connection with a
disagreement with respect to any Tax Return of any LAI Company or the Tax
treatment of any item that would affect the amount of Tax owed by any LAI
Company.
(e) The Pre-Closing Statement delivered by LAI will accurately
reflect all of the following items as part of the calculation of the
Cancellation of Indebtedness Tax: (i) LAI's total consolidated net operating
loss for federal income tax purposes for its current fiscal year plus any net
operating loss carryover for all prior fiscal years, (ii) the total amount of
Debt owed by any LAI Company to Churchill or other creditor that is forgiven or
canceled in connection with the Merger or that has been forgiven, canceled or
reduced within the 12 months prior to Closing, (iii) the dollar amount of tax
attributes, including the tax basis in the properties of and capital stock held
by the LAI Companies and CMC and its direct and indirect subsidiaries, that are
reduced due to the amount of cancellation of indebtedness income that is not
recognized by the LAI Companies pursuant to Code Section 108(a)(1), and (iv) the
aggregate amount of unpaid Taxes of the LAI Companies with respect to any
Pre-Effective Time Periods (except to the extent of the dollar amount of the IRS
Payment Amount, which is the aggregate amount of Taxes and related interest paid
in connection with the filing of the LAI Amended Tax Returns). Neither CMC nor
any of the LAI Companies will recognize any cancellation of indebtedness income
during any Post-Effective Periods as a result of the transactions contemplated
hereby or any third party transaction related thereto, except as will be
reflected in the adjustment to the Purchase Price under SECTION 2.3.
(f) The LAI Amended Tax Returns adequately reflect in full all
Taxes of the LAI Companies for the periods covered thereby.
(g) For purposes of this Agreement (i) "TAX" or "TAXES" shall mean
(1) any and all taxes, customs, duties, tariffs, imposts, charges, deficiencies,
assessments, levies or other like
33
governmental charges, including, without limitation, income, gross receipts,
excise, real or personal property, ad valorem, value added, estimated,
alternative minimum, stamp, sales, withholding, social security, occupation,
use, service, service use, license, net worth, payroll, franchise, transfer and
recording taxes and charges, imposed by the IRS or any other taxing authority
(whether domestic or foreign including, without limitation, any state, county,
local or foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such amounts, (2) any Tax liability for the
payment of any amounts described in (1) as a result of being a member of an
affiliated, consolidated, combined, unitary, or similar group or as a result of
transferor or successor liability, and (3) any liability for the payment of any
amounts as a result of being a party to any tax sharing agreement or as a result
of any obligation to indemnify any other person with respect to the payment of
any amounts of the type described in (1) or (2), and (ii) "TAX RETURN" shall
mean any report, return, document, declaration, election or other information or
filing required to be supplied to any taxing or Governmental Authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns and any documents with respect to or
accompanying payments of estimated Taxes or requests for the extension of time
in which to file any such report, return, document, declaration or other
information.
SECTION 3.28. Compliance with Applicable Law. Except as set forth in
SECTION 3.28 of the Disclosure Schedule, each of the LAI Companies holds all
Permits necessary for the lawful conduct of its business under and pursuant to,
and the businesses of each of the LAI Companies are not being conducted in
violation of, any provision of any Law, Order or Permit applicable to any of the
LAI Companies.
SECTION 3.29. Brokers' Fees and Commissions. Except as set forth in
SECTION 3.29 of the Disclosure Schedule, none of the LAI Companies, their
directors or officers, or any of their respective employees or agents, has
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
the transactions contemplated by this Agreement.
SECTION 3.30. Proprietary Rights.
(a) SECTION 3.30(a) of the Disclosure Schedule contains an
accurate and complete list of all domestic and foreign patents, patent
applications, trade names, material unregistered trademarks and service marks,
trademark and service mark registrations and applications, copyright
registrations and applications, and domain names owned or used by any of the LAI
Companies in the operation of their businesses. SECTION 3.30(a) of the
Disclosure Schedule also contains an accurate and complete list of all
agreements that grant any of the LAI Companies licenses to third party
Intellectual Property including, without limitation, computer software licenses
other than non-material software licenses that are granted in commercially
available software sold "off the shelf," "click through" or "shrink wrap" and
that has a purchase price, individually or in the aggregate of less than $10,000
(collectively, the "LICENSED INTELLECTUAL PROPERTY").
34
(b) Except as set forth in SECTION 3.30(b) of the Disclosure
Schedule, the LAI Companies own or have the right to use pursuant to an
agreement (as listed in SECTION 3.30(b) of the Disclosure Schedule with respect
to the Licensed Intellectual Property), free and clear of all Liens, all
Intellectual Property necessary for the operation of their respective businesses
as such businesses are now conducted.
(c) With respect to the Licensed Intellectual Property: (i) the
agreement covering the item is legal, valid, binding and enforceable and the LAI
Company a party thereto is not in default under such agreement; (ii) the
agreement does not contain any provision preventing or limiting the consummation
of the transactions contemplated hereby including any provision granting a party
a right of, or otherwise causing the, termination or modification of any
provisions as a result thereof; (iii) no consents or payments are required to
enable the LAI Companies to continue the use of such Intellectual Property under
such agreement following the Closing Date other than payments in the ordinary
course of business; and (iv) no LAI Company is, and to the Knowledge of any LAI
Company no party to such agreement is, in breach or default in any respect, no
transaction contemplated by this Agreement will result in a breach or default of
such agreement in any respect, and no event has occurred, nor will the
transactions contemplated by this Agreement cause an occurrence, which with
notice or lapse of time would constitute a breach or default by any of the LAI
Companies or permit termination, modification or acceleration under such
agreement.
(d) Except as set forth in SECTION 3.30(d) of the Disclosure
Schedule or as may be inherent in the sale of products in the ordinary course of
business, none of the LAI Companies has granted any licenses of or other rights
to use any Intellectual Property to any third party.
(e) No Intellectual Property used by any of the LAI Companies is
owned by any stockholder (other than another LAI Company), officer, director or
employee of any of the LAI Companies.
(f) The LAI Companies have taken all commercially reasonable
actions to protect and preserve the confidentiality of all trade secrets and
confidential information included in the Intellectual Property used by any of
the LAI Companies in the operation of their respective businesses ("CONFIDENTIAL
INFORMATION"). To the Knowledge of the LAI Companies, no Confidential
Information material to the business of any of the LAI Companies has been
disclosed or authorized to be disclosed to any third party, other than pursuant
to a non-disclosure agreement that reasonably protects such LAI Company's
proprietary interests in and to such Confidential Information or under
circumstances in which the third party is under a legal duty not to disclose
such Confidential Information.
(g) None of the LAI Companies has interfered with, infringed upon,
misappropriated or violated any Intellectual Property rights of third parties,
and none of the LAI Companies has received any charge, complaint, claim or
notice alleging any such interference, infringement, misappropriation or
violation. To the Knowledge of the LAI Companies, no third party has interfered
with, infringed upon, misappropriated or violated any Intellectual Property
rights owned by any of the LAI Companies.
35
(h) None of the LAI Companies has entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property right other than LAI's standard warranty policy for
products or services sold or performed.
(i) All patents, and issued trademark, service mark and copyright
registrations owned by any of the LAI Companies are valid and subsisting. There
are no past due, unpaid maintenance fees, annuities or other fees payable in
each case to a Governmental Authority on the Intellectual Property owned by any
of the LAI Companies, and no such fees or annuities are due within thirty (30)
days following the Closing Date.
SECTION 3.31. Insurance. Each of the LAI Companies has insurance
policies in full force and effect for such amounts as are sufficient for
compliance with all requirements of applicable Law and of all Material Contracts
to which any of the LAI Companies are parties or by which they are bound. Set
forth in SECTION 3.31 of the Disclosure Schedule is a list of all fire,
liability and other forms of insurance and all fidelity bonds held by or
applicable to each of the LAI Companies or their respective businesses or
properties, setting forth in respect of each such policy the policy name, policy
number, expiration date, carrier, term, type of coverage, policy limits,
deductibles and current annual premium. Except as set forth in SECTION 3.31 of
the Disclosure Schedule, to the Knowledge of the LAI Companies, no event
relating to any of the LAI Companies or their respective businesses has occurred
which can reasonably be expected to result in a retroactive upward adjustment in
premiums under any such insurance policies or which is likely to result in a
prospective upward adjustment in such premiums. Except as set forth in SECTION
3.31 of the Disclosure Schedule, excluding insurance policies that have expired
and been replaced in the ordinary course of business, no insurance policy of any
LAI Company has been cancelled within the last three years, and to the Knowledge
of the LAI Companies, no threat has been made to cancel any insurance policy of
any of the LAI Companies during such period. Except as noted on SECTION 3.31 of
the Disclosure Schedule, all such insurance will remain in full force and effect
with respect to periods before the Closing after giving effect to the Merger and
the transactions contemplated hereby. No event has occurred, including, without
limitation, the failure by any of the LAI Companies to give any notice or
information or any of the LAI Companies giving any inaccurate or erroneous
notice or information, which limits or impairs the rights of any of the LAI
Companies under any such insurance policies.
SECTION 3.32. Environmental Matters.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "CURRENT FACILITY" means any real property,
leaseholds, or other interests, including any interests in buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) that is or was leased, owned or operated by any LAI Company on or after
January 1, 1998.
(ii) "ENVIRONMENTAL CLAIM" means any accusation,
allegation, notice of violation, action, claim, environmental lien, demand,
abatement, Order or direction
36
(conditional or otherwise) by any Governmental Authority or any other person (1)
for personal injury (including sickness, disease, death), damage to tangible or
intangible property, damage to the environment (including natural resources),
nuisance, pollution, contamination, trespass or other adverse effects on
property or to the environment arising under any Environmental Requirement or in
connection with any Hazardous Material, or (2) for any Environmental Costs or
Liabilities or (3) for the conduct of any Remedial Action;
(iii) "ENVIRONMENTAL COSTS AND LIABILITIES" means any and
all losses, liabilities, obligations, damages, fines, penalties, judgments,
actions, claims, response, cost recovery or other costs and expenses (including,
without limitation, fees, disbursements and expenses of legal counsel, experts,
engineers and consultants and the costs of investigation and feasibility studies
and Remedial Action) arising from or under or resulting from or based upon (A)
the existence of a Release prior to Closing or the continuation of the existence
of a Release that occurred prior to Closing of, or exposure as a result of a
Release prior to Closing to, any Hazardous Material arising or occurring in
connection with the operation of the business of any LAI Company, any Former or
Current Facility or with any act, omission or conduct of any LAI Company or
related to any property that is or was owned, operated or leased by any LAI
Company or any activities or operations thereof; (B) prior to the Closing Date,
the transportation, storage, treatment or disposal of Hazardous Materials by or
on behalf of any LAI Company or in connection with any Former or Current
Facility or other property that is or was owned, operated or leased prior to the
Closing Date, by any LAI Company or utilized by any LAI Company in the conduct
of the business of any LAI Company or any Former or Current Facility prior to
the Closing Date; or (C) any violation of any Environmental Requirement or any
liability under any Environmental Requirement that occurred in connection with
the operation of any LAI Company or Former or Current Facility prior to the
Closing Date;
(iv) "ENVIRONMENTAL LAW" means any federal, state, local,
or foreign law (including common law), statute, code, ordinance, rule,
regulation or other requirement relating to the environment, natural resources,
or public or employee health and safety and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. Section 9601 et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq., the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section
1251 et seq., the Clean Air Act, 33 U.S.C. Section 2601 et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et seq., the Oil Pollution
Act of 1990, 33 U.S.C. Section 2701 et seq., Federal Safe Drinking Water Act, 42
U.S.C. Section 300 F et seq. and the Occupational Safety and Health Act, 29
U.S.C. Section 651 et seq., as such laws have been amended or supplemented, and
the regulations promulgated pursuant thereto, and all analogous state or local
statutes as in effect on the date hereof;
(v) "ENVIRONMENTAL PERMIT" means any Permit required under
any Environmental Law or Order;
(vi) "ENVIRONMENTAL REQUIREMENT" means any applicable
requirement under Environmental Law, any Environmental Permit or any Order;
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(vii) "FORMER FACILITY means any real property,
leaseholds, or other interests, including any interests in buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) that is not a Current Facility and that was leased, owned or operated by
any LAI Company prior to the date hereof.
(viii) "HAZARDOUS MATERIAL" means any substance, material
or waste which is regulated under any Environmental Law or which otherwise
constitutes a risk to human health or the environment and is regulated by any
Governmental Authority, including, without limitation, any material, substance
or waste which is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous substance," "restricted hazardous
waste," "contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, and including, without limitation, petroleum, petroleum
products (including crude oil and any fraction thereof), asbestos,
asbestos-containing materials, urea formaldehyde and polychlorinated biphenyls;
(ix) "RELEASE" means any release, spill, emission,
leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal,
discharge, dispersal, leaching, or migration on or into the indoor or outdoor
environment or into or out of any property (whether sudden or non-sudden,
accidental or non-accidental); and
(x) "REMEDIAL ACTION" means any action, including,
without limitation, any capital expenditures, required or voluntarily undertaken
to (1) clean up, remove, treat, or in any other way address any Hazardous
Material; (2) prevent the Release or threat of Release, or minimize the further
Release of any Hazardous Material; (3) perform pre-remedial studies and
investigations or post-remedial monitoring and care with respect to any
Hazardous Material; or (4) bring any Facility into compliance with any
Environmental Requirement.
(b) Except as set forth in SECTION 3.32(b) of the Disclosure
Schedule:
(i) and except in compliance with Environmental Law and
in such amounts as would not give rise to restrictions, obligations or
liabilities under Environmental Law, no Current Facility has been or is being
used by the LAI Companies, and no Former Facility has been used by the LAI
Companies, and to the Knowledge of the LAI Companies, no Former or Current
Facility has ever been used by any Person, for the disposal of Hazardous
Materials;
(ii) no Hazardous Materials that were wastes have been
transported to any Former or Current Facility by an LAI Company or, to the
Knowledge of the LAI Companies, by any other Person;
(iii) no Hazardous Materials that were wastes have been
transported from any Former or Current Facility by an LAI Company or, to the
Knowledge of the LAI Companies, by any other person; as to any such Former or
Current Facility, the LAI Companies have listed on SECTION 3.32(b) of the
Disclosure Schedule a description of: the nature of the Hazardous Materials; the
location to which such materials were taken; and the time periods during which
such disposal took place;
38
(iv) except in compliance with Environmental Law and in
such amounts as would not give rise to restrictions, obligations or liabilities
under Environmental Law, no Hazardous Materials have been Released to or from
any Current or Former Facility by an LAI Company or, to the Knowledge of the LAI
Companies, by any other Person, in amounts that could result in liability, or
obligations, under any Environmental Law;
(v) the business conducted by each LAI Company at each
Current Facility has been and is, and each Former Facility was, in compliance
with all applicable Environmental Requirements;
(vi) each LAI Company (A) has obtained and currently
maintains, and has timely filed any necessary renewal applications for, all
Environmental Permits necessary for the conduct of the business conducted by
each LAI Company, (B) has owned and operated, and owns and operates, its Current
Facilities, and to the Knowledge of LAI and TLC has owned and operated its
Former Facilities, in compliance with all requirements of those Environmental
Permits and (C) has not received any notice of (I) any requirement for any
additional Environmental Permit or (II) any threat or proceeding to revoke,
modify or otherwise affect any of those Environmental Permits;
(vii) there are no Environmental Claims or legal
proceedings (A) pending against any LAI Company or any Current Facility, or (B)
to the Knowledge of the LAI Companies, (I) pending against any Former Facility
or (II) threatened against any LAI Company or any Former or Current Facility,
alleging or asserting any Environmental Claim, and to the Knowledge of the LAI
Companies, there exists no reasonable basis for the assertion of such claims or
for such proceedings;
(viii) neither any LAI Company, nor, to the Knowledge of
the LAI Companies, any predecessor of any LAI Company or, any current owner or
any former owner or operator of any real or personal property currently owned,
leased or operated by any LAI Company, has filed any notice under any
Environmental Law reporting a Release or threatened Release of any Hazardous
Material or received any notice of any Environmental Claim with respect thereto;
(ix) neither any LAI Company, any Current Facility nor,
to the Knowledge of the LAI Companies, any Former Facility, is currently subject
to, or the subject of, any Order under any Environmental Law; and neither any
LAI Company, any Current Facility nor, to the Knowledge of the LAI Companies,
any Former Facility, has in the past, been subject to, or the subject of, any
such Order; and
(x) neither any LAI Company nor, to the Knowledge of the
LAI Companies any predecessor of any LAI Company has given any contractual
indemnity, release, or other liability shifting mechanism to any person with
respect to any actual or potential Environmental Claim or Environmental Costs
and Liabilities.
39
(c) Underground and Above Ground Storage Tanks. Except as set
forth in SECTION 3.32(c) of the Disclosure Schedule, no underground or
aboveground storage tanks containing petroleum, petroleum products, any wastes
or any Hazardous Materials are currently located on any Current Facility, and,
to the Knowledge of the LAI Companies, have been located on any Former Facility.
Except to the extent set forth in SECTION 3.32(c) of the Disclosure Schedule,
the LAI Companies have complied with all Environmental Requirements regarding
the installation, use, testing, monitoring, operation and closure of each UST or
AST. As to each such underground or aboveground storage tank identified in
SECTION 3.32(c) of the Disclosure Schedule (each a "UST" or an "AST,"
respectively), if any, the LAI Companies have listed on such Schedule and has
provided to CMC or Sub a copy of the following, if available:
(i) information and material, including any available
drawings and photographs, showing the location of each UST and AST, and
identifying whether any LAI Company currently owns or leases the property on
which the UST or AST is located (and if an LAI Company does not currently own or
lease such property, the dates on which it did and the current owner or lessee
of such property);
(ii) the date of installation and specific use or uses of
each of each listed UST or AST;
(iii) tank and piping tightness tests and cathodic
protection tests or similar studies or reports for each UST or AST;
(iv) each notice to or from a Governmental Authority
relating to each UST or AST;
(v) the records with regard to the UST or AST, including
without limitation repair records, release detection records, release reporting
and corrective action records, financial assurance compliance records and
records of ownership; and
(vi) to the extent not otherwise set forth pursuant to
the above, a summary description of instances, past or present, in which, to the
Knowledge of the LAI Companies, the UST or AST failed to meet applicable
standards and regulations for tightness or otherwise and the extent of such
failure, and any other operational or environmental problems with regard to the
UST or AST, including, without limitation, spills and Releases, including spills
and Releases in connection with delivery of materials to the UST or AST, and
soil, groundwater or surface water contamination.
SECTION 3.33. Books and Records. The books of account, minute book, and
other corporate records of each of the LAI Companies, all of which have been
made available to CMC, are complete and correct in all material respects and
have been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls. There are no assets
having a value in excess of $5,000, individually or in the aggregate, not
reflected in the books of account of the LAI Companies. The minute book of each
of the LAI Companies contains accurate and fair summaries of all meetings held
of, and corporation action taken by, the stockholders, the board of directors,
and committees of the board of directors of
40
each of the LAI Companies, and no action taken by such stockholders, board of
directors, or committee has been held for which minutes have not been prepared
and are not contained in such minute books.
SECTION 3.34. Information. No representation or warranty by LAI or TLC
contained in this Agreement (including the Disclosure Schedule) or in any
certificate or document furnished by LAI or TLC pursuant to this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading.
SECTION 3.35. Certain Business Practices and Regulations; Potential
Conflicts of Interest.
(a) The LAI Companies and the directors, officers, agents or
employees of the LAI Companies acting on behalf of the LAI Companies have not
(i) used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns from corporate funds or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
(b) Except as set forth in SECTION 3.35 of the Disclosure
Schedule, none of the stockholders, officers or directors of any of the LAI
Companies or any entity controlled by any of the foregoing (i) owns, directly or
indirectly, any equity or voting interest of at least 5% in, or is a director,
officer, employee, consultant or agent of, any person which is a lessor, lessee
or customer of, or supplier of goods or services (other than oversight and other
services provided by TGF I Management, Inc., and Electra Partners, Inc. and
their respective affiliates) to, any of the LAI Companies, (ii) owns, directly
or indirectly, in whole or in part, any real property, leasehold interests or
other property that any of the LAI Companies used to conduct its business, (iii)
has any cause of action or other suit, action or claim whatsoever against, or
owes any amount to any of the LAI Companies, (iv) has sold to, or purchased
from, any of the LAI Companies any assets or property for aggregate
consideration in excess of $5,000 since January 1, 2001, or (v) is a party to
any Contract or participates in any arrangement, written or oral, in each case
pursuant to which any of the LAI Companies provide office space or services of
any nature to any such individual or entity, except to such individual in his
capacity as an employee, officer, director or stockholder of any of the LAI
Companies. Except as set forth in SECTION 3.35 of the Disclosure Schedule, none
of the officers or directors of any of the LAI Companies or any entity
controlled by any of the foregoing owns, directly or indirectly, any significant
interest in, or is a director, officer, employee, consultant or agent of, or any
person which a competitor of, any of the LAI Companies.
SECTION 3.36. No Material Adverse Effect. Except as set forth in
SECTION 3.36 of the Disclosure Schedule, since January 31, 2003, there has not
occurred an event or condition that, individually or when taken together with
all other events or conditions, has had or could
41
reasonably be expected to have, whether before or after the Effective Time, a
Material Adverse Effect.
SECTION 3.37. Agreements with Churchill and Other Debtholders.
Churchill has consented to this Agreement and the Escrow Agreement with respect
to the Debt owed by the LAI Companies to Churchill pursuant to the Consent to
Merger, Forbearance, Payoff Agreement and Release among the LAI Companies, CMC
and Churchill (the "CHURCHILL CONSENT AND AGREEMENT"), and the Churchill Consent
and Agreement remains in full force and effect. A true, correct and complete
copy of such consent and agreement of Churchill is included in SECTION 3.37 of
the Disclosure Schedule. Immediately prior to the Closing, subject to the
satisfaction of all conditions in the Churchill Consent and Agreement, the
amount of Debt owed by the LAI Companies to Churchill will be reduced as
provided in the Churchill Consent and Agreement. Except for the Obligations (as
such term is defined in the Churchill Loan Agreement) as reduced by the
Churchill Consent and Agreement, Churchill does not have any claims against any
of the LAI Companies, and none of the LAI Companies has any claim against
Churchill. The Senior Lenders have entered into a letter agreement with the LAI
Companies setting forth, among other things, the amount necessary to pay the
Senior Obligations Payoff Amount in full. A true, correct and complete copy of
such letter is included in SECTION 3.37 of the Disclosure Schedule. This
Agreement and the transactions contemplated hereby have either been consented to
by the holders of the outstanding 17.5% Subordinated Promissory Notes of LAI or
such notes will have been duly canceled prior to the Closing. True, correct and
complete copies of all Contracts between any LAI Company and any holder of 17.5%
Subordinated Promissory Notes of LAI with respect to the payment and settlement
thereof are attached to SECTION 3.37 of the Disclosure Schedule.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF THE PRINCIPAL STOCKHOLDERS
Each Principal Stockholder severally with respect to itself (and not
jointly) represents and warrants to CMC and Sub that, as of the date of this
Agreement:
SECTION 4.1. Ownership of Shares. Such Principal Stockholder is and
will be on the Closing Date the record and beneficial owner and holder of the
number of issued and outstanding shares of LAI Capital Stock set forth opposite
such Principal Stockholder's name in SECTION 3.4 of the Disclosure Schedule free
and clear of all Liens. Except as set forth in SECTION 3.4 of the Disclosure
Schedule, such Principal Stockholder is not a party to any voting trust, proxy
or other agreement with respect to the voting of any shares of LAI Capital
Stock.
SECTION 4.2. Authorization. Such Principal Stockholder has been duly
organized and is validly existing under the laws of the jurisdiction of its
organization. Such Principal Stockholder has full power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party
and to perform the obligations of such Principal Stockholder hereunder and
thereunder. This Agreement has been, and the Ancillary Agreements to which
42
such Principal Stockholder is a party will be as of the Closing, duly and
validly authorized, executed and delivered by such Principal Stockholder and,
assuming this Agreement and the Ancillary Agreements constitute the valid and
binding obligations of CMC, Sub, LAI, TLC and the other Principal Stockholder,
constitute valid and binding obligations of such Principal Stockholder,
enforceable against it in accordance with their respective terms. No other
action on the part of such Principal Stockholder is necessary to authorize the
execution and delivery of this Agreement, the Ancillary Agreements to which it
is a party or the consummation of the transactions contemplated hereby or
thereby. Except for any consents, approvals, filings or registrations that may
be required under the HSR Act and the filing of the Certificate of Merger with
the Delaware Secretary of State pursuant to the DGCL, no filing or registration
with, no notice to and no Permit or consent of any Governmental Authority is
necessary in connection with the execution, delivery and performance of this
Agreement by such Principal Stockholder, or the consummation by such Principal
Stockholder of the transactions contemplated by this Agreement.
SECTION 4.3. No Violation. Except as set forth in SECTION 4.3 of the
Disclosure Schedule, neither the execution and delivery of this Agreement and
the Ancillary Agreements to which it is a party by such Principal Stockholder
and the performance by such Principal Stockholder of its obligations hereunder
and thereunder, nor the consummation by such Principal Stockholder of the
transactions contemplated hereby and thereby will, directly or indirectly:
(a) violate, conflict with or result in any breach of (with or
without due notice or lapse of time or both) any provision of the organizational
documents or any resolution, statement, policy or procedure adopted by such
Principal Stockholder;
(b) violate any Order of any court of Governmental Authority
applicable to such Principal Stockholder or any of its respective properties or
assets; or
(c) violate any requirements of Law applicable to such Principal
Stockholder.
SECTION 4.4. Brokers and Finders. Such Principal Stockholder has not
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
the transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF CMC AND SUB
CMC and Sub hereby jointly and severally represent and warrant to the
Sellers that:
SECTION 5.1. Organization. Each of CMC and Sub is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, with all requisite power and authority to own, lease and operate its
respective properties and to carry on its respective businesses as now being
conducted. CMC and Sub have delivered to LAI complete
43
and correct copies of their respective Certificates of Incorporation and Bylaws,
and such documents are in full force and effect and have not been amended,
modified, revoked, terminated or cancelled or in any manner varied from the
documents delivered to LAI.
SECTION 5.2. Authorization. CMC and Sub have full corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which they are parties and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement by CMC and Sub, the
performance by CMC and Sub of their respective obligations hereunder, and the
consummation by them of the transactions contemplated hereby, have been duly and
validly authorized by the respective boards of directors of CMC and Sub and by
the sole stockholder of Sub. No other corporate action on the part of CMC or Sub
is necessary to authorize the execution and delivery of this Agreement, the
Ancillary Agreements or to consummate the transactions contemplated hereby and
thereby. This Agreement has been, and as of the Closing Date the Ancillary
Agreements will have been, duly and validly executed and delivered by CMC and
Sub and, assuming the Agreement and the Ancillary Agreements constitute the
valid and binding obligations of each of the Sellers and any other party
thereto, will constitute valid and binding obligations of CMC and Sub,
enforceable against each of them in accordance with their respective terms.
SECTION 5.3. No Violation. Neither the execution and delivery of this
Agreement and the Ancillary Agreements by CMC and Sub and the performance by CMC
and Sub of their obligations hereunder and thereunder nor the consummation by
CMC and Sub of the transactions contemplated hereby and thereby will directly
and indirectly (a) violate, conflict with or result in any breach (with or
without due notice or the lapse of time or both) of any provision of the
Certificate or Articles of Incorporation or Bylaws of CMC or Sub, (b) violate
any Order of any court or Governmental Authority applicable to CMC or Sub or (c)
violate any requirement of Law applicable to the CMC or Sub.
SECTION 5.4. Consents and Approvals. Other than any consents and
approvals of or filings or registrations that may be required pursuant to the
HSR Act and the filing of Certificate of Merger with the Delaware Secretary of
State pursuant to the DGCL, no filing or registration with, no notice to and no
permit, authorization, consent or approval of any Governmental Authority is
necessary in connection with the execution, delivery and performance of this
Agreement and the Ancillary Agreements by CMC and Sub, or the consummation by
CMC or Sub of the transactions contemplated hereby and thereby.
SECTION 5.5. Brokers and Finders. Except for amounts payable to Goldman
Sachs for advisory services in connection with the Merger, neither CMC nor Sub
has incurred any obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in connection
with the transactions contemplated by this Agreement.
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ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of Business of each of the LAI Companies Prior to
the Effective Time.
(a) Except as contemplated by this Agreement or the Ancillary
Agreements, during the period from the date of this Agreement and continuing
until the Effective Time, the Sellers agree that, except to the extent that CMC
shall otherwise consent in writing, LAI and TLC shall, and shall cause their
Subsidiaries to, and the Principal Stockholders shall use commercially
reasonable efforts to cause the LAI Companies to, carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, and shall use their commercially reasonable
efforts to:
(i) preserve intact their present business organization;
(ii) keep available the services of their present
officers and employees;
(iii) preserve their current relationships with
customers, suppliers, lenders and others having business dealings with them;
(iv) maintain their respective properties and facilities,
including those held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(v) perform in a timely manner all of their obligations
under this Agreement and all other Material Contracts relating to or affecting
any of their respective assets;
(vi) keep in full force and effect present insurance
policies or other comparable insurance coverage; and
(vii) maintain and preserve the goodwill associated with
their respective businesses.
(b) Without limiting the generality of the foregoing, prior to the
Effective Time, and except as expressly contemplated or permitted by this
Agreement or the Ancillary Agreements, or required by applicable Law, neither
LAI nor TLC will permit, and the Principal Stockholders will not take any
affirmative action to permit, any of the LAI Companies to, without the prior
written consent of CMC, which consent will not be unreasonably withheld:
(i) split, combine or reclassify any shares of its
capital stock, declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock, or directly or indirectly, redeem,
purchase or otherwise acquire any shares of its capital stock or other
securities;
(ii) issue, sell, pledge, dispose of, encumber or deliver
(whether through the issuance or granting of any options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class of any of
the LAI Companies or any securities
45
convertible into or exercisable or exchangeable for shares of stock of any class
of any of the LAI Companies (other than issuance of Certificates in replacement
of lost Certificates);
(iii) (A) incur any liability or obligation (absolute,
accrued, contingent or otherwise) that would be considered a long-term liability
on LAI's consolidated balance sheet prepared in accordance with GAAP applied on
a consistent basis with the Financial Statements, except in accordance with the
Senior Loan Agreement, (B) incur any other liability or obligation (absolute,
accrued, contingent or otherwise) other than in the ordinary course of business
consistent with past practices, (C) incur or issue any Debt or debt securities,
or (D) assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other person;
(iv) make any capital expenditures in excess of $100,000
in the aggregate;
(v) acquire or agree to acquire (by merger, share
exchange, consolidation or acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or division or
significant assets thereof or acquire, or agree to acquire, directly or
indirectly, any equity interest in any person;
(vi) merge, consolidate or agree to consolidate with or
into any other person;
(vii) amend or modify any Charter Documents (except in
accordance with SECTION 7.2(u);
(viii) sell, lease, license, encumber or dispose of any
of their assets, other than in the ordinary course of business consistent with
past practices;
(ix) except as otherwise contemplated by this Agreement,
amend, modify, terminate or enter into any Material Contract, other than in the
ordinary course of business consistent with past practices (it being expressly
understood and agreed that any amendment, modification or termination of the
Senior Loan Agreement or the Churchill Loan Agreement, or any agreement or
instrument related thereto, shall not be deemed to be in the ordinary course of
business), or commit a breach of or otherwise fail to comply with any obligation
under any Material Contract or Permit;
(x) make any change in financial or Tax accounting
methods, principles or practices unless required by GAAP or applicable Law;
(xi) extend credit in the sale of products, collection of
receivables or otherwise, other than in the ordinary course of business
consistent with past practices;
(xii) fail to maintain its books, accounts and records in
the usual, regular and ordinary manner on a basis consistent with prior years;
(xiii) fail to use its commercially reasonable efforts to
take, or omit to use its commercially reasonable efforts to take, any action
where such failure or omission would
46
cause (x) any representation or warranty in ARTICLE III or ARTICLE IV hereof to
become untrue or incorrect or (y) any of the conditions to the Merger set forth
in ARTICLE VII not being satisfied;
(xiv) adopt or amend any collective bargaining agreement
or Employee Benefit Plan other than as required by Law;
(xv) grant to any employee any bonus or increase in
compensation, fringe benefit, severance or termination pay, or enter into to any
employment agreement with any employee, except as may be required under
employment or termination agreements in effect on the date of this Agreement;
provided, however, that the LAI Companies may grant normal salary and wage
increases to their employees in accordance with their payroll policies and
consistent with past practices;
(xvi) enter into any Contract, including a Contract to
purchase or lease assets or operating supplies, which includes an aggregate
payment or commitment on the part of any party of more than $100,000;
(xvii) other than in the ordinary course of business
consistent with past practices, submit any binding bid, enter into any Contract
whereby any of the LAI Companies is obligated to provide products or services to
their customers, or enter into any Contract to purchase any reinforcing bar;
(xviii) except as contemplated by SECTION 6.11(e), make
any changes or agree to make any changes to any federal or state income Tax
Returns filed prior to the date hereof or file any new or amended federal or
state income Tax Returns;
(xix) make any loans or advances to any person (other
than any of the LAI Companies) other than travel or entertainment advances in
the ordinary course of business to employees and directors;
(xx) directly or indirectly make or cause to be made any
payment to any Affiliate other than in accordance with existing agreements and
then only in accordance with past practices, or enter into any new agreement
with any officer, director, employee, stockholder or Affiliate of any of the LAI
Companies;
(xxi) permit, create or assume any Lien upon any assets
or properties whether now owned or hereafter acquired, except for Permitted
Liens;
(xxii) waive any material rights or material claims;
(xxiii) either (i) commence a Legal Proceeding other than
for routine collection of accounts receivable or (ii) settle or compromise any
claim or pending or threatened Legal Proceeding;
(xxiv) enter into or execute any hedging Contract,
commodity Contract or derivative Contract;
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(xxv) terminate or close any hedging Contract unless
LAI's obligations under the purchase or sale Contract to which the hedging
Contract relates are themselves satisfied or terminated; or
(xxvi) agree or commit, in writing or otherwise, to do
any of the foregoing.
SECTION 6.2. Access to Information. Subject to applicable Law, between
the date of this Agreement and the Effective Time, upon reasonable prior notice
and at reasonable times during normal business hours without significant
disruption to the business of any of the LAI Companies, LAI and TLC will, and
the Principal Stockholders will use commercially reasonable efforts to cause
each of the LAI Companies to, (a) give CMC and its authorized representatives
reasonable access to all LAI Company personnel that LAI shall reasonably
designate, offices and other facilities, and to all books and records, of each
of the LAI Companies (including Tax returns and accounting work papers), (b)
permit CMC to make and will fully cooperate with regard to such inspections as
it may reasonably require and (c) cause its officers to furnish CMC such
financial and operating data and other information with respect to the business
and properties of each of the LAI Companies as CMC may from time to time
reasonably request.
SECTION 6.3. All Reasonable Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done as promptly as practicable, all things necessary, proper and
advisable under applicable Laws to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement. If at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, including, without limitation, the execution
of additional instruments, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
SECTION 6.4. Consents and Approvals. The parties hereto each will
cooperate with one another and use all reasonable efforts to prepare all
necessary documentation (including, without limitation, furnishing all
information required under the HSR Act and taking all action as may be necessary
or advisable to cause early termination of any applicable waiting period under
the HSR Act), to effect promptly all necessary filings and to obtain all
necessary permits, consents, approvals, orders and authorizations of or any
exemptions by, all third parties and Governmental Authorities necessary to
consummate the transactions contemplated by this Agreement; provided that
nothing in this Agreement shall be deemed to require CMC or any Subsidiary of
CMC to agree to, or proffer to, divest or hold separate any assets or any
portion of any business of CMC, LAI or any of their respective Subsidiaries.
Each party will keep the other party apprised of the status of any inquiries
made of such party by any other Governmental Authority or members of their
respective staffs with respect to this Agreement or the transactions
contemplated hereby.
SECTION 6.5. Public Announcements. CMC and LAI will consult with each
other and will mutually agree (the agreement of each party not to be
unreasonably withheld, conditioned or delayed) upon the content and timing of
any press release or other public statements with respect to the transactions
contemplated by this Agreement, including, without limitation, the Merger,
48
and Sellers shall not issue any such press release or make any such public
statement prior to such consultation and agreement, except as may be required by
applicable Law or by obligations pursuant to any listing agreement with any
securities exchange or any stock exchange regulations, provided, however, that
CMC and Sellers will give prior written notice to the other parties of the
content and timing of any such press release or other public statement required
by applicable Law or by obligations pursuant to any listing agreement with any
securities exchange or any stock exchange regulations.
SECTION 6.6. Notice of Breaches. Between the date of this Agreement and
the Closing, the Sellers shall give CMC prompt written notice if any of them
actually becomes aware of the occurrence of (a) any breach of representations or
warranties of any Seller, (b) any fact, event or condition that could reasonably
be expected to result in a breach of or inaccuracy in any representation or
warranty of Sellers had that representation or warranty been made as of the time
of the occurrence of such fact, event or condition, (c) any Material Adverse
Effect, or (d) any fact, event or condition that could reasonably be expected to
result in a Material Adverse Affect. During the same period, the Sellers shall
give CMC prompt written notice of any breach of any covenant in this ARTICLE VI
or if any of them actually becomes aware of the occurrence or failure to occur
of an event that may make the satisfaction of the conditions in ARTICLE VII
impossible or unlikely. Between the date of this Agreement and the Closing, CMC
and Sub shall give the Sellers prompt written notice if either of them becomes
aware of the occurrence of (a) any breach of representations or warranties of
CMC or Sub or (b) any fact, event or condition that could reasonably be expected
to result in a breach of or inaccuracy in any representation or warranty of CMC
or Sub had that representation or warranty been made as of the time of the
occurrence of such fact, event or condition.
SECTION 6.7. Exclusivity Agreement.
(a) From and after the date hereof, the Sellers shall not,
directly or indirectly, take (nor shall they authorize or permit any of the LAI
Companies or their respective officers, directors, employees, partners, members,
agents, attorneys or other representatives, or to the extent within their
control, other affiliates to take) any action to (i) encourage, solicit,
initiate or facilitate any Acquisition Proposal, (ii) enter into any agreement
with respect to any Acquisition Proposal, (iii) participate in any substantive
way in discussions regarding an unsolicited inquiry of any Seller by a person
unaffiliated with the Sellers with respect to an Acquisition Proposal, or (iv)
participate in any way in discussions or negotiations with, or furnish any
information to, any person in connection with, or take any other action to
facilitate any inquiries or making of any proposal that constitutes, or could
reasonably be expected to lead to, any Acquisition Proposal.
(b) The Sellers shall, as promptly as practicable (and (i) with
respect to LAI and TLC in no event later than two business days after receipt
thereof and (ii) with respect to TGF and EFPE in no event later than two
business days after receipt thereof by Brent Humphries of TGF Management Corp.
and Peter Carnwath of EFPE, but not later than seven (7) days after receipt
thereof by any other employee of TGF Management Corp. or EFPE), advise CMC of
any inquiry or proposal received by any of them relating to any potential
Acquisition Proposal (an "INQUIRY"). At the request of CMC, the Sellers shall as
promptly as practical (i) furnish CMC with a copy of any Inquiry if it is in
writing, or a written summary if it is not in writing, (ii)
49
advise CMC of the material terms of any Inquiry, including the identity of the
person and its affiliates making the Inquiry, (iii) advise CMC of any
information requested from any Seller, (iv) advise CMC of any negotiations or
discussions being sought to be initiated with any Seller, and (v) keep CMC
reasonably informed with respect to any developments relating to the Inquiry.
(c) Notwithstanding the foregoing, at any time prior to obtaining
the Stockholder Approval, in response to a bona fide written Acquisition
Proposal that the Board of Directors of LAI determines in good faith (after
consultation with outside counsel and a financial advisor of nationally
recognized reputation) constitutes or would reasonably be expected to lead to a
Superior Proposal, and which Acquisition Proposal was not solicited after the
date hereof and was made after the date hereof and did not otherwise result from
a breach of this SECTION 6.7, LAI may, if its Board of Directors determines in
good faith (after consultation with outside counsel) that it is required to do
so in order to comply with its fiduciary duties to the stockholders of LAI under
applicable Law, and subject to compliance with SECTION 6.7(b), (x) furnish
information with respect to LAI and its Subsidiaries to the person making such
Acquisition Proposal (and its representatives) pursuant to a customary
confidentiality agreement (which need not restrict such person from making an
unsolicited Acquisition Proposal) not less restrictive of such person than the
Confidentiality Agreement, provided that all such information has previously
been provided to CMC or is provided to CMC prior to or substantially concurrent
with the time it is provided to such person, and (y) participate in discussions
or negotiations with the person making such Acquisition Proposal (and its
representatives) regarding such Acquisition Proposal.
(d) Neither the Board of Directors of LAI nor any committee
thereof shall (i) (A) withdraw (or modify in a manner adverse to CMC), or
propose to withdraw (or modify in a manner adverse to CMC), the approval,
recommendation or declaration of advisability by such Board of Directors or any
such committee thereof of this Agreement, the Merger or the other transactions
contemplated by this Agreement or (B) recommend, adopt or approve, or propose
publicly to recommend, adopt or approve, any Acquisition Proposal (any action
described in this clause (i) being referred to as an "ADVERSE RECOMMENDATION
CHANGE") or (ii) approve or recommend, or propose to approve or recommend, or
allow LAI or any of its Subsidiaries to execute or enter into, any letter of
intent, memorandum of understanding, agreement in principle, merger agreement,
acquisition agreement, option agreement, joint venture agreement, partnership
agreement or other similar agreement constituting or related to, or that is
intended to or would reasonably be expected to lead to, any Acquisition Proposal
(other than a confidentiality agreement referred to in SECTION 6.7(c) (an
"ACQUISITION AGREEMENT"). Notwithstanding the foregoing, at any time prior to
obtaining the Stockholder Approval, the Board of Directors of LAI may (x) make
an Adverse Recommendation Change and (y) after payment of the termination fee
pursuant to SECTION 9.2(c), cause LAI to terminate this Agreement (and
concurrently with or after such termination, if it so chooses, cause LAI to
enter into an Acquisition Proposal with respect to any Superior Proposal), if in
any such case LAI's Board of Directors determines in good faith (after
consultation with outside counsel) that it is required to do so in order to
comply with its fiduciary duties to the stockholders of LAI under applicable
Law; provided, however, that no Adverse Recommendation Change may be made, and
this Agreement may not be terminated, until after the fourth business day
following CMC's receipt of written notice (a "NOTICE OF ADVERSE RECOMMENDATION")
from LAI advising CMC that
50
the Board of Directors of LAI intends to take such action and specifying the
reasons therefor, including the terms and conditions of any Superior Proposal
that is the basis of the proposed action by the Board of Directors (it being
understood and agreed that any amendment to the financial terms or any other
material term of such Superior Proposal shall require a new Notice of Adverse
Recommendation and a new four business day period). In determining whether to
make a Company Adverse Recommendation Change, the Board of Directors of LAI
shall take into account any changes to the terms of this Agreement proposed by
CMC in response to a Notice of Adverse Recommendation or otherwise.
(e) "ACQUISITION PROPOSAL" means any offer or proposal concerning
any (i) merger, consolidation, business combination, share exchange or similar
transaction involving any of the LAI Companies (ii) sale, lease or other
disposition directly or indirectly by merger, recapitalization, consolidation,
business combination, share exchange, joint venture, or otherwise of assets of
any of the LAI Companies representing 5% or more of the assets of LAI and its
Subsidiaries, taken as a whole, other than the ordinary course of business,
(iii) issuance, sale, or other disposition of (including by way of merger,
recapitalization, consolidation, business combination, share exchange, joint
venture, license or any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into or exchangeable for, such
securities) representing 5% or more of the voting power of any of the LAI
Companies, other than pursuant to an employee stock based compensation plan,
(iv) transaction in which any person shall acquire beneficial ownership or the
right to acquire beneficial ownership, or any group shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 5% or
more of the outstanding voting capital stock of any of the LAI Companies, or (v)
any combination of the foregoing (other than the transactions contemplated by
this Agreement).
(f) "SUPERIOR PROPOSAL" means any bona fide offer made by a person
that is not a party to this Agreement or an Affiliate of a party to this
Agreement that if consummated would result in such person (or its stockholders)
owning, directly or indirectly, all or substantially all of the shares of LAI
Capital Stock then outstanding (or of the surviving entity in a merger or the
direct or indirect parent of the surviving entity in a merger) or all or
substantially all the assets of LAI, which the Board of Directors of LAI
determines in good faith (after consultation with counsel and a financial
advisor of nationally recognized reputation) to be (i) more favorable to the
stockholders of LAI from a financial point of view than the Merger (taking into
account all the terms and conditions of such proposal and this Agreement
(including any changes to the terms of this Agreement proposed by CMC in
response to such offer or otherwise)) and (ii) reasonably capable of being
completed, taking into account all financial, legal, regulatory and other
aspects of such proposal.
SECTION 6.8. Escrow Agreement. At the Effective Time, CMC, Churchill
and the Escrow Agent named therein shall enter into the Escrow Agreement.
SECTION 6.9. Waiver of Restrictions on Transfer. The Sellers agree
that, effective as of the Effective Time, all restrictions on transfer
(including any rights of first offer or rights of first refusal), if any, on LAI
Capital Stock, held by LAI's stockholders shall be waived to permit consummation
of the Merger.
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SECTION 6.10. Delivery of Financial Statements. LAI shall deliver to
CMC within twenty (20) days after the end of each calendar month after the date
hereof, or within two (2) days after the date of preparation, whichever is
earlier, copies of the consolidated financial statements of the LAI Companies
prepared by LAI on a monthly basis for the year-to-date period and monthly
detail trial balances. Each of such financial statements shall be prepared in
accordance with GAAP applied consistently with the Financial Statements and
throughout the periods involved and shall present fairly, in all material
respects, the financial condition of LAI and its consolidated Subsidiaries as at
said dates and for such periods (subject to normal year end adjustments, which
shall not be material in the aggregate). In addition, if applicable, LAI shall
deliver to CMC such financial statements of LAI and its Subsidiaries as CMC may
reasonably request to enable CMC to comply with its filing requirements under
the Exchange Act. The fees and costs of preparing all such financial statements
pursuant to this SECTION 6.10 shall be borne by LAI and shall be deemed to be
"accounting" fees under SECTION 2.3(a)(i).
SECTION 6.11. Tax Matters.
(a) Liability for Taxes. The Surviving Corporation shall be liable
for all Taxes (including, specifically, for this purpose, Taxes that are due
with respect to Tax Returns that are required to be filed by the LAI Companies
for taxable periods ending on or before the Effective Time) of the LAI Companies
with respect to any and all periods, or portions thereof, ending on or before
the Effective Time ("PRE-EFFECTIVE TIME PERIODS") and for all claims, losses,
liabilities, obligations, damages, impositions, assessments, demands, judgments,
settlements, costs and expenses with respect to such Taxes. CMC shall be liable
for Taxes of the LAI Companies with respect to any and all periods, or portions
thereof, beginning after the Effective Time ("POST-EFFECTIVE TIME PERIODS") and
for any and all claims, losses, liabilities, obligations, damages, impositions,
assessments, demands, judgments, settlements, costs and expenses with respect to
such Taxes. Any and all transactions or events contemplated by this Agreement
that occur at or prior to the Effective Time shall be deemed to have occurred in
the Pre-Effective Time Periods.
(b) Allocation of Liability for Taxes. In the case of any Taxes
that are attributable to a taxable period which begins before the Effective Time
and ends after the Effective Time, the amount of Taxes attributable to the
Pre-Effective Time Periods shall be determined as follows:
(i) In the case of franchise or similar Taxes imposed on
any of the LAI Companies based on capital (including net worth or long-term
debt), the number of shares of stock authorized, issued or outstanding, or ad
valorem or property taxes, the portion attributable to the Pre-Effective Time
Periods shall be the amount of such Taxes for the entire taxable period
multiplied by a fraction, the numerator of which is the number of days in the
Pre-Effective Time Periods and the denominator of which is the number of days in
the entire taxable period; provided, however, the amount of Tax attributable to
the Pre-Effective Time Periods shall not exceed the amount of Tax the LAI
Companies would have paid if the taxable period ended immediately prior to the
Effective Time.
(ii) In the case of all other Taxes, the portion
attributable to the Pre-Effective Time Periods shall be determined on the basis
of an interim closing of the books of the
52
LAI Companies as of the Effective Time, and the determination of the
hypothetical Tax for such Pre-Effective Time Periods shall be determined on the
basis of such interim closing of the books, without annualization. The
hypothetical Tax for any period shall in no case be less than zero. Taxes
attributable to the Pre-Effective Time Periods shall be determined under the
same method of accounting used by the LAI Companies during that period.
(c) Administration of Tax Matters. The LAI Companies shall
reasonably consult with PriceWaterhouseCoopers LLP when calculating all tax
accruals of the LAI Companies for Interim Pre-Effective Time Periods, and the
LAI Companies shall permit CMC to review PriceWaterhouseCooper's work papers and
to consult with PriceWaterhouseCoopers with respect to the calculation of such
tax accruals. The Principal Stockholders shall prepare and timely file, or cause
to be timely filed, for the LAI Companies, Tax Returns with respect to the
Pre-Effective Time Periods that are required by law to be filed after the
Effective Time including, but not limited to, federal income Tax Return(s). The
Principal Stockholders shall, at least thirty days prior to the due date of such
Tax Returns, provide a copy of such Tax Returns together with the work papers
and schedules utilized in their preparation to CMC for its consent thereto,
which shall not be unreasonably withheld, conditioned or delayed. If CMC has not
provided the Principal Stockholders with a written objection to such Tax Returns
within twenty days of receiving such Tax Returns, CMC's consent thereto shall be
deemed to have been received. In the event that CMC provides the Principal
Stockholders with a written objection to such Tax Returns within twenty days of
receiving such Tax Returns, the Principal Stockholders and CMC shall reasonably
cooperate with each other to reach a timely and mutually satisfactory solution
to the disputed matters. CMC, the LAI Companies and the Principal Stockholders
shall cooperate fully, as and to the extent reasonably requested, in connection
with the filing of Tax Returns.
(d) Tax Audits. In the case of an audit or administrative or
judicial proceeding that relates to any Pre-Effective Time Periods and that is
commenced on or before June 30, 2007, the Principal Stockholders shall have the
right, at their own expense, to control the conduct of such audit or proceeding;
provided that (i) the Principal Stockholders shall not have the right to control
the conduct of such audit or proceeding if at the time of such audit or
proceeding the dollar amount of all Claims under Article X that have not been
satisfied exceeds the amount then held in the Escrow Fund and (ii) the Principal
Stockholders may not agree to a settlement or compromise to any such audit or
proceeding that may reasonably be expected to have an adverse effect on the Tax
liability of the LAI Companies for any Post-Effective Time Periods without the
prior written consent of CMC. CMC may also participate in any such audit or
proceeding, at its own expense, and, if the Principal Stockholders do not assume
the defense or any such audit or proceeding, CMC may defend the same in such
manner as it may deem appropriate including, but not limited to, settling such
audit or proceeding with the consent of the Principal Stockholders (whose
consent shall be required for only such audits or proceedings commenced on or
before June 30, 2007, or until the distribution of the entire Escrow fund, if
earlier), which shall not be unreasonably withheld, conditioned or delayed, and
in accordance with its right to indemnification pursuant to SECTION 10.2. CMC
shall control the conduct of any audit or administrative or judicial proceeding
that relates to any Post-Effective Time Periods. CMC, the LAI Companies and the
Principal Stockholders shall cooperate fully, as and to the extent reasonably
requested, in connection with any audit or administrative or judicial proceeding
with
53
respect to Taxes and Tax Returns. Such cooperation shall include the retention,
and, upon the other party's request, the provision of records and information
that are reasonably relevant to any such audit or administrative or judicial
proceeding and making employees available on a mutually convenient basis to
provide assistance including additional information and explanation of any
material provided hereunder; provided that the party requesting such assistance
shall pay the reasonable out-of-pocket expenses incurred by the party providing
such assistance; and provided further that no party shall be required to provide
assistance at times or in amounts that would interfere unreasonably with the
business and operations of such party. CMC agrees to retain all books and
records with respect to Tax matters pertinent to the LAI Companies relating to
any Pre-Effective Time Periods and to any Tax periods beginning before the
Effective Time and ending after the Effective Time, until the expiration of any
applicable statute of limitations or extensions thereof.
(e) Amended Tax Returns. The LAI Companies will prepare and
deliver at Closing manually and fully executed copies of the LAI Amended Tax
Returns that accurately reflect the disallowance of carrybacks of net operating
losses of an aggregate of $4,495,714. Manually and fully executed amended state
income Tax Returns for similarly affected periods will also be delivered at
Closing. The Principal Stockholders may not file any amended Tax Returns or
refund claims in respect of any taxable period of the LAI Companies ending on or
prior to the Effective Time without the prior written consent of CMC, which
consent shall not be unreasonably withheld, conditioned or delayed. CMC shall
not, and shall not permit or cause the LAI Companies to, amend any Tax Return of
the LAI Companies with respect to any taxable period of the LAI Companies ending
on or prior to the Effective Time without the prior written consent of the
Principal Stockholders, which shall not be unreasonably withheld, conditioned or
delayed.
SECTION 6.12. Stockholder Approval. LAI shall, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene and
hold a meeting of its stockholders for the purpose of approving this Agreement,
the Merger and the transactions contemplated hereby, or solicit written consents
of its stockholders in lieu of a meeting of stockholders for such purpose. LAI
shall, through its board of directors, recommend to its stockholders approval of
this Agreement, the Merger, the amendment to LAI's Certificate of Incorporation
pursuant to SECTION 7.2(u) and the transactions contemplated hereby and shall
not recommend any other Acquisition Proposal, except as permitted under SECTION
6.7(d).
SECTION 6.13. Payment of Indebtedness by Related Persons. Except as
expressly provided in this Agreement, LAI shall cause all indebtedness owed to
any of the LAI Companies by any stockholders, officers, directors or employees
of any of the LAI Companies or any entity controlled by any of the foregoing to
be paid in full prior to the Closing.
SECTION 6.14. 401(k) Plan. Prior to the Closing Date, LAI shall have
contributed to the 401(k) plan maintained by any of the LAI Companies in effect
on the date immediately preceding the Closing Date (the "LAI 401(k) PLAN") any
amounts required to be contributed to said plan, in accordance with the terms
thereof, including any contributions due after the Closing Date but attributable
either to a prior plan year or to that portion of the current plan year ending
on the Closing Date.
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SECTION 6.15. Environmental Insurance Policy; D&O Insurance Policy.
Prior to Closing, LAI shall obtain an extension of the reporting period for its
Pollution Legal Liability Select Policy for at least eighteen (18) months after
Closing (the "ENVIRONMENTAL INSURANCE POLICY"). LAI shall pay all costs,
including all premium costs, to obtain such extension of the reporting period
under the Environmental Insurance Policy. Prior to Closing, LAI shall obtain a
Directors and Officers Liability Insurance Policy for the benefit of pre-Closing
and Closing officers and directors of the LAI Companies that extends for a
period of six years after Closing on terms and conditions at least as favorable
to LAI's directors and officers as LAI's existing Directors and Officers
Liability Insurance Policy issued by Chubb Insurance Company (the "D&O INSURANCE
POLICY") and that covers pre-Closing and Closing actions and/or omissions by
such officers and directors of the LAI Companies. The D&O Insurance Policy shall
provide that it will remain in full force and effect after the Merger. LAI shall
pay all costs, including all premium costs, to obtain the D&O Insurance Policy.
The D&O Insurance Policy and the insurance company issuing the D&O Insurance
Policy shall be reasonably acceptable to CMC.
SECTION 6.16. Accounts Receivable Collection. CMC shall use
commercially reasonable efforts in the ordinary course of business and
consistent with CMC's past practices to collect all Accounts Receivable set
forth in SECTION 3.10(b) of the Disclosure Schedule. In discharging this duty,
in no event shall CMC be required to file suit, file any document with any
Governmental Authority, factor any such Accounts Receivable or sell or otherwise
assign to or employ the use of a collection agency.
SECTION 6.17. Opinions. Each of TGF and EFPE agrees to use its
commercially reasonable efforts to deliver to CMC within 15 days after the
Closing an opinion of its counsel in form reasonably satisfactory to CMC and TGF
or EFPE, as the case may be.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.1. Conditions to Each Party's Obligations under this
Agreement. The respective obligations of each party under this Agreement shall
be subject to the fulfillment at or prior to the Effective Time of the following
conditions, any of which may be waived in writing, in whole or in part, by the
party for whose benefit such condition exists:
(a) All actions by or in respect of, or filings with, any
Governmental Authority required to permit the consummation of the Merger shall
have been taken or made, and all approvals of Governmental Authorities shall
have been obtained;
(b) Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated; and
(c) No injunction, restraining Order or other ruling or Order
issued by any court of competent jurisdiction or Governmental Authority or other
legal restraint, challenge or
55
prohibition preventing, delaying, making illegal or otherwise interfering with
the consummation of the Merger shall be in effect, and no Legal Proceedings
shall have been instituted by persons other than the parties to this Agreement
or their Affiliates for the purpose thereof.
SECTION 7.2. Conditions to the Obligations of CMC and Sub under this
Agreement. The obligations of CMC and Sub under this Agreement shall be further
subject to the satisfaction, at or prior to the Effective Time, of the following
conditions, any of which may be waived by CMC and Sub in writing, in whole or in
part:
(a) Each of the obligations of LAI and TLC required to be
performed by them at or prior to the Closing pursuant to the terms of this
Agreement and all Ancillary Agreements shall have been duly performed and
complied with in all respects;
(b) Each of the obligations of the Principal Stockholders required
to be performed by each of them at or prior to the Closing pursuant to the terms
of this Agreement and all Ancillary Agreements to which they are a party shall
have been duly performed and complied with in all respects;
(c) The representations and warranties of each of LAI and TLC set
forth in SECTION 3.1, SECTION 3.2, SECTION 3.4, SECTION 3.5 and SECTION 3.7, and
all representations and warranties of LAI and TLC in this Agreement and all
Ancillary Agreements that are qualified by materiality, shall be true and
correct in all respects as of the date of this Agreement and as of the Closing,
as though made at and as of the Closing (except to the extent that any such
representation or warranty speaks as of an earlier date, in which such
representation or warranty shall have been true and correct as of such date);
and all other representations and warranties of LAI and TLC contained in this
Agreement and all Ancillary Agreements shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing, as though made
at and as of the Closing (except to the extent that any such representation or
warranty speaks as of an earlier date, in which such representation or warranty
shall have been true and correct as of such date);
(d) The representations and warranties of each of the Principal
Stockholders in this Agreement and all Ancillary Agreements that are qualified
by materiality, shall be true and correct in all respects as of the date of this
Agreement and as of the Closing, as though made at and as of the Closing (except
to the extent that any such representation or warranty speaks as of an earlier
date, in which such representation or warranty shall have been true and correct
as of such date); and all other representations and warranties of the Principal
Stockholders contained in this Agreement and all Ancillary Agreements shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing, as though made at and as of the Closing (except to the extent
that any such representation or warranty speaks as of an earlier date, in which
such representation or warranty shall have been true and correct as of such
date);
(e) Each document required to be delivered pursuant to SECTION
8.1(a) shall have been delivered;
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(f) CMC shall have received from Andrews Kurth LLP, counsel to LAI
and TLC, an opinion of counsel in the form attached hereto as EXHIBIT E; ("LAI
LEGAL OPINION");
(g) CMC shall have received from Kevin Dooley, General Counsel to
Churchill, an opinion of counsel in the form and substance reasonably
satisfactory to CMC regarding Churchill's authorization to execute and deliver
the Churchill Consent and Agreement and the enforceability of such Agreement;
(h) LAI shall have delivered to CMC a statement of LAI Expenses in
form and substance reasonably satisfactory to CMC, which shall be certified by
the Chief Financial Officer of LAI;
(i) All officers and directors of each of the LAI Companies shall
have delivered letters of resignation effective immediately after the Effective
Time;
(j) Each of A.B. Irwin, III and Steve Kreider shall have executed
an employment agreement with the Surviving Corporation in form and substance
satisfactory to CMC (the "EMPLOYMENT AGREEMENTS");
(k) Any and all Permits, consents, waivers and clearances of all
third parties and any Governmental Authority which are necessary in connection
with the consummation of the Merger and the other transactions contemplated
hereby and the continuing operation of the Surviving Corporation consistent with
past practices shall have been obtained and be in full force and effect;
(l) No Order issued by any Governmental Authority limiting or
restricting the Surviving Corporation's conduct or operation of its businesses
following the Merger shall be in effect, nor shall any proceeding brought by a
Governmental Authority seeking any such Order be pending;
(m) CMC shall have received (i) certificates of LAI and TLC,
signed by the Chief Executive Officer of each such entity, dated as of the
Closing Date, to the effect that the conditions set forth in SECTION 7.2(a),
SECTION 7.2(c), SECTION 7.2(l), SECTION 7.2(o), SECTION 7.2(p), SECTION 7.2(q),
SECTION 7.2(r), SECTION 7.2(s), and SECTION 7.2(t) have been satisfied and (ii)
certificates of TGF and EFPE, signed by an authorized representative of each
such entity, dated as of the Closing Date, to the effect that the closing
conditions set forth in SECTION 7.2(b) and SECTION 7.2(d) have been satisfied
with respect to such party;
(n) At or prior to the Closing, on behalf of the holders of LAI
Capital Stock, LAI shall furnish to CMC an affidavit, stating, under penalty of
perjury, that LAI is not and has not been a United States real property holding
corporation at any time during the applicable period specified in Code Section
897(c)(1)(A)(ii) and no interest in LAI constitutes a U.S. real property
interest pursuant to Section 1445(b) of the Code;
(o) This Agreement and the Merger shall have been approved and
adopted by the affirmative vote of the holders of at least ninety-five percent
(95%) of the outstanding shares and
57
voting power of LAI Capital Stock, and none of such stockholders shall have
exercised their dissenters' or appraisal rights under the DGCL, and CMC shall
have been furnished evidence of such approval reasonably satisfactory to it;
(p) Except for claims made that are consistent with the list of
all holders of LAI Capital Stock, there must not have been made or threatened by
any person any claim asserting that such person (i) is the holder or the
beneficial owner of, or has the right to acquire or to obtain the beneficial
ownership of, any stock of, or any other voting, equity or ownership interest
in, any of the LAI Companies, or (ii) is entitled to all or any portion of the
Merger Consideration payable in respect of the shares of LAI Capital Stock;
(q) The Shareholders Agreement, all Stock Restriction Agreements,
all Indemnification Agreements, the Joinder Agreement, all Contracts giving rise
to Change of Control Payments, all employment Contracts listed or required to be
listed in the Disclosure Schedule and all other employment Contracts other than
employment Contracts providing for "at will" employment between any of the LAI
Companies and any of their respective employees, and all agreements of the LAI
Companies relating to management services shall have been terminated without any
liability or obligation of any LAI Company whatsoever, except to the extent
fully reflected as a liability on the Pre-Closing Statement and CMC shall have
been furnished evidence of such terminations reasonably satisfactory to it;
(r) All stock option/stock issuance plans of the LAI Companies
shall have been terminated prior to Closing, and all outstanding options,
warrants or rights to acquire any shares of LAI Capital Stock (or securities
convertible or exercisable for shares of LAI Capital Stock) shall have been
exercised and, if necessary, converted, in full or shall have been canceled and
terminated prior to the Closing.
(s) LAI shall have obtained the Environmental Insurance Policy,
the Environmental Insurance Policy shall be in full force and effect and the
Environmental Insurance Policy shall remain in full force and effect after the
Closing; and LAI shall have obtained the D&O Insurance Policy, the D&O Insurance
Policy shall be in full force and effect and the D&O Insurance Policy shall
remain in full force in effect after the Closing;
(t) The Debt Payoff Amount as reflected in the certificates or
instruments delivered under SECTION 2.1(f) does not exceed the sum of the Senior
Obligations Payoff amount plus the Churchill Payoff Amount and does not exceed
the Payoff Cap;
(u) LAI shall have duly filed an amendment to its certificate of
incorporation (including any certificate of designation, if applicable) that
provides that the Merger shall not (i) be deemed to constitute a liquidation
that would entitle the LAI Preferred Stockholders to receive any liquidation
preference, preferential payment or other payment or distribution, (ii) entitle
any LAI Preferred Stockholder to require LAI to repurchase or redeem any shares
of LAI Preferred Stock, and (iii) result in any conversion of any LAI Capital
Stock into any other class or series of LAI Capital Stock;
58
(v) The LAI Companies shall have written off all Accounts
Receivable, other than those set forth in SECTION 3.10(b) of the Disclosure
Schedule, which in the reasonable judgment of LAI are uncollectible (such
written off Accounts Receivable are referred to as the "WRITTEN OFF ACCOUNTS
RECEIVABLE"), and LAI shall have delivered to CMC a complete list of such
Written Off Accounts Receivable; and
SECTION 7.3. Conditions to the Obligations of the Sellers under this
Agreement. The obligations of the Sellers under this Agreement shall be further
subject to the satisfaction, at or prior to the Effective Time, of the following
conditions, any of which may be waived by the Sellers in writing in whole or in
part:
(a) Each of the obligations of CMC and Sub, respectively, required
to be performed by it at or prior to the Closing pursuant to the terms of this
Agreement and all Ancillary Agreements shall have been duly performed and
complied with in all respects;
(b) The representations and warranties of CMC and Sub contained in
this Agreement and all Ancillary Agreements that are qualified by materiality
shall be true and correct in all respects as of the date of this Agreement and
as of the Closing, as though made at and as of the Closing; and all other
representations and warranties of CMC and Sub contained in this Agreement and
all Ancillary Agreements shall be true and correct in all material respects as
of the date of this Agreement and all Ancillary Agreements and as of the
Closing, as though made at and as of the Closing;
(c) Each document required to be delivered pursuant to SECTION
8.1(b), including without limitation the Escrow Agreement, shall have been
delivered;
(d) Sellers shall have received a certificate signed by the Chief
Executive Officer of each of CMC and Sub, dated as of the Closing Date, to the
effect that the conditions set forth in SECTION 7.3(a) and SECTION 7.3(b) have
been satisfied;
(e) Sellers shall have received from Haynes and Boone, LLP and/or
David M. Sudbury, General Counsel of CMC, opinions of counsel in the form
attached hereto as EXHIBIT F (the "CMC LEGAL OPINION");
(f) Any and all Permits, consents, waivers, and clearances of all
Governmental Authorities which are necessary in connection with the consummation
of the Merger and the other transactions contemplated hereby shall have been
obtained and be in full force and effect; and
(g) CMC and Sub shall have furnished to Sellers such additional
certificates and other documents as Sellers may have reasonably requested as to
the satisfaction of any of the conditions set forth in SECTION 7.1 and SECTION
7.3.
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ARTICLE VIII
CLOSING
SECTION 8.1. Closing. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Haynes and
Boone, LLP, 901 Main Street, Dallas, Texas 75202, subject to the satisfaction or
waiver of the conditions set forth in ARTICLE VII, on the later of December 23,
2003, or the first Monday that is a business day after all conditions to the
Closing have been satisfied or waived, or at such other time and place and on
such other date as CMC and LAI shall agree (the "CLOSING DATE"). At the Closing:
(a) The Sellers shall deliver to CMC the following:
(i) the certificates described in SECTION 7.2(h), SECTION
7.2(m), SECTION 7.2(n), and SECTION 7.2(t);
(ii) copies of the resolutions adopted by the Board of
Directors and stockholders of LAI authorizing the execution and delivery of this
Agreement and the consummation of all the transactions contemplated hereby, duly
certified as of the Closing by the Secretary of LAI;
(iii) corporate good standing certificate dated within
five days of the closing of LAI and all of its Subsidiaries, with respect to
each state in which LAI or any of its Subsidiaries is incorporated, does
business or is qualified to do business;
(iv) incumbency certificates for LAI and TLC;
(v) copies of all Permits, consents, waivers and
clearances provided for pursuant to SECTION 7.2(k);
(vi) the LAI Legal Opinion;
(vii) the written resignations of the directors and
officers of the LAI Companies pursuant to SECTION 7.2(i);
(viii) the Employment Agreements;
(ix) the Escrow Agreement signed by the Escrow Agent and
Churchill;
(x) the releases signed by each of the Principal
Stockholders and certain other LAI Stockholder in the form attached hereto as
EXHIBIT G;
(xi) A file-stamped copy of LAI's amendment to its
Certificate of Incorporation pursuant to SECTION 7.2(u) certified by the
Delaware Secretary of State;
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(xii) Releases of all Liens on any shares of capital
stock of any of the LAI Companies and on all properties and assets owned by each
of the LAI Companies, except for the Liens referred to in clauses (a), (b) and
(c) of the definition of Permitted Liens;
(xiii) such other documents as CMC or Sub may reasonably
request for the purpose of (A) enabling their counsel to provide the CMC Legal
Opinion, (B) evidencing the accuracy of any of the Sellers' representations and
warranties, (C) evidencing the performance by any Seller of, or the compliance
by any Seller with, any covenant or obligation required to be performed or
complied with by such party, (D) evidencing the satisfaction of any condition
referred to in SECTION 7.1 and SECTION 7.2, or (E) otherwise facilitating the
consummation or performance of any of the transactions contemplated by this
Agreement; and
(xiv) a schedule identifying the Written Off Accounts
Receivable by customer number, customer name, job number, invoice number and
amount.
(b) CMC and Sub shall deliver or cause to be delivered to LAI and
the Principal Stockholders the following:
(i) the certificates described in SECTION 7.3(d) and
SECTION 7.3(g);
(ii) copies of the resolutions adopted by the Boards of
Directors of CMC and Sub authorizing the execution and delivery of this
Agreement and the Ancillary Agreements duly certified as of the Closing by the
respective Secretaries of CMC and Sub;
(iii) incumbency certificates for CMC and Sub;
(iv) The CMC Legal Opinion;
(v) The Escrow Agreement signed by CMC;
(vi) such other documents as the Sellers may reasonably
request for the purpose of (A) enabling their counsel to provide the LAI Legal
Opinion and the legal opinions described in SECTION 6.17, (B) evidencing the
accuracy of any representation or warranty of CMC or Sub, (C) evidencing the
performance by CMC or Sub of, or the compliance by CMC or Sub with, any covenant
or obligation required to be performed or complied with by CMC or Sub, (D)
evidencing the satisfaction of any condition referred to in SECTION 7.1 or
SECTION 7.3, or (E) otherwise facilitating the consummation of any of the
transactions contemplated by this Agreement;
(vii) all other previously undelivered documents required
to be delivered by CMC to the Sellers at or prior to the Closing pursuant to the
terms of this Agreement; and
(viii) Confirmation that all payments required by ARTICLE
II hereof shall have been made and received.
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ARTICLE IX
TERMINATION AND ABANDONMENT
SECTION 9.1. Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time:
(a) by mutual consent of LAI and CMC; or
(b) by either LAI or CMC:
(i) if there shall have been a material breach of any
representation, warranty, covenant or agreement on the part of CMC or Sub on the
one hand, or any Seller on the other, set forth in this Agreement (for such
purpose, each such representation and warranty shall be read without regard and
without giving effect to any "materiality" or "Material Adverse Effect" standard
of qualification contained in such representation or warranty and as if such
standard or qualification were deleted from such representation or warranty),
and, if such breach can be cured, such breach has not been cured within ten (10)
days after notice of such breach is given by the non-breaching party to the
breaching party; or
(ii) if a court of competent jurisdiction or Governmental
Authority shall have issued an Order or taken any other action (which Order the
parties hereto shall use their reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such Order or other action shall have become
final and nonappealable; or
(iii) if the Effective Time shall not have occurred on or
before January 5, 2004; provided, however, that the right to terminate this
Agreement shall not be available to any party whose breach of this Agreement has
been the principal cause of, or principally resulted in, the failure of the
Merger to occur on or before such date; or
(c) (i) by CMC if any of the conditions to its obligations in
ARTICLE VII has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of CMC
to comply with its obligations under this Agreement) and CMC has not waived such
condition on or before the Closing Date; or (ii) by Sellers, if any of the
conditions to their respective obligations in ARTICLE VII has not been satisfied
as of the Closing Date or if satisfaction of such condition is or becomes
impossible (other than through the failure of Sellers to comply with their
obligations under this Agreement) and Sellers have not waived such condition on
or before the Closing Date; or
(d) by CMC:
(i) upon the occurrence of a Material Adverse Effect or
an event which could reasonably be expected to have a Material Adverse Effect;
or
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(ii) in the event that (x) an Adverse Recommendation
Change shall have occurred or (y) the Board of Directors of LAI fails to
reaffirm its recommendation to its stockholders of this Agreement, the Merger or
the other transactions contemplated by this Agreement within ten business days
of receipt of a written request by CMC to provide such reaffirmation following
an Acquisition Proposal; or
(e) by LAI pursuant to SECTION 6.7(d).
Each party's right of termination under SECTION 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies.
SECTION 9.2. Procedure and Effect of Termination. In the event of
termination and abandonment of the Merger pursuant to SECTION 9.1, written
notice thereof shall forthwith be given to the other parties to this Agreement
and this Agreement shall terminate and the Merger shall be abandoned, without
further action by any of the parties hereto. If this Agreement is terminated as
provided herein:
(a) upon request therefor, each party will redeliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether obtained before or after the execution
hereof, to the party furnishing the same; and
(b) no party hereto shall have any liability or further obligation
to any other party to this Agreement resulting from such termination except (i)
that the provisions of this ARTICLE IX, SECTION 6.5, ARTICLE X, and ARTICLE XI
shall remain in full force and effect, and (ii) no party waives any claim or
right against a breaching party resulting from the breach by a party hereto of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
(c) In the event that (i) this Agreement is terminated by CMC
pursuant to clause (ii) of SECTION 9.1(d), (ii) this Agreement is terminated by
LAI pursuant to SECTION 9.1(e) or (iii) (A) an Acquisition Proposal shall have
been made to LAI or shall have been made directly to the stockholders of LAI
generally or shall have otherwise become known or any person shall have
announced an intention (whether or not conditional) to make an Acquisition
Proposal, (B) thereafter this Agreement is terminated pursuant to clause (iii)
of SECTION 9.1(b) and (C) within 12 months after such termination, LAI enters
into a definitive agreement to consummate, or consummates, the transactions
contemplated by any Acquisition Proposal, then LAI shall pay CMC a fee equal to
$1,697,500 plus all of CMC's out-of-pocket fees and expenses (including without
limitation, fees and expenses of its advisors, accountants and counsel) incurred
in connection with this Agreement and the transactions contemplated hereby (the
"TERMINATION FEE") by wire transfer of same-day funds on the first business day
following (x) in the case of a payment required by clause (i) or (ii) above, the
date of termination of this Agreement and (y) in the case of a payment required
by clause (iii) above, the date of the first to occur of the events referred to
in clause (iii)(C) of this SECTION 9.2(c).
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ARTICLE X
INDEMNIFICATION; REMEDIES
SECTION 10.1. Survival; Right to Indemnification Not Affected by
Knowledge. All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule, and all Ancillary Agreements will survive
the Effective Time; provided that (i) the representations and warranties in this
Agreement other than in SECTION 3.27 shall survive the Effective Time for a
period of eighteen (18) months and (ii) the representations and warranties in
SECTION 3.27 (including SECTION 3.27 of the Disclosure Schedule and any subparts
thereof) shall survive until the expiration of the applicable statutes of
limitation. A claim for indemnification under this ARTICLE X and arising during
the applicable survival period must be made within 30 days after the end of the
applicable survival period in the immediately preceding sentence. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty as of the time such representation or warranty
was made, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties, covenants and
obligations.
SECTION 10.2. Indemnification and Payment of Damages by the Sellers.
Prior to the Closing, subject to SECTION 10.4 and SECTION 10.6, LAI and TLC,
jointly and severally, will, and after the Closing, each Principal Stockholder,
severally and not jointly, will, indemnify and hold harmless CMC, Sub and
Surviving Corporation for, and will pay to such indemnified parties the amount
of, any loss, cost, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not involving
a third-party claim (collectively, "DAMAGES"), arising, directly or indirectly,
from or in connection with:
(a) any breach of any representation or warranty (or any alleged
breach of a representation or warranty, if any third party alleges facts that,
if true, would constitute a breach of such representation or warranty) made by
any of the Sellers in this Agreement, the Disclosure Schedule, any Ancillary
Agreement (other than the Employment Agreements), or any other certificate or
document delivered by any of the LAI Companies or the Principal Stockholders
pursuant to this Agreement;
(b) any breach by any of the Sellers of any covenant or obligation
in this Agreement;
(c) any misrepresentation or willful nondisclosure by any LAI
Company in connection with the application for or obtaining of the Environmental
Insurance Policy or the
64
D&O Insurance Policy that causes any such insurance policy to become void or
causes a loss of coverage under any such insurance policy.
(d) any matter disclosed in SECTION 3.3 (Item (f) only), SECTION
3.13, SECTION 3.15, SECTION 3.16, SECTION 3.25, (Items (a)(32), (a)(33) (f),
(h), (m) and (o) only) SECTION 3.26, SECTION 3.27, SECTION 3.28, SECTION 3.29,
SECTION 3.32 or SECTION 3.36 of the Disclosure Schedule.
(e) the filing of all Form 5500s necessary under ERISA with
respect to the LAI Companies' Employee Benefit Plans or such other actions as
may be necessary to bring all Employee Benefit Plans into compliance with ERISA.
Notwithstanding the foregoing, (i) the Sellers shall not have any obligation to
indemnify CMC, Sub or Surviving Corporation for any Damages incurred by CMC, Sub
or Surviving Corporation under the Worker Adjustment and Retraining Notification
Act ("WARN") or similar state laws due to CMC's, Sub's or Surviving
Corporation's termination of the employment of any of the employees of the LAI
Companies after the Closing, (ii) the Sellers shall not have any obligation to
indemnify CMC or the Surviving Corporation after the Closing for breaches of the
representations contained in the first and last sentences of SECTION 3.11 and
(iii) the Sellers shall not have any obligation to indemnify CMC or the
Surviving Corporation after the Closing for breaches of the representations and
warranties contained in the last sentence of SECTION 3.10(a). If a breach of
SECTION 3.27(e) occurs and a related reduction in Tax attributes occurs, CMC's
Damages shall include an amount equal to (i) 38% multiplied by (ii) the dollar
amount, if any, of the Tax attributes except for LAI net operating losses
incurred prior to the Effective Time, including without limitation the Tax basis
in the properties of and capital stock held by the LAI Companies and CMC and its
direct and indirect subsidiaries, that are reduced due to the amount of any
cancellation of indebtedness income to which such breach relates, after giving
full effect, if any, to all reductions in the Purchase Price.
SECTION 10.3. Indemnification and Payment of Damages by CMC and Sub.
CMC and Sub, jointly and severally, will, prior to the Closing, indemnify and
hold harmless LAI and the Principal Stockholders for, and will after the
Closing, indemnify and hold harmless the Principal Stockholders for, and will
pay to such indemnified parties the amount of, any Damages arising, directly or
indirectly, from or in connection with:
(a) any breach of any representation or warranty (or any alleged
breach of a representation or warranty, if any third party alleges facts that,
if true, would constitute a breach of such representation or warranty) made by
CMC or Sub in or pursuant to this Agreement or in any certificate or document
delivered by CMC or Sub pursuant to this Agreement, or
(b) any breach by CMC or Sub of any covenant or obligation of CMC
or Sub in this Agreement.
SECTION 10.4. Limitations of Liability. Anything to the contrary
contained in this ARTICLE X notwithstanding, except as provided below in this
SECTION 10.4, no party shall be entitled to recover under SECTION 10.2(a),
SECTION 10.3(a) and SECTION 10.5 from the
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applicable parties unless and until the total of all claims thereunder for
Damages exceeds $300,000 (the "INDEMNIFICATION THRESHOLD"). Indemnifiable
Damages shall accumulate until such time as they exceed the Indemnification
Threshold, whereupon the party to be indemnified shall be entitled to seek
indemnification for all Damages; provided, however, notwithstanding anything to
the contrary in this Agreement, after the Effective Time, no holder of LAI
Capital Stock shall be liable for any Damages under SECTION 10.2 or SECTION 10.5
or any other provision of this Agreement except to the extent of (and only from)
the Churchill Escrow Fund Payment Amount (the "INDEMNIFICATION CAP") (i.e., all
indemnification obligations of the Sellers and the LAI Stockholders shall be
satisfied solely by recourse to the Escrow Fund). Notwithstanding the foregoing,
(i) the indemnities under SECTION 10.2(a) arising from a breach of SECTION
3.10(b) and SECTION 3.27 shall not be subject to the Indemnification Threshold,
and (ii) all Damages suffered by CMC, Sub and the Surviving Corporation under
SECTION 10.2(a) arising from a breach of SECTION 3.10(b) shall not be
recoverable unless and until the total of all claims thereunder for Damages
exceeds the amount of the Accounts Receivable Threshold as of the time the
related Claim for indemnification is made under this ARTICLE X, whereupon the
party to be indemnified shall be entitled to indemnification for all Damages in
excess of the amount of the Accounts Receivable Threshold as of the time such
Claim is made. In addition to any other limitations that may apply, CMC, Sub and
Surviving Corporation shall not be entitled to indemnification hereunder for
Damages if and to the extent such Damages or the economic effect thereof (e.g.,
levels of Inventory and Accounts Receivable) have been taken into account in
calculating the Post-Closing Statement. If a party is entitled to
indemnification under more than one clause or subclause of SECTION 10.2, SECTION
10.3, or SECTION 10.5 with respect to Damages, then such party shall be entitled
to only one indemnification or recovery of such Damages to the extent it arises
out of the same circumstances and events, it being understood that this sentence
is solely to preclude a duplicate recovery by such party. The amount of Damages
that an indemnified party may recover under this ARTICLE X shall be net of (i)
any amounts which such indemnified party actually recovers and collects from
third parties or is otherwise actually reimbursed in connection with such
Damages, and (ii) any insurance proceeds actually received by such indemnified
party, less any deductibles or retention amounts, co-payments, related premium
increases or other payment obligations that directly result from any Damage
(including reasonable attorneys' fees and other costs of collection to the
extent not payable or reimbursable by third parties) that relate to or arise
from the making of the claim for indemnification. CMC, Sub and Surviving
Corporation shall not after the Effective Date have any indemnification
obligations or other liabilities to the Sellers arising under any Contract
entered into prior to the date hereof except for this Agreement, the Ancillary
Agreements and the Confidentiality Agreement. The Sellers shall not after the
Effective Date have any indemnification obligations or other liabilities to CMC,
Sub and Surviving Corporation arising under any Contract entered into prior to
the date hereof except for this Agreement, the Ancillary Agreements, the
Confidentiality Agreement and the Non-Released Contracts. The parties hereby
agree that the limitations set forth in this SECTION 10.4 shall not apply to (i)
the indemnification obligations of any party in the event of fraud, willful
misrepresentation, misrepresentation of a party when such party making the
misrepresentation has actual, conscious knowledge of such misrepresentation, or
willful intent to deceive or mislead on the part of such party and (ii) the
indemnification obligations of any party with respect to any Damages that have
resulted proximately from the fraud or willful misconduct of such party. In
determining whether there has been a breach of representation or warranty for
the purposes of this Article and the
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amount of any Damages pursuant to this Article, each representation and warranty
shall be read without regard and without giving effect to any "materiality" or
"Material Adverse Effect" standard of qualification contained in such
representation or warranty (i.e., as if such standard or qualification were
deleted from such representation or warranty).
SECTION 10.5. Environmental Indemnification and Payment of Damages by
the Sellers. In addition to (and without duplication of) the indemnification
already provided by SECTION 10.2, prior to the Closing, subject to SECTION 10.4
and SECTION 10.6, LAI and TLC, jointly and severally, will, and after the
Closing, each Principal Stockholder, severally and not jointly, will, indemnify
and hold harmless CMC, Sub and Surviving Corporation for, and will pay to such
indemnified parties the amount of, any Damages arising, directly or indirectly,
from, or in connection with:
(a) any breach of any environmental representation or warranty (or
any alleged breach of a representation or warranty, if any third party alleges
facts that, if true, would constitute a breach of such representation or
warranty) made by any of the Sellers in SECTION 3.32 or in SECTION 3.32 of the
Disclosure Schedule;
(b) any condition related to any unlawful presence of or to any
Release of Hazardous Material at any Former or Current Facility first occurring
on or prior to Closing, but only to the extent that Damages result from such
pre-Closing presence or Release; and
(c) any Environmental Claim, Environmental Costs and Liabilities
or any other obligation under Environmental Law arising from acts, omissions or
conditions first occurring on or prior to Closing, including without limitation,
disposal at offsite locations, but only to the extent that Damages result from
such pre-Closing acts, omissions or conditions.
With respect to any investigation, remediation, or other action by indemnitee,
prior to the submittal of any plans to any Governmental Authority that relate to
the indemnification under this SECTION 10.5, indemnitee will provide
indemnifying party a copy of any such submittals or plans. Indemnifying party
will have no more than five (5) working days to comment on such submittals and
plans. If indemnitee rejects any of indemnifying party's comments, indemnitee
will provide notice to indemnifying party of the reasons for rejection.
Indemnitee will provide copies to indemnifying party of all final submittals to
any Governmental Authority that relate to the indemnification under this SECTION
10.5, at the time at which it files those submittals. Indemnitee will notify
indemnifying party of any telephone conferences and meeting dates with any
Governmental Authority that relate to the indemnification under this SECTION
10.5, at least five (5) working days prior to such dates (unless shorter notice
is required under applicable Law, in which event indemnitee will provide prompt
telephonic notice to indemnifying party), and will afford indemnifying party the
right to participate for informational purposes only. Indemnifying party will
not contact or otherwise negotiate with any Governmental Authority or any other
person on any matter that may affect indemnitee in any way, unless required by
Environmental Law, without the prior written consent of indemnitee.
67
SECTION 10.6. Recourse Limited to Escrow Fund. All post-Closing
indemnification and other obligations of the Sellers and the LAI Stockholders
under this ARTICLE X or any other provision of this Agreement shall be satisfied
solely by recourse to the Escrow Fund.
SECTION 10.7. Procedure for Indemnification--Third Party Claims.
(a) Promptly after receipt by an indemnified party under SECTION
10.2, SECTION 10.3 or SECTION 10.5 of notice of the commencement of any
proceeding against it, such indemnified party will, if a Claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such Claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is materially
prejudiced by the indemnifying party's failure to give such notice. Such notice
shall describe the Claim and the basis for indemnification sought, shall
indicate the amount (if reasonably ascertainable) of the Damages that have been
or may be sustained by the indemnitee and shall be accompanied by supporting
documentation, if reasonably available.
(b) If any proceeding referred to in SECTION 10.7(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such proceeding, the indemnifying party will, unless (x) the
Claim involves Taxes or matters under SECTION 10.5, or (y) at the time the
indemnified party gives notice to the indemnifying party of the Claim in
question the dollar amount of all Claims (including such Claim in question) that
have not been satisfied exceeds the amount then held in the Escrow Fund, be
entitled to participate in such proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate as a result of a conflict in the interests of the indemnified and
indemnifying parties, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election (which election must be given by the 60th day
after the indemnified party has given notice under SECTION 10.7(a) of the
commencement of a Claim) to assume the defense of such proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this ARTICLE X for any fees of other
counsel or any other expenses with respect to the defense of such proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a proceeding, (i) it will be
conclusively established for purposes of this Agreement that the Claims made in
that proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such Claims may be effected by the indemnifying
party without the indemnified party's consent, such consent not to be
unreasonably withheld, conditioned or delayed, unless (A) there is no finding or
admission of any violation of Law or any violation of the legal rights of any
person and no effect on any other Claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party from the Escrow Fund; and (iii) the
indemnified party
68
will have no liability with respect to any compromise or settlement of such
Claims effected without its consent, which consent shall not be unreasonably
withheld, conditioned or delayed. If notice is given to an indemnifying party of
the commencement of any proceeding and the indemnifying party does not, by the
60th day after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such proceeding, the
indemnifying party will be bound by any determination made in such proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its Affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such proceeding,
whether or not the indemnifying party has assumed the defense, but the
indemnifying party will not be bound by any compromise or settlement effected
without its consent (which may not be unreasonably withheld, conditioned or
delayed).
(d) Subject to SECTION 11.12, the Sellers hereby consent to the
non-exclusive jurisdiction of any court in which a proceeding is brought against
any indemnified party for purposes of any claim that an indemnified party may
have under this Agreement with respect to such proceeding or the matters alleged
therein, and agree that process may be served on the Principal Stockholders with
respect to such a claim anywhere in the world; provided that this provision
shall not be deemed to subject TGF to the jurisdiction of any court outside the
State of Texas if TGF's submission to such jurisdiction is prohibited by
applicable Law.
(e) CMC shall send to Churchill copies of all notices it gives to
the Principal Stockholders pursuant to SECTION 10.7(a) or SECTION 10.7(c).
(f) With respect to any third party Claim subject to
indemnification under this ARTICLE X: (i) both the indemnified party and the
indemnifying party, as the case may be, shall, where the other person is not
represented by its own counsel, provide such person with copies of all pleadings
and all correspondence between opposing parties or counsel in any Litigation or
threatened Litigation and shall provide notice to such person of all court
proceedings; and (ii) the parties agree (each at its own expense) to render to
each other such assistance as they may reasonably require of each other and to
cooperate in good faith with each other in order to ensure the proper and
adequate defense of any third party Claim; provided that no party shall be
obligated to disclose any information protected by an attorney-client or
work-product privilege. With respect to any third party Claim subject to
indemnification under this ARTICLE X, the parties agree to cooperate in such a
manner as to preserve in full (to the extent possible) the confidentiality of
all confidential information and the attorney-client and work-product
privileges. In connection therewith, each party agrees that: (i) it will use its
best efforts, in respect of any third party Claim in which it has assumed or
participated in the defense, to avoid production of confidential information
(consistent with applicable law and rules of procedure) and to request the
issuance of protective orders from a court that will protect the confidentiality
of any confidential information that is required to be disclosed during
discovery; and (ii) all communications between any party hereto and counsel
responsible for or participating
69
in the defense of any third party Claim shall, to the extent possible, be made
so as to preserve any applicable attorney-client or work-product privilege.
SECTION 10.8. Procedure for Indemnification--Other Claims. A Claim for
indemnification for any matter not involving a third-party Claim may be asserted
by notice to the party from whom indemnification is sought.
SECTION 10.9. Exclusive Remedy. The parties hereby acknowledge and
agree that the indemnification provided by SECTION 10.2, SECTION 10.3 and
SECTION 10.5, as subject to the provisions of SECTION 10.4, shall, after the
Effective Time, be the sole and exclusive remedy of the parties for claims of
any kind arising out of this Agreement, and the parties hereby waive any and all
other remedies under law or in equity. The parties acknowledge and agree that
one purpose of the representations and warranties in this Agreement is to
allocate risk among the parties and to give an aggrieved party the right to be
indemnified pursuant to this ARTICLE X. Accordingly, the parties acknowledge and
agree that breaches of such representations and warranties shall not necessarily
be deemed to constitute fraud or a knowing misrepresentation or willful intent
to deceive the other parties.
SECTION 10.10. Indemnification in Case of Strict Liability or
Indemnitee Negligence. THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE X SHALL BE
ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR
FUTURE ACTS, CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE
ENVIRONMENTAL LAW (INCLUDING, WITHOUT LIMITATION, CERCLA), FRAUDULENT TRANSFER
ACT, OCCUPATIONAL SAFETY AND HEALTH LAW OR PRODUCTS LIABILITY, SECURITIES OR
OTHER LEGAL REQUIREMENT) AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE
PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE,
CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING
INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED UPON THE
PERSON SEEKING INDEMNIFICATION.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Amendment and Modification. This Agreement may be amended
by a written instrument signed by the parties hereto and, as applicable,
approved by action taken by their respective Boards of Directors, at any time,
but no amendment shall be made which by Law requires further approval by the
stockholders of LAI without such further approval.
SECTION 11.2. Waiver of Compliance. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist
70
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
SECTION 11.3. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 11.4. Fees and Obligations. If any party shall be required to
employ attorneys to enforce or defend its rights hereunder, the prevailing party
shall be entitled to recover its reasonable attorneys' fees in addition to any
other remedies to which it may be entitled. The filing fees incurred in
connection with any filings or registrations pursuant to the HSR Act, if so
required, shall be borne equally by CMC and LAI.
SECTION 11.5. Parties in Interest. This Agreement shall be binding upon
and, except as provided below, inure solely to the benefit of each party hereto,
and, nothing in this Agreement, except as set forth below, express or implied,
is intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement, except (i) as expressly
provided in ARTICLE X and (ii) that Churchill is intended to be a third party
beneficiary of ARTICLE II and SECTION 11.6 of this Agreement.
SECTION 11.6. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon the earlier of delivery
thereof if by hand or upon receipt if sent by mail (registered or certified
mail, postage prepaid, return receipt requested) or on the second next business
day after deposit if sent by a recognized overnight delivery service or upon
transmission if sent by telecopy or facsimile transmission (with written
confirmation of receipt) as follows:
(a) If to CMC or Sub, to:
Commercial Metals Company
6565 N. MacArthur Blvd.
Irving, Texas 75039
Attention: Stanley A. Rabin
Facsimile No.: 214/689-4326
with copies to (which shall not constitute notice):
David M. Sudbury
General Counsel
Commercial Metals Company
6565 N. MacArthur Blvd.
Irving, Texas 75039
Facsimile No.: 214/689-4326
71
and
Haynes and Boone, L.L.P.
901 Main Street
Dallas, Texas 75202
Attention: William R. Hays, III
Facsimile No.: 214/200-0467
(b) If to LAI, to:
Lofland Acquisition, Inc.
2920 N. Stemmons Freeway
Dallas, Texas 75247
Attention:A. Blake Irwin, Chief Executive Officer
Facsimile No.: 214/638-4205
with a copy to (which shall not constitute notice):
Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: Joseph A. Hoffman
Facsimile No.: 214/659-4861
(c) If to TLC, to:
The Lofland Company
2920 N. Stemmons Freeway
Dallas, Texas 75247
Attention: A. Blake Irwin, Chief Executive Officer
Facsimile No.: 214/638-4205
with a copy to (which shall not constitute notice):
Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: Joseph A. Hoffman
Facsimile No.: 214/659-4861
72
(d) If to the Principal Stockholders, to:
EF Private Equity Partners (Americas) L.P.
c/o Electra Partners, Inc.
708 Third Avenue, 21st Floor
New York, New York 10017
Attention:Peter Carnwath
Facsimile No.: 212-818-0010
with a copy to (which shall not constitute notice):
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attention:Peter Hanlon
Facsimile No.: 212-728-8111
and
The Board of Trustees of the Texas Growth Fund,
as Trustee for the Texas Growth Fund - 1995 Trust
c/o TGF I Management Corp.
111 Congress Avenue, Suite 2900
Austin, Texas 78701
Attention:J. Brent Humphries
Facsimile No.: 512-322-3101
with copies to (which shall not constitute notice):
Vinson & Elkins
2801 Via Fortuna, Suite 100
Austin, Texas 78746
Attention: Barry Burgdorf
Facsimile No.: 512-236-3246
73
(e) If to Churchill, to:
Churchill Capital Partners III, L.P.
333 South Seventh Street, Suite 2400
Minneapolis, Minnesota 55402-2435
Attention:Mark McDonald
Facsimile No.: 612-673-6630
with a copy to (which shall not constitute notice):
Faegre & Benson LLP
90 South Seventh Street
Minneapolis, Minnesota 55402-3901
Attention: Lyle Ward
Facsimile No.: 612-766-1600
SECTION 11.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Texas without regard to
the conflicts-of-laws rules thereof.
SECTION 11.8. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
SECTION 11.9. Headings. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.10. Entire Agreement. This Agreement (and the Disclosure
Schedule and Exhibits hereto), the Confidentiality Agreement, the Environmental
Access Agreements, the Escrow Agreement and the other documents delivered
pursuant hereto and referenced herein constitute the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein or therein. There are no agreements, representations, warranties or
covenants other than those expressly set forth herein or therein. This Agreement
(and the Disclosure Schedule and Exhibits hereto) supersede all prior agreements
and understandings between the parties with respect to such subject matter.
SECTION 11.11. Assignment. This Agreement shall not be assigned by
operation of Law or otherwise.
SECTION 11.12. Jurisdiction and Venue. The parties hereto agree that
any suit, action or proceeding arising out of or relating to this Agreement
shall be instituted only in the state or federal courts in Dallas County, Texas.
Each party waives any objection it may have now or hereafter to the laying of
the venue of any such suit, action or proceeding, and irrevocably submits to the
jurisdiction of any such court in any such suit, action or proceeding.
74
SECTION 11.13. Disclosure of Tax Treatment. Notwithstanding anything
set forth herein to the contrary or in any other agreement to which a party
hereto is bound, the parties hereto are hereby expressly authorized to disclose
the "tax treatment" and "tax structure" (as those terms are defined in Treas.
Reg. Section 1.6011-4(c)(8) and (9), respectively) of the Merger; provided,
however, that the foregoing authorization shall apply only to the extent
necessary such that the Merger will not constitute a "confidential transaction"
within the meaning of Treas. Reg. Section 1.6011-4(b)(3).
[Signature Pages Follow]
75
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed on its behalf by its duly authorized officers, all as of
the day and year first above written.
COMMERCIAL METALS COMPANY
By: /s/ Stanley A. Rabin
Name: Stanley A. Rabin
----------------------------
Title: Chairman, President and
Chief Executive Officer
----------------------------
LAI ACQUISITION COMPANY
By: /s/ Russell B. Rinn
-----------------------------------
Name: Russell B. Rinn
----------------------------
Title: President
----------------------------
LOFLAND ACQUISITION, INC.
By: /s/ A. Blake Irwin
-----------------------------------
Name: A. Blake Irwin
----------------------------
Title: Chief Executive Officer
----------------------------
THE LOFLAND COMPANY
By: s/ A. Blake Irwin
-----------------------------------
Name: A. Blake Irwin
----------------------------
Title: Chief Executive Officer
----------------------------
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
EF PRIVATE EQUITY PARTNERS
(AMERICAS) L.P.
Address:
c/o Electra Partners, Inc.
708 Third Avenue, 21st Floor
New York, New York 10017
By: /s/ Peter A. Carnwath
---------------------------
Name: Peter A. Carnwath
--------------------------
Title: Authorized Signatory
-------------------------
THE BOARD OF TRUSTEES OF THE TEXAS
GROWTH FUND II, ON BEHALF OF THE
TEXAS GROWTH FUND - 1995 TRUST
By: TGF I Management Corp., as
Executive Director
Address:
111 Congress Avenue, Suite 2900
Austin, Texas 78701 By: /s/ J. Brent Humphries
---------------------------
Name: J. Brent Humphries
--------------------------
Title: Managing Director
-------------------------
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
EXHIBIT A
DEFINITIONS
"1/31/03 FINANCIAL STATEMENTS" means the Financial Statements as of and for the
12 months ended January 31, 2003.
"ACCOUNTS RECEIVABLE" has the meaning set forth in SECTION 3.9.
"ACCOUNTS RECEIVABLE THRESHOLD" means the sum of (i) $227,470 plus (ii) the
dollar amount of Written Off Accounts Receivable actually collected by any LAI
Company after the Closing.
"ACQUISITION AGREEMENT" has the meaning set forth in SECTION 6.7(d)
"ACQUISITION PROPOSAL" has the meaning set forth in SECTION 6.7(e).
"ADJUSTED ACCOUNTING PRINCIPLES" has the meaning set forth in SECTION 2.3(a)(i)
"ADVERSE RECOMMENDATION CHANGE" has the meaning set forth in SECTION 6.7(d).
"AFFILIATE" shall mean a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
another person.
"AGREEMENT" has the meaning set forth in the preamble to this Agreement.
"ANCILLARY AGREEMENTS" means the Escrow Agreement, the Employment Agreements,
the releases referred to in SECTION 8.1(a)(x) and all other instruments executed
in connection with this Agreement.
"ARBITRATOR" has the meaning set forth in SECTION 2.3(a)(ii).
"AST" has the meaning set forth in SECTION 3.32(c).
"AUDITED FINANCIAL STATEMENTS" has the meaning set forth in SECTION 3.7.
"CANCELLATION OF INDEBTEDNESS TAX" has the meaning set forth in SECTION
2.3(a)(i).
"CERCLA" has the meaning set forth in SECTION 3.32(a)(iv).
"CERTIFICATES" has the meaning set forth in SECTION 2.5(b).
"CERTIFICATE OF MERGER" has the meaning set forth in SECTION 1.2.
"CHANGE OF CONTROL PAYMENTS" means (i) all payments, other than payment of the
Merger Consideration, to which any officer, director, employee, stockholder,
option or warrant holder of any LAI Company is or would be entitled to receive
in connection with the transactions contemplated hereby and (ii) all amounts
payable to third parties under any Contract as a result of or in connection with
the entry into or consummation of the transactions contemplated hereby.
Exhibit A-1
The costs associated with terminating any Contract or settling any matter
pursuant to SECTION 7.2(n) shall be considered Change in Control Payments.
"CHARTER DOCUMENTS" has the meaning set forth in SECTION 3.1.
"CHURCHILL" means Churchill Capital Partners III, L.P.
"CHURCHILL CLOSING PAYMENT AMOUNT" has the meaning set forth in SECTION 2.1(d).
"CHURCHILL CONSENT AND AGREEMENT" has the meaning set forth in SECTION 3.37.
"CHURCHILL ESCROW FUND PAYMENT AMOUNT" has the meaning set forth in SECTION
2.1(d).
"CHURCHILL HOLDBACK AMOUNT" has the meaning set forth in SECTION 2.1(d).
"CHURCHILL LOAN AGREEMENT" means the Amended and Restated Note Purchase
Agreement dated as of March 29, 2002, as it may have been amended to the date of
this Agreement.
"CHURCHILL PAYOFF AMOUNT" has the meaning set forth in SECTION 2.1(d).
"CLAIMS" means claims for indemnification under ARTICLE X.
"CLOSING" has the meaning set forth in SECTION 8.1.
"CLOSING DATE" has the meaning set forth in SECTION 8.1.
"CLOSING DIFFERENTIAL" had the meaning set forth in SECTION 2.3(b)(ii).
"CLOSING TANGIBLE NET OPERATING ASSETS AMOUNT" has the meaning set forth in
SECTION 2.3(b)(i).
"CMC" has the meaning set forth in the preamble to this Agreement.
"CMC LEGAL OPINION" has the meaning set forth in SECTION 7.3(e).
"COBRA" has the meaning set forth in SECTION 3.25(j)(xiii).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON PER SHARE AMOUNT" means $0.01.
"CONFIDENTIAL INFORMATION" has the meaning set forth in SECTION 3.30(f).
"CONFIDENTIALITY AGREEMENT" means the Mutual Confidentiality Agreement dated as
of July 30, 2003 among certain of the parties to the Agreement.
"CONSTITUENT CORPORATIONS" has the meaning set forth in the preamble to this
Agreement.
Exhibit A-2
"CONTRACT" means any contract, agreement, binding bid, indenture, note, bond,
loan, instrument, lease, conditional sales contract, mortgage, license,
franchise, insurance policy, commitment or other arrangement or agreement.
"CRSI" has the meaning set forth in SECTION 2.3(a)(ii)(B).
"CURRENT FACILITY" has the meaning set forth in SECTION 3.32(a).
"D&O INSURANCE POLICY" has the meaning set forth in SECTION 6.15.
"DAMAGES" has the meaning set forth in SECTION 10.2.
"DEBT" means, as to any of the LAI Companies, as of any date of determination,
(i) all indebtedness of such person for borrowed money or any obligation of any
of the LAI Companies issued in substitution for or exchange of indebtedness for
borrowed money, or for the deferred purchase of property; (ii) all amounts owed
by such person to banks or other persons in respect of reimbursement obligations
under letters of credit, surety bonds and other similar instruments guaranteeing
payment or other performance of obligations by such person; (iii) all
indebtedness for borrowed money or for the deferred purchase price of property
or services secured by any Lien on any property owned by such person, to the
extent attributable to such person's interest in such property, even though such
person has not assumed or become liable for the payment thereof, (iv) lease
obligations of such person which, in accordance with GAAP, should be
capitalized; (v) guarantees by any of the LAI Companies of obligations of a
person that is not one of the LAI Companies, (vii) negative cash balances after
giving effect to all unpaid checks, drafts or promises or undertakings to pay
amounts due, and (viii) all accrued and unpaid interest attributable to the
foregoing.
"DEBT PAYOFF AMOUNT" has the meaning set forth in SECTION 2.1(d).
"DIVIDEND" has the meaning set forth in SECTION 3.9.
"DGCL" has the meaning set forth in the recitals to this Agreement.
"DISCLOSURE SCHEDULE" has the meaning set forth in the preamble to ARTICLE III.
"DISSENTING SHARES" has the meaning set forth in SECTION 2.2.
"DOL" means the Department of Labor.
"EFFECTIVE TIME" has the meaning set forth in SECTION 1.6.
"EFPE" has the meaning set forth in the preamble to this Agreement.
"EMPLOYEE BENEFIT PLANS" has the meaning set forth in SECTION 3.25(a).
"EMPLOYMENT AGREEMENTS" has the meaning set forth in SECTION 7.2(j).
Exhibit A-3
"ENVIRONMENTAL ACCESS AGREEMENTS" means the Access Assignment for Phase I
Environmental Site Assessment dated August ___, 2003 among certain of the
parties to the Agreement and the Access Agreement for Phase II Environmental
Site Assessment dated September 29, 2003 among certain of the parties to the
Agreement.
"ENVIRONMENTAL CLAIM" has the meaning set forth in SECTION 3.32(a)(ii).
"ENVIRONMENTAL COSTS AND LIABILITIES" has the meaning set forth in SECTION
3.32(a)(iii).
"ENVIRONMENTAL INSURANCE POLICY" has the meaning set forth in SECTION 6.15.
"ENVIRONMENTAL LAW" has the meaning set forth in SECTION 3.32(a)(iv).
"ENVIRONMENTAL PERMIT" has the meaning set forth in SECTION 3.32(a)(v).
"ENVIRONMENTAL REQUIREMENT" has the meaning set forth in SECTION 3.32(a)(vi).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA AFFILIATE" has the meaning set forth in SECTION 3.25(a).
"ESCROW AGENT" has the meaning set forth in SECTION 2.5(a).
"ESCROW AGREEMENT" has the meaning set forth in SECTION 2.5(a).
"ESCROW FUND" has the meaning set forth in SECTION 2.5(a).
"ESCROW FUND AMOUNT" has the meaning set forth in SECTION 2.1(d).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 3.7.
"FORMER FACILITY" has the meaning set forth in SECTION 3.32(a).
"GAAP" has the meaning set forth in SECTION 3.7.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof and an entity exercising executive, legislative,
judicial, regulatory or administrative function of or pertaining to government.
"GUST AMENDMENTS" has the meaning set forth in SECTION 3.25(e).
"HAZARDOUS MATERIAL" has the meaning set forth in SECTION 3.32(a)(viii).
"HIPAA" means the Health Insurance and Portability and Privacy Act of 1996, as
amended.
"HSR ACT" had the meaning set forth in SECTION 3.6.
Exhibit A-4
"INDEMNIFICATION CAP" has the meaning set forth in SECTION 10.4.
"INDEMNIFICATION THRESHOLD" has the meaning set forth in SECTION 10.4.
"INSURED" has the meaning set forth in SECTION 3.18.
"INQUIRY" has the meaning set forth in SECTION 6.7(b).
"INTELLECTUAL PROPERTY" means domestic and foreign patents, patent applications,
Know-how, trade names, trademarks, service marks, trademark registrations and
applications, service mark registrations and applications, copyrights, copyright
registrations and applications, trade secrets, confidential information, domain
names and other proprietary rights.
"INTERIM FINANCIAL STATEMENTS" has the meaning set forth in SECTION 3.7.
"INVENTORY" has the meaning set forth in SECTION 2.3(a)(ii).
"INVENTORY VALUE" has the meaning set forth in SECTION 2.3(a)(ii).
"IRS" means the Internal Revenue Service.
"IRS PAYMENT AMOUNT" has the meaning set forth in SECTION 2.1(d).
"JOINDER AGREEMENT" means the Joinder Agreement effective April 11, 2001 among
LAI and the party thereto, as amended by the First Amendment to Shareholders
Agreement.
"KNOW-HOW" shall mean laboratory journals, know-how (including, without
limitation, product know-how and use and application know-how), formulae,
product formulations, recipes, processes, product designs, specifications,
quality control, procedures, manufacturing, engineering and other drawings,
computer data bases and software, technology, other intangibles, technical
information, safety information, engineering data and design and engineering
specifications, research records, market surveys and all promotional literature,
customer and supplier lists and similar data.
"KNOWLEDGE" of a person that is an entity shall mean the actual knowledge of any
officer or director of such entity, or persons holding similar positions, after
due inquiry.
"LAI" has the meaning set forth in the preamble to this Agreement.
"LAI 401(k) PLAN" has the meaning set forth in SECTION 6.14.
"LAI AMENDED TAX RETURNS" means the federal income tax returns of LAI for the
Tax years ended September 30, 1997 and January 31, 2000.
"LAI CAPITAL STOCK" has the meaning set forth in SECTION 2.1(b).
"LAI COMMON STOCK" has the meaning set forth in SECTION 2.1(b).
"LAI COMPANIES" has the meaning set forth in SECTION 3.1.
Exhibit A-5
"LAI EXPENSES" has the meaning set forth in SECTION 2.3(a)(i).
"LAI LEGAL OPINION" has the meaning set forth in SECTION 7.2(f).
"LAI PREFERRED STOCK" has the meaning set forth in SECTION 2.1(b).
"LAI SERIES A PREFERRED STOCK" has the meaning set forth in SECTION 2.1(b).
"LAI SERIES B PREFERRED STOCK" has the meaning set forth in SECTION 2.1(b).
"LAI SERIES C PREFERRED STOCK" has the meaning set forth in SECTION 2.1(b).
"LAI STOCKHOLDERS" means the holders of LAI Capital Stock.
"LAW" means any law, principle of common law, statute, code, regulation,
ordinance, constitution, treaty or rule enacted or promulgated by any
Governmental Authority.
"LEGAL PROCEEDINGS" means any judicial, administrative or arbitral actions,
suits, proceedings (public or private) or governmental proceedings.
"LICENSED INTELLECTUAL PROPERTY" has the meaning set forth in SECTION 3.30(a).
"LIEN" or "LIENS" has the meaning set forth in SECTION 3.17.
"LITIGATION" has the meaning set forth in SECTION 3.16.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
operations, liabilities, results of operations, properties, foreseeable
prospects, assets or financial condition of, in the case of LAI, the LAI
Companies taken as a whole; provided, however, that changes or effects that are
caused by the conditions affecting the United States economy as a whole or
affecting the industry in which LAI competes, which conditions do not affect LAI
in a disproportionate manner, shall not be considered a Material Adverse Effect.
"MATERIAL CONTRACT" has the meaning set forth in SECTION 3.23.
"MATERIAL CUSTOMER CONTRACT" has the meaning set forth in SECTION 3.23.
"MERGER" has the meaning set forth in the recitals to this Agreement.
"MERGER CONSIDERATION" has the meaning set forth in SECTION 2.1(d).
"NON-RELEASED CONTRACTS" means the Contracts to which CMC, a direct or indirect
subsidiary or Affiliate of CMC or a joint venture involving CMC or such
subsidiary or Affiliate is a party that were entered into in connection with the
DFW Airport Terminal D Parking Structure project and the UT Southwestern Medical
Center - Phase 4 project.
"NOTICE OF ADVERSE RECOMMENDATION" has the meaning set forth in SECTION 6.7(d).
Exhibit A-6
"ORDER" means any order, writ, injunction, judgment, decree, ruling, assessment
or arbitration award.
"OWNED REAL PROPERTY" has the meaning set forth in SECTION 3.18.
"PAYOFF CAP" has the meaning set forth in SECTION 2.1(d).
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSKE AGREEMENTS" means collectively the Penske Purchase Agreement and the
Penske Lease Agreement.
"PENSKE LEASE AGREEMENT" means the Vehicle Lease Service Agreement dated as of
August 4, 1993 between TLC and Penske Truck Leasing Co., L.P., as amended, and
each Contract related to or entered into in connection with such agreement.
"PENSKE PURCHASE AGREEMENT" means the Purchase, Sale and Development Agreement
dated as of November 5, 1993 between TLC and Penske Truck Leasing Co., L.P., as
amended.
"PERMITTED LIEN" has the meaning set forth in SECTION 3.17.
"PERMITS" shall mean permits, tariffs, authorizations, licenses, certificates,
concessions, agreements, variances, interim permits, approvals, registrations,
franchises and rights under any Law or otherwise issued or required by any
Governmental Authority and any applications for the foregoing which are
necessary for the LAI Companies to own or hold their properties or to engage in
their businesses pursuant to applicable Law.
"PERSON" shall mean an individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization or,
as applicable, any other entity.
"PER SHARE AMOUNT" has the meaning set forth in SECTION 2.1(c)(iv).
"PRE-CLOSING BALANCE SHEET" has the meaning set forth in SECTION 2.3(a)(i).
"PRE-CLOSING STATEMENT" has the meaning set forth in SECTION 2.3(a)(i).
"PRE-EFFECTIVE TIME PERIODS" has the meaning set forth in SECTION 6.11(a).
"POST-CLOSING STATEMENT" has the meaning set forth in SECTION 2.3(b)(i).
"POST-EFFECTIVE TIME PERIODS" has the meaning set forth in SECTION 6.11(a).
"PRINCIPAL STOCKHOLDERS" has the meaning set forth in the preamble to this
Agreement.
"PROPRIETARY RIGHTS AGREEMENT" has the meaning set forth in SECTION 3.24.
"PROPOSED CLOSING DIFFERENTIAL" has the meaning set forth in SECTION 2.3(b)(ii).
Exhibit A-7
"PURCHASE PRICE" has the meaning set forth in SECTION 2.1(d).
"QUALIFIED PLAN" has the meaning set forth in SECTION 3.25(b).
"RCRA" has the meaning set forth in SECTION 3.32(a)(iv).
"RELEASE" has the meaning set forth in SECTION 3.32(a)(ix).
"REMEDIAL ACTION" has the meaning set forth in SECTION 3.32(a)(x).
"SECURITIES ACT" has the meaning set forth in SECTION 3.4.
"SELLERS" has the meaning set forth in the preamble to this Agreement.
"SENIOR LENDERS" means Fleet Capital Corporation, U. S. Bank National
Association and Heller Financial, Inc.
"SENIOR LOAN AGREEMENT" means the Loan and Security Agreement dated April 12,
2000 among LAI and the Senior Lenders as it may have been amended to the date of
this Agreement.
"SENIOR OBLIGATIONS PAYOFF AMOUNT" has the meaning set forth in SECTION 2.1(d).
"SERIES A PER SHARE AMOUNT" means $0.01.
"SERIES B PER SHARE AMOUNT" means $0.01.
"SERIES C PER SHARE AMOUNT" means $0.01.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement dated January 9, 1998,
as amended by the First Amendment to Shareholders Agreement dated April 11,
2001, the Second Amendment to Shareholders Agreement made and entered into
effective as of November 26, 2002, and the Third Amendment to Shareholders
Agreement, made and entered into effective as of November 26, 2002, among
Lofland Acquisition, Inc., William J. Hughes III, Alton Tipps, EF Private Equity
Partners (Americas) LP, Donald Bazhaw, Kevin Brisco, Elizabeth Lloyd, Richard
Teague, Russel Jackson, Texas Growth Fund - 1995 Trust, Daniel B. Stuart, Chas.
A. Neal & Company, John A. Sadden, Jr., Paradigm Partners, L.P., Daniel B.
Stuart, Jr., A. Blake Irwin III, Mary Lou Harris, Keith Wright, Larry E.
Ciarkowski, Robert Tipton, Mark T. McClain and Jill Gamboa and the related
Registration Rights Agreement.
"STOCKHOLDER APPROVAL" has the meaning set forth in SECTION 3.2.
"STOCK RESTRICTION AGREEMENTS" means those Stock Restriction Agreements dated
January 8, 1998 between Lofland Acquisition, Inc. and each of A. Blake Irwin
III, Russel K. Jackson, Larry E. Ciarkowski, Mark T. McClain, Keith Wright,
William J. Hughes III, Mary Lou Harris, Kevin Brisco and Alton Tipps.
"STOCKHOLDERS' CLOSING DOCUMENTS" has the meaning set forth in SECTION 4.2.
Exhibit A-8
"SUB" has the meaning set forth in the preamble to this Agreement.
"SUBSIDIARY" has the meaning set forth in SECTION 3.5(a).
"SUPERIOR PROPOSAL" has the meaning set forth in SECTION 6.7(f).
"SURVIVING CORPORATION" has the meaning set forth in SECTION 1.1.
"TANGIBLE NET OPERATING ASSETS" means at a particular date the aggregate amount
calculated in accordance with EXHIBIT C, with the line items comprising such
calculation being determined in conformity with GAAP applied in a manner
consistent with the 1/31/03 Financial Statements.
"TANGIBLE NET OPERATING ASSETS ADJUSTMENT" has the meaning set forth in SECTION
2.3(a)(iii).
"TANGIBLE NET OPERATING ASSETS ESTIMATE" has the meaning set forth in SECTION
2.3(a)(i).
"TAX" or "TAXES" has the meaning set forth in SECTION 3.27(g).
"TAX RETURN" has the meaning set forth in SECTION 3.27(g).
"TERMINATION FEE" has the meaning set forth in SECTION 9.2(c).
"TGF" has the meaning set forth in the preamble to this Agreement.
"TITLE POLICY" has the meaning set forth in SECTION 3.18.
"TLC" has the meaning set forth in the preamble to this Agreement.
"TREASURY SHARES" has the meaning set forth in SECTION 2.1(b).
"UST" has the meaning set forth in SECTION 3.32(c).
"WARN" has the meaning set forth in SECTION 10.2.
"WRITTEN OFF ACCOUNTS RECEIVABLE" has the meaning set forth in SECTION 7.2(v).
Exhibit A-9
Note: The remaining exhibits to the Agreement have been omitted in accordance
with Rule 601(b)(2) of Regulation S-K. The Registrant agrees to furnish
supplementally a copy of any omitted exhibit to the Commission upon request.