EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AAC HOLDING CORP.,
AAC ACQUISITION CORP.,
AMERICAN ACHIEVEMENT CORPORATION
AND
THE STOCKHOLDERS PARTY HERETO
DATED AS OF
DECEMBER 24, 2003
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER....................................................................................... 1
1.1 The Merger................................................................................... 1
1.2 Effective Time of the Merger................................................................. 2
1.3 Directors and Officers....................................................................... 2
1.4 Closing...................................................................................... 2
1.5 Additional Actions........................................................................... 2
ARTICLE II CONVERSION OF AND PAYMENT FOR SECURITIES........................................................ 2
2.1 Conversion of Capital Stock.................................................................. 2
2.2 Warrants; Options............................................................................ 3
2.3 Preferred Stock of Commemorative Brands, Inc................................................. 4
2.4 Payment of Total Purchase Price.............................................................. 4
2.5 Appointment of Stockholders' Representative.................................................. 6
2.6 Working Capital Adjustments.................................................................. 7
2.7 Closing Adjustments.......................................................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS............................................. 10
3.1 Organization................................................................................. 10
3.2 Title........................................................................................ 10
3.3 Authorization; Validity of Agreement; Necessary Action....................................... 10
3.4 Consents and Approvals; No Violations........................................................ 11
3.5 Litigation................................................................................... 11
3.6 Exclusivity of Representations and Warranties................................................ 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................... 11
4.1 Organization................................................................................. 11
4.2 Capitalization............................................................................... 12
4.3 Authorization; Validity of Agreement; Company Action......................................... 13
4.4 Consents and Approvals; No Violations........................................................ 13
4.5 SEC Reports and Financial Statements......................................................... 14
4.6 No Undisclosed Liabilities................................................................... 15
4.7 Absence of Certain Changes................................................................... 15
4.8 Taxes........................................................................................ 15
4.9 Owned and Leased Real Properties............................................................. 16
4.10 Intellectual Property........................................................................ 17
4.11 Agreements, Contracts and Commitments........................................................ 18
4.12 Litigation................................................................................... 18
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4.13 Environmental Matters........................................................................ 19
4.14 Employee Benefit Plans....................................................................... 20
4.15 Compliance With Laws......................................................................... 22
4.16 Permits...................................................................................... 22
4.17 Labor Matters................................................................................ 22
4.18 Insurance.................................................................................... 22
4.19 Suppliers.................................................................................... 23
4.20 Debt......................................................................................... 23
4.21 Assets....................................................................................... 23
4.22 Inventories.................................................................................. 24
4.23 Accounts Receivable.......................................................................... 24
4.24 Customers.................................................................................... 24
4.25 Affiliate Transactions....................................................................... 24
4.26 Brokers...................................................................................... 24
4.27 Exclusivity of Representations and Warranties................................................ 25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER AND TRANSITORY SUBSIDIARY............................ 25
5.1 Organization................................................................................. 25
5.2 Capitalization............................................................................... 25
5.3 Authorization; Validity of Agreement; Necessary Action....................................... 25
5.4 Consents and Approvals; No Violations........................................................ 26
5.5 Litigation................................................................................... 26
5.6 Financing Resources.......................................................................... 26
5.7 Brokers...................................................................................... 26
ARTICLE VI COVENANTS; ADDITIONAL AGREEMENTS................................................................ 26
6.1 Interim Operations of the Company............................................................ 26
6.2 Confidentiality.............................................................................. 28
6.3 Access to Information........................................................................ 28
6.4 Filings; Third Party Consents................................................................ 29
6.5 Public Disclosure............................................................................ 29
6.6 Directors' and Officers' Insurance and Indemnification....................................... 29
6.7 Resignations................................................................................. 30
6.8 Additional Actions........................................................................... 31
6.9 Taxes........................................................................................ 31
6.10 Exclusivity.................................................................................. 31
6.11 Stockholders' Release........................................................................ 32
6.12 Notice of Developments....................................................................... 32
6.13 Noncompetition and Nonsolicitation........................................................... 32
ARTICLE VII CONDITIONS TO EFFECT THE MERGER................................................................ 33
7.1 Conditions to Each Party's Obligation to Effect the Merger................................... 33
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7.2 Conditions to the Buyer's and the Transitory Subsidiary's Obligation to Effect the Merger.... 34
7.3 Conditions to the Company's and the Stockholders' Obligations to Effect the Merger........... 36
ARTICLE VIII TERMINATION................................................................................... 38
8.1 Termination.................................................................................. 38
8.2 Effect of Termination........................................................................ 39
ARTICLE IX SURVIVAL; INDEMNIFICATION....................................................................... 39
9.1 Survival..................................................................................... 39
9.2 Indemnification.............................................................................. 40
9.3 Limits on Indemnification by the Stockholders................................................ 41
9.4 Subrogation.................................................................................. 43
9.5 Exclusive Remedy............................................................................. 43
9.6 No Circular Recovery......................................................................... 43
ARTICLE X DEFINITIONS...................................................................................... 43
ARTICLE XI MISCELLANEOUS................................................................................... 45
11.1 Notices...................................................................................... 45
11.2 Entire Agreement............................................................................. 47
11.3 No Third Party Beneficiaries................................................................. 47
11.4 Assignment................................................................................... 47
11.5 Fees and Expenses............................................................................ 47
11.6 Amendment.................................................................................... 47
11.7 Extension; Waiver............................................................................ 47
11.8 Interpretation............................................................................... 48
11.9 Counterparts................................................................................. 48
11.10 Severability................................................................................. 48
11.11 Governing Law................................................................................ 48
11.12 Submission to Jurisdiction................................................................... 48
11.13 Remedies..................................................................................... 49
11.14 Waiver of Jury Trial......................................................................... 49
Schedule I - Stockholders
Schedule II - Warrants and Options
Exhibit A - Form of Warrant Termination
Exhibit B - CBI Certificate of Incorporation
Exhibit C - Sample Balance Sheet
Exhibit D - Maximum and Minimum Working Capital and Cash Amounts
Exhibit E - Financing Letters
Exhibit F - Schedule of Projected Capital Expenditures
Exhibit G - Scope of Environmental Review
Exhibit H - Facilities
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, entered into as of December 24, 2003,
by and among American Achievement Corporation, a Delaware corporation (the
"Company"), AAC Holding Corp., a Delaware corporation (the "Buyer"), AAC
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the
Buyer (the "Transitory Subsidiary"), the stockholders of the Company listed on
Schedule I attached hereto (each, a "Stockholder", and, collectively, the
"Stockholders") and, for purposes of Section 2.5 only, Castle Harlan, Inc. in
its capacity as Stockholders' Representative. The Buyer, the Transitory
Subsidiary, the Company, the Stockholders and the Stockholders' Representative
are individually referred to herein as a "Party" and collectively referred to
herein as the "Parties".
Preliminary Statement
WHEREAS, the respective Boards of Directors of the Company, the
Buyer and the Transitory Subsidiary deem it advisable and in the best interests
of each corporation and their respective stockholders that the Buyer acquire the
Company;
WHEREAS, the acquisition of the Company by the Buyer shall be
effected through a merger (the "Merger") of the Transitory Subsidiary with and
into the Company in accordance with the terms of this Agreement and the General
Corporation Law of the State of Delaware (the "DGCL"), as a result of which the
Company shall become a wholly-owned subsidiary of the Buyer;
WHEREAS, the Board of Directors of the Company (the "Company Board")
and the Stockholders have approved and adopted this Agreement and the Merger;
and
WHEREAS, the Buyer and the Transitory Subsidiary have approved and
adopted this Agreement and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
Parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2), the Company and
the Transitory Subsidiary shall consummate the Merger pursuant to which (a) the
Transitory Subsidiary shall be merged with and into the Company and the separate
corporate existence of the Transitory Subsidiary shall thereupon cease, (b) the
Company shall be the successor or surviving corporation in the Merger (the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Delaware, (c) the Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until
further amended in accordance with the DGCL, and (d) the By-laws of the Company,
as in effect immediately prior to the Effective Time, shall be the By-laws of
the Surviving Corporation until further amended in accordance with the DGCL. The
Merger shall have the effects set forth in Section 259 of the DGCL.
1.2 Effective Time of the Merger. Subject to the provisions of this
Agreement, prior to the Closing (as defined in Section 1.4), the Buyer shall
prepare, and on the Closing Date (as defined in Section 1.4) the Buyer shall
cause to be filed with the Secretary of State of the State of Delaware, a
certificate of merger in such form as is required by, and executed by the
Surviving Corporation in accordance with, the relevant provisions of the DGCL
(the "Certificate of Merger"). The Merger shall become effective upon the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware or at such later time as is established by the Parties and set forth in
the Certificate of Merger (the "Effective Time").
1.3 Directors and Officers. The directors of the Transitory
Subsidiary immediately prior to the Effective Time shall, from and after the
Effective Time, be the directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and By-laws of the
Surviving Corporation, until each such director's successor is duly elected or
appointed and qualified. Except as set forth in Section 6.7, the officers of the
Company immediately prior to the Effective Time shall be, from and after the
Effective Time, the officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation, until each such officer's successor is duly elected or appointed
and qualified.
1.4 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m., on a date to be specified by the Parties (the "Closing
Date"), which shall be no later than two Business Days following the
satisfaction or waiver of all of the conditions set forth in Article VII of this
Agreement, other than such conditions which are to be satisfied on the Closing
Date, at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York,
New York, 10022, unless another date, place or time is agreed to in writing by
the Parties hereto; provided, that, in no event shall the Closing take place
prior to ten days following the delivery of any Company Breach Notice,
Stockholder Breach Notice or Buyer Breach Notice pursuant to Sections 8.1(d) or
8.1(e). The Closing shall be concurrent with the Effective Time. For purposes of
this Agreement, "Business Day" shall mean any day of the year, other than a
Saturday, Sunday or any day on which banks are required or authorized to close
in New York, New York.
1.5 Additional Actions. The Buyer, the Surviving Corporation and the
Stockholders may, at any time after the Effective Time, take any action,
including executing and delivering any document in the name and on behalf of the
Company, reasonably necessary in order to consummate the transactions
contemplated by this Agreement.
ARTICLE II
CONVERSION OF AND PAYMENT FOR SECURITIES
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 any shares of
(i) common stock, par
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value $0.01 per share, of the Company (the "Common Stock"), (ii) Series A
Preferred Stock, par value $0.01 per share, of the Company (the "Series A
Preferred Stock") (each share of Common Stock and Series A Preferred Stock, a
"Share", and, collectively, the "Shares") or (iii) common stock, par value $0.01
per share, of the Transitory Subsidiary (the "Transitory Subsidiary Common
Stock"):
(a) Capital Stock of the Transitory Subsidiary. Each issued and
outstanding share of the Transitory Subsidiary Common Stock shall be converted
into and become one fully paid and nonassessable share of common stock of the
Surviving Corporation.
(b) Exchange of Common Stock. Each issued and outstanding share of
Common Stock shall be converted into the right to receive in cash the Price Per
Common Share, to be paid to the holder thereof at the Closing. All such shares
of Common Stock, from and after the Effective Time, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any shares of Common Stock
shall cease to have any rights with respect thereto, except for the right to
receive the Price Per Common Share with respect to such shares. For purposes of
this Agreement, "Price Per Common Share" shall mean an amount equal to (A) the
Total Purchase Price (as defined in Section 2.4) plus the aggregate exercise
price of the Warrants and the Options receiving Warrant Consideration or Option
Consideration pursuant to Section 2.2, less the sum of the aggregate amounts
payable pursuant to Section 2.4(a), (b), (c) and (d), divided by (B) the
aggregate number of shares of Common Stock issued and outstanding on the date
hereof, as set forth on Schedule I, plus the aggregate number of shares of
Common Stock underlying the Warrants and Options receiving Warrant Consideration
or Option Consideration pursuant to Section 2.2, each as set forth on Schedule
II. Each share of Common Stock held in the treasury of the Company shall be
cancelled without any conversion thereof and no payment or distribution shall be
made with respect thereto.
(c) Exchange of Preferred Stock. Each issued and outstanding share
of Series A Preferred Stock shall be converted into the right to receive $100.00
in cash, plus all accrued and unpaid dividends thereon through and including the
Closing Date (the "Preferred Stock Cash Merger Consideration", to be paid to the
holder thereof at the Closing. All such shares of Series A Preferred Stock, from
and after the Effective Time, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any shares of Series A Preferred Stock shall cease
to have any rights with respect thereto, except for the right to receive the
Preferred Stock Cash Merger Consideration. Each share of preferred stock held in
the treasury of the Company shall be cancelled without any conversion thereof
and no payment or distribution shall be made with respect thereto.
2.2 Warrants and Options.
(a) With respect to any warrants to purchase Common Stock set forth
on Schedule II (each, a "Warrant", and, collectively, the "Warrants"), the
Company shall, prior to the Closing, obtain the written agreement of each holder
of a Warrant, as set forth on Schedule II, that such Warrant will be cancelled
in exchange for the payment of the Warrant Consideration (as defined below).
Such written agreements shall be in the form attached hereto as Exhibit A and
will include a provision that payment of such Warrant Consideration in respect
of any
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Warrant shall be deemed a release of any and all rights the holder had or may
have had in and in respect of such Warrant. At the Closing, each Warrant shall
be cancelled by the Company pursuant to such written agreements, and the Company
shall pay to each holder thereof an amount equal to the excess of the Price Per
Common Share over the exercise price of such Warrant, multiplied by the number
of Shares subject to such Warrant (the "Warrant Consideration"), each as set
forth on Schedule II attached hereto.
(b) Prior to the Closing, the Company shall use commercially
reasonable efforts to obtain the written agreement of each holder of options to
purchase Common Stock (each, an "Option" and collectively, the "Options") under
the Company's 2000 Stock Option Plan (the "Option Plan"), as set forth on
Schedule II, that such Options will be cancelled in exchange for the payment of
the Option Consideration (as defined below). Such written agreements shall be in
form and substance reasonably satisfactory to the Buyer and the Company and will
include a provision that payment of such Option Consideration in respect of any
Option shall be deemed a release of any and all rights the holder had or may
have had in and in respect of such Option. At the Effective Time, each
outstanding Option whether or not then exercisable, shall be cancelled by the
Company pursuant to such written agreements, and the Company shall pay to each
holder of cancelled Options at the Closing an amount in cash equal to the excess
of the Price Per Common Share over the per share exercise price of such Option,
multiplied by the number of Shares underlying such Option (the "Option
Consideration"), minus the amount of any withholding required under federal,
state or local law as a result of the transactions contemplated under this
Section 2.2.
2.3 Preferred Stock of Commemorative Brands, Inc. Simultaneously
with the Closing, the Company shall cause Commemorative Brands, Inc. ("CBI") to
redeem all of the issued and outstanding shares of its Series A Preferred Stock
(the "CBI Preferred Shares"), as set forth on Schedule 4.2(a) of the Disclosure
Schedule, and to pay to the holder thereof an amount equal to $100.00 per share
in cash, plus all accrued and unpaid dividends thereon through and including the
Closing Date, in accordance with CBI's Certificate of Incorporation, attached as
Exhibit B hereto (the "CBI Preferred Consideration"). The redemption of CBI
Preferred Shares as set forth in this Section 2.3 shall be deemed a release of
any and all rights the holder had or may have had in and in respect of such CBI
Preferred Shares, other than the right to receive the CBI Preferred
Consideration in respect thereof.
2.4 Payment of Total Purchase Price. The aggregate cash amount to be
paid by the Buyer at Closing shall be $403.5 million, subject to adjustment as
set forth in Sections 2.6 and 2.7 (the "Total Purchase Price"). At the Closing,
the Buyer shall pay by wire transfer of immediately available funds the Total
Purchase Price as follows:
(a) to such account or accounts as the Company specifies to the
Buyer, the aggregate amount required to pay and satisfy in full all costs, fees
and expenses (including legal, accounting, consulting, advisory and brokerage
fees and expenses) incurred by the Company or the Stockholders in connection
with the negotiation and preparation of this Agreement, related agreements and
the transactions contemplated hereby and thereby, including without limitation
the fees and expenses of Deutsche Bank Securities, Inc., Lane Berry & Co.
International, Schulte Roth & Zabel LLP and Deloitte & Touche LLP, and any and
all payments required to be made under the Success Bonus Plan (as defined in
Section 7.2(p)) as a result of the transactions
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contemplated hereby (the "Transaction Expenses"), in each case to the extent
incurred at or prior to the Closing;
(b) to such account or accounts as the Company specifies to the
Buyer in accordance with instructions provided to the Company by holders of Debt
(as hereinafter defined) of the Company and the Company Subsidiaries, the
aggregate amount necessary to satisfy and extinguish all Debt of the Company and
the Company Subsidiaries (including without limitation all principal and accrued
interest thereon through the date on which such Debt is satisfied and
extinguished, and all premiums and other amounts and expenses associated with
(x) tendering for and repurchasing or redeeming in full the 11-5/8% Senior Notes
due 2007 of the Company (the "11-5/8% Notes") issued pursuant to the indenture
dated as of February 20, 2002, as amended or supplemented (the "11-5/8% Note
Indenture"), as contemplated by Section 6.14 and (y) repurchasing or redeeming
in full the 11% Senior Subordinated Notes due 2007 of CBI (the "11% CBI Notes")
issued pursuant to the indenture dated December 16, 1996, as amended or
supplemented (the "CBI Note Indenture")), other than Debt specified on Section
2.4(b) of the Disclosure Schedule; provided, that a portion of the amount
allocated to the purchase, redemption or defeasance of the 11-5/8% Notes as
described above in this clause (b), equal to the excess, if any, of (i) the
aggregate amount which would be necessary to repurchase or redeem in full 100%
of the outstanding 11-5/8% Notes in accordance with Section 6.14 if 100% of such
Notes were tendered over (ii) the aggregate amount necessary to repurchase or
redeem the 11-5/8% Notes actually tendered in the Tender Offer at the Closing in
accordance with Section 6.14 (including, without limitation, in either case, all
principal and accrued interest thereon through the Closing Date and all premiums
paid thereon in accordance with Section 6.14) shall be paid into an account
specified by the Buyer (which, for the avoidance of doubt, will not affect the
deduction of such amount contemplated by Section 2.1(b) for purposes of
calculating the Price Per Common Share);
(c) to such account or accounts as the Company specifies, the
aggregate amount required to pay in full the aggregate Preferred Stock Cash
Merger Consideration;
(d) on behalf of CBI, to such account or accounts as the holders of
the CBI Preferred Shares specify no later than two days prior to the Closing,
the aggregate amount required to pay in full the aggregate CBI Preferred
Consideration;
(e) to such account or accounts as the Company specifies to the
Buyer, an amount to the Stockholders' Representative equal to $2,000,000 to be
held by the Stockholders' Representative to satisfy the obligations of the
Stockholders pursuant to Section 2.6(f)(i);
(f) to such account or accounts as the Company specifies, an amount
to each Stockholder equal to (i) the Price Per Common Share multiplied by the
number of shares of Common Stock owned by such Stockholder as set forth on
Schedule I minus (ii) the product of (A) the aggregate amount paid pursuant to
Section 2.4(e) multiplied by (B) such Stockholders' "Pro Rata Percentage" (as
set forth on Schedule I);
(g) to such account or accounts as the Company specifies, an amount
to each holder of a Warrant equal to the Warrant Consideration for such Warrant
payable pursuant to the terms of Section 2.2; and
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(h) to such account or accounts as the Company specifies, an amount
to each holder of an Option equal to the Option Consideration for such Option
payable pursuant to the terms of Section 2.2;
provided, however, that the Buyer will be entitled to deduct and withhold or
cause the Company to deduct and withhold and promptly pay over to the
appropriate taxing authority any withholding taxes or other amounts required
under the Code or any applicable law to be deducted, withheld and paid over. To
the extent that any such amounts are so deducted, withheld and paid over, such
amounts will be treated for all purposes of this Agreement as having been paid
to the Person in respect of which such deduction and withholding was made. Not
later than two Business Days prior to the Closing, the Company shall furnish to
the Buyer a certificate (the "Closing Payment Certificate"), signed by the
Company, dated the Closing Date, which sets forth (i) each party entitled to a
payment pursuant to Section 2.4 and the amount due in respect thereof (the
aggregate amount of which payments shall not exceed the Total Purchase Price)
and (ii) the aggregate amount of cash dividends or other cash distributions paid
or made by the Company from and after the date of this Agreement to the Closing
Date. The Buyer shall be entitled to rely conclusively on the amounts set forth
in the Closing Payment Certificate. For purposes of this Agreement, "Person"
shall mean means any individual or corporation, association, partnership,
limited liability company, joint venture, joint stock or other company, business
trust, trust, organization, Governmental Entity or other entity of any kind.
2.5 Appointment of Stockholders' Representative. (a) Each of the
Stockholders does hereby make, constitute and appoint Castle Harlan, Inc. (the
"Stockholders' Representative"), as his, her or its agent, to act in his, her or
its name, place and stead, as such Stockholder's attorney-in-fact, to (i)
execute and deliver all documents necessary or desirable to carry out the intent
of this Agreement and any other documents, instruments and/or agreements
contemplated by this Agreement (each, an "Additional Agreement"), (ii) determine
whether the conditions to Closing in Article VII hereof have been satisfied,
(iii) initiate, defend or settle any claims for indemnification under Article IX
hereof and, except as set forth in Section 2.5(d), to serve as the named party
with respect to any such claims on behalf of each of the Stockholders, (iv) give
and receive on behalf of the Stockholders any and all notices from or to any
Stockholder hereunder or under any Additional Agreement, (v) grant any consent
or approval on behalf of the Stockholders under this Agreement, (vi) hold and
pay over to the Buyer a portion of the Total Purchase Price on behalf of the
Stockholders for the purpose of satisfying any payments which may be required
pursuant to Section 2.6(f)(i), and (vii) make all other elections or decisions
contemplated by this Agreement and any Additional Agreement, and does hereby
give and grant unto the Stockholders' Representative the power and authority to
do and perform each such act and thing whatsoever that the Stockholders may or
are required to do pursuant to this Agreement and all Additional Agreements, and
to amend, modify or supplement any of the foregoing in each such Stockholder's
name, place and stead, as if such Stockholder had personally done such act, and
Castle Harlan, Inc. as Stockholders' Representative hereby accepts such
appointment. The death, incapacity, dissolution, liquidation, insolvency or
bankruptcy of any Stockholder shall not terminate such appointment or the
authority and agency of the Stockholders' Representative. The power-of-attorney
granted in this Section is coupled with an interest and is irrevocable. The
Stockholders agree jointly and severally to indemnify, defend and hold harmless
the Stockholders' Representative from and against any and all loss, damage,
liability and expense that may be incurred by the Stockholders' Representative
arising out of or
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in connection with its acceptance or appointment as Stockholders' Representative
under this Agreement (except such as may result from the Stockholders'
Representative's bad faith), including the legal costs and expenses of defending
itself against any claim or liability in connection with its performance under
this Agreement and any Additional Agreements executed and delivered by the
Stockholders' Representative in connection with this Agreement or any Additional
Agreement. In connection with its appointment as set forth in clause (vi) above,
the Stockholders' Representative hereby agrees for the benefit of the
Stockholders that it will promptly (subject, if applicable, to the resolution of
any dispute in accordance with the procedures set forth in Section 2.6) satisfy
any obligations of the Stockholders pursuant to Section 2.6(f)(i) out of, and in
an amount not exceeding, the aggregate amount held by the Stockholders'
Representative on the Stockholders' behalf pursuant to Section 2.4(e) and clause
(vi) above.
(b) Reliance. Each Party hereto shall be entitled to rely
exclusively upon any communication given or other action taken by the
Stockholders' Representative on behalf of the Stockholders pursuant to this
Agreement, and shall not be liable for any action taken or not taken in good
faith reliance on a communication or other instruction from the Stockholders'
Representative on behalf of the Stockholders.
(c) Limitation on Liability. The Stockholders' Representative,
solely in its capacity as such, shall have no liability to the Buyer for any
default under this Agreement or any Additional Agreement by any Stockholder, and
shall have no liability whatsoever to the Stockholders or any Person claiming
by, through or under them, for or in respect of any of its acts or omissions,
except only for its bad faith.
(d) Additional Limitation. Notwithstanding the foregoing, the
Stockholders' Representative, each Stockholder, the Company and the Buyer
expressly acknowledge that the Stockholders' Representative shall have no
authority or responsibility to act on behalf of any Stockholder in connection
with any claim, action or proceeding initiated against such Stockholder pursuant
to a breach by such Stockholder of such Stockholder's individual
representations, warranties or covenants hereunder.
2.6 Working Capital Adjustments.
(a) Estimated Balance Sheet. The Company will, in consultation with
the Buyer and in good faith, prepare or cause to be prepared, and delivered to
the Buyer not later than three Business Days prior to the Closing Date, an
estimated consolidated balance sheet of the Company as of immediately prior to
the Closing (the "Estimated Closing Balance Sheet"), together with a written
statement setting forth in reasonable detail its estimate of the Working Capital
as of immediately prior to the Closing as reflected on the Estimated Closing
Balance Sheet (the "Estimated Working Capital Statement"). The Estimated Closing
Balance Sheet and the Estimated Working Capital Statement will be prepared using
accounting principles consistently applied and elements classified and presented
in a manner consistent with the balance sheet included in the Company's Monthly
Financial Reporting Packages currently being provided to certain of the
Company's institutional shareholders (an example of which as of November 29,
2003, together with the form of Estimated Working Capital Statement, is attached
as Exhibit C); provided, that the Estimated Closing Balance Sheet and the
Estimated Working
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Capital Statement will (i) classify accrued interest and the Taylor defined
pension plan liability as elements of accrued expenses and (ii) exclude any
excess of the deferred tax asset over $2.784 million from current assets.
Subject to the foregoing, for purposes of this Agreement, "Working Capital"
shall be defined as the current assets of the Company (consisting of trade
accounts receivable net of allowance for doubtful accounts, inventory, prepaid
expenses and other account receivables) less the current liabilities of the
Company (consisting of trade accounts payable, customer prepayments, accrued
expenses and consigned gold).
(b) Adjustment to Total Purchase Price. If the Working Capital
reflected on the Estimated Working Capital Statement is less than $19,400,000,
the Total Purchase Price payable at Closing pursuant to Section 2.4 shall be
reduced by the amount of such shortfall on a dollar-for-dollar basis; provided,
that in no event shall the Total Purchase Price be decreased pursuant to this
Section 2.6(b) by more than the Maximum Working Capital Amount set forth
opposite the calendar week in which the Closing takes place as set forth on
Exhibit D hereto and in no event shall the Total Purchase Price be decreased
pursuant to this Section 2.6(b) by less than the Minimum Working Capital Amount
set forth opposite the calendar week in which the Closing takes place as set
forth on Exhibit D hereto. Furthermore, notwithstanding the foregoing, the
reduction to the Total Purchase Price contemplated in the preceding sentence
shall itself be decreased dollar-for-dollar by the amount of any Cash Shortfall
(as such term is defined in Section 6.1 of this Agreement).
(c) Closing Balance Sheet. As promptly as possible and in any event
within forty-five days after the Closing Date, the Buyer will prepare or cause
to be prepared, and will provide to the Stockholders' Representative, a
consolidated balance sheet of the Company as of immediately prior to the Closing
(the "Closing Balance Sheet"), together with a written statement setting forth
in reasonable detail its determination of the Working Capital as of immediately
prior to the Closing as reflected on the Closing Balance Sheet (the "Working
Capital Statement"). The Closing Balance Sheet and the Working Capital Statement
will be prepared in a form and manner and on a basis consistent with the form
and manner in and basis on which the Estimated Closing Balance Sheet and the
Estimated Working Capital Statement were prepared by the Company (the
"Accounting Standards"). The Stockholders' Representative will have access at
reasonable hours and upon reasonable notice to the work papers and other
materials used by the Buyer in the preparation of the Closing Balance Sheet and
the Working Capital Statement.
(d) Dispute Notice. The Closing Balance Sheet and the Working
Capital Statement will be final, conclusive and binding on the parties (and will
be deemed to constitute a "Final Working Capital Statement" pursuant to Section
2.6(e)) unless the Stockholders' Representative provides a written notice (a
"Dispute Notice") to the Buyer no later than the thirtieth (30th) day after
delivery of the Working Capital Statement setting forth in reasonable detail (a)
any item on the Closing Balance Sheet and/or the Working Capital Statement which
the Stockholders' Representative believes has not been prepared in accordance
with the Accounting Standards or reflects a mathematical error and (b) the
correct amount of such item in accordance with the Accounting Standards. Any
item or amount as to which no dispute is raised in the Dispute Notice will be
final, conclusive and binding on the parties.
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(e) Resolution of Disputes. The Company and the Stockholders'
Representative will attempt to resolve the matters raised in a Dispute Notice in
good faith. Ten Business Days after delivery of the Dispute Notice, either the
Company or the Stockholders' Representative may provide written notice to the
other that it elects to submit the disputed items to KPMG LLP or another
nationally recognized independent accounting firm chosen jointly by the Company
and Stockholders' Representative (the "Working Capital Referee"). The Working
Capital Referee will promptly, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, review only those items and
amounts specifically set forth and objected to in the Dispute Notice and resolve
the dispute with respect to each such specific item and amount in accordance
with the Accounting Standards. The final consolidated balance sheet of the
Company as of the Closing Date and the related statement of the Working Capital
on the Closing Date as reflected on such balance sheet as so determined by the
Working Capital Referee shall be referred to as the "Final Working Capital
Statement." The fees and expenses of the Working Capital Referee will be shared
equally by the Stockholders and the Buyer, and the decision of the Working
Capital Referee with respect to the items of the Closing Balance Sheet and the
Working Capital Statement submitted to it will be final, conclusive and binding
on the parties. Each of the parties to this Agreement agrees to use its
reasonable best efforts to cooperate with the Working Capital Referee and to
cause the Working Capital Referee to resolve any dispute no later than thirty
Business Days after selection of the Working Capital Referee.
(f) Purchase Price Adjustment. Promptly, and in any event no later
than the fifth Business Day, after determination of the Final Working Capital
Statement pursuant to Section 2.6(d) or 2.6(e),
(i) if the Working Capital reflected on the Final Working
Capital Statement is less than the Working Capital reflected on the Estimated
Working Capital Statement, the Stockholders will cause the Stockholders'
Representative to pay to the Company out of the funds held by the Stockholders'
Representative pursuant to Section 2.4(e) and Section 2.5(a)(vi) the amount of
such shortfall by wire transfer in immediately available funds; provided, that
in no event shall the sum of the amount of the decrease in the Total Purchase
Price pursuant to Section 2.6(b) plus the amount of the decrease in the Total
Purchase Price pursuant to this Section 2.6(f)(i), exceed the Maximum Working
Capital Amount in the aggregate or be less than the Minimum Working Capital
Amount in the aggregate, in each case as specified on Exhibit D hereto opposite
the calendar week in which the Closing occurs; and provided further, that the
excess, if any, of the funds held by the Stockholders' Representative pursuant
to Section 2.4(e) and Section 2.5(a)(vi) over the amount of such shortfall may,
after the payment of all amounts required to be paid pursuant to this Section
2.6(f)(i), be released by the Stockholders' Representative to the Stockholders
in accordance with each such Stockholder's Pro Rata Percentage; and
(ii) if the Working Capital reflected on the Final Working
Capital Statement is greater than the Working Capital reflected on the Estimated
Working Capital Statement, the Buyer will cause the Company to pay to each
Stockholder its Pro Rata Percentage of the amount of such excess by wire
transfer in immediately available funds; provided, that in no event shall the
amount of the decrease in the Total Purchase Price pursuant to Section 2.6(b),
net of the amount of the increase in the Total Purchase Price pursuant to this
Section 2.6(f)(ii), exceed the Maximum Working Capital Amount in the aggregate
or be less than the Minimum
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Working Capital Amount in the aggregate, in each case as specified on Exhibit D
hereto opposite the calendar week in which the Closing occurs.
2.7 Closing Adjustment. In the event that, prior to the Closing
Date, the Company has consummated the acquisition of C-B Graduation
Announcements, LLC (the "C-B Closing") pursuant to the Asset Purchase Agreement
dated as of September 29, 2003 (the "C-B Agreement") among C-B Graduation
Announcements, LLC, Christopher Barr and Commemorative Brands, Inc., the Total
Purchase Price payable at Closing pursuant to Section 2.4 shall be increased by
the amount of the "Purchase Price" (as such term is used in Section 3 of the C-B
Agreement) paid in cash by the Company or any Company Subsidiary at the C-B
Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders represents and warrants to the Buyer as
follows:
3.1 Organization. Such Stockholder is a natural person or an entity
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization.
3.2 Title. Such Stockholder has good and valid title to the number
of Shares set opposite its name on Schedule I, free and clear of any liens,
encumbrances or other restrictions on transfer. Except for the Shares set forth
on Schedule I or as set forth in Section 4.2(a) of the Disclosure Schedule, such
Stockholder does not own any capital stock of the Company or any options,
warrants or rights to purchase any capital stock of the Company or any
securities convertible into or exchangeable for capital stock of the Company.
Other than pursuant to this Agreement, there is no contractual obligation
pursuant to which such Stockholder has, directly or indirectly, granted any
option, warrant or other right to any Person to acquire any Shares.
3.3 Authorization; Validity of Agreement; Necessary Action. Such
Stockholder has full power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by such Stockholder of this Agreement, and the consummation by
such Stockholder of the transactions contemplated hereby to be consummated by
it, have been duly authorized by the governing body of such Stockholder, if
applicable, and no other action on the part of such Stockholder is necessary to
authorize the execution and delivery by such Stockholder of this Agreement and
the consummation by such Stockholder of the transactions contemplated hereby to
be consummated by it. This Agreement has been duly executed and delivered by
such Stockholder, and, assuming due and valid authorization, execution and
delivery hereof by each of the other Parties hereto, is a valid and binding
obligation of the Stockholder, enforceable against it in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
creditor's rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief and other equitable
remedies.
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3.4 Consents and Approvals; No Violations. Except for the filings,
permits, authorizations, consents and approvals as may be required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), neither the execution, delivery or performance of this Agreement by such
Stockholder nor the consummation by such Stockholder of the transactions
contemplated hereby, nor compliance by such Stockholder with any of the
provisions hereof, will (i) conflict with or result in any breach of any
provision of the organizational documents of such Stockholder, if applicable,
(ii) require such Stockholder to obtain any filing with, or permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity"), (iii) result in any violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default under, any of the terms, conditions or provisions of any contract to
which such Stockholder is a party or is otherwise bound, or (iv) violate in any
respect any order, writ, injunction, decree, statute, rule or regulation
applicable to such Stockholder or any of its properties or assets.
3.5 Litigation. Such Stockholder is not subject to any action, suit,
proceeding, claim, arbitration or investigation pending or threatened against or
affecting the Stockholder, or any judgment, order or decree outstanding against
the Stockholder, that would reasonably be expected to affect the ability of the
Stockholder to consummate the transactions contemplated hereby.
3.6 Exclusivity of Representations and Warranties. The
representations and warranties made by such Stockholder in this Agreement are
the exclusive representations and warranties made by such Stockholder. Such
Stockholder hereby disclaims any other express or implied representations or
warranties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary as set forth in this Article IV, except as set forth in the
disclosure schedule attached hereto (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IV, and the disclosures in any
paragraph of the Disclosure Schedule shall be deemed to be disclosed and
incorporated in any other paragraph of the Disclosure Schedule when such
disclosure would be appropriate and the relevance of such disclosure is
reasonably clear from the context and content of the disclosure.
4.1 Organization. (a) Each of the Company and the Company
Subsidiaries (as defined below) is an entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization and has all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as now being
conducted, and is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary.
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(b) Section 4.1(b) of the Disclosure Schedule sets forth a complete
and accurate list of the Subsidiaries of the Company (each, a "Company
Subsidiary", and, collectively, the "Company Subsidiaries"). As used in this
Agreement, the term "Subsidiary" means with respect to a Party any corporation
or other entity in which such Party owns a majority of the issued and
outstanding capital stock or similar interests or of which such Party is a
general partner, managing member or joint venturer. Except as set forth in
Section 4.1(b) of the Disclosure Schedule, the Company does not own any equity
interest in any corporation or other entity other than the Company Subsidiaries.
(c) The Company has (x) made available to the Buyer true, accurate
and complete copies of the Organizational Documents of the Company and each of
the Company Subsidiaries and (y) made available to the Buyer the minute books of
the Company and each of the Company Subsidiaries which contain records of all
meetings held of, and other corporate actions taken by, its stockholders, Boards
of Directors and any committees appointed by its Boards of Directors. For
purposes of this Agreement, "Organizational Documents" means with respect to any
entity, (a) the certificate or articles of incorporation or organization and any
joint venture, limited liability company, operating or partnership agreement and
other similar documents adopted or filed in connection with the creation,
formation or organization of such entity and (b) all by-laws, shareholder
agreements and similar documents, instruments or agreements relating to the
organization or governance of such entity, in each case, as amended or
supplemented.
4.2 Capitalization. (a) The authorized capital stock of the Company
consists of 1,250,000 shares of Common Stock, par value $0.01 per share, and
1,250,000 shares of preferred stock, par value $0.01 per share, of which
1,200,000 shares are designated Series A Preferred Stock. The Company holds no
shares of its capital stock in its treasury. As of the date hereof, (i) with
respect to Common Stock, 809,774.64 shares are issued and outstanding, 97,404
shares are reserved for issuance upon exercise of outstanding Options granted
under the Company's stock option plans or otherwise, and 21,405 shares are
reserved for issuance upon the exercise of outstanding Warrants; and (ii) with
respect to preferred stock, 1,007,365.36 shares of Series A Preferred Stock are
issued and outstanding. Schedule I sets forth the name and address of each
record and beneficial holder of shares of Common Stock and Series A Preferred
Stock and the number of shares of the applicable class held by each such Person.
All outstanding shares of the Company's capital stock are duly authorized,
validly issued, fully paid and non-assessable. Except as set forth in Section
4.1(b) or in Section 4.2(a) of the Disclosure Schedule, (i) there are no shares
of capital stock of the Company or any of the Company Subsidiaries authorized,
issued or outstanding, (ii) there are no existing options, warrants, calls,
preemptive rights, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company or any of the Company Subsidiaries, obligating the Company or any
of the Company Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or other equity interests in the
Company or any of the Company Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any of the Company Subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or
commitment, and (iii) there are no outstanding contractual obligations of the
Company or any of the Company Subsidiaries to repurchase,
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redeem or otherwise acquire any Shares or any other capital stock of the Company
or any Company Subsidiary.
(b) Except as set forth in Section 4.2(b) of the Disclosure
Schedule, all of the outstanding shares of capital stock and partnership or
limited liability company interests of each of the Company Subsidiaries are
owned of record and beneficially by the Company and all such shares have been
validly issued and are fully paid and nonassessable and are owned by either the
Company or one of the Company Subsidiaries free and clear of all liens, charges,
claims or encumbrances.
(c) There are no voting trusts or other agreements or understandings
to which the Company or any of the Company Subsidiaries is a party with respect
to the voting of the capital stock of the Company or any of the Company
Subsidiaries.
(d) Other than pursuant to Section 2.3 of this Agreement, none of
the Company or the Company Subsidiaries is required to redeem, repurchase or
otherwise acquire shares of capital stock of the Company, or any of the Company
Subsidiaries, as a result of the transactions contemplated by this Agreement.
4.3 Authorization; Validity of Agreement; Company Action. The
Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement, and the consummation
by it of the Merger and of the transactions contemplated hereby, have been duly
authorized by the Company Board and the Stockholders, and no other corporate
action on the part of the Company is necessary to authorize the execution and
delivery by the Company of this Agreement and the consummation by it of this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, assuming due and valid authorization,
execution and delivery hereof by each of the other Parties hereto, is a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting creditor's rights generally, and (ii) as limited by laws relating to
the availability of specific performance, injunctive relief and other equitable
remedies.
4.4 Consents and Approvals; No Violations. Except for the filings,
permits, authorizations, consents and approvals as may be required as set forth
in Section 4.4 of the Disclosure Schedule, the HSR Act, and the DGCL, neither
the execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or the By-laws of the Company or any of the Company Subsidiaries,
(ii) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity (other than filings, permits, authorizations, consents
or approvals the failure of which to make or obtain would not have an adverse
effect on the Company and the Company Subsidiaries, taken together as a whole,
or the ability of the Company to consummate the transactions contemplated by
this Agreement), (iii) result in any violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of payment, termination, amendment,
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cancellation or acceleration) under, any of the terms, conditions or provisions
of any Company Material Contract (as defined in Section 4.11), (iv) violate in
any respect any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of the Company Subsidiaries or any of their
properties or assets, (v) require any action by (including any authorization,
consent or approval) or in respect of (including notice to), any Person under
any Company Material Contract or Company Permit, or (vi) result in the creation
or imposition of any lien upon, or the forfeiture of, any asset of the Company
or any of the Company Subsidiaries.
4.5 SEC Reports and Financial Statements.
(a) The Company has filed with the Securities and Exchange
Commission (the "SEC") all forms, reports, schedules, statements and other
documents required to be filed by it since April 8, 2002 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (collectively, the
"Company SEC Documents"). As of their respective dates, the Company SEC
Documents, including, without limitation, any financial statements or schedules
included therein (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (b) complied in all material respects with
the applicable requirements of the Exchange Act, and the applicable rules and
regulations of the SEC thereunder. Each of the financial statements (including,
in each case, any related notes and schedules) contained in the Company SEC
Documents has been prepared from, and is in accordance with, the books and
records of the Company and its consolidated Company Subsidiaries, complies in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, has been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) ("GAAP") and fairly presents the
consolidated financial position and the consolidated results of operations and
cash flows of the Company and its consolidated Company Subsidiaries at the dates
and for the periods covered thereby.
(b) Attached as Section 4.5 of the Disclosure Schedule are copies of
the unaudited consolidated balance sheet of the Company as of November 29, 2003
and the related unaudited consolidated statements of income, cash flow and
changes in stockholders' equity of the Company and its consolidated Company
Subsidiaries for the three month period then ended (the "Interim Financials").
The Interim Financials (i) were prepared in accordance with the books and
records of the Company and the Company Subsidiaries, (ii) have been prepared in
accordance with GAAP (subject to normal year-end audit adjustments, the effect
of which will not, individually or in the aggregate, result in material
adjustments, and the absence of notes that, if presented, would not differ
materially from those included in the Most Recent 10-K) and (iii) fairly present
the consolidated financial position of the Company as of the date thereof and
the consolidated results of the operations of the Company and changes in
financial position for the period covered thereby.
(c) The asset reserves and accruals set forth on the face of the
balance sheet included in the Most Recent 10-K and in the Interim Financials are
fairly stated and all material
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adjustments to the reserves, and the reasons therefore, have been disclosed in
such financial statements and the notes thereto.
4.6 No Undisclosed Liabilities. Except as set forth in Section 4.6
of the Disclosure Schedule or as specifically disclosed on the face of the
balance sheet or the notes thereto included in the Form 10-K of the Company
filed with the SEC for the fiscal year ended August 30, 2003 (the "Most Recent
10-K"), and except for liabilities incurred for subsequent periods in the
ordinary course of business (none of which liabilities relate to the breach of
any contract, commission of any tort or violation of any law) or incurred or to
be incurred in connection with the Company's compliance with its obligations
pursuant to the Company Material Contracts, the Company and the Company
Subsidiaries do not have any liabilities that are material to the Company and
the Company Subsidiaries, taken as a whole, either accrued, contingent or
otherwise, whether due or to become due.
4.7 Absence of Certain Changes. Except as set forth in Section 4.7
of the Disclosure Schedule, since August 30, 2003, the Company and the Company
Subsidiaries have conducted their business, taken together as a whole, only in
the ordinary and usual course in all material respects and there has not
occurred: (a) any events or changes that have resulted in or would reasonably be
expected to result in, individually or in the aggregate, a Company Material
Adverse Effect (as defined below); (b) 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 the Company; or (c) any change by the Company
or any of the Company Subsidiaries in accounting principles, practices, policies
or methods, (d) any amendment to the Organizational Documents of the Company or
any of the Company Subsidiaries; (e) any transaction (including payments under
the Management Agreement (as defined in Section 7.2(c)) with, or for the benefit
of, any Stockholder or any affiliate of any Stockholder (other than payments of
wages and salaries made to officers, directors and employees in the ordinary
course of business); (f) any material loss, destruction or damage (in each case,
whether or not insured) affecting the Company or any material asset of the
Company or any of the Company Subsidiaries; (g) any increase in the compensation
payable or paid, whether conditionally or otherwise, to any employee, consultant
or agent other than in the ordinary course of business, any director or officer
or any Stockholder or any affiliate of any Stockholder; (f) any agreement by the
Company or any of the Company Subsidiaries to do any of the things referred to
elsewhere in this Section 4.7. For purposes of this Agreement, "Company Material
Adverse Effect" means any material adverse change, event, circumstance,
development or effect on the business, financial condition or results of
operations of the Company and the Company Subsidiaries, taken as a whole.
4.8 Taxes. The Company, each Company Subsidiary and each affiliated
group (within the meaning of Section 1504 of the Internal Revenue Code of 1986,
as amended (the "Code")) or consolidated, combined or unitary group (under state
or local Tax law) of which the Company or any Company Subsidiary is or has been
a member (each, an "Affiliated Group") have timely filed all Tax Returns
required to be filed. All Taxes required to be paid (whether or not shown on any
Tax Return) by the Company, each Company Subsidiary and any Affiliated Group
have been paid in full. Except as set forth in Section 4.8 of the Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries has any
liabilities for the Taxes of any Person other than the Company and the Company
Subsidiaries under Treasury regulation
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Section 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise. Except as set forth on
Section 4.8 of the Disclosure Schedule, no Tax liens have been filed and no
claims are being asserted with respect to any Taxes of the Company, any Company
Subsidiary or any Affiliated Group, and no examination, audit or inquiry is
currently being conducted by any Taxing authority. The Company and each Company
Subsidiary have complied in all material respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes and with
all reporting and recordkeeping requirements with respect thereto and is not
liable for any Taxes for failure to comply with such laws, rules, and
regulations. Except as set forth in Section 4.8 of the Disclosure Schedule, none
of the Company, the Company Subsidiaries and any Affiliated Group has made or is
obligated to make, separately or in the aggregate, any payments that would not
be deductible under Code Sections 162, 280G or 404 or that may be subject to an
excise tax under Code Section 4999. Except as set forth in Section 4.8 of the
Disclosure Schedule, none of the Company, the Company Subsidiaries and any
Affiliated Group will be required to include any amount in taxable income or
exclude any item of deduction or loss from taxable income for any taxable period
(or portion thereof) ending after the Closing as a result of any (a) change in
accounting method for a taxable period ending on or prior to the Closing
pursuant to Code Section 481, or any similar provision of state, local or
foreign Tax law, (b) "closing agreement" as described in Code Section 7121 (or
any corresponding or similar provision of state, local or foreign Tax law)
executed on or prior to the Closing, (c) excess loss account described in
Treasury regulations under Code Section 1502, (d) installment sale or open
transaction disposition made on or prior to the Closing, or (e) prepaid amount
received on or prior to the Closing. Since the Company's inception, the Company
and the Company Subsidiaries have not undergone an ownership change within the
meaning of Code Section 382. Except as set forth in Section 4.8 of the
Disclosure Schedule, there are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns of the Company, any Company Subsidiary or any Affiliated
Group. Neither the Company nor any Company Subsidiary is a party to any
agreement or understanding providing for the allocation or sharing of Taxes
other than with respect to each other. For purposes of this Agreement, (i)
"Taxes" means all taxes and similar charges or liabilities, including, without
limitation, income, gross receipts, ad valorem, premium, value-added, excise,
real property, personal property, sales, use, services, transfer, withholding,
employment, payroll and franchise taxes imposed by the United States of America
or any state, local or foreign government, or any agency thereof, or other
political subdivision of the United States or any such government, and any
interest, fines, penalties or additions to tax resulting from, attributable to
or incurred in connection with any tax or any contest or dispute thereof, and
(ii) "Tax Returns" means all reports, returns, claim for refund, declarations,
statements or other information including any schedule or attachment thereto,
and any amendment thereof required to be supplied to a taxing authority in
connection with Taxes. The Company has not 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). As of August 30,
2003, the Company's U.S. net operating loss carryforwards were not less than $73
million. As of the closing date, the Company's aggregate depreciable and
amortizable tax basis in its long-term assets, excluding its current assets,
will be not less than $190 million.
4.9 Owned and Leased Real Properties. (a) Section 4.9(a) of the
Disclosure Schedule sets forth a list of the addresses of all real property
owned by the Company or any
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Company Subsidiary (the "Real Estate"). There is no pending or, to the Company's
Knowledge, threatened condemnation or eminent domain proceeding with respect to
the Real Estate. For purposes of this Agreement, to the "Company's Knowledge" or
any phrase of similar import means the actual knowledge of, or such knowledge as
would be obtained upon reasonable investigation by, the individuals listed on
Section 4.9(a) of the Disclosure Schedule.
(b) Except as set forth in Section 4.9(b) of the Disclosure
Schedule, all of the buildings, fixtures and other improvements located on the
Real Estate are in good operating condition and repair in all material respects.
All material permits necessary in connection with the construction upon, and
present use and operation of, the Real Estate and the lawful occupancy thereof
have been issued by the appropriate Governmental Entities. The current use of
the Real Estate is, in all material respects, in accordance with the
certificates of occupancy relating thereto and the terms of any such permits.
All such permits will continue in full force and effect immediately after giving
effect to the transactions contemplated by this Agreement. The Real Estate and
its current use, occupancy and operation by the Company and the Company
Subsidiaries do not (a) constitute a nonconforming use under any applicable
building, zoning, subdivision or other land use or similar legal requirements or
(b) otherwise violate or conflict with any material covenants, conditions,
restrictions or other contractual obligations of the Company or the Company
Subsidiaries.
(c) Section 4.9(c) of the Disclosure Schedule sets forth a list of
all real property leased, subleased or licensed by the Company or any of the
Company Subsidiaries (collectively, the "Company Leases") and the location of
the premises. The Company has made available to the Buyer true, correct and
complete copies of the Company Leases including all amendments, modifications,
notices or memoranda of lease thereto and all estoppel certificates or
subordinations, non-disturbance and adornment agreements related thereto. Except
as set forth in Section 4.9(c) of the Disclosure Schedule, neither the Company
nor any of the Company Subsidiaries nor, to the Company's Knowledge, any other
party to any Company Lease, is in material default under any Company Lease.
4.10 Intellectual Property. (a) The Company and the Company
Subsidiaries own, license or otherwise possess legally enforceable rights to use
all Company Intellectual Property except, where the failure to own, license or
possess such rights has not had at any time during the past eight years (or such
shorter period of time as the Company or Commemorative Brands, Inc. (or its
predecessors since 1996) has owned the business utilizing such Intellectual
Property), and would not reasonably be expected to have, a Company Material
Adverse Effect. For purposes of this Agreement, "Company Intellectual Property"
means Intellectual Property utilized by the Company or the Company Subsidiaries
in the conduct of the business of the Company and the Company Subsidiaries,
taken together as a whole; and "Intellectual Property" means (i) patents,
trademarks, service marks, trade names, domain names, copyrights, designs and
trade secrets, (ii) any applications for and registrations of such patents,
trademarks, service marks, trade names, domain names, copyrights and designs,
and (iii) other tangible or intangible proprietary or confidential information
and material.
(b) The execution and delivery of this Agreement and consummation of
the Merger will not result in any material breach of, or create on behalf of any
third party the right to terminate or modify, any license, sublicense or other
agreement relating to any Company
-17-
Intellectual Property. Section 4.10(b) of the Disclosure Schedule sets forth (i)
a complete and accurate list of the Company's issued or applied-for patents,
registered or applied-for trademarks and registered or applied-for copyrights
and (ii) each contractual obligation under with the Company or any Company
Subsidiary has granted to any third party the right to use, or any other
interest in, any Company Intellectual Property.
(c) To the Company's Knowledge, all patents and registrations and
applications for registered trademarks, service marks and copyrights that are
held by the Company or any of the Company Subsidiaries are valid and subsisting
in all material respects. To the Company's Knowledge, except as set forth on
Section 4.10(c) of the Disclosure Schedule, no other Person is infringing,
violating or misappropriating any of the Company Intellectual Property.
(d) To the Company's Knowledge, none of the business or activities
conducted by the Company or any of the Company Subsidiaries infringes or
violates or constitutes a misappropriation of any Intellectual Property of any
third party. Neither the Company nor any of the Company Subsidiaries has
received any written (and, except as set forth on Section 4.10(d) of the
Disclosure Schedule, the Company has no Knowledge of any threatened) complaint,
claim or notice alleging any such infringement, violation or misappropriation.
4.11 Agreements, Contracts and Commitments. Except as set forth in
Section 4.11 of the Disclosure Schedule or as filed as an exhibit to the Most
Recent 10-K (including through incorporation by reference), there are no
contracts, agreements, commitments or instruments that are material to the
business, financial condition or results of operations of the Company and the
Company Subsidiaries, taken as a whole (including without limitation all written
or oral contracts, agreements, commitments or instruments providing for required
payments by or to the Company or any of the Company Subsidiaries in excess of
$100,000 in any one fiscal year or which cannot be canceled solely at the
Company or the applicable Company Subsidiary's option on sixty days' notice or
less without payment of any premium or penalty or incurrence of liability, or
any agreements to enter into any of the foregoing) (collectively, the "Company
Material Contracts"). Each Company Material Contract is in full force and effect
and is enforceable by the Company or the applicable Company Subsidiary, as the
case may be, in all material respects in accordance with its terms. Neither the
Company nor any of the Company Subsidiaries nor, to the Company's Knowledge, any
other party to any Company Material Contract is in material violation of or in
material default under (nor does there exist any condition that, upon the
passage of time or the giving of notice or both, would cause such a material
violation of or material default under) any Company Material Contract.
4.12 Litigation. Except as set forth in Section 4.12 of the
Disclosure Schedule, there is no action, suit, proceeding, claim, arbitration or
investigation (including Equal Employment Opportunity Commission investigations)
pending or, to the Company's Knowledge, threatened against, by or affecting the
Company or any of the Company Subsidiaries or any judgment, order or decree
outstanding against or affecting the Company or any of the Company Subsidiaries,
or any settlement agreement pursuant to which any amounts payable by, or any
obligations of, the Company or any of the Company Subsidiaries remain payable or
outstanding. Except as set forth on Section 4.12 of the Disclosure Schedule, (i)
the Company and the
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Company Subsidiaries do not have any indemnification obligations with respect to
liabilities of any other Person (by contract or otherwise) (other than
indemnification obligations which would not give rise to an aggregate liability
of the Company and the Company Subsidiaries in excess of $100,000,
indemnification obligations of the Company with respect to liabilities of a
Company Subsidiary or indemnification obligations of any Company Subsidiary with
respect to liabilities of the Company or any other Company Subsidiary) and (ii)
no claims under or in respect of any such indemnification obligation has been
made against the Company.
4.13 Environmental Matters. (a) Except as set forth on Section 4.13
of the Disclosure Schedule: (i) the Company and each of the Company Subsidiaries
have complied with in all material respects, and are not currently in material
violation of, any applicable Environmental Laws; (ii) the Company and each of
the Company Subsidiaries have all material permits, licenses and approvals
required under Environmental Laws to operate and conduct their businesses as
currently operated and conducted; (iii) there has been no release of hazardous
substances in material violation of, or which may give rise to liability under,
Environmental Laws at any of the properties currently owned or operated by the
Company or any of the Company Subsidiaries; (iv) neither the Company nor any of
the Company Subsidiaries have received written notice that hazardous substances
generated by the Company or any Company Subsidiary or, to the Knowledge of the
Company, any predecessor, have or may have been disposed of or come to rest at
any disposal or treatment facility where any governmental authority has required
a removal or remedial action, as such term is defined under Environmental Law,
and (v) the Company has made available to the Buyer true, accurate and complete
copies of all material environmental records, reports, notifications, permits,
filed permit applications, engineering studies, and environmental studies or
assessments.
(a) For purposes of this Agreement, "Environmental Law" means any
material federal, state, local or foreign law, regulation, order, decree,
permit, authorization or published agency requirement of any jurisdiction
relating to: (i) the protection of the environment, human health or natural
resources or (ii) the use, storage, treatment, transportation, disposal or
release of any hazardous substance.
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4.14 Employee Benefit Plans. (a) Section 4.14(a) of the Disclosure
Schedule sets forth a complete and accurate list of all Employee Benefit Plans
(as defined below) maintained, or contributed to, by the Company or any of the
Company Subsidiaries for the benefit of any employee or former employee,
independent contractor, officer or director of the Company or any ERISA
Affiliate of the Company or for which the Company or any of the Company
Subsidiaries has any liability, contingent or otherwise (each, a "Company
Employee Plan"). The Company has provided or made available to Purchaser copies
of each Company Benefit Plan, including without limitation (to the extent
applicable) all plan and trust documents, the governmental filings for the
immediately preceding two years (including any financial statements and
accountant opinions), summary plan descriptions, the actuarial reports for the
most recent two years for each of the preceding two years, and the most recent
IRS determination letter. Each Company Benefit Plan (other than any
Multiemployer Plan) has been operated in all material respects in compliance
with its terms and applicable law, including without limitation ERISA and the
Code. Each Company Benefit Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and each trust established under or in
connection with any Company Benefit Plan is qualified under Section 501(a) of
the Code.
(b) Except as set forth in Section 4.14(b) of the Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries is a party to
any oral or written (i) agreement with any executive officer of the Company (A)
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company or any of
the Company Subsidiaries of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee or (C) providing severance benefits or other benefits after the
termination of employment of such executive officer; or (ii) agreement or plan
binding the Company or any of the Company Subsidiaries, including any stock
option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan or severance benefit plan, any of the benefits of which shall be
increased, or the vesting of the benefits of which shall be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which shall be calculated on the basis of any of
the transactions contemplated by this Agreement. As used in this Agreement, the
term "executive officer" shall have the meaning set forth in Rule 3b-7 of the
Exchange Act.
(c) For purposes of this Agreement, "Employee Benefit Plans" means
any written or oral, severance, bonus, change-in-control, profit sharing,
compensation, termination, stock option, stock appreciation right, restricted
stock, phantom stock, performance unit, pension, retirement, deferred
compensation, fringe benefit, welfare or other employee benefit agreement, trust
fund or other similar plan, program, practice or arrangement.
(d) For purposes of this Agreement, "ERISA Affiliate" means, with
respect to any entity, trade or business, any other entity, trade or business
that is a member of a group described in Section 414(b), (c), (m) or (o) of the
Code, or Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the first
entity, trade or business pursuant to ERISA Section 4001(a)(14), at any time.
-20-
(e) For purposes of this Agreement, "ERISA" means the Employee
Retirement Income Security Act of 1974 and the related regulations thereof, as
amended as of the date hereof.
(f) Except as set forth in Section 4.14(f) of the Disclosure
Schedule, none of the Company, any Company Subsidiary or any ERISA Affiliate has
incurred within the past six (6) years, or is reasonably expected to incur, any
material liability under Title IV of ERISA that has not been satisfied in full,
other than liability for premiums due the Pension Benefit Guaranty Corporation
("PBGC"). The PBGC has not instituted proceedings to terminate any of the
Company Benefit Plans (except "multiemployer plans", as such term is defined in
Section 3(37) of ERISA) and no condition exists that presents a material risk
that such proceedings will be instituted. Other than as set forth in Section
4.14(f) of the Disclosure Schedule, with respect to each of the Company Benefit
Plans that is an employee pension benefit plan (as defined in Section 3(2) of
ERISA, other than multi-employer plans) subject to Title IV of ERISA, the
present value of accrued benefits under each such Company Benefit Plan, based
upon actuarial assumptions used for funding purposes in the most recent
actuarial report prepared by such Company Benefit Plan's actuary with respect to
such Company Benefit Plan, did not, as of its latest valuation date, exceed the
then-current value of the assets of such Company Benefit Plan allocable to such
accrued benefits.
(g) Except as set forth in Section 4.14(g), neither the Company nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any material
liability that has not been satisfied in full in connection with any Company
Benefit Plan that is a multiemployer plan on account of a "complete withdrawal"
or "partial withdrawal" as such terms are respectively defined in sections 4203
and 4205 of ERISA. In the event of any complete or partial withdrawal from any
multiemployer plan in which the Company or any ERISA Affiliate participates
determined as of the Closing Date, there would be no withdrawal liability
determined under Title IV of ERISA.
(h) Except as set forth in Section 4.14(h), no Company Benefit Plan
or employment or similar agreement to which the Company or any of the Company
Subsidiaries are a party, provides medical, life insurance or other welfare
benefits (whether or not insured), with respect to current or former employees
for periods extending beyond their retirement or other termination of
employment, other than as mandated by applicable law. A true, complete and
correct list of all persons who are eligible to receive retiree medical or death
benefits under any Company Benefit Plan is included in Section 4.14(h) of the
Disclosure Schedule (other than health care continuation coverage described in
Section 4980B of the Code), and, other than as set forth therein, there is no
other person(s) who is or may become eligible to receive retiree medical or
death benefits under any such plan.
(i) Except as set forth in Section 4.14(i) of the Disclosure
Schedule, no Company Benefit Plan, any trusts created thereunder or any trustee
or administrator thereof, has engaged in (i) a nonexempt "prohibited
transaction" (as such term is defined in section 406 of ERISA or section 4975 of
the Code) that would reasonably be expected to subject the Company or any
Company Subsidiary to any material tax or penalty on prohibited transactions
imposed by such section 4975 of the Code or section 502(i) of ERISA, or (ii) any
transaction that would reasonably be expected to give rise to a material
liability to any member of the Company Group
-21-
under section 4976 of the Code or section 409 of ERISA. The Company and each
ERISA Affiliate has complied with all its obligations under Section 4980B of the
Code in all material respects. Except as disclosed on Section 4.14(i) of the
Disclosure Schedule, there are no pending or, to the Company's Knowledge,
threatened claims involving the Company Benefit Plans (other than routine claims
for benefits).
(j) All premium payments, employer contributions, and employee
deferrals with respect to any Company Benefit Plan have been timely paid or
contributed as required under the terms of each such Company Benefit Plan and
may be required by law, and all accruals are appropriately reflected on the
financial statements of the Company in accordance with generally accepted
accounting principles.
4.15 Compliance With Laws. Except as set forth in Section 4.15 of
the Disclosure Schedule, the Company and each of the Company Subsidiaries have
complied with in all material respects, are not in material violation of, and
have not received any notice alleging any material violation with respect to,
any applicable provisions of any foreign, federal, state or local statute, law
or regulation applicable to the conduct of their businesses or the ownership or
operation of their properties or assets, in each case taken together as a whole.
4.16 Permits. The Company and each of the Company Subsidiaries
possess, and have been and are in material compliance with all permits, licenses
and franchises necessary for the conduct of their businesses and each such
permit, license and franchise is in full force and effect (the "Company
Permits").
4.17 Labor Matters. Except as set forth in Section 4.17 of the
Disclosure Schedule, neither the Company nor any of the Company Subsidiaries is
a party to or otherwise bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor organization.
There is no material pending or, to the Company's Knowledge, threatened labor
strike, or dispute, walkout, work stoppage, slow-down, lockout or organizational
effort involving employees of the Company or any of the Company Subsidiaries.
Except as disclosed in Section 4.17 of the Disclosure Schedule, no collective
bargaining agreement of the Company or any Company Subsidiary restricts the
Company or any Company Subsidiary from relocating, closing or subcontracting any
of its employees or operations. There are no material controversies, disputes or
claims pending or, to the Knowledge of the Company, threatened between the
Company or any Company Subsidiary on the one hand, and any current or former
director, officer, employee, agent or independent contractor (or representative
thereof) on the other, and, to the Knowledge of the Company, there is no basis
for the Company initiating any such dispute or claim against any such Person.
4.18 Insurance. Section 4.18 of the Disclosure Schedule lists the
material insurance policies held by the Company and the Company Subsidiaries
(collectively, the "Insurance Policies"). Each Insurance Policy is in full force
and effect, and all premiums due thereon have been paid in full; none of the
Insurance Policies shall terminate or lapse by reason of the transactions
contemplated by this Agreement; each of the Company and the Company Subsidiaries
has complied in all material respects with the provisions of each Insurance
Policy under which it is the insured party; no insurer under any Insurance
Policy has cancelled or generally disclaimed liability for claims under any such
policy or indicated in writing any intent
-22-
to do so or not to renew any such policy; and, to the Company's Knowledge, all
material claims (as defined by each policy) under the Insurance Policies have
been filed in a timely fashion and are fully insured.
4.19 Suppliers. No supplier of the Company and the Company
Subsidiaries that is material to the Company and the Company Subsidiaries, taken
as a whole, has indicated in writing to the Company or any of the Company
Subsidiaries that it intends to stop, materially decrease the rate of, or
materially alter the pricing, terms or method of, supplying products or services
to, or otherwise doing business with, the Company and the Company Subsidiaries
and, to the Company's Knowledge, the Company has not received notice that any
such suppliers intend to stop, materially decrease the rate of, or materially
alter the pricing, terms or method of supplying products or services to, or
otherwise doing business with, the Company and the Company Subsidiaries as a
result of the consummation of the transactions contemplated by this Agreement.
4.20 Debt. Neither the Company nor the Company Subsidiaries have any
liabilities in respect of Debt except as set forth on Section 4.20 of the
Disclosure Schedule or as set forth on the face of the balance sheet included in
the Most Recent 10-K. For each item of Debt, Section 4.20 of the Disclosure
Schedule correctly sets forth the debtor, the principal amount of the Debt as of
the date of this Agreement, the creditor, the maturity date, and the collateral,
if any, securing the Debt. Neither the Company nor the Company Subsidiaries have
any liability in respect of a guarantee of any liability of any other Person
(other than the Company or a Company Subsidiary). For purposes of this
Agreement, "Debt" means all obligations (including all obligations in respect of
principal, accrued interest, penalties, fees and premiums) (a) for borrowed
money (including overdraft facilities), (b) evidenced by notes, bonds,
debentures or similar contractual obligations, (c) for the deferred purchase
price of property, goods or services (other than trade payables or accruals
incurred in the ordinary course of business), (d) under capital leases (in
accordance with GAAP), (e) in respect of letters of credit and bankers'
acceptances, (f) for contractual obligations relating to interest rate
protection, swap agreements and collar agreements and (g) in the nature of
guarantees of the obligations described in clauses (a) through (f) above of any
other Person.
4.21 Assets. Each of the Company and the Company Subsidiaries has
sole and exclusive, good and marketable title to, or, in the case of property
held under a lease or other contractual obligation, a sole and exclusive,
enforceable leasehold interest in, or right to use, all of its properties,
rights and assets, whether real or personal and whether tangible or intangible,
including all assets reflected on the face of the balance sheet included in the
Most Recent 10-K or acquired after the date of such balance sheet (except for
such assets which have been sold or otherwise disposed of since such date in the
ordinary course of business) (collectively, the "Assets"). Except as disclosed
on Section 4.21 of the Disclosure Schedule, none of the Assets is subject to any
liens or other encumbrances, other than Permitted Liens. The Assets comprise all
of the assets, properties and rights of every type and description, whether real
or personal, tangible or intangible, used or necessary to the conduct of the
Business as it is presently conducted. For purposes of this Agreement,
"Permitted Liens" shall mean (a) statutory liens for current Taxes, special
assessments or other governmental charges not yet due and payable, (b)
mechanics', materialmen's, carriers', workers', repairers' and similar statutory
liens arising or
-23-
incurred in the ordinary course of business and (c) zoning, entitlement,
building and other land use regulations imposed by governmental agencies.
4.22 Inventories. The inventory of the Company and the Company
Subsidiaries consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods, all of which is, in all material
respects, merchantable and fit or suitable and usable to the production or
completion of merchantable products for sale in the ordinary course of business,
and none of which is slow-moving, obsolete, below standard quality, damaged, or
defective in any material respects, subject only to the reserve for inventory
writedown set forth on the face of the balance sheet included in the Most Recent
10-K (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with GAAP and the past custom and
practice of the Company and its Subsidiaries. Since the date of the balance
sheet included in the Most Recent 10-K, no material amount of inventory has been
sold or disposed of except through sales in the ordinary course of business.
4.23 Accounts Receivable. All accounts and notes receivable
reflected on the balance sheet included in the Most Recent 10-K and all accounts
and notes receivable arising subsequent to the date of the balance sheet
included in the Most Recent 10-K and on or prior to the Closing Date, have
arisen in the ordinary course of business, represent legal, valid, binding and
enforceable obligations to the Company or a Company Subsidiary, as applicable,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting creditor's rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief and other equitable remedies, and, to the
Company's Knowledge, will not be subject to any contests, claims, counterclaims
or setoffs.
4.24 Customers. Section 4.24 of the Disclosure Schedule sets forth a
complete and accurate list of each customer of the Company or the Company
Subsidiaries with more than $500,000 of aggregate billings during the most
recently ended fiscal year, indicating any existing contractual obligations with
each such Customer. The relationships of the Company and the Company
Subsidiaries with the customers required to be listed on Section 4.24 of the
Disclosure Schedule are good commercial working relationships and none of such
customers has canceled, terminated or otherwise materially altered (including
any material reduction in the rate or amount of purchases or material decrease
in the prices paid) or notified the Company and the Company Subsidiaries of any
intention to do any of the foregoing.
4.25 Affiliate Transactions. Except for the matters disclosed in
Section 4.25 of the Disclosure Schedule, no Stockholder or any affiliate of any
Stockholder is a consultant, competitor, creditor, debtor, customer,
distributor, supplier or vendor of, or is a party to any oral or written
contract or agreement with, the Company or any Company Subsidiary, or holds a
direct or indirect interest in any such entity. Except as disclosed in Section
4.25 of the Disclosure Schedule, no Stockholder or any affiliate of any
Stockholder owns any direct or indirect interest in any asset used in, or
necessary to, the business conducted by the Company and the Company
Subsidiaries.
4.26 Brokers. Except for Deutsche Bank Securities, Inc. and Lane
Berry & Co. International, no agent, broker, Person or firm acting on behalf of
the Company is or will be
-24-
entitled to any advisory commission or broker's or finder's fee from any of the
Parties hereto in connection with any of the transactions contemplated herein.
4.27 Exclusivity of Representations and Warranties. The
representations and warranties made by the Company in this Agreement are the
exclusive representations and warranties made by the Company. The Company hereby
disclaims any other express or implied representations or warranties.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE BUYER AND TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and
warrants to the Company as follows:
5.1 Organization. Each of the Buyer and the Transitory Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as now being conducted, and is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the character of the
property owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary.
5.2 Capitalization. The authorized capital stock of the Transitory
Subsidiary consists of 1,000 shares of the Transitory Subsidiary Common Stock,
100 shares of which are outstanding and owned by the Buyer and are duly
authorized, validly issued, fully paid and nonassessable.
5.3 Authorization; Validity of Agreement; Necessary Action. Each of
the Buyer and the Transitory Subsidiary has full corporate power and authority
to execute and deliver this Agreement, and to consummate the transactions
contemplated hereby. The execution, delivery and performance by each of the
Buyer and the Transitory Subsidiary of this Agreement and the consummation of
the Merger and of the transactions contemplated hereby have been duly authorized
by the Board of Directors of each of the Buyer and the Transitory Subsidiary,
and by the Buyer as the sole stockholder of the Transitory Subsidiary, and no
other corporate action on the part of the Buyer or the Transitory Subsidiary is
necessary to authorize the execution and delivery by the Buyer and the
Transitory Subsidiary of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Buyer and the Transitory Subsidiary, and, assuming due and valid authorization,
execution and delivery hereof by each of the other Parties hereto, is a valid
and binding obligation of each of the Buyer and the Transitory Subsidiary,
enforceable against each of them in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting creditor's rights generally, and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief and other equitable remedies.
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5.4 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under the HSR
Act, neither the execution, delivery or performance of this Agreement by each of
the Buyer and the Transitory Subsidiary nor the consummation by each of the
Buyer and the Transitory Subsidiary of the transactions contemplated hereby, nor
compliance by each of the Buyer and the Transitory Subsidiary with any of the
provisions hereof, will (i) conflict with or result in any breach of any
provision of the certificate of incorporation or the by-laws of either the Buyer
or the Transitory Subsidiary, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (iii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which either the Buyer or the Transitory Subsidiary
is a party or by which it or any of its properties or assets may be bound, or
(iv) violate in any respect any order, writ, injunction, decree, statute, rule
or regulation applicable to either the Buyer or the Transitory Subsidiary or any
of their properties or assets.
5.5 Litigation. Neither the Buyer nor the Transitory Subsidiary is
subject to any action, suit, proceeding, claim, arbitration or investigation
pending or threatened against or affecting the Buyer or the Transitory
Subsidiary, or any judgment, order or decree outstanding against the Buyer or
the Transitory Subsidiary that would affect the ability of the Buyer or the
Transitory Subsidiary to consummate the transactions contemplated hereby.
5.6 Financing Resources. Attached hereto as Exhibit E are true and
correct copies of letters (the "Financing Letters") from the Buyer's lenders,
pursuant to which the Buyer's lenders have agreed to finance (the "Financing") a
portion of the aggregate purchase price pursuant to Article II hereof as
described and subject to the conditions and limitations set forth in such
letters. Such letters are in full force and effect. Such letters do not contain
any obligations to be performed by the Buyer prior to the date hereof which the
Buyer has not performed.
5.7 Brokers. No agent, broker, Person or firm acting on behalf of
the Buyer or the Transitory Subsidiary is or will be entitled to any advisory
commission or broker's or finder's fee from any of the Parties hereto in
connection with any of the transactions contemplated herein.
ARTICLE VI
COVENANTS; ADDITIONAL AGREEMENTS
6.1 Interim Operations of the Company. Except as expressly provided
herein or as consented to in writing by the Buyer, from and after the date of
this Agreement until the earlier of the termination of this Agreement in
accordance with its terms or the Closing, the Company shall, and shall cause
each of the Company Subsidiaries to, act and carry on its business in the
ordinary course of business consistent with the past customs and practices of
the Company and the Company Subsidiaries (including past practice with respect
to quantity, amount, magnitude and frequency, standard employment and payroll
policies and past practice with respect to management of working capital), and
use commercially reasonable efforts, consistent with past practices, to maintain
and preserve its and each Company Subsidiary's
-26-
business organization, assets and properties, continue funding the operations
and capital expenditures of the Company and the Company Subsidiaries in
accordance with the cumulative capital expenditures schedule attached as Exhibit
F hereto (with an appropriate proportional adjustment for the month in which the
Closing takes place reflecting (on a straight-line basis) the number of days in
such month prior to Closing), keep available the services of its present
officers and key employees and preserve its business relationships with material
suppliers and others having material business dealings with it; provided, that,
the Company shall be permitted to consummate the C-B Closing (as defined in
Section 2.7) in accordance with the C-B Agreement (as in effect on September 29,
2003) (provided that the C-B Agreement shall not be amended, and no provision
thereof waived, without the prior written consent of the Buyer (not to be
unreasonably withheld). Without limiting the generality of the foregoing, except
as expressly set forth in Section 6.1 of the Disclosure Schedule, from and after
the date of this Agreement until the earlier of the termination of this
Agreement in accordance with its terms or the Closing, the Company shall not,
and shall not permit any of the Company Subsidiaries to, directly or indirectly,
do any of the following without the prior written consent of the Buyer: (i)
amend its Certificate of Incorporation or By-laws or similar organizational
documents; (ii) split, combine or reclassify any of its capital stock; (iii)
issue, sell, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire any shares of, capital stock of any
class of the Company or any Company Subsidiary (provided, that, the Company
shall be permitted to issue shares of Common Stock upon (1) the exercise of
options outstanding under the Option Plan as of the date hereof and (2) the
exercise of any Warrants, and provided further that upon any such exercise and
issuance the parties shall promptly amend Section 4.2(a) of the Disclosure
Schedule to reflect the issuance of such shares and the elimination of such
options or Warrants, as applicable); (iv) redeem, purchase or otherwise acquire
any outstanding shares of capital stock of the Company or any Company
Subsidiary, other than pursuant to the terms of the Option Plan, any option
agreement thereunder or any employment or similar agreement; (v) declare or pay
any cash dividend or make any other cash distribution to stockholders of the
Company, other than cash dividends paid from and after the date of this
Agreement to the Closing Date in an aggregate amount not to exceed the Maximum
Cash Amount set forth opposite the week in which the Closing occurs on Exhibit
D; provided, however, that any excess of the Minimum Cash Amount set forth
opposite the week in which the Closing occurs over the aggregate amount of cash
dividends paid from and after the date of this Agreement to the Closing Date
shall be the "Cash Shortfall" for purposes of Section 2.6(b); (vi) permit to
occur any transaction with, or for the benefit of, any Stockholder or any
affiliate of any Stockholder (other than (1) payments of wages and salaries made
to officers, directors and employees in the ordinary course of business, (2)
ordinary course payments under the Management Agreement as in effect on the date
hereof and (3) regularly scheduled mandatory interest payments on the 11-5/8%
Notes and the 11% CBI Notes); (vii) permit to occur any increase in the
compensation payable or paid, whether conditionally or otherwise, to, or any
amendment, modification or waiver of any provision of, or supplement to, in any
employment, management or similar agreement with, (1) any employee, consultant
or agent other than in the ordinary course of business or (2) any director or
officer or any Stockholder or any affiliate of any Stockholder (provided, that,
the Company shall be permitted to establish the Success Bonus Plan, all amounts
owing under which shall be paid and which shall be terminated at the Closing as
contemplated by Sections 2.4(a) and 7.2(p)); or (viii) agree in writing to take
any of the foregoing actions.
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6.2 Confidentiality. The Parties acknowledge that the Buyer and the
Company have previously executed a confidentiality agreement, dated as of
September 11, 2003 (the "Confidentiality Agreement"), which Confidentiality
Agreement shall continue in full force and effect in accordance with its terms,
except as expressly modified herein. Each Stockholder hereby agrees with the
Buyer that such Stockholder and its representatives shall not, and that such
Stockholder shall cause its affiliates not to, at any time on or after the
Closing Date, directly or indirectly, without the prior written consent of the
Buyer, disclose or use, in any way harmful to the Buyer or the Company, or
otherwise contrary to the interests of the Buyer or the Company, any
confidential or proprietary information involving or relating to the Business or
the Company; provided, however, that the information subject to the foregoing
provisions of this sentence shall not include any information generally
available to, or known by, the public (other than as a result of disclosure in
violation hereof) or any information otherwise known on a non-confidential basis
by any Stockholder or its affiliates; and provided, further, that the provisions
of this Section 6.2 shall not prohibit any retention of records or disclosure
(a) required by any applicable legal requirement so long as reasonable prior
notice is given of such disclosure and a reasonable opportunity is afforded to
contest the same or (b) made in connection with the enforcement of any right or
remedy relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the foregoing, each Party (and each employee,
representative, or other agent of each of the Parties) may disclose to any and
all Persons, without limitation of any kind, the tax treatment and tax structure
of the Merger and all materials of any kind (including opinions or other tax
analyses) that are provided to such Party relating to such tax treatment and tax
structure, all as contemplated by Treasury Regulation Section
1.6011-4(b)(3)(iii); provided, however, disclosure of the tax treatment and tax
structure and material referred to above shall be permitted as provided above
only upon the earlier to occur of (1) the date of the public announcement of
discussions relating to the Merger, (2) the date of the public announcement of
the Merger, or (3) the date of the execution of an agreement (with or without
conditions) to enter into the Merger. The preceding disclosure authorization
shall not affect, or prevent any Party from asserting any attorney-client
privilege, work-product doctrine, or other applicable privilege or defense
against disclosure of such information. For this purpose, "tax structure" is
limited to any facts relevant to the U.S. federal income tax treatment of the
Merger and does not include information relating to the identity of the Parties.
6.3 Access to Information. The Company shall (and shall cause each
of the Company Subsidiaries to) afford to the Buyer's officers, employees,
accountants, counsel, prospective providers of the Financing and other
representatives reasonable access, upon reasonable advance notice, during normal
business hours during the period prior to the Closing, to all of its properties,
books, contracts, commitments, personnel and records and, during such period,
the Company shall (and shall cause each of the Company Subsidiaries to) furnish
to the Buyer all other information concerning its business, properties, assets
and personnel as the Buyer may reasonably request; provided, that, the Buyer
agrees and acknowledges that its due diligence investigation relating to the
environmental condition of the real property owned or occupied by the Company
and the Company Subsidiaries ("Buyer's Environmental Due Diligence") shall be
limited to the scope of work set forth on Exhibit G hereto prior to the Closing.
The Buyer will hold any such information that is nonpublic in confidence in
accordance with the Confidentiality Agreement. Except as provided for in Section
8.1(d), no information or knowledge obtained in any investigation pursuant to
this Section 6.3 or otherwise shall affect or be deemed to modify
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any representation or warranty contained in this Agreement or the conditions to
the obligations of the Parties to consummate the Merger. The Company will be
entitled to review copies of the reports (and any amendment or supplement
thereto) prepared for the Buyer pursuant to paragraph 2 of Exhibit G (the "Buyer
Environmental Reports") no later than January 23, 2004.
6.4 Filings; Third Party Consents.
(a) Each of the Parties hereto shall take all other reasonable
actions necessary to comply promptly with all legal requirements that may be
imposed on it with respect to this Agreement and the transactions contemplated
hereby (which actions shall include, without limitation, furnishing all
information required under the HSR Act and in connection with approvals of or
filings with any other Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with this
Agreement and the transactions contemplated hereby.
(b) The Company shall use commercially reasonable efforts to obtain
any consent or approval of any third party required at or prior to the Closing
in connection with this Agreement and the transactions contemplated hereby, each
of which is listed on Section 4.4 of the Disclosure Schedule; provided that the
Company shall not be required, in order to obtain any such consent or approval
of a third party, to pay to such third party any fees or amounts other than as
provided in any existing contractual arrangements with such third parties.
(c) The fees associated with the filing required under the HSR Act
in respect of the transaction contemplated hereunder shall be borne equally by
the Stockholders on the one hand (which fees, with respect to the Stockholders,
shall be deemed to be Transaction Expenses), and the Buyer on the other hand.
6.5 Public Disclosure. Except as may be required by law, (i) prior
to the Closing, any press release or other public statement concerning the
Merger, this Agreement or any transaction contemplated hereby shall be issued
only in such form as shall be mutually agreed upon by the Company and the Buyer
and (ii) following the Closing, the Stockholders' Representative and the Buyer,
shall each use its commercially reasonable efforts to consult with the other
Party before issuing any other press release or otherwise making any public
statement with respect to the Merger or this Agreement or any other transaction
contemplated hereby and shall not issue any such press release or make any such
public statement prior to using such efforts.
6.6 Directors' and Officers' Insurance and Indemnification.
(a) Subject to Section 9.6, after the Effective Time, the Surviving
Corporation (or any successor to the Surviving Corporation) shall indemnify,
defend and hold harmless each present and former officer and director of the
Company and the Company Subsidiaries (each, a "D& O Indemnified Party") against
all losses, claims, damages, liabilities, fees and expenses (including
reasonable fees and disbursements of counsel) and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided, that, any such
settlement is effected with the written consent of the Surviving Corporation,
such consent not to be unreasonably withheld)
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incurred by such D&O Indemnified Party by reason of the fact that such person
was an officer or director of the Company or any Company Subsidiary at or prior
to the Effective Time to the full extent permitted under the laws of the State
of Delaware, such right to include, to the extent so permitted under the laws of
the State of Delaware, the advancement of expenses incurred in the investigation
or defense of any action or suit (including any pending or threatened action or
suit); provided that, nothing herein shall limit any other indemnification
rights of any present or former directors or officers of the Company or any of
the Company Subsidiaries, whether pursuant to any organizational or governing
documents or any agreement or otherwise.
(b) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance covering claims arising from facts
or events that occurred at or prior to the Effective Time ("D&O Insurance"), for
a period of not less than six years after the Effective Date; provided, that,
the Surviving Corporation may substitute therefor policies of substantially
similar coverage and amounts containing terms no less favorable to such former
directors or officers; provided further, that if the existing D&O Insurance
expires, is terminated or cancelled during such period, the Surviving
Corporation will obtain substantially similar D&O Insurance (and in any event no
less favorable to such former directors and officers) for the remainder of such
period.
(c) To the extent permitted by applicable law, the Surviving
Corporation shall cause the Certificate of Incorporation and By-laws of the
Surviving Corporation and any Company Subsidiaries which were in existence as of
the Closing (the "Covered Subsidiaries") to contain provisions with respect to
advancement of expenses, indemnification and exculpation from liability of
individuals who on or prior to the Effective Time were directors or officers of
the Company or any Covered Subsidiary at least as favorable to such persons as
those set forth in the Certificate of Incorporation and By-laws of the Company
or such Covered Subsidiary, as applicable, on the date of this Agreement, and
shall cause such provisions not to be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of such persons.
(d) In the event that the Surviving Corporation, any Covered
Subsidiary or any of their respective successors or assigns (i) consolidates
with or merges into any other Person and shall not be the continuing or
surviving corporation or entity in such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any Person,
then, and in each case, the Surviving Corporation shall cause proper provision
to be made so that the successors and assigns of the Surviving Corporation or
such Covered Subsidiary, as applicable, honor the indemnification obligations
set forth in this Section 6.6.
(e) The obligations of the Surviving Corporation (with respect to
itself and the Covered Subsidiaries) as of the Closing Date under this Section
6.6 shall not be terminated, modified or assigned in such a manner as to
adversely affect any current or former director or officer to whom this Section
6.6 applies without the consent of such affected director or officer (it being
expressly agreed that the directors and officers to whom this Section 6.6
applies shall be third-party beneficiaries of this Section 6.6).
6.7 Resignations. The Company shall cause to be delivered to the
Buyer on the Closing Date such resignations of members of the Company Board and
officers of the
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Company and the Company Subsidiaries as set forth on Section 6.7 of the
Disclosure Schedule or as specified in writing by the Buyer at least two
Business Days prior to the Closing, such resignations to be effective
concurrently with the Closing.
6.8 Additional Actions. Subject to the terms and conditions herein
provided (including, without limitation, Section 6.4(c) hereof), each of the
Parties hereto shall use all commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable consistent with applicable laws and regulations, (1) to
remove any injunctions or other impediments or delays, legal or otherwise, to
the Merger and (2) to consummate and make effective the Merger and the other
transactions contemplated by this Agreement, including without limitation
satisfaction (but not waiver) of the closing conditions set forth in Article VII
hereof and cooperation in connection with the satisfaction of the conditions to
financing specified in the Financing Letters. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the stockholders and the proper officers and
directors of the Surviving Corporation, as the case may be, shall use all
reasonable efforts to take, or cause to be taken, all such necessary actions.
6.9 Taxes. If, for any Tax purpose, the taxable period of the
Company or any Company Subsidiary does not end on the Closing Date (a "Straddle
Period"), the Buyer shall prepare and file the Tax Return relating to such
Straddle Period on a basis that is consistent with the manner in which the
Company or such Company Subsidiary filed Tax Returns in respect of such Tax for
prior taxable periods. After the Closing Date, the Buyer, the Surviving
Corporation and each subsidiary of the Surviving Corporation shall make
available to the Stockholders all information, records and other documents
reasonably requested by the Stockholders relating to the Surviving Corporation
or any subsidiary of the Surviving Corporation for all periods prior to or
including the Closing Date and shall preserve such information, records and
other documents until the expiration of the applicable statute of limitations or
extensions thereof.
6.10 Exclusivity. From the date of this Agreement until the earlier
of Closing or termination of this Agreement, neither the Stockholders nor the
Company shall (and the Company and Stockholders shall not permit their
respective affiliates or any of their or their affiliates' representatives to)
directly or indirectly: (a) solicit, initiate, or encourage the submission of
any proposal or offer from any Person relating to, or enter into any agreement
or consummate any transaction relating to, the acquisition of any equity
interests in the Company or any Company Subsidiary (other than the exercise of
Options and Warrants existing on the date hereof as permitted pursuant to
Section 6.1) or any merger, recapitalization, share exchange, sale of
substantial assets (other than sales of inventory in the ordinary course of
business) or any similar transaction or alternative to the transaction
contemplated by this Agreement involving the Company or any Company Subsidiary
or (b) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Stockholders shall vote their Shares in favor of any such
acquisition structured as a merger, consolidation, share exchange or otherwise.
The Company and the Stockholders shall notify the Buyer promptly if any Person
makes any proposal, offer, inquiry or contact with respect to any of the
foregoing (whether solicited or unsolicited).
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6.11 Stockholders' Release. Effective as of the Closing, each
Stockholder hereby releases, remises and forever discharges any and all rights
and claims that it has had, now has or might now have against the Company or any
of the Company Subsidiaries except for (a) rights and claims arising from or in
connection with this Agreement and (b) rights and claims arising from or in
connection with claims asserted against such Stockholder by third parties for
which the Buyer Indemnitees are not entitled to indemnification by such
Stockholder pursuant to Section 9.2.
6.12 Notice of Developments. Each Party will give prompt written
notice to the other Parties of any development causing or constituting a breach
of any of its own representations, warranties or covenants contained herein.
Except as contemplated by Sections 8.1(d) and 8.1(e), no such disclosure,
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentations, breach of warranty, or breach of
covenant.
6.13 Nonsolicitation. For a period of three years from and after the
Closing Date, each Stockholder agrees that it will not and will cause its
affiliates not to recruit, offer employment, employ, engage as a consultant,
lure or entice away, or in any other manner persuade or attempt to persuade, any
person who is an employee of any of the Company or any of the Company
Subsidiaries to leave the employ of the Company or any of the Company
Subsidiaries; provided, however, that the provisions of this Section 6.13 shall
cease to apply to any employee whose employment with the Company and the Company
Subsidiaries is terminated by the Company or any Company Subsidiary after the
Closing.
6.14 Tender Offer.
(a) As soon as practicable (but not prior to January 5, 2004), the
Stockholders will cause the Company to (i) commence a tender offer and consent
solicitation (the "Tender Offer") pursuant to the applicable rules of the
Exchange Act for all outstanding 11-5/8% Notes, which shall be conducted in
accordance with customary debt tender and exit consent procedures in form and
substance reasonably satisfactory to the Buyer and the Company, (ii) keep such
Tender Offer open for at least twenty Business Days prior to the Closing Date,
(iii) provide in such Tender Offer for a "make-whole" premium equal to (x)
105.813% of the principal amount of the Notes plus all scheduled interest
payments due on the Notes from the date specified for the closing of the Tender
Offer to January 1, 2005 discounted a rate of interest equal to the weekly
average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year plus 50 basis points over (y) the principal amount
of the Notes, (iv) condition receipt of the Tender Offer consideration by each
holder on the execution by the holder receiving such consideration of a consent
to an amendment to the 11-5/8% Note Indenture in form and substance reasonably
satisfactory to the Buyer and the Company and (v) use commercially reasonable
efforts to consummate the Tender Offer on the Closing Date on the terms set
forth above. The Company and the Buyer will cooperate with one another in
connection with the preparation of all filings, mailings or other submissions to
be made in connection with the Tender Offer. The Stockholders shall bear the
cost of the premium to be paid in clause (iii) above and any costs and expenses
related to the Tender Offer; provided, that the Stockholders shall in no event
be required to pay a "make-whole" premium in excess of the amount set forth in
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clause (iii) above (and the failure to agree to do so shall not be a breach of
any covenant or agreement of the Company or any of the Stockholders).
(b) If at any time prior to the Closing any information relating to
the Company or any Company Subsidiary, or any of its affiliates, officers,
directors or employees should be discovered by the Company or any Company
Subsidiary that should be set forth in an amendment or supplement to the
documents filed or mailed in respect of the Tender Offer so that such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading, the
Company will promptly notify the Buyer and, to the extent required by law, rules
or regulations, an appropriate amendment or supplement describing such
information will promptly be prepared and, if required, filed with the SEC
and/or disseminated to the holders of the 11-5/8% Notes.
6.15 Maintenance of Net Worth. Until the earlier of (i) December 31,
2005 and (ii) the final adjudication, settlement, satisfaction, waiver or
release of all claims initiated pursuant to Section 9.2(a) or 9.2(b) in
accordance with Section 9.2(d) prior to such date, neither Castle Harlan
Partners II, L.P. nor Castle Harlan Partners, III, L.P. shall make any
distribution (by redemption or otherwise) if, after giving effect to such
distribution, the aggregate net worth of Castle Harlan Partners II, L.P. and
Castle Harlan Partners, III, L.P. would be less than $30,000,000.
6.16 Original Signatories. Each of the Stockholders who have
executed this Agreement as of the date hereof (the "Original Signatories")
shall, on or prior to the Closing, use commercially reasonable efforts to cause
each other Person whose name appears on the signature pages hereto (other than
the Buyer and the Transitory Subsidiary) to execute and deliver a counterpart
signature page to this Agreement to the Buyer, and upon such execution and
delivery such Person shall become a Party to and be bound by this Agreement as a
Stockholder with effect from and after the date hereof. Notwithstanding the
foregoing, this Agreement shall be effective upon the execution and delivery of
this Agreement by the Buyer, the Transitory Subsidiary, the Company and the
Original Signatories.
ARTICLE VII
CONDITIONS TO EFFECT THE MERGER
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each Party to this Agreement to effect the Merger
shall be subject to the satisfaction or waiver at or prior to the Closing of
each of the following conditions:
(a) Governmental Approvals. Other than the filing of the Certificate
of Merger, all authorizations, consents, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any Governmental
Entity in connection with the Merger and the consummation of the other
transactions contemplated by this Agreement, shall have been filed, been
obtained or occurred, including any authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations or terminations of
waiting periods imposed or required by the HSR Act.
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(b) Illegality. There shall have been no action taken, or statute,
rule, regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Merger or the other transactions
contemplated by this Agreement by any Governmental Entity that prohibits or
makes illegal the consummation of the Merger or the other transactions
contemplated by this Agreement.
7.2 Conditions to the Buyer's and the Transitory Subsidiary's
Obligation to Effect the Merger. The obligation of the Buyer and the Transitory
Subsidiary to effect the Merger shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any and all of which may be
waived in whole or in part by the Buyer and the Transitory Subsidiary to the
extent permitted by applicable law:
(a) Representations and Warranties. The representations and
warranties of the Company and each Stockholder set forth in this Agreement and
in any document, instrument or certificate delivered hereunder (a) that are not
qualified by materiality or Material Adverse Effect shall be true and correct in
all material respects at and as of the Closing with the same force and effect as
if made at and as of the Closing and (b) that are qualified by materiality or
Material Adverse Effect shall be true and correct in all respects at and as of
the Closing with the same force and effect as if made at and as of the Closing,
in each case, other than representations and warranties that expressly speak
only as of a specific date or time, which shall be true and correct in all
material respects, unless qualified by materiality or Material Adverse Effect,
in which case they will be true and correct in all respects, as of such
specified date or time. The Company shall have delivered to the Buyer a
certificate signed on behalf of the Company by the Chief Executive Officer of
the Company to such effect with respect to the Company, and each Stockholder
shall have delivered to the Buyer a certificate signed by or on behalf of such
Stockholder to such effect with respect to such Stockholder.
(b) Covenants. The Company and the Stockholders shall have performed
or complied in all material respects with all obligations, agreements or
covenants required to be performed under this Agreement at or prior to the
Closing. The Company shall have delivered to the Buyer a certificate signed on
behalf of the Company by the Chief Executive Officer of the Company to such
effect with respect to the Company, and each Stockholder shall have delivered to
the Buyer a certificate signed by or on behalf of such Stockholder to such
effect with respect to such Stockholder.
(c) Management Agreement. The Management Agreement, dated as of
March 30, 2001, among the Company, the Company Subsidiaries listed therein and
Castle Harlan, Inc. (the "Management Agreement "), shall have been terminated as
of the Closing.
(d) Financing. The Buyer will have obtained the proceeds of the
Financing on terms and conditions no less favorable to the Buyer than those
specified in the Commitment Letters.
(e) Tender Offer for 11-5/8% Notes. The Company shall have received
the consent and tender of holders of at least two-thirds in aggregate principal
amount of the outstanding 11-5/8% Notes pursuant to the Tender Offer, and shall
have consummated the Tender Offer in accordance with the terms of Section 6.14.
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(f) Redemption of 11% CBI Notes. The Company shall have delivered to
the trustee for the 11% CBI Notes a notice of redemption reasonably satisfactory
in form and substance to the Buyer and the Company for all outstanding 11% CBI
Notes in accordance with Article III of the CBI Note Indenture concurrently with
the deposit by the Company with the trustee or the paying agent for the 11% CBI
Notes of the aggregate amount payable pursuant to Section 2.4(b)(y) hereof, and
no other restriction or impediment to the redemption of all such 11% CBI Notes
in accordance with the CBI Notes Indenture shall exist.
(g) Repayment of Debt. The Company and the Buyer shall have received
a letter from each holder of Debt indicated in Section 7.2(g) of the Disclosure
Schedule stating (a) the aggregate amount of such Debt outstanding as of the
Closing Date (including all prepayment premiums and penalties and fees and
expenses associated with prepayment), (b) that, if such aggregate amount so
identified is paid to such holder on the Closing Date, such Debt will be paid in
full (including all prepayment premiums and penalties and fees and expenses
associated with prepayment) and (c) that, if such aggregate amount so identified
is paid on the Closing Date, such holder will release any and all liens and
other encumbrances that it or its affiliates may have with respect to the
Company, any of the Company Subsidiaries or any of its assets and will take all
actions necessary to effectuate such release.
(h) CBI Preferred Shares. The Company will have delivered to the
Buyer certificates, duly endorsed (or accompanied by duly executed stock
transfer powers), evidencing the CBI Preferred Shares.
(i) Cancellation of Warrants and Options. The Company and the
holders of the Warrants and Options shall have taken all necessary actions to
terminate the Warrants and Options as of the Closing, and the Buyer shall have
received copies of each agreement required to be obtained pursuant to Section
2.2.
(j) Resignations. The Buyer will have received the resignations,
effective as of the Closing, of each director and officer of the Company, other
than those whom the Buyer will have specified in writing at least two Business
Days prior to the Closing.
(k) Absence of Litigation. No action will be pending or threatened
in writing (a) which would prevent consummation of any of the transactions
contemplated by this Agreement, (b) which would result in any of the
transactions contemplated by this Agreement being rescinded following
consummation, (c) which would limit or otherwise adversely affect the right of
the Buyer to own and control the Company, or to operate all or any material
portion of either the business or assets of the Company or of the business or
assets of the Buyer or any of its affiliates or (d) would compel the Buyer or
any of its affiliates to dispose of all or any material portion of either the
business or assets of the Company or the business or assets of the Buyer or any
of its affiliates.
(l) FIRPTA Tax Certificate. The Company will have delivered to the
Buyer a certification in such form as may be reasonably requested by the Buyer
conforming to the requirements of Treasury Regulations section 1.1445-2(c)(3)
and section 1.897-2(h).
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(m) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Buyer and its counsel, and they will have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.
(n) Legal Opinion. The Buyer will have received from Schulte Roth &
Zabel LLP, counsel to the Company and the Stockholders, a customary opinion with
respect to the transactions contemplated by this Agreement, which opinion shall
be in form and substance reasonably satisfactory to the Buyer. Such opinion
will, at the request of the Buyer, be confirmed to any provider of the
Financing.
(o) Estimated Closing Balance Sheet. The Buyer shall have received
the Estimated Closing Balance Sheet and Estimated Working Capital Statement
prepared and approved in accordance with Section 2.6.
(p) Success Bonus Plan. The Success Bonus Plan, to be entered into
prior to the Closing, (the "Success Bonus Plan"), shall have been terminated to
the Buyer's reasonable satisfaction, and all amounts payable thereunder shall
have been paid in full as Transaction Expenses in accordance with Section 2.4(a)
at the Closing.
(q) Stockholders. All of the Persons listed as Stockholders on the
signature pages to this Agreement and the Stockholders' Representative shall
have executed and delivered this Agreement to the Buyer, either on the date
hereof or pursuant to Section 6.16.
(r) Noncompetition Agreements. Each of David G. Fiore, Charlyn A.
Daughtery, Parke H. Davis and Donald A. Percenti shall be subject to
noncompetition obligations running in favor of the Company with effect from and
after the Closing no less favorable to the Company than the noncompetition
obligations to which such persons are subject as of the date of this Agreement.
(s) Consents, etc. All actions by (including any authorization,
consent or approval) or in respect of (including notice to), or filings with,
any Governmental Entity or other Person that are required to consummate the
transactions contemplated by this Agreement, as disclosed in Section 4.4 of the
Disclosure Schedule or as otherwise reasonably requested by the Buyer, will have
been obtained or made, in a manner reasonably satisfactory in form and substance
to the Buyer, and no such authorization, consent or approval will have been
revoked.
7.3 Conditions to the Company's and the Stockholders' Obligations to
Effect the Merger. The obligations of the Company and the Stockholders to effect
the Merger shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any and all of which may be waived in whole or
in part by the Company and the Stockholders' Representative, to the extent
permitted by applicable law:
(a) Representations and Warranties. The representations and
warranties of the Buyer and the Transitory Subsidiary set forth in this
Agreement shall be true when made and immediately prior to the Closing Date as
though made on or as of the Closing Date, except where any breach of a
representation or warranty would not, individually or in the aggregate,
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reasonably be expected to result in a Buyer Material Adverse Effect. Each of the
Buyer and the Transitory Subsidiary shall have delivered to the Company a
certificate, signed on behalf of it by its Chief Executive Officer, to such
effect. For purposes of this Agreement, "Buyer Material Adverse Effect" means
any material adverse change, event, circumstance, development or effect on the
ability of the Buyer or the Transitory Subsidiary, as the case may be, to
perform its obligations under this Agreement or otherwise in connection with the
transactions contemplated herein.
(b) Covenants. Each of the Buyer and the Transitory Subsidiary shall
have performed or complied in all material respects with all obligations,
agreements or covenants required to be performed by it under this Agreement at
or prior to the Closing. Each of the Buyer and the Transitory Subsidiary shall
have delivered to the Company and the Stockholders' Representative a
certificate, signed on behalf of it by its Chief Executive Officer, to such
effect.
(c) Consideration.
(i) Each Stockholder shall receive the Price Per Common Share
and/or Preferred Stock Cash Merger Consideration for its Shares, as the case may
be, as set forth in Article II hereof.
(ii) Each holder of a Warrant shall receive the Warrant
Consideration for such Warrant, as set forth in Article II hereof.
(iii) The holder of CBI Preferred Shares shall receive the CBI
Preferred Consideration.
(iv) Each Stockholder holding any 11% CBI Notes shall have
received the consideration payable in respect of such notes as set forth in
Section 2.4(b).
(d) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Company and its counsel, and the Company and the Stockholders will have
received all such counterpart original and certified or other copies of such
documents as they may reasonably request.
(e) Absence of Litigation. No action will be pending or threatened
in writing (a) which would prevent consummation of any of the transactions
contemplated by this Agreement, or (b) which would result in any of the
transactions contemplated by this Agreement being rescinded following
consummation.
(f) Legal Opinion. The Stockholders shall have received from Ropes &
Gray LLP, counsel to the Buyer, a customary opinion with respect to the
transactions contemplated by this Agreement, which opinion will be in form and
substance reasonably satisfactory to the Stockholders.
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ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, as follows:
(a) by mutual written consent of the Buyer and the Company;
(b) by either the Buyer or the Company, if the Merger shall not have
been consummated by April 2, 2004 (the "Termination Date");
(c) by either the Buyer or the Company, if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger;
(d) by the Buyer within ten days after receiving written notice from
the Company (a "Company Breach Notice") or any Stockholder (a "Stockholder
Breach Notice"), as the case may be, pursuant to Section 6.12 of (i) a breach
of, or inaccuracy in, any representation or warranty of the Company or such
Stockholder contained in this Agreement or (ii) a breach or violation by the
Company or such Stockholder of any of its or their respective covenants and
agreements contained in this Agreement if, in the case of either (i) or (ii),
such breach, inaccuracy or violation occurs or arises following the date of this
Agreement and such Company Breach Notice or Stockholder Breach Notice states,
with specific reference to this Section 8.1(d), that such breach, inaccuracy or
violation will give rise to a failure of a condition specified in Section 7.2(a)
or 7.2(b); provided, that, if the Buyer does not terminate this Agreement in
accordance with this Section 8.1(d) within ten days of its receipt of a Company
Breach Notice or Stockholder Breach Notice containing the foregoing statement,
the Disclosure Schedule shall be amended in the manner specified in the Company
Breach Notice or Stockholder Breach Notice, as the case may be, so as to include
specific disclosure of the events or circumstances giving rise to the breach,
inaccuracy or violation referenced in such Company Breach Notice or Stockholder
Breach Notice, as applicable, and the Stockholders will have no obligation to
indemnify the Buyer pursuant to Article IX for any Losses arising from the
breach, inaccuracy, or violation referenced in such Company Breach Notice or
Stockholder Breach Notice, as applicable, if the Closing occurs;
(e) by the Company within ten days after receiving written notice (a
"Buyer Breach Notice") from the Buyer pursuant to Section 6.12 of (i) a breach
of, or inaccuracy in, any representation or warranty of the Buyer or the
Transitory Subsidiary contained in this Agreement or (ii) a breach or violation
by the Buyer or the Transitory Subsidiary of any of its covenants and agreements
contained in this Agreement if, in the case of either (i) or (ii), such breach,
inaccuracy or violation occurs or arises following the date of this Agreement
and such Buyer Breach Notice states, with specific reference to this Section
8.1(e), that such breach, inaccuracy or violation will give rise to a failure of
a condition specified in Section 7.3(a) or 7.3(b); provided, that, if the
Company does not terminate this Agreement in accordance with this Section 8.1(e)
within ten days of its receipt of a Buyer Breach Notice containing the foregoing
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statement, the Buyer will have no obligation to indemnify the Stockholders
pursuant to Article IX for any Losses arising from the breach, inaccuracy or
violation referenced in such Buyer Breach Notice if the Closing occurs; and
(f) by the Buyer, on or prior to January 23, 2004, if the Buyer
Environmental Reports identify potential Losses arising from environmental
conditions described therein estimated in such report (at the upper end of each
applicable estimated range) to be in excess of $1.5 million in the aggregate.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of the Buyer, the
Company, the Transitory Subsidiary, the Stockholders or their respective
officers, directors, stockholders or affiliates; provided, that, (i) any such
termination shall not relieve any Party from liability for any willful breach of
this Agreement, (ii) any termination pursuant to Section 8.1(f) shall not
relieve the Buyer from liability for any breach of the Buyer's agreement set
forth in the proviso to the first sentence of Section 6.3, and (iii) the
provisions of Section 6.2 and 6.5, this Section 8.2 and Article XI of this
Agreement and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.1 Survival. Except as otherwise provided in this Section 9.1, each
of the representations and warranties of the Company and the Buyer contained in
this Agreement or in any certificate, document or other instrument delivered in
connection with this Agreement, and the representations and warranties of the
Stockholders contained in Sections 3.1 and 3.5, shall survive the Closing until
December 31, 2005. The representations and warranties of the Company set forth
in Sections 4.1 (Organization), 4.2 (Capitalization), 4.3 (Authorization;
Validity of Agreement; Company Action), and clause (i) only of Section 4.4 (No
Violation of Certificate of Incorporation and Bylaws), and the representations
and warranties set forth in Section 3 (other than Sections 3.1 and 3.5), shall
survive indefinitely. The representations and warranties of the Buyer and the
Transitory Subsidiary set forth in Sections 5.1 (Organization), 5.2
(Capitalization), 5.3 (Authorization; Validity of Agreement; Necessary Action)
and clause (i) only of Section 5.4 (No Violation of Certificate of Incorporation
or Bylaws) shall survive indefinitely. The representations and warranties of the
Company set forth in Section 4.8 (Taxes) shall survive until the thirtieth day
after the expiration of the applicable statute of limitations (taking into
account any tolling periods or other extensions). Each of the covenants and
agreements of the Parties contained in this Agreement or in any document,
certificate or other instrument delivered in connection with this Agreement
shall, unless otherwise specifically provided therein, survive indefinitely.
Notwithstanding the foregoing, (i) in the case of any claim or suit based upon
fraud, there shall be no limit as to the time within which such claim or suit
may be initiated or brought (subject to any applicable statutes of limitations,
after taking into account any tolling periods or other extensions) and (ii) the
termination of any of the foregoing survival periods shall in no way affect
claims made in respect of the breach of the applicable
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representation and warranty notice of which is delivered pursuant to Section
9.2(d) prior to the date of such termination.
9.2 Indemnification. From and after the Closing, each Stockholder
shall indemnify the Buyer, and the Buyer and the Surviving Corporation shall
jointly and severally indemnify each Stockholder, as set forth below:
(a) Subject to Sections 9.1 and 9.3, each Stockholder hereby agrees,
severally and not jointly, to indemnify and hold harmless the Buyer and its
directors, officers, shareholders, employees, agents and affiliates (including
without limitation the Company and the Company Subsidiaries) (collectively, the
"Buyer Indemnified Persons") for, from and against all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs and
expenses (including any reasonable attorneys' fees) (collectively, "Losses")
that result from (i) the breach of any representation or warranty made by such
Stockholder in this Agreement, the Additional Agreements or in any documents,
Schedules, instruments or certificates delivered pursuant thereto, or (ii) the
failure by such Stockholder to perform any of its covenants or other agreements
contained in this Agreement, the Additional Agreements or in any documents,
Schedules, instruments or certificates delivered pursuant thereto.
(b) Subject to Sections 9.1 and 9.3, each Stockholder hereby agrees,
severally and not jointly, to indemnify and hold harmless each of the Buyer
Indemnified Persons for, from and against all Losses that result from (i) the
breach of any representation or warranty made by the Company in this Agreement
or in any document, Schedule, instrument or certificate delivered pursuant to
this Agreement (in each case, as such representation or warranty would read if
all qualifications as to materiality, including each reference to the defined
term "Material Adverse Effect," were deleted therefrom), (ii) the failure by the
Company to perform any of its covenants or other agreements contained in this
Agreement, the Additional Agreements or in any documents, Schedules, instruments
or certificates delivered pursuant thereto, to the extent required to be
performed prior to the Closing, or (iii) the failure of the Stockholders'
Representative to satisfy its obligations pursuant to Section 2.6(f)(i).
(c) Subject to Section 9.1, each of the Buyer and the Surviving
Corporation, jointly and severally, hereby agrees to indemnify and hold harmless
each of the Stockholders and their respective partners, members, directors,
officers, employees, agents and affiliates (collectively, the "Stockholder
Indemnified Persons") for, from and against any Losses that result from (i) the
breach of any representation or warranty made by either the Buyer or the
Transitory Subsidiary in this Agreement or in any document, Schedule, instrument
or certificate delivered pursuant to this Agreement (in each case, as such
representation or warranty would read if all qualifications as to materiality,
including each reference to the defined term "Material Adverse Effect," were
deleted therefrom) or (ii) the failure by the Buyer or the Transitory Subsidiary
or, to the extent performance is required following the Effective Time, the
Surviving Corporation to perform any of its covenants or other agreements
contained in this Agreement, the Additional Agreements or in any documents,
Schedules, instruments or certificates delivered pursuant thereto.
(d) If any Buyer Indemnified Person, on the one hand, or any
Stockholder Indemnified Person, on the other hand (the "Indemnified Party"), has
a claim or potential claim
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or receives notice of any claim, potential claim or the commencement of any
action of or by any third party which could give rise to an obligation on the
part of any Stockholder, on the one hand, or the Buyer or the Surviving
Corporation, on the other hand, to provide indemnification (the "Indemnifying
Party") pursuant to this Section 9.2, the Indemnified Party shall promptly give
the Indemnifying Party notice thereof (the "Indemnification Claim"). The failure
to give such prompt notice shall not prevent any Indemnified Party from being
indemnified hereunder for any Losses, except to the extent that the failure to
so promptly notify the Indemnifying Party actually damages the Indemnifying
Party. Any Indemnification Claim shall describe the claim in reasonable detail.
(e) The Indemnifying Party shall have the right to compromise or, if
appropriate, defend at its own cost and through counsel of its own choosing, any
third party claim or demand giving rise to any Indemnification Claim. In the
event that the Indemnifying Party undertakes to compromise or defend any such
claim or demand, it shall promptly notify the Indemnified Party in writing of
its intention to do so. The Indemnified Party shall fully cooperate with the
Indemnifying Party and its counsel in the defense or compromise of such claim or
demand. Without limiting the foregoing, the Buyer Indemnified Parties shall
provide the Stockholders, if they are the Indemnifying Parties, with reasonable
access to the books, records, employees and officers (including as witnesses) of
the Surviving Corporation and the Company Subsidiaries. After the assumption of
the defense by the Indemnifying Party, the Indemnifying Party shall not be
liable for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with such claim or demand, but the Indemnified Party may
participate in such defense at its own expense. No settlement of an
Indemnification Claim shall be made without the written consent of the
Indemnifying Party. The Indemnifying Party shall not, except with the written
consent of the Indemnified Party (not to be unreasonably withheld or delayed),
consent to the entry of a judgment or settlement of an Indemnification Claim
that (i) does not provide for the payment by the Indemnifying Party of money as
the sole relief for the claimant or plaintiff or (ii) does not include as an
unconditional term thereof, the giving by the claimant or plaintiff to the
Indemnified Party of an unconditional release from all liability in respect of
such Indemnification Claim.
9.3 Limits on Indemnification by the Stockholders.
(a) The Stockholders will have no obligation to indemnify the Buyer
Indemnified Persons pursuant to (x) Section 9.2(a)(i) to the extent such
indemnification obligations relate to breaches of Sections 3.1 or 3.5 or (y)
Section 9.2(b)(i), unless the aggregate amount of all such Losses described in
clauses (x) and (y) incurred or suffered by the Buyer Indemnified Persons
exceeds $1,000,000, and then only to the extent such Losses exceed $1,000,000
(the "Basket Limitation"), and the maximum aggregate amount recoverable by the
Buyer Indemnified Persons hereunder in respect of Losses pursuant to Section
9.2(a)(i) (to the extent such Losses relate solely to breaches of Sections 3.1
or 3.5) and Section 9.2(b)(i) shall in no event exceed $15,000,000 (the "Cap
Limitation"); provided, however, that (i) the foregoing Basket and Cap
Limitations shall not apply to (a) claims for indemnification arising from
breaches of the representations and warranties set forth in Sections 4.1
(Organization), 4.2 (Capitalization), 4.3 (Authorization; Validity of Agreement;
Company Action), clause (i) only of Section 4.4 (No Violation of Certificate of
Incorporation and Bylaws), 4.8 (Taxes), 4.15 (Compliance with Laws) and 4.26
(Brokers) or (b) claims based upon fraud and (ii) the foregoing
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Basket Limitation shall not apply to claims for indemnification arising from
breaches of the representations and warranties set forth in Sections 4.13
(Environmental Matters) and 4.14 (Employee Benefit Plans), but the Stockholders
will have no obligation to indemnify the Buyer Indemnified Persons in respect of
either such Section unless the aggregate amount of Losses arising from breaches
of the applicable representation and warranty exceeds $100,000 (in the case of
Section 4.13 (Environmental Matters)) or $50,000 (in the case of Section 4.14
(Employee Benefit Plans)), and then only to the extent such Losses exceed the
foregoing amounts. In the absence of fraud, in no event shall the aggregate
liability of any Stockholder for indemnification pursuant to this Article IX
exceed the aggregate consideration received by such Stockholder pursuant to this
Agreement.
(b) The amount of any Loss suffered by an Indemnified Party shall be
reduced to take into account any deduction, credit or other tax benefit actually
realized by the Indemnified Party or any insurance or other benefits which such
Indemnified Party actually receives in respect of or as a result of such Loss or
the facts or circumstances relating thereto.
(c) It is the intention of the Parties to treat any indemnity
payment made under this Agreement as an adjustment to the purchase price for all
federal, state, local and foreign Tax purposes, and the Parties agree to file
their Tax Returns accordingly.
(d) Unless and except to the extent required to do so under any
Environmental Law or in fulfillment of the express requirement of a Governmental
Entity that is not required as a result of intentional actions or inactions of
the Buyer or its affiliates designed in whole or in part to effect such a
requirement and, then, only with prior notice to the Stockholders'
Representative and after providing the Stockholders' Representative with an
opportunity to be present at any surface or subsurface investigation and an
ability to split any samples taken at the Buyer's cost, in the event the Buyer
initiates, conducts, or authorizes any surface or subsurface investigation of an
environmental condition at any facility listed on Exhibit H hereto which may
constitute an Indemnification Claim, without the express written consent of the
Stockholders' Representative, any Losses incurred or matters discovered as a
result of such investigation shall be excluded from an Indemnification Claim and
the Stockholders shall not have any indemnification or obligation with respect
thereto. Activities conducted by the Buyer or its affiliates at such facilities
in the ordinary course of business, such as improvements or repairs, will not be
considered a surface or subsurface investigation, provided the Buyer and its
affiliates do not intend in connection with such activity to identify
environmental liabilities.
(e) In the event any Company Breach Notice, Stockholder Breach
Notice or Buyer Breach Notice is delivered pursuant to Sections 8.1(d) or
8.1(e), the obligations of the applicable Party to provide indemnity as set
forth in this Article IX shall be limited as set forth in Section 8.1(d) or
8.1(e), as the case may be.
(f) To the extent that the Stockholders are required to indemnify a
Buyer Indemnified Person pursuant to Section 9.2(b) in respect of any Loss, such
indemnification shall be made on a pro rata basis, with each Stockholder
contributing to such Loss to the extent of its Pro Rata Percentage (as set forth
on Schedule I) of such Loss; provided, however, that in the event that either of
Castle Harlan Partners II, L.P. or Castle Harlan Partners III, L.P. does not
satisfy in full any indemnity obligations of such Stockholder promptly (and in
any event within
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thirty days of the date on which such Stockholder is obligated to make payment
in respect of such obligation), such obligation shall immediately and without
further action of any Party become a joint and several obligation of each of
Castle Harlan Partners II, L.P. and Castle Harlan Partners III, L.P. Except as
set forth in this Section 9.3(f), in no event shall any Stockholder be required
to make an indemnification payment pursuant to Section 9.2(b) in respect of any
Loss in an amount that exceeds the amount of such Loss multiplied by such
Stockholder's Pro Rata Percentage.
9.4 Subrogation. In the event of payment by or on behalf of any
Indemnifying Party to any Indemnified Party in connection with any claim or
demand by any third party, such Indemnifying Party shall be subrogated to and
shall stand in the place of such Indemnified Party as to any events or
circumstances in respect of which such Indemnified Party may have any right,
defense or claim relating to such claim or demand against any claimant or
plaintiff asserting such claim or demand. Such Indemnified Party shall cooperate
with such Indemnifying Party in a reasonable manner, at the Indemnifying Party's
expense, in presenting any subrogated right, defense or claim.
9.5 Exclusive Remedy. Except with respect to claims based upon
fraud, the indemnification rights provided in this Article IX shall be the sole
and exclusive remedy of the Parties following the Closing (i) for any and all
breaches or alleged breaches of any representations, warranties, covenants or
agreements of the Parties or of any other provisions of this Agreement, the
Additional Agreements or in any documents, Schedules, instruments or
certificates delivered pursuant thereto, or (ii) otherwise in connection with
the transactions contemplated hereby.
9.6 No Circular Recovery. Each Stockholder hereby agrees that it
will not make any claim for indemnification against the Buyer, the Company or
any Company Subsidiary by reason of the fact that such Stockholder was a
controlling person, director, officer, employee or representative of the Company
or any Company Subsidiary with respect to any claim brought by a Buyer
Indemnified Person against any Stockholder relating to this Agreement or any of
the transactions contemplated hereby.
ARTICLE X
DEFINITIONS
10.1 For purposes of this Agreement, each of the defined terms is
defined in the Section of the Agreement indicated below:
Index of Defined Terms
DEFINED TERM SECTION
- ------------ -------
Additional Agreement................................................................ 2.6
Affiliated Group.................................................................... 4.8
Buyer............................................................................... Introduction
Buyer Indemnified Persons........................................................... 9.2(a)
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Buyer Material Adverse Effect....................................................... 7.3(a)
CBI................................................................................. 2.3
CBI Preferred Consideration......................................................... 2.3
CBI Preferred Shares................................................................ 2.3
Code................................................................................ 4.8
Company............................................................................. Introduction
Company Board....................................................................... Preliminary Statement
Company Employee Plans.............................................................. 4.14(a)
Company Intellectual Property....................................................... 4.10(a)
Company Leases...................................................................... 4.9(c)
Company Material Adverse Effect..................................................... 4.7
Company Material Contracts.......................................................... 4.11
Company Permits..................................................................... 4.16
Company SEC Documents............................................................... 4.5
Company Subsidiaries................................................................ 4.1(b)
Company Subsidiary.................................................................. 4.1(b)
Company's Knowledge................................................................. 4.9(a)
Confidentiality Agreement........................................................... 6.2
D&O Insurance....................................................................... 6.6(b)
DGCL................................................................................ Preliminary Statement
Disclosure Schedule................................................................. Article IV
Employee Benefit Plans.............................................................. 4.14(c)
Environmental Law................................................................... 4.13(b)
ERISA............................................................................... 4.14(e)
ERISA Affiliate..................................................................... 4.14(d)
Exchange Act........................................................................ 4.5
GAAP................................................................................ 4.5
Governmental Entity................................................................. 3.4
Indemnification Claim............................................................... 9.2(d)
Indemnifying Party.................................................................. 9.2(d)
Insurance Policies.................................................................. 4.18
Intellectual Property............................................................... 4.10(a)
Losses.............................................................................. 9.2(a)
Management Agreement................................................................ 7.2(c)
Merger.............................................................................. Preliminary Statement
Parties............................................................................. Introduction
Party............................................................................... Introduction
Real Estate......................................................................... 4.9(a)
SEC................................................................................. 4.5
Stockholder......................................................................... Introduction
Stockholders........................................................................ Introduction
Stockholders' Representative........................................................ 2.6
Straddle Period..................................................................... 6.9
Subsidiary.......................................................................... 4.1(b)
Tax Returns......................................................................... 4.8
Taxes............................................................................... 4.8
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Transitory Subsidiary............................................................... Introduction
Warrant............................................................................. 2.2
Warrant Consideration............................................................... 2.2, 2.2
Warrants............................................................................ 2.2
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices, requests, claims and demands and other
communications hereunder shall be in writing and shall be deemed duly delivered
(i) on the date of personal delivery or delivery by courier, if such date is a
Business Day and such delivery was made prior to 4:00 p.m. (New York time), and
otherwise on the next Business Day; (ii) five Business Days after being sent by
registered or certified mail, return receipt requested, postage prepaid; (ii)
one Business Day after being sent for next business day delivery, fees prepaid,
via a reputable nationwide overnight courier service, in each case to the
intended recipient as set forth below; or (iv) on the date of facsimile
transmission, if such date is a Business Day with confirmation of receipt prior
to 4:00 p.m. (New York time), and otherwise on the next Business Day.
(a) if to the Buyer or the Transitory Subsidiary, to:
AAC Holding Corp.
c/o Fenway Partners, Inc.
152 W. 57th Street
New York, NY 10029
Telephone: (212) 698-9400
Facsimile: (212) 658-9449
Attention: Richard C. Dresdale
Mac LaFollette
with a copy to:
Ropes & Gray LLP
One International Place
Boston, MA 02110
Telephone: (617) 951-7799
Facsimile: (617) 951-7050
Attention: C. Todd Boes
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(b) if to the Company, to:
American Achievement Corporation
7211 Circle S Road
Austin, Texas 78745
Attention: David G. Fiore
Telephone: (512) 444-0571
Facsimile: (512) 443-5213
with copies to:
Castle Harlan, Inc.
150 East 58th Street
New York, New York 10155
Attention: David B. Pittaway
Telephone: (212) 644-8600
Facsimile: (212) 207-8042
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Marc Weingarten, Esq.
Michael R. Littenberg, Esq.
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
(c) if to the Stockholders, to the applicable Stockholder at its
address indicated on Schedule I, and:
Castle Harlan, Inc.
150 East 58th Street
New York, New York 10155
Attention: David B. Pittaway
Telephone: (212) 644-8600
Facsimile: (212) 207-8042
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Marc Weingarten, Esq.
Michael R. Littenberg, Esq.
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
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Any Party to this Agreement may give any notice or other communication hereunder
using any other means, but no such notice or other communication shall be deemed
to have been duly given unless and until it actually is received by the Party
for whom it is intended. Any Party to this Agreement may change the address to
which notices and other communications hereunder are to be delivered by giving
the other Parties to this Agreement notice in the manner herein set forth.
11.2 Entire Agreement. This Agreement (including the Disclosure
Schedule attached hereto, as amended pursuant to Section 8.1(d), if applicable)
and any Additional Agreements constitute the entire agreement among the Parties
hereto and supersede any prior understandings, agreements or representations by
or among the Parties hereto, or any of them, written or oral, with respect to
the subject matter hereof; provided, that, the Confidentiality Agreement shall
remain in effect in accordance with its terms.
11.3 No Third Party Beneficiaries. This Agreement is not intended,
and shall not be deemed, to confer any rights or remedies upon any Person other
than the Parties hereto and their respective successors and permitted assigns,
or to create any third-party beneficiary hereto, except as specifically stated
in Section 6.6(e).
11.4 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the Parties hereto
without the prior written consent of the other Parties, and any such assignment
without such prior written consent shall be null and void, except that the Buyer
may substitute any direct or indirect wholly-owned Subsidiary of the Buyer for
the Transitory Subsidiary without consent of the Company; provided, that, each
of the Buyer and the Transitory Subsidiary shall remain liable for all of its
obligations under this Agreement.
11.5 Fees and Expenses. With respect to the costs and expenses
incurred in connection with the transactions contemplated by this Agreement:
(a) if the Closing occurs, the Stockholders (i) will bear the
Transaction Expenses of the Stockholders, the Company and the Company
Subsidiaries, and (ii) will not have any liability in respect of any transaction
expenses of the Buyer (which will be borne by the Company); or
(b) if the Closing does not occur, the Buyer will not have any
liability in respect of the Transactions Expenses of any Stockholder, the
Company or any Company Subsidiary, nor will any Stockholder, the Company or any
Company Subsidiary have any liability in respect of the transaction expenses of
the Buyer.
11.6 Amendment. This Agreement may be amended by the mutual consent
of the Buyer, the Company and the Stockholders' Representative at any time prior
to the Effective Time. Thereafter, it may be amended by the mutual consent of
the Buyer, the Surviving Corporation and the Stockholders' Representative. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the requisite Parties.
11.7 Extension; Waiver. At any time prior to the Effective Time, the
Parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the
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other Parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a Party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such Party. The failure of any Party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.
11.8 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation." As used in this Agreement, the term "affiliate(s)" shall have the
meaning set forth in Rule 12b-2 of the Exchange Act. Whenever this Agreement
indicates that the Company or any Company Subsidiary has "made available" any
document to the Buyer, such statement shall be deemed to be a statement that
such document was (i) delivered to the Buyer, (ii) made available for viewing
online on the "Deutsche Bank Workspace Project Ring Intralinks Virtual Data
Room" as of December 4, 2003 or (iii) was listed as an exhibit in the Most
Recent 10-K. Notwithstanding the foregoing, each of the minute books of the
Company and the Company Subsidiaries set forth on Section 11.8 of the Disclosure
Schedule shall be deemed to have been delivered to the Buyer.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts (including by facsimile), all of which shall be considered one and
the same agreement and shall become effective when two or more counterparts have
been signed by each of the Parties and delivered to the other Parties.
11.10 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a Governmental Entity of competent jurisdiction to
be invalid, void, unenforceable or against its regulatory policy, the remainder
of the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
11.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
laws of any jurisdictions other than those of the State of New York.
11.12 Submission to Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought exclusively in any federal or state court located in the County of New
York in the State of New York, and each of the Parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any Party anywhere in the world, whether within or
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without the jurisdiction of any such court. Without limiting the foregoing, each
Party agrees that service of process on such Party as provided in Section 11.1
as to giving notice hereunder shall be deemed effective service of process on
such Party.
11.13 Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a Party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such Party, and the exercise by a Party of any one remedy shall not preclude the
exercise of any other remedy. The Parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which the Parties are entitled at law or in equity.
11.14 Waiver of Jury Trial. Each of the Parties hereby irrevocably
waives all rights to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to
this Agreement or the transactions contemplated hereby or the actions or
omissions of any Party in the negotiation, administration, performance and
enforcement of this Agreement.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the Company, the Buyer, the Transitory
Subsidiary and the Stockholders have signed or caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
AMERICAN ACHIEVEMENT CORPORATION
By:___________________________________________
Name: David G. Fiore
Title: President and Chief
Executive Officer
AAC HOLDING CORP.
By:___________________________________________
Name: Mac LaFollette
Title
AAC ACQUISITION CORP.
By:___________________________________________
Name: Mac LaFollette
Title:
-50-
STOCKHOLDERS:
CASTLE HARLAN PARTNERS II, L.P.
By:___________________________________________
Name:
Title:
CASTLE HARLAN PARTNERS III, L.P.
By:___________________________________________
Name:
Title:
CASTLE HARLAN OFFSHORE PARTNERS III, L.P.
By:___________________________________________
Name:
Title:
CASTLE HARLAN OFFSHORE PARTNERS, L.P.
By:___________________________________________
Name:
Title:
CASTLE HARLAN AFFILIATES III, L.P.
By:___________________________________________
Name:
Title:
FROGMORE FAMILY FUND, LLC
By:___________________________________________
Name:
Title:
-51-
BRANFORD CASTLE HOLDINGS, INC.
By:___________________________________________
Name:
Title:
DRESDNER BANK, AG, GRAND CAYMAN BRANCH
By:___________________________________________
Name:
Title:
-52-
LEONARD M. HARLAN
___________________________________________
DAVID B. PITTAWAY
___________________________________________
JONATHON I. MARK
___________________________________________
DAVID H. CHOW
___________________________________________
ZANE TANKEL
___________________________________________
EDWARD O. VETTER
___________________________________________
KEN ROMAN
___________________________________________
DAVID G. FIORE
___________________________________________
CHARLYN A. DAUGHERTY
___________________________________________
-53-
PARKE H. DAVIS
___________________________________________
DONALD A. PERCENTI
___________________________________________
CLYDE W. WALLS
___________________________________________
-54-
STOCKHOLDERS' REPRESENTATIVE
(A SIGNATORY HERETO FOR PURPOSES OF
SECTION 2.5):
CASTLE HARLAN, INC.
___________________________________________
-55-
SCHEDULE I
STOCKHOLDERS
NUMBER OF NUMBER OF
SHARES OF SHARES OF
COMMON SERIES A PRO-RATA
NAME ADDRESS STOCK PREFERRED STOCK PERCENTAGE
- ---------------------- ----------------------------- ---------- --------------- ----------
150 East 58th Street
Castle Harlan New York, New York 10155
Partners II, L.P. Attention: David B. Pittaway 330,840.00 406,240.00 40.86%
150 East 58th Street
Castle Harlan New York, New York 10155
Partners III, L.P. Attention: David B. Pittaway 413,072.45 515,429.13 51.01%
Castle Harlan 150 East 58th Street
Offshore Partners III, New York, New York 10155
L.P. Attention: David B. Pittaway 6,773.12 8,451.62 0.84%
Castle Harlan 150 East 58th Street
Offshore Partners, New York, New York 10155
L.P. Attention: David B. Pittaway 20,804.00 25,545.00 2.57%
150 East 58th Street
Castle Harlan New York, New York 10155
Affiliates III, L.P. Attention: David B. Pittaway 6,902.40 8,612.67 0.85%
150 East 58th Street
Frogmore Family New York, New York 10155
Fund, LLC Attention: David B. Pittaway 1,572.97 1,961.84 0.19%
150 East 58th Street
Branford Castle New York, New York 10155
Holdings, Inc. Attention: David B. Pittaway 4,622.06 5,728.87 0.57%
150 East 58th Street
Leonard M. Harlan New York, New York 10155 2,313.14 2,866.90 0.29%
150 East 58th Street
David B. Pittaway New York, New York 10155 1,004.95 1,126.12 0.12%
Jonathon I. Mark 105.91 129.85 0.01%
Dresdner Bank, AG, 150 East 58th Street
Grand Cayman New York, New York 10155
Branch Attention: David B. Pittaway 18,483.00 22,697.00 2.28%
David H. Chow 234.00 234.00 0.03%
150 East 58th Street
Zane Tankel New York, New York 10155 938.00 938.00 0.12%
150 East 58th Street
Edward O. Vetter New York, New York 10155 400.00 400.00 0.05%
150 East 58th Street
Ken Roman New York, New York 10155 423.64 519.36 0.05%
7211 Circle S Road
David G. Fiore Austin, Texas 78745 0.00 5,500.00 0.00%
7211 Circle S Road
Charlyn A. Daugherty Austin, Texas 78745 328.00 328.00 0.04%
7211 Circle S Road
Parke H. Davis Austin, Texas 78745 188.00 188.00 0.02%
7211 Circle S Road
Donald A. Percenti Austin, Texas 78745 469.00 469.00 0.06%
2203 Onion Creek Parkway
# 17
Clyde W. Walls Austin, Texas 78747 300.00 0.00 0.04%
---------- ------------ ------
809,774.64 1,007,365.36 100.00%
---------- ------------ ------
-56-
SCHEDULE II
WARRANTS
NUMBER OF SHARES OF COMMON
WARRANT HOLDER STOCK UNDERLYING WARRANT EXERCISE PRICE
- -------------------------------- -------------------------- --------------
Castle Harlan Partners III, L.P. 19,820 $ 6.67
Deutsche Banc Alex. Brown, Inc. 1,585 $ 6.67
STRIKE
NAME AMOUNT PRICE
- --------------------- ------ ------
Alan Heath 500 $ 1.51
Charlyn A. Cook 2,757 $ 7.02
Charlyn A. Cook 2,243 $ 1.51
Charlyn A. Cook 4,000 $ 6.02
David G. Fiore 12,524 $ 7.02
David G. Fiore 12,500 $ 1.51
David G. Fiore 10,000 $ 6.02
David Nesuda 250 $ 1.51
Don Griffin 400 $ 1.51
Donald J. Percenti 2,757 $ 7.02
Donald J. Percenti 2,243 $ 1.51
Donald J. Percenti 4,000 $ 6.02
Ed Vetter 937 $ 7.02
Ed Vetter 178 $ 1.51
Fred Partlo 250 $ 1.51
Gary C. Jones 388 $ 7.02
Gary Gallivan 600 $ 1.51
Gary Gerritsen 1,034 $ 7.02
Gary Thompson 250 $ 1.51
George Olsen 600 $ 1.51
Harold E. Mitts 500 $ 1.51
J. David Weber 388 $ 7.02
Jason Loos 250 $ 1.51
Jeff Fix 2,000 $ 6.02
Jerry J. Engler 388 $ 7.02
Jorge Espinoza 500 $ 1.51
Joseph T. Flanagan 500 $ 1.51
Karen Heisel 250 $ 1.51
Kean Chan 388 $ 7.02
Ken Roman 1,059 $11.70
Kenneth Thornberry 500 $ 1.51
Laura Conway 250 $ 1.51
Leah Bush 500 $ 1.51
Lisa Raper Williamson 500 $ 6.02
Loxy Passmore 388 $ 7.02
Loxy Passmore 112 $ 1.51
Marilyn Hamblin 172 $ 7.02
Marilyn Hamblin 228 $ 1.51
Michael Metcalf 250 $ 1.51
Norma B. Lockwood 250 $ 1.51
Norman Smith 2,500 $ 1.51
Ollie F. Myers 500 $ 1.51
Parke H. Davis 2,757 $ 7.02
Parke H. Davis 2,243 $ 1.51
Parke H. Davis 4,000 $ 6.02
Phillip Endicott 388 $ 7.02
Phillip Endicott 112 $ 1.51
Riccardo Parra 250 $ 1.51
Robert McQuade 517 $ 7.02
Roger Smith 388 $ 7.02
Roger Smith 212 $ 1.51
Sandra Russell 500 $ 1.51
Sharon Brown 2,000 $ 1.51
Sherice P. Bench 1,034 $ 7.02
Sherice P. Bench 3,966 $ 1.51
Sherice P. Bench 4,000 $ 6.02
Solomon Cohen 250 $ 1.51
Steven Bauer 500 $ 1.51
T. David Collier 388 $ 7.02
T. David Collier 112 $ 1.51
William Cheney 500 $ 1.51
William Homan 500 $ 1.51
William M. Petrasek 388 $ 7.02
William Suhr 500 $ 1.51
Zane Tankel 937 $ 7.02
Zane Tankel 178 $ 1.51
TOTAL 97,404
-57-
EXHIBIT A
Form of Warrant Termination
-58-
EXHIBIT B
CBI's Certificate of Incorporation
-59-
EXHIBIT C
Sample Balance Sheet and form of Estimated Working
Capital Statement (as of November 29, 2003)
AMERICAN ACHIEVEMENT CORPORATION
BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
COMPANY MONTHLY
REPORTING PACKAGE
NOV-03
-----------------
ASSETS
Current Assets
Cash 4,339
Accounts Receivable - Trade 46,867
Allowance for Doubtful Accounts (3,616)
Accounts Receivable - Other 5,385
Inventory 29,667
Prepaid Expenses 21,790
-------
Total Current Assets 104,432
Total Fixed Assets-Net 68,676
Other Assets
Trademarks 47,340
Transaction Costs 10,522
Goodwill 178,504
Accumulated Amortization (31,016)
Other Assets 25,987
-------
Total Other Assets 231,337
-------
TOTAL ASSETS 404,445
=======
-60-
Sample Balance Sheet and form of Estimated Working
Capital Statement (as of November 29, 2003) - cont'd
LIABILITIES & EQUITY
Current Liabilities
Bank Overdraft 3,264
Accounts Payable - Trade 9,898
Accrued Expenses 37,706
Customer Prepayments 27,985
Consigned Gold 6,997
Total Current Liabilities 85,850
Long Term Debt
Bank Revolver 0
Senior Unsecured Notes/AAC 177,000
Discount on Senior Unsecured Notes (1,076)
11% Senior Subordinated Notes 41,355
-------
Total Long Term Debt 217,279
Other Long Term Liabilities 11,792
Intercompany Liability 0
Reedemable Minority Interest in Subsidiary 18,350
Stockholders' Equity
Preferred Stock - Series A 10
Common Stock 8
Additional Paid in Capital 95,350
Retained Earnings - Prior (18,375)
Retained Earnings - Current (686)
Other Comprehensive Income (OCI) (5,133)
-------
Total Stockholders' Equity 71,174
-------
TOTAL LIABILITIES & EQUITY 404,445
=======
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Sample Balance Sheet and form of Estimated Working
Capital Statement (as of November 29, 2003) - cont'd
AMERICAN ACHIEVEMENT CORPORATION
WORKING CAPITAL STATEMENT
(IN THOUSANDS)
(UNAUDITED)
COMPANY ESTIMATED
MONTHLY WORKING
REPORTING CAPITAL
PACKAGE STATEMENT
NOV-03 NOV-03
--------- ---------
ASSETS
Current Assets
Accounts Receivable - Trade 46,867 46,867
Allowance for Doubtful Accounts (3,616) (3,616)
Accounts Receivable - Other 5,385 5,385
Inventory 29,667 29,667
Prepaid Expenses 21,790 (3,594) (2) 18,196
------- ------
Total Current Assets 100,093 96,499
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable - Trade 9,898 9,898
Accrued Expenses 37,706 (1) 37,706
Customer Prepayments 27,985 27,985
Consigned Gold 6,997 6,997
------- ------
Total Current Liabilities 82,586 82,586
------- ------
Working Capital @ November 2003 13,913
------- ------
(1) Contains accrued interest of $10,283.
(2) Contains deferred tax asset of $6,378 and for Estimated Working Capital
Statement, all amounts in excess of $2,784 are excluded.
-62-
EXHIBIT D
MAXIMUM AND MINIMUM WORKING CAPITAL AND CASH AMOUNTS
(dollars in thousands)
WEEK MINIMUM WORKING MAXIMUM WORKING MINIMUM CASH MAXIMUM CASH
ENDING CAPITAL AMOUNT CAPITAL AMOUNT AMOUNT AMOUNT
- --------- --------------- -------------- ------------ ------------
1/30/2003 14,104 15,904 11,008 12,808
2/6/2003 14,057 15,857 11,225 13,025
2/13/2003 14,010 15,810 11,442 13,242
2/20/2003 13,963 15,763 11,658 13,458
2/27/2003 13,916 15,716 11,875 13,675
3/5/2003 13,722 15,522 12,483 14,283
3/12/2003 13,528 15,328 13,091 14,891
3/19/2003 13,334 15,134 13,698 15,498
3/26/2003 13,140 14,940 14,306 16,106
4/2/2003 12,946 14,746 14,914 16,714
-63-
EXHIBIT E
Financing Letters
-64-
EXHIBIT F
Schedule of Projected Capital Expenditures
CAPITAL EXPENDITURES
($ in thousands)
MANAGEMENT PROJECTIONS
------------------------------------------------------------
SEP-03 OCT-03 NOV-03 DEC-03 JAN-04 FEB-04
------ ------ ------ ------ ------ -------
CUMULATIVE CAPITAL EXPENDITURE $3,886 $5,097 $5,948 $7,445 $8,346 $10,120
MANAGEMENT PROJECTIONS
--------------------------------------------------------------
MAR-04 APR-04 MAY-04 JUN-04 JUL-04 AUG-04
------- ------- ------- ------- ------- --------
CUMULATIVE CAPITAL EXPENDITURE $11,017 $11,902 $13,611 $14,493 $15,372 $17,000
-65-
EXHIBIT G
Scope of Environmental Review
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[O'BRIEN & GERE LOGO]
MEMORANDUM
TO: Richard Dresdale, Mac LaFollette, Sanjay Morey - Fenway Partners
CC: Stuart J Spiegel - O'Brien & Gere
FROM: Scott Scheidelman
DATE: 7/10/2004
RE: American Achievement Corporation Phase I ESA/Environmental
Compliance Review
At your request, O'Brien & Gere Engineers, Inc. (O'Brien & Gere) has prepared
this scope of services to perform Phase I Environmental Site Assessments (ESAs)
and environmental compliance reviews of multiple American Achievement
Corporation facilities. It is our understanding at this time that there are
eight (8) facilities in the following locations that will be visited. These
include the following:
- Louisville, Kentucky
- Malverne, Pennsylvania
- San Angelo, Texas
- Dallas, Texas
- El Paso, Texas (4605 Osborne Drive)
- El Paso, Texas (10365 Railroad Drive)
- Austin, Texas
- Juarez, Mexico
Our scope for each facility will include a Phase I environmental
site assessment (ESA) in accordance with ASTM procedure E1527-00.
Additionally, an environmental compliance review will be conducted
of each facility. As you are aware, at your previous request,
O'Brien & Gere has conducted a review of environmental reports that
you provided for these facilities (with the exception of the Mexico
location). Based on that review, we recommend that all sites are
visited and a Phase I ESA and environmental compliance review be
conducted.
The following paragraphs describe the detailed scope of services
that will be performed:
1. Phase I Environmental Site Assessment - The assessment will
involve a review of information indicating site and
neighboring land use (past and present), uses of the site,
environmental regulatory activity connected with the site, and
a reconnaissance of structures or related property. Examples
of issues that will be addressed include impacts of
surrounding land uses, PCB-containing equipment, underground
and above ground
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tanks, hazardous waste or material storage, and incidents of
spills of the aforementioned materials as may be applicable to
this property.
A site inspection will be conducted and will include:
a) a visual observation of current practices at the site,
material storage and handling procedures, and waste
disposal activities, and
b) interviews with appropriate personnel regarding the
details of past activities as listed in (a).
State and federal regulatory listings will be checked in
accordance with provisions of the ASTM procedure (i.e.,
CERCLIS, and the state list of inactive disposal areas) to
assess whether the site may be subject to current or future
regulatory action. If appropriate, local municipal offices
will be queried as to the status of past activities at this
location. Historical aerial photographs and/or city
directories will be reviewed for an indication of past land
use at the property and adjacent properties, where
appropriate. Surrounding land use and activities may suggest
other avenues to follow regarding past site conditions and
usage.
The following information is requested for the Phase I ESA:
- contact names and telephone numbers for each facility
- copies of previous environmental reports
In accordance with ASTM E1527-00 (Section 12.1.4), the
following, which is not intended to be all inclusive,
represents out-of-scope items with respect to this ESA and,
therefore, will not be addressed: asbestos-containing
materials, radon, lead-based paint, lead in drinking water,
and wetlands; in addition, O'Brien & Gere will not address
interpretations of zoning regulations, building code
requirements, or property title issues as part of this scope.
Environmental compliance review - The main focus of the
document review is to support the evaluation of facility
compliance with the following federal statutes, as applicable
to the specific facilities and their operations:
- Solid Waste Disposal Act (SWDA),
- Resource Conservation and Recovery Act (RCRA),
- Hazardous and Solid Waste Amendments (HSWA),
- Underground Storage Tank (UST) provisions of RCRA
- Clean Air Act and promulgated regulations
- Clean Water Act and promulgated regulations
- Emergency Planning and Community Right-to-Know Act (EPCRA)
and promulgated regulations, to the extent they may apply to
reporting and releases
- Section 103 of the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) and promulgated
regulations
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- Toxic Substances Control Act (TSCA) and promulgated
regulations as they relate to PCBs and represent a standard
of care for asbestos.
2. Report preparation - O'Brien & Gere will prepare an individual
report for each of the eight facilities. Each report will
contain an introductory section that will present the
methodology used in the investigation, as well as programmatic
issues at the facility, and comments (as may be appropriate),
and individual sections addressing site environmental quality.
This Phase I ESA and environmental compliance review will not
involve any sampling of any media or materials found at or under any
of the eight facilities, and O'Brian & Gere agree not to conduct any
sampling of any media or materials found at or under any of the
eight facilities. O'Brian & Gere further agrees that it will not
engage in any dialogue or conversation, verbal or in writing, with
any representative of any governmental authority on any substantive
matter regarding the American Achievement Corporation, its
subsidiaries or its facilities without the express written
authorization from the American Achievement Corporation, which
authorization will not be unreasonably withheld or delayed;
provided, that, O'Brian & Gere may, without obtaining such
authorization, review governmental files and related regulatory
documents and make procedural inquiries regarding such files and
documents.
As you are aware, we will be working through the Holiday season and
will require full Company co-operation during that period to
complete this work in a timely fashion.
-69-
INDEMNIFICATION
The report prepared as part of this ESA is intended solely for the use of
Fenway and its lender. O'Brien & Gere can address this report to
additional parties with the execution of a secondary client agreement and
payment of a minimal administrative fee. To expedite completion of these
services please advise us if additional reports will be needed.
This assessment does not constitute legal advice or opinion. Given
changing regulatory requirements and the potential legal
implications of such an assessment, you may wish to consult legal
counsel as part of the overall review of this assessment.
O'Brien & Gere agrees to correct or re-perform, without additional cost to
Fenway, services not performed in accordance with the standard of care
prevailing at the time and in the place where such service is performed.
O'Brien & Gere agrees to defend, indemnify, and hold harmless Fenway, its
directors, officers, employees, agents, successors and assigns from
damages suffered or costs and expenses incurred, including reasonable
attorney's fees, in the proportion and to the extent caused by O'Brien &
Gere willful misconduct or negligent acts, errors or omissions. O'Brien &
Gere's maximum liability shall be limited to the invoiced amount of these
services. The parties waive any right they may have in law or in equity to
demand or receive consequential damages or punitive damages.
-70-
EXHIBIT H
Facilities
Facilities located at:
- 1550 Mockingbird Lane, Dallas, Texas
- 67 Great Valley Parkway, Malvern, Pennsylvania
- 2027 Industrial Drive, San Angelo, Texas
- 10365 Railroad Drive, El Paso, Texas
- 3210 Dyer Street, El Paso, Texas
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