EXECUTION VERSION
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SECURITIES PURCHASE AGREEMENT
BY AND AMONG
BICYCLE HOLDING, INC.,
THE SELLERS IDENTIFIED HEREIN,
THE SELLER REPRESENTATIVE IDENTIFIED HEREIN
AND
JARDEN CORPORATION
DATED AS OF FEBRUARY 24, 2004
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TABLE OF CONTENTS
SECTION 1. ACQUISITION OF SECURITIES.............................................................................1
1.1. Purchase and Sale of Purchased Securities................................................................1
SECTION 2. PURCHASE PRICE AND PAYMENT............................................................................2
2.1. Purchase Price...........................................................................................2
2.2. Contingent Payment.......................................................................................2
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING SELLERS......................................................8
3.1. Organization and Good Standing...........................................................................8
3.2. Power and Authorization..................................................................................9
3.3. No Conflicts.............................................................................................9
3.4. Ownership of the Purchased Securities...................................................................10
3.5. Exercise of Options and Conversion of the Convertible Note..............................................10
3.6. Investment Representations..............................................................................10
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND ITS SUBSIDIARIES............................11
4.1. Organization and Good Standing..........................................................................11
4.2. Power and Authorization.................................................................................11
4.3. Capitalization..........................................................................................12
4.4. Investments and Subsidiaries............................................................................13
4.5. No Conflicts............................................................................................13
4.6. Financial Matters.......................................................................................13
4.7. Absence of Undisclosed Liabilities......................................................................14
4.8. Real Property...........................................................................................14
4.9. Personal Property.......................................................................................16
4.10. Taxes..................................................................................................16
4.11. Litigation.............................................................................................17
4.12. Labor Matters..........................................................................................17
4.13. Intellectual Property Rights...........................................................................18
4.14. Contracts and Commitments..............................................................................19
4.15. Existing Condition.....................................................................................21
4.16. Employee Benefit Plans.................................................................................21
4.17. Directors and Officers.................................................................................23
4.18. Compliance with Laws...................................................................................23
4.19. Environmental..........................................................................................24
4.20. Transactions With Affiliates...........................................................................25
4.21. Insurance..............................................................................................25
4.22. Brokers................................................................................................25
4.23. Product Liability......................................................................................26
4.24. Possession of Assets and Operation of Equipment........................................................26
4.25. Absence of Certain Business Practices..................................................................26
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................26
5.1. Incorporation and Good Standing.........................................................................26
5.2. Power and Authorization.................................................................................27
5.3. Validity of Contemplated Transactions...................................................................27
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5.4. Consents................................................................................................27
5.5. Relocation of Operations................................................................................27
5.6. Litigation..............................................................................................28
5.7. Sufficient Funds........................................................................................28
5.8. Brokers.................................................................................................28
5.9. SEC Filings; Financial Statements.......................................................................28
5.10. Investment Representations.............................................................................28
SECTION 6. COVENANTS OF THE PARTIES UNTIL CLOSING...............................................................29
6.1. Conduct of Business Pending Closing.....................................................................29
6.2. Negative Covenants......................................................................................30
6.3. Access..................................................................................................32
6.4. Consents................................................................................................32
6.5. HSR Act.................................................................................................32
6.6. No Solicitation.........................................................................................33
6.7. Interest in Purchased Securities........................................................................34
6.8. Custody of Purchased Securities.........................................................................34
6.9. Disclosure Schedule.....................................................................................34
6.10. Monthly Financials.....................................................................................36
6.11. Preservation of Earnings...............................................................................36
6.12. Estimate of Closing Date Deductions....................................................................36
6.13. Outstanding Options....................................................................................36
6.14. Indebtedness...........................................................................................36
6.15. Withholdings...........................................................................................36
SECTION 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS..........................................................37
7.1. Deliveries at Closing...................................................................................37
7.2. Representations and Warranties..........................................................................37
7.3. Performance of Covenants................................................................................37
7.4. Approvals...............................................................................................38
7.5. Legal Matters...........................................................................................38
7.6. Closing Disclosure Schedule.............................................................................38
7.7. Derivative Securities...................................................................................38
7.8. Release of Indebtedness.................................................................................38
7.9. No Material Adverse Effect..............................................................................38
7.10. Stockholders Agreement.................................................................................39
SECTION 8. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S OBLIGATIONS.......................................39
8.1. Deliveries at Closing...................................................................................39
8.2. Representations and Warranties..........................................................................39
8.3. Performance of Covenants................................................................................39
8.4. Approvals...............................................................................................39
8.5. Legal Matters...........................................................................................40
SECTION 9. CLOSINGS.............................................................................................40
9.1. Time and Place of Closing...............................................................................40
9.2. Deliveries at the Closing by the Sellers................................................................40
9.3. Deliveries at the Closing by the Buyer..................................................................41
9.4. Indebtedness Payoff.....................................................................................42
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SECTION 10. TERMINATION AND ABANDONMENT.........................................................................42
10.1. Termination............................................................................................42
10.2. Procedure for Termination..............................................................................43
SECTION 11. INDEMNIFICATION.....................................................................................43
11.1. Survival of Representations, Warranties and Covenants and Certain Claims...............................43
11.2. Indemnity..............................................................................................44
11.3. Exclusive Remedy.......................................................................................49
SECTION 12. CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS.........................................................49
12.1. Tax Matters............................................................................................49
12.2. Employee Benefits Matters..............................................................................51
12.3. General Confidentiality; Non-Competition, Non-Solicitation; Non-Disparagement..........................51
12.4. Seller Representative..................................................................................54
12.5. Purchase of Put/Call Shares............................................................................54
12.6. Holdback Amount........................................................................................55
SECTION 13. DEFINITIONS.........................................................................................56
SECTION 14. MISCELLANEOUS.......................................................................................63
14.1. Construction...........................................................................................63
14.2. Further Assurances.....................................................................................63
14.3. Costs and Expenses.....................................................................................63
14.4. Notices................................................................................................64
14.5. Assignment and Benefit.................................................................................65
14.6. Amendment, Modification and Waiver.....................................................................66
14.7. Governing Law; Consent to Jurisdiction.................................................................66
14.8. Section Headings and Defined Terms.....................................................................66
14.9. Severability...........................................................................................66
14.10. Effectiveness and Counterparts........................................................................66
14.11. Entire Agreement......................................................................................67
14.12. Retention of Counsel..................................................................................67
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EXHIBITS:
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Exhibit A Adjustment Procedures
Exhibit B Non-Compete Parties
Exhibit C Employment Agreement Parties
Exhibit D Subordinated Debt
Exhibit E Restricted Sellers
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of February 24, 2004 (this
"Agreement"), by and among Bicycle Holding, Inc., a Delaware corporation (the
"Company"), the Sellers (as defined below), Dudley S. Taft, as the Seller
Representative (as defined below), and Jarden Corporation, a Delaware
corporation (the "Buyer"). In addition to the terms defined elsewhere in this
Agreement, certain terms used herein are defined in Section 13 hereof.
R E C I T A L S:
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WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer desires
to purchase from the Sellers, the capital stock of the Company beneficially
owned by the Sellers, as set forth opposite the Sellers' respective names on
Schedule I attached hereto (the "Purchased Securities"), which Purchased
Securities represent at least 75% of the outstanding capital stock of the
Company (on a fully diluted basis), on the terms and conditions set forth in
this Agreement;
WHEREAS, on the date hereof, the Buyer and certain holders of
securities of the Company (the "Put/Call Holders") are, simultaneously with this
Agreement, entering into a Put and Call Agreement (the "Put and Call
Agreement"), pursuant to which the Put/Call Holders are being granted the right
to put to the Buyer, and the Buyer is being granted the right to purchase from
the Put/Call Holders, shares of capital stock of the Company, all as more fully
described in the Put and Call Agreement (collectively, the "Put/Call Shares"),
representing not more than 25% of the outstanding capital stock of the Company
(on a fully diluted basis) on the terms and conditions set forth in such Put and
Call Agreement;
WHEREAS, the Purchased Securities and the Put/Call Shares, together,
will represent 100% of the outstanding equity interests (on a fully diluted
basis) in the Company; and
WHEREAS, the parties hereto desire to provide for certain other matters
as provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, each intending to be legally bound, hereby agree as follows:
SECTION 1. ACQUISITION OF SECURITIES
1.1. Purchase and Sale of Purchased Securities.
Subject to the terms and conditions of, and on the basis of and in
reliance upon the covenants, agreements and representations and warranties set
forth in, this Agreement, at the Closing (as defined below), each Seller shall
sell, transfer, convey, assign, and deliver to the Buyer, and the Buyer shall
purchase and acquire from each Seller, free and clear of all Encumbrances, all
of the Purchased Securities set forth opposite such Seller's name on Schedule I
attached hereto at such Seller's Proportionate Interest of the Purchase Price
(as defined below) therefor, as set forth opposite such Seller's name on such
Schedule I.
SECTION 2. PURCHASE PRICE AND PAYMENT
2.1. Purchase Price.
(a) The aggregate purchase price (the "Purchase Price") for the
Purchased Securities shall be an amount equal to the product of (A) Two Hundred
and Thirty-Two Million Dollars ($232,000,000) less the Closing Date Deduction
(the "Adjusted Equity Value"); multiplied by (B) the Purchased Securities
Percentage as of the Closing, to be paid in cash or reserved by the Buyer at the
Closing in accordance with Section 2.1(b).
(b) In addition to all other applicable terms hereof, the Purchase
Price will be paid and subject to adjustment as follows:
(i) The Purchase Price, less the Initial Holdback Amount (as
hereinafter defined), shall be paid by the Buyer to the Seller Representative by
wire transfer of immediately available funds at the Closing; and
(ii) the product of (A) $20,000,000, multiplied by (B) the
Purchased Securities Percentage (such product of (A) multiplied by (B), the
"Initial Holdback Amount") shall be retained by the Buyer from the Purchase
Price to satisfy any claims for indemnity made pursuant to Section 11.2(a) and
Section 11.2(b) (it being understood that, except as otherwise set forth herein,
the Holdback Amount shall be a cap or limit on the Sellers' indemnity
obligations under this Agreement). The term "Holdback Amount" shall mean the
Initial Holdback Amount, as such amount is reduced from time to time by (1) any
claims for indemnity paid against it, and (2) the April 1, 2005 and April 1,
2006 release payments to Sellers, each of which shall be administered in
accordance with Section 12.6, and increased by any Aggregate Call Holdback
Amount or Individual Put Holdback Amounts retained by the Buyer in connection
with its purchase of Put/Call Shares pursuant to the Put and Call Agreement.
2.2. Contingent Payment.
(a) As soon as practicable, but in any event no later than ninety
(90) days following each of December 31, 2004, December 31, 2005 and December
31, 2006, the Buyer shall (i) prepare in accordance with GAAP a statement
derived from the audited financial statements of the Buyer (each, an "Earn-Out
Statement") of the Business EBITDA (as defined below) for each of the full
fiscal years ending on such dates (such one-year periods together being the
"Earn-Out Period") and, in the Earn-Out Statement for the fiscal year ending
December 31, 2006, the Average Annual Business EBITDA (as defined below) for the
Earn-Out Period, and (ii) deliver each Earn-Out Statement to the Seller
Representative. At any time prior to the expiration of each period ending
forty-five (45) days following the Seller Representative's receipt of each
Earn-Out Statement for the fiscal years ending December 31, 2004 and December
31, 2005 (each such period, a "Preliminary Dispute Period") and, with respect to
the Final Earn-Out Statement (as defined below), during the Final Dispute Period
(as defined below), the Buyer shall upon reasonable notice, and during normal
business hours, provide the Seller Representative and/or one or more accountants
designated by the Seller Representative with reasonable access to the management
of the Company, and the Buyer shall, and shall cause the Buyer's accountants,
upon reasonable notice, to provide reasonable access to any and all
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documents, records and work papers used in the preparation of such Earn-Out
Statement or Final Earn-Out Statement (as applicable) and shall reasonably
cooperate with the Seller Representative and/or such accountant(s) in connection
with any such review of such Earn-Out Statement or Final Earn-Out Statement and
the documents, records and work papers related thereto. The Seller
Representative shall have until the expiration of each Preliminary Dispute
Period to dispute any or all amounts or elements of the Earn-Out Statement
delivered immediately prior to such Preliminary Dispute Period (any such
dispute, a "Preliminary Dispute"). The Seller Representative may provide to the
Buyer, prior to the end of any Preliminary Dispute Period, written notice of a
Preliminary Dispute (a "Preliminary Dispute Notice"), specifically setting forth
the amounts and elements with which the Seller Representative disagrees and each
basis for each such disagreement. If the Seller Representative does not so
deliver a Preliminary Dispute Notice to the Buyer prior to the end of any
applicable Preliminary Dispute Period, the Earn-Out Statement delivered
immediately prior to such Preliminary Dispute Period shall be final and binding
upon each Seller and the Seller Representative in the form in which it was
delivered to the Seller Representative by the Buyer, and no amounts in such
Earn-Out Statement may be disputed by or on behalf of any Seller in the Dispute
Notice (as defined below). The Seller Representative shall have forty-five (45)
days after receipt of the Earn-Out Statement prepared for the fiscal year ending
December 31, 2006 (the "Final Earn-Out Statement") (such period, the "Final
Dispute Period") to dispute any or all amounts or elements of the Final Earn-Out
Statement (together with any items set forth in a Preliminary Dispute Notice
with respect to any Preliminary Dispute Period that has not been resolved
between the Buyer and the Seller Representative in accordance with Section
2.2(b), a "Dispute"). The Seller Representative may provide to the Buyer, prior
to the end of the Final Dispute Period, written notice of a Dispute (a "Dispute
Notice"), specifically setting forth the amounts and elements with which the
Seller Representative disagrees and each basis for each such disagreement and
any such Dispute shall be limited to the matters as set forth in such Dispute
Notice. If immediately prior to the end of the Final Dispute Period any
Preliminary Dispute Notice has not been resolved between the Buyer and the
Seller Representative in accordance with Section 2.2(b), in the absence of
written notice from the Seller Representative canceling such Preliminary Dispute
Notice or amending its terms, the Seller Representative shall be deemed to have
delivered a Dispute Notice with respect to any such Preliminary Dispute Notice
(and the terms of any such Dispute Notice shall be the same as set forth in the
applicable Preliminary Dispute Notice). If a Dispute Notice is not delivered or
deemed to have been delivered to the Buyer prior to the end of the Final Dispute
Period, the Final Earn-Out Statement shall be final and binding upon each Seller
and the Seller Representative in the form in which it was delivered to the
Seller Representative by the Buyer, and no amounts in such Final Earn-Out
Statement may be disputed by or on behalf of any Seller in the Dispute Notice.
Notwithstanding anything in this Section 2.2 to the contrary, the Buyer may not
dispute any amounts or elements contained in any Earn-Out Statement, including
the Final Earn-Out Statement, once any such Earn-Out Statement has been
delivered to the Seller Representative (except to the extent that any such
disputed amounts or elements relate to or arise out of any pending Dispute).
(b) If the Seller Representative shall have delivered to the Buyer
a Preliminary Dispute Notice prior to the end of the Preliminary Dispute Period,
the Seller Representative and the Buyer shall, in good faith, attempt to resolve
the Preliminary Dispute described in such Preliminary Dispute Notice and to
agree in writing upon the final contents of the subject Earn-Out Statement
within ninety (90) days following delivery by the Seller
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Representative of such Preliminary Dispute Notice to the Buyer. If the Seller
Representative and the Buyer cannot so agree upon such final contents of such
Earn-Out Statement within such ninety (90) day period, the Seller Representative
shall retain the right to incorporate any and all unresolved amounts or elements
in a Dispute Notice. If the Seller Representative shall have delivered to the
Buyer a Dispute Notice prior to the end of the Final Dispute Period, the Seller
Representative and the Buyer shall, in good faith, attempt to resolve the
Dispute described in such Dispute Notice and to agree in writing upon the final
contents (to the extent then under dispute) of each relevant Earn-Out Statement
(including the Final Earn-Out Statement) within fifteen (15) days following
delivery by the Seller Representative of such Dispute Notice to the Buyer. If
the Seller Representative and the Buyer are unable to resolve such Dispute
within such fifteen (15) day period, then the Seller Representative and the
Buyer shall promptly submit such Dispute for resolution to an independent
certified public accounting firm of recognized international standing, mutually
acceptable to the Seller Representative and the Buyer (the "Arbitrating
Accountant"), for review and resolution of any and all matters that remain in
dispute and that were properly included in the Dispute Notice, provided that any
amount of the Contingent Payment payable in respect of resolved amounts that are
not otherwise subject to any Dispute shall promptly be paid by the Buyer to the
Seller Representative in accordance herewith. In connection with the resolution
of any Dispute, the Arbitrating Accountant shall have reasonable access to the
management of the Company and the Buyer and all work papers, records, documents
and facilities reasonably necessary to perform its functions as arbitrator
hereunder. The Arbitrating Accountant's function shall be to resolve only the
matters in Dispute in accordance with the terms and provisions of this Section
2.2 and, if required, to revise each applicable Earn-Out Statement (including
the Final Earn-Out Statement) in order to conform with its resolution of the
Dispute. In rendering its decision, the Arbitrating Accountant shall, in its
sole discretion, apportion its fees and expenses in connection with the Dispute,
based on its views as to the relative merits of the positions of each party in
the Dispute; provided, however, that the Sellers shall advance half, and the
Buyer shall advance the other half, of any retainer fee or deposit required by
the Arbitrating Accountant in advance of a final resolution, subject to
reapportionment by the Arbitrating Accountant of its fees and expenses as
aforesaid. All determinations of the Arbitrating Accountant rendered in
accordance with this Section 2.2, including any revisions made to any Earn-Out
Statement (including the Final Earn-Out Statement) and the Arbitrating
Accountant's apportionment of expenses as between the relevant Sellers and the
Buyer, shall be final and binding on the parties hereto (including the Seller
Representative), and none of the Sellers, the Seller Representative nor the
Buyer shall have any right to appeal any such determinations.
(c) The Buyer and each Seller shall, and the Sellers shall cause
the Seller Representative to, cooperate fully and expeditiously with the
Arbitrating Accountant in order to facilitate the receipt of the final
determinations of the Arbitrating Accountant within thirty (30) days following
submission of a Dispute to the Arbitrating Accountant.
(d) On or before the later of March 31, 2007 and forty-five (45)
days after the date (the "Final Earn-Out Determination Date") of the final
determination of the contents of the Earn-Out Statements, including the Final
Earn-Out Statement (whether as a result of the failure by the Seller
Representative to timely deliver a Dispute Notice, the agreement by the Seller
Representative and the Buyer on the final contents of such Earn-Out Statements
or the determination of the Arbitrating Accountant), the Seller Representative
shall notify the Buyer in
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writing of those Persons to which the Contingent Payment is to be paid, which
notice shall include the allocation of the Contingent Payment among such Persons
(which allocation shall not result in the payment of more than 20% of the
Contingent Payment to any such Persons who are not identified as "accredited
investors" (as defined in Rule 501(a) promulgated under the Securities Act) on
Schedule I hereto) and the respective addresses or accounts to which such
Contingent Payment (as so allocated) shall be delivered. The Buyer shall
promptly pay to such Persons (as so instructed by the Seller Representative in
such notice, and the Buyer shall have no liability to any Seller for following
such instructions) in cash or Buyer Common Stock (as defined below), or a
combination thereof, in the Buyer's sole discretion, the following applicable
amount (subject to any withholdings required by applicable Law), if any, in
respect of the Contingent Payment:
(i) If the Average Annual Business EBITDA is less than Thirty
Million Dollars ($30,000,000), no amount shall be required to be paid.
(ii) If the Average Annual Business EBITDA is equal to or
greater than Thirty Million Dollars ($30,000,000) but less than Thirty-Two
Million Dollars ($32,000,000), an amount equal to the product of (A) the excess
of the Average Annual Business EBITDA over Thirty Million Dollars ($30,000,000),
multiplied by five (5), multiplied by (B) the Purchased Securities Percentage.
(iii) If the Average Annual Business EBITDA is equal to or
greater than Thirty-Two Million Dollars ($32,000,000), an amount equal to the
product of (A) Ten Million Dollars ($10,000,000), multiplied by (B) the
Purchased Securities Percentage.
(e) In the event that, prior to January 1, 2007, the Buyer sells
or otherwise disposes of all or substantially all of the Bicycle Business (which
shall not include the sale of the Bicycle Business as part of a sale or change
of control transaction of Buyer), the Buyer shall notify the Seller
Representative in writing of the closing of such sale or disposition not less
than ten (10) days prior to the date on which such closing is scheduled to
occur. Within thirty (30) days after the closing of such sale or disposition,
the Seller Representative shall notify the Buyer in writing of those Persons to
which the Contingent Payment is to be paid, which notice shall include the
allocation of the Contingent Payment among such Persons (which allocation shall
not result in the payment of more than Two Million Dollars ($2,000,000) of the
Contingent Payment to any such Persons who are not identified as "accredited
investors" (as defined in Rule 501(a) promulgated under the Securities Act) on
Schedule I hereto) and the respective addresses or accounts to which such
Contingent Payment (as so allocated) shall be delivered. The Buyer shall
promptly pay to such Persons (as so instructed by the Seller Representative in
such notice, and the Buyer shall have no liability to any Seller for following
such instructions) the Contingent Payment in an amount equal to the product of
(i) Ten Million Dollars ($10,000,000), multiplied by (ii) the Purchased
Securities Percentage.
(f) Within thirty (30) days after the Final Earn-Out Determination
Date, the Buyer shall provide to the Seller Representative a written statement:
(i) electing to pay the Contingent Payment (if any) in accordance with the
written instructions of the Seller Representative set forth in the notice to the
Buyer given pursuant to Section 2.2(d) (A) in cash ("Cash Payment Election"),
(B) in validly issued, fully paid and nonassessable shares of the
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common stock, par value $0.01 per share, of the Buyer ("Buyer Common Stock") up
to a maximum of Eight Million Dollars ($8,000,000) in value, which shares will
be delivered to the Persons identified as "accredited investors" (as defined in
Rule 501(a) promulgated under the Securities Act) on Schedule I hereto ("Stock
Payment Election"), plus up to Two Million Dollars ($2,000,000) of the
Contingent Payment, if any, for payment in cash to the Persons not so identified
as accredited investors, or (C) in some combination of the foregoing (provided
that up to Two Million Dollars ($2,000,000) of the Contingent Payment, if any,
shall be available for payment in cash to the Persons not so identified as
accredited investors); and (ii) setting forth a date (the "Contingent Payment
Closing Date") on or before the later of March 31, 2007 or forty-five (45) days
after the Final Earn-Out Determination Date on which the payment of the
Contingent Payment shall be made by the Buyer. The following provisions shall be
applicable to the making of a Stock Payment Election and a Cash Payment Election
by the Buyer:
(i) If a Stock Payment Election is made by the Buyer, the
number of shares of Buyer Common Stock to be delivered pursuant to this Section
2.2 shall be calculated on the basis of the average closing price of a share of
Buyer Common Stock on the New York Stock Exchange (or such other securities
exchange that shall be at such time the principal market for Buyer Common Stock)
for the ten (10) consecutive trading days ending on the date that is two (2)
business days prior to the Contingent Payment Closing Date (such ten-day period,
the "Determination Period").
(ii) The Stock Payment Election may be exercised, and Buyer
Common Stock may be issued instead of cash, (A) only if a registration statement
covering the issuance of the shares of Buyer Common Stock issued on the
Contingent Payment Closing Date shall be declared effective by the Securities
and Exchange Commission ("SEC") on or before the Contingent Payment Closing
Date; and (B) the shares of Buyer Common Stock (or stock of any successor or
assignee of the Buyer under this Agreement) are listed and publicly traded on a
national stock exchange or securities market. In the event of a Stock Payment
Election, the Buyer shall use its commercially reasonable efforts to cause such
registration statement to be filed and declared effective as soon as reasonably
practicable after such Stock Payment Election is made.
(iii) (A) Notwithstanding anything herein to the contrary,
should the Buyer then be prohibited from paying the Contingent Payment in full
in cash pursuant to the Senior Credit Facility, the Buyer shall be permitted to
make payment of the Contingent Payment partially in Buyer Common Stock (as
provided in Section 2.2(f)(i)(B)) without having to satisfy the condition set
forth in clause (A) of the first sentence of Section 2.2(f)(ii) if the Buyer is
unable to satisfy such condition after using its reasonable efforts to do so;
provided, however, that in such an event, the Buyer shall continue to employ
commercially reasonable efforts to register for resale as soon as reasonably
possible the Buyer Common Stock issued as the Contingent Payment hereunder. Upon
the eventual effective date of any such registration statement, if the value of
the Buyer Common Stock so issued as the Contingent Payment, as measured at the
close of the trading day immediately preceding the effective date of such
registration (the "Delayed Registration Valuation"), is less than the Contingent
Payment, then the Buyer shall issue (in accordance with the written instructions
of the Seller Representative set forth in the notice to the Buyer given pursuant
to Section 2.2(d)) and include in the registration
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an amount of shares having a value equal to the difference between the
Contingent Payment and the Delayed Registration Valuation.
(B) If the Buyer makes a Cash Payment Election or is
otherwise required to pay the Contingent Payment in cash and is unable to pay
the Contingent Payment in cash because of its failure to satisfy the condition
in the preceding sentence relating to the Senior Credit Facility, then the
parties hereto agree that the Buyer shall, to the extent not prohibited under
the Senior Credit Facility, pay in accordance with the written instructions of
the Seller Representative set forth in the notice to the Buyer given pursuant to
Section 2.2(d) or (e), as applicable, the Contingent Payment in cash, and shall
further pay as set forth in such instructions, the then remaining balance of any
amounts due pursuant to Section 2.2(d) in Buyer Common Stock.
(g) For purposes of this Section 2.2, the following terms shall
have the following respective meanings:
(i) "Acquired Business" shall mean any business that is
acquired by the Buyer or any of its Affiliates (including the Company) and that,
by written agreement among the Buyer and the Seller Representative, is included
in the definition of the Bicycle Business for the purpose of calculating
Business EBITDA, and for which the Average Annual Business EBITDA targets set
forth in Section 2.2(d) may be adjusted upon the mutual written agreement of the
Buyer and the Seller Representative.
(ii) "Average Annual Business EBITDA" shall mean (A) the sum
of the Business EBITDA for each of the three full fiscal years ending December
31, 2004, 2005 and 2006, divided by (B) 3.0.
(iii) "Bicycle Business" shall mean the Business and any
additional product lines developed by the Company or any Subsidiary, and any
Acquired Business as of the date the acquisition of such Acquired Business is
consummated.
(iv) "Business EBITDA" shall mean, for each full fiscal year
in the Earn-Out Period, the Net Income of the Bicycle Business, plus an amount
which, in the determination of Net Income for each such fiscal year, has been
deducted for (A) interest expense for such fiscal year, (B) total Taxes
(including Transfer Taxes) for such fiscal year, (C) depreciation and
amortization expense for such fiscal year, (D) Excluded Expenses and (E) any
legal, accounting, investment banking and other expenses incurred in connection
with the transactions contemplated hereby, in each case determined in accordance
with GAAP.
(v) "Excluded Expenses" shall mean the following expenses, as
reflected in each Earn-Out Statement: (A) the Buyer's and any of its Affiliates'
general corporate overhead and administrative expenses, other than those
directly related to the Company or any Subsidiary; (B) nonrecurring business
expenses that are not related to the generation of revenues in subsequent fiscal
periods; (C) any compensation expenses relating to the issuance, conversion,
exercise, cancellation and payments with respect to options or stock; (D) direct
and indirect costs (including time and travel expenses) incurred by the Company
or any Subsidiary in working with the Buyer's corporate office on matters not
directly related to the Bicycle Business; (E) other
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expenses allocated to the Company or any Subsidiary in respect of any matters
not directly related to the Bicycle Business; and (F) extraordinary items as
determined in accordance with GAAP.
(vi) "Net Income" shall mean, for any period, net income as
determined in accordance GAAP.
(vii) "Senior Credit Facility" shall mean the Buyer's credit
facility under the Credit Agreement, dated as of April 24, 2002, by and among
the Buyer, Bank of America, N.A., in its capacity as administrative agent, and
the various lenders signatory thereto (as heretofore amended and as from time to
time hereafter further amended, modified, supplemented, restated, amended and
restated, replaced, renewed, or refinanced from time to time) .
(h) From and after the Closing Date (as defined below) and until
the earlier to occur of (i) December 31, 2006 or (ii) the closing of a sale of
the Bicycle Business, as described in Section 2.2(e), the Buyer shall use its
commercially reasonable efforts to cause the Bicycle Business to be operated and
managed in a manner consistent with reasonable business practices. The Buyer
further agrees and undertakes to each Seller that the Buyer will use
commercially reasonable efforts to (A) promote, support and continue the
operations of the Bicycle Business, and will act in good faith with regard to
the achievement of the Average Annual Business EBITDA target set forth in
Section 2.2(d)(iii); and (B) maintain the separate legal existence of the
Company and each Subsidiary, provided that the Buyer shall be permitted to
change the legal form of the Company and any Subsidiary so long as any such
change does not materially adversely affect the ability of the Company to
achieve the Average Annual Business EBITDA target set forth in Section
2.2(d)(iii).
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING SELLERS
As a material inducement to the Buyer to enter into and perform its
obligations under this Agreement, each Seller, with respect to itself and not
any other Seller, hereby represents and warrants to the Buyer (a) except as
shall be specifically set forth in the Initial Disclosure Schedule (as defined
below), as finally agreed upon pursuant to Section 6.9(b), as of the date
hereof, and (b) except as shall be specifically set forth in the Closing
Disclosure Schedule (as defined below), as of the Closing Date (except as
otherwise provided herein), as follows:
3.1. Organization and Good Standing.
Such Seller, if not an individual, is a Person duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization (as applicable) and has all necessary corporate or
organizational power and authority to carry on its business as presently
conducted.
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3.2. Power and Authorization.
(a) Such Seller, if not an individual, has all requisite corporate
or organizational (as applicable) and other power and authority to enter into
and perform its obligations under this Agreement and under the other agreements
and documents (collectively, the "Seller Closing Documents") required to be
delivered by it pursuant hereto at the Closing (as defined below). The
execution, delivery and performance by such Seller of this Agreement and the
Seller Closing Documents have been duly authorized by all necessary corporate,
organizational or other action. This Agreement has been duly and validly
executed and delivered by such Seller and constitutes the legal, valid and
binding obligation of such Seller, enforceable against it in accordance with its
terms and, when executed and delivered as contemplated herein, each of the
Seller Closing Documents shall constitute the legal, valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms, in each case subject to applicable bankruptcy, insolvency and similar
laws affecting the enforceability of creditors' rights generally, general
equitable principles, the discretion of courts in granting equitable remedies
and matters of public policy.
(b) Such Seller, if an individual, is at least eighteen (18) years
of age (or such Seller has a guardian or custodian, which guardian or custodian
has executed this Agreement on such Seller's behalf, who is at least eighteen
(18) years of age), and has (or such guardian or custodian has) all requisite
power and authority to enter into and perform such Seller's obligations under
this Agreement and under the Seller Closing Documents required to be delivered
by such Seller pursuant hereto at the Closing. This Agreement has been duly and
validly executed and delivered by such Seller (or such guardian or custodian)
and constitutes the legal, valid and binding obligation of such Seller,
enforceable against him in accordance with its terms and, when executed and
delivered as contemplated herein, each of the Seller Closing Documents shall
constitute the legal, valid and binding obligation of such Seller, enforceable
against such Seller in accordance with its terms, in each case subject to
applicable bankruptcy, insolvency and similar laws affecting the enforceability
of creditors' rights generally, general equitable principles, the discretion of
courts in granting equitable remedies and matters of public policy.
3.3. No Conflicts.
(a) The execution, delivery and performance of this Agreement and
the Seller Closing Documents do not and will not (with or without the passage of
time or the giving of notice): (i) violate or conflict with (as applicable) the
articles or certificate of incorporation, bylaws, articles or certificate of
formation or organization, limited liability company or operating agreement,
partnership agreement or other organizational document of such Seller; (ii)
violate or conflict with any Law binding upon such Seller or violate or conflict
with, result in a breach of, constitute a default or otherwise cause any loss of
benefit under any material agreement or other material obligation to which such
Seller is a party or by which the Seller or any of its assets are otherwise
bound, except, in each case, for such violations, conflicts, breaches, defaults
or losses as would not have an adverse effect upon the ability of such Seller to
enter into or perform its obligations under this Agreement or any Seller Closing
Document; or (iii) result in, require or permit the creation or imposition of
any Encumbrance upon or with respect to any of the Purchased Securities held by
such Seller. Except for filings under the Hart-Scott-Rodino
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Antitrust Improvements Act of 1976 (the "HSR Act"), no consent, authorization,
waiver by or filing with any governmental agency, administrative body or other
third party is required in connection with the execution, delivery or
performance of this Agreement by such Seller or the consummation by the Seller
of the transactions contemplated hereby, except for such consents,
authorizations, waivers or filings, as to which the failure to obtain would not
have an adverse effect upon the ability of such Seller to enter into or perform
its obligations under this Agreement or any Seller Closing Document.
(b) There are no Proceedings pending against such Seller or, to
the Knowledge of such Seller, pending against the Company or threatened against
such Seller or the Company that question any of the transactions contemplated
by, or the validity of, this Agreement or any of the other agreements or
instruments contemplated hereby or which, if adversely determined, would have an
adverse effect upon the ability of the Seller to enter into or perform its
obligations under this Agreement or any such other agreements or instruments.
3.4. Ownership of the Purchased Securities.
Such Seller owns all right title and interest, and has good and valid
title, in and to all of the Purchased Securities set forth opposite its name on
Schedule I attached hereto, beneficially and of record, free and clear of any
Encumbrance. There are no shareholder or other agreements affecting the right of
such Seller to convey such Purchased Securities (or rights therein) to the Buyer
as contemplated hereby or any other right of the Seller with respect to such
Purchased Securities, and such Seller has the absolute right, authority, power
and capacity to sell, transfer, convey, assign and deliver the Purchased
Securities to the Buyer as contemplated hereby, free and clear of any
Encumbrance (except for restrictions imposed generally by applicable securities
laws). Upon delivery to the Buyer of the certificate or other instruments
representing all of the Purchased Securities set forth opposite such Seller's
name on Schedule I attached hereto, the Buyer will acquire good and valid title
in and to such Purchased Securities, free and clear of any Encumbrance (except
for applicable securities laws restrictions).
3.5. Exercise of Options and Conversion of the Convertible Note.
As of the Closing, all Outstanding Options, to extent owned,
beneficially or of record, by such Seller will be exercised, converted or
otherwise cancelled or extinguished and, from and after the Closing, none of
such Outstanding Options will be outstanding.
3.6. Investment Representations.
Such Seller hereby acknowledges and agrees that the Contingent Payment,
if any, payable thereto hereunder may be paid, in whole or in part, in the form
of Buyer Common Stock (as provided herein) and that, in connection with such
potential receipt of Buyer Common Stock (the "Right") in accordance with this
Agreement, the Seller hereby further represents and warrants to the Buyer that
such Seller: (a) except to the extent that the Buyer Common Stock is registered
under the Securities Act, is acquiring the Right (and will acquire the related
Buyer Common Stock) to be acquired by it hereunder for its own account and not
with a view to, or for sale in connection with, any resale, transfer or
distribution thereof, nor with any present intention of distributing, or to make
any distribution of, such Right (or Buyer Common Stock), except for
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any allocation of the Contingent Payment (as provided in Section 2.2(d) or (e));
(b) has (or have) been afforded an opportunity to ask questions of and receive
answers from representatives of the Buyer concerning the terms and conditions of
this Agreement and the acquisition of the Right (and the related Buyer Common
Stock) as contemplated hereby; and (c) if identified as such on Schedule I
hereto, is an "accredited investor", as such term is defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND ITS
SUBSIDIARIES
As a material inducement to the Buyer to enter into and perform its
obligations under this Agreement, each Seller and the Company hereby represent
and warrant to the Buyer (a) except as shall be specifically set forth in the
Initial Disclosure Schedule, as finally agreed upon pursuant to Section 6.9(b),
as of the date hereof, and (b) except as shall be specifically set forth in the
Closing Disclosure Schedule, as of the Closing Date (except as otherwise
provided herein), as follows:
4.1. Organization and Good Standing.
The Company and each Subsidiary is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, and has all necessary corporate or other power and authority, as
applicable, to conduct its business as presently conducted and to own and lease
the properties and assets used in connection therewith and to perform all of its
obligations under each agreement and instrument by which it is bound. The
Company and each Subsidiary is qualified to do business and is in good standing
in each jurisdiction where the nature or character of the property owned, leased
or operated by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure to be so qualified or be in
good standing would not reasonably be likely to have a Material Adverse Effect.
Section 4.1 of the Disclosure Schedule shall set forth all jurisdictions in
which the Company or any Subsidiary is qualified to do business, in each case
identifying the entity or entities so qualified to do business in such
jurisdictions.
4.2. Power and Authorization.
The Company has all requisite corporate power and authority to enter
into and perform its obligations under this Agreement and under the other
agreements and documents required to be delivered by it pursuant hereto at the
Closing (collectively, the "Company Closing Documents"). The execution, delivery
and performance by the Company of this Agreement have been duly authorized by
all necessary corporate action. This Agreement has been duly and validly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
the enforceability of creditors' rights generally, general equitable principles,
the discretion of courts in granting equitable remedies and matters of public
policy.
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4.3. Capitalization.
(a) As of the date hereof, the total outstanding shares of the
Company's capital stock consist of 2,191.26 shares of common stock, par value
$0.01 per share (the "Company Common Stock"), all of which shares are owned of
record by the Sellers and the Put/Call Holders. Immediately after the Closing,
the total outstanding shares of the Company's capital stock will consist of no
more than 2,401.6899 shares of Company Common Stock, all of which shares (other
than those that are Purchased Securities acquired by the Buyer at the Closing)
will be owned of record by the Sellers and the Put/Call Holders. Other than the
Outstanding Options, there are no outstanding offers, options, warrants, rights,
agreements or commitments of any kind (contingent or otherwise), including
employee benefit arrangements, relating to the issuance, conversion,
registration, voting, sale, repurchase or transfer of any equity interests or
other securities of the Company or obligating the Company or any other Person to
purchase or redeem any such equity interests or other securities. All of the
issued and outstanding shares of capital stock of the Company have been duly
authorized, are validly issued and outstanding, are fully paid and nonassessable
and have been issued and are held in compliance with all applicable securities
and other Laws. No securities issued by the Company from the date of its
incorporation to the date hereof were, and as of the Closing Date will have
been, issued in violation of any statutory or common law preemptive rights.
There are no dividends which have accrued or been declared but are unpaid on any
capital stock of the Company. All permits or authorizations required to be
obtained from or registrations required to be effected with any Person in
connection with any and all issuances of securities of the Company from the date
of its incorporation to the date hereof, and as of the Closing Date will, have
been obtained or effected.
(b) Section 4.3(b) of the Disclosure Schedule shall set forth for
each Subsidiary: (i) its name and jurisdiction of incorporation, formation or
organization; (ii) if such Subsidiary is a corporation, (A) the number of shares
of authorized capital stock of each class or series of its capital stock, (B)
the number of issued and outstanding shares of each class or series of its
capital stock, the names of the record holders thereof, and the number of shares
held by each such holder and (C) the number of shares of its capital stock held
in treasury; and (iii) if such Subsidiary is not a corporation, (Y) the amount
of each class or series of its authorized equity interests and (Z) the amount of
issued and outstanding interest of each class or series of its equity interests,
the names of the record holders thereof, and the amount or percentage interest
thereof held by each such holder. There are no outstanding offers, options,
warrants, rights, agreements or commitments of any kind (contingent or
otherwise), including employee benefit arrangements, relating to the issuance,
conversion, registration, voting, sale, repurchase or transfer of any equity
interests or other securities of any Subsidiary or obligating any Subsidiary or
any other Person to purchase or redeem any such equity interests or other
securities. All of the issued and outstanding equity interests of each
Subsidiary have been issued and are held in compliance with all applicable
securities and other Laws. No securities issued by any Subsidiary from the date
of its incorporation or organization (as applicable) to the date hereof were,
and as of the Closing Date will have been, issued in violation of any statutory
or common law preemptive rights. There are no dividends which have accrued or
been declared but are unpaid on the outstanding equity interests of any
Subsidiary. All permits or authorizations required to be obtained from or
registrations required to be effected with any Person in connection with any and
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all issuances of securities of any Subsidiary from the date of its incorporation
to the date hereof, and as of the Closing Date will, have been obtained or
effected.
4.4. Investments and Subsidiaries.
The Business is conducted solely by and through the Company and the
Subsidiaries, and neither the Company nor any Subsidiary directly or indirectly
owns, controls or has any investment or other ownership interest in any Person
other than the Company's ownership of its interest in the Subsidiaries.
4.5. No Conflicts.
The execution, delivery and performance of this Agreement and the
Company Closing Documents do not and will not (with or without the passage of
time or the giving of notice): (i) violate or conflict with the articles or
certificate of incorporation, bylaws, articles or certificate of formation or
organization, limited liability company or operating agreement, partnership
agreement or other organizational document of the Company or any Subsidiary;
(ii) violate or conflict with any Law binding upon the Company or any
Subsidiary, except as would not reasonably be likely to have a Material Adverse
Effect or as caused, upon consummation of the transactions contemplated hereby,
by the nature of the Buyer's business or the Buyer's directors or officers;
(iii) violate or conflict with, result in a breach of, constitute a default or
otherwise cause any loss of benefit under any material agreement or other
material obligation to which the Company or any Subsidiary is a party (including
without limitation the Contracts that shall be set forth in Section 4.14 of the
Disclosure Schedule), or by which either of them or any of their assets are
otherwise bound, except, in each case, for such violations, conflicts, breaches,
defaults or losses as would not reasonably be likely to have a Material Adverse
Effect or that are caused, upon consummation of the transactions contemplated
hereby, by the nature of the Buyer's business or the Buyer's directors or
officers; (iv) result in the creation of an Encumbrance pursuant to, or give
rise to any penalty, acceleration of remedies, right of termination or otherwise
cause any alteration of any rights or obligations of any party under any
material Contract to which either the Company or any Subsidiary is a party or by
which either of them or any of their assets are otherwise bound, except any such
Encumbrance, penalty or right caused, upon consummation of the transactions
contemplated hereby, by the nature of the Buyer's business or the Buyer's
directors or officers; or (v) require any consent, notice, authorization, waiver
by or filing with any governmental agency, administrative body or other third
party, except (A) as would not reasonably be likely to have a Material Adverse
Effect, (B) for filings under the HSR Act or (C) for filings that are caused,
upon consummation of the transactions contemplated hereby, by the nature of the
Buyer's business.
4.6. Financial Matters.
The Company has delivered to the Buyer true and complete copies of the
Company's (a) audited consolidated balance sheet and related audited
consolidated statements of income, stockholder's equity and comprehensive
income, and cash flows at and for the fiscal years ended September 28, 2003 and
September 29, 2002, including the notes thereto (the "Audited Financial
Statements"), and (b) unaudited consolidated balance sheet at December 31, 2003
(the "Interim Balance Sheet") and the related unaudited consolidated statements
of income
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and cash flows for the three months ended December 31, 2003 (the "Interim
Financial Statements" and, together with the Audited Financial Statements and
the Monthly Statements delivered to the Buyer pursuant to Section 6.10, the
"Financial Statements"). The Company's audited consolidated balance sheet at
September 28, 2003 is referred to herein as the "Balance Sheet". The Financial
Statements (i) have been prepared based on the books and records of the Company
and each Subsidiary, in accordance with GAAP consistently applied throughout the
periods covered thereby, except, in the case of the Interim Financial
Statements, for normal year-end adjustments, the omission of footnote
disclosures required by GAAP and the omission of a statement of stockholder's
equity and comprehensive income, and (ii) fairly present in all material
respects the financial position of the Company and the Subsidiaries on a
consolidated basis as of the respective dates thereof and the results of
operations, changes in stockholders' equity and comprehensive income (in the
case of the Audited Financial Statements), and cash flows for the periods
covered thereby.
4.7. Absence of Undisclosed Liabilities.
There are no liabilities or obligations of the Company or any
Subsidiary, either accrued, absolute or otherwise, other than those that: (a)
are disclosed or reserved against on the Balance Sheet, the Interim Balance
Sheet or the notes thereto; (b) have arisen in the ordinary course of business
since the date of the Interim Balance Sheet; (c) shall have been described in
Section 4.7 of the Disclosure Schedule; or (d) are not required by GAAP to be
reflected on the Interim Balance Sheet or the Balance Sheet. Except as shown in
the Balance Sheet, the Interim Balance Sheet or as shall be shown in Section 4.7
of the Disclosure Schedule, neither the Company nor any Subsidiary is directly
or indirectly liable upon or with respect to (by discount, repurchase agreements
or otherwise), or obliged in any other way to provide funds in respect of, or to
guarantee or assume, any debt, liability, obligation or dividend of any other
Person. Except as set forth in (a) above, to the Knowledge of the Company, there
are no contingent liabilities or obligations of the Company or any Subsidiary.
4.8. Real Property.
(a) Section 4.8(a) of the Disclosure Schedule sets forth a true,
accurate and complete list of the addresses of all real property owned or leased
by the Company or any Subsidiary (each, a "Property"; collectively, the
"Properties").
(b) The Company and each Subsidiary (as applicable) has insurable
title in fee simple to all of the Properties designated in Section 4.8(a) of the
Disclosure Schedule as owned by it (the "Owned Properties") and owns all right,
title and interest in and to all leasehold estates and other rights purported to
be granted to them by the leases and other agreements relating to the Properties
as described in Section 4.8(a) of the Disclosure Schedule, in each case free and
clear of any Encumbrance except for: (i) liens for current taxes not yet
delinquent, assessments and governmental charges and levies which are not in
default or which are being contested in good faith by appropriate proceedings
and are not material in amount or value in relation to the value of the
associated Property and adequate reserves with respect thereto are maintained on
the books and records of the Company or such Subsidiary; (ii) any zoning or
other governmentally established restrictions or encumbrances; (iii) such
utility and municipal easements and restrictions, if any, as do not detract in
any material respect from the value of the
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Property subject thereto and do not materially interfere with any Property used
in the ordinary conduct of the Business as presently conducted; and (iv)
Encumbrances that, individually or in the aggregate, do not have a material
adverse effect upon the Property or Properties affected thereby (collectively,
the "Permitted Encumbrances"). The Sellers or the Company shall provide copies
of all existing surveys, title insurance policies and their respective exception
documents, to the extent in the possession of the Company or any Subsidiary, to
Buyer or its representatives. Neither the Company nor any Subsidiary has
received written notice that (i) any building or structure, to the extent of the
premises owned or leased by the Company or any Subsidiary, or (ii) any
appurtenance thereto or equipment therein, or (iii) the operation or maintenance
thereof, violates in any material respect any restrictive covenant or any rule
adopted by any national, state or local association or board of insurance
underwriters. Neither the Company nor any Subsidiary has received written notice
of any pending or threatened condemnation proceeding, special assessment, tax
certiorari or similar proceeding with respect to any Property. To the Knowledge
of the Company, the applicable covenants, easements or rights-of-way affecting
the Properties do not impair in any material respect the Company's or any
Subsidiary's ability to use any Property in the operation of the Business as
presently conducted. To the Knowledge of the Company, the Company and each
Subsidiary (as applicable) have sufficient access to public roads, streets or
the like or valid perpetual easements over private streets, roads or other
private property for such ingress to and egress from each Property to use each
Property in the operation of the Business as presently conducted. For the
purposes of this Section 4.8(b), "insurable title" is deemed to be such title as
a nationally reputable title company will insure at standard rates.
(c) Neither the Company nor any Subsidiary has received any
written notice (i) of any pending or contemplated rezoning proceeding affecting
any Property, or (ii) from any utility company or municipality of any fact or
condition that would be reasonably likely to result in the discontinuation of
presently available sewer, water, electric, gas, telephone or other utilities or
services for any Property.
(d) The improvements to, or which constitute a portion of, any
Property are in the operating condition and repair necessary for the Business to
operate in the ordinary course, as presently conducted.
(e) Neither the Company nor any Subsidiary is party to any lease
or license with respect to any Owned Property.
(f) No part of any Owned Property, including, without limitation,
any building or improvement thereon, is subject to any purchase option, right of
first refusal or first offer or other similar right.
(g) All brokerage commissions and other compensation and fees
payable by the Company by reason of the acquisition of any Owned Property have
been paid in full.
(h) The Company or a Subsidiary currently has a leasehold interest
in those Properties indicated as such in Section 4.8(a) of the Disclosure
Schedule (each, a "Leased Property"), and Section 4.8(h) of Disclosure Schedule
sets forth a list of all leases, licenses, permits, subleases and occupancy
agreements, together with all amendments and supplements thereto, through which
the Company or any Subsidiary has rights in and to such Leased Property
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(each, as may have been amended or supplemented, a "Lease"). The Sellers shall
provide true, correct and complete copies of all Leases to the Buyer or its
representatives. No option has been exercised under any Lease, except options
whose exercise has been evidenced by a written document, a true, complete and
accurate copy of which shall be delivered to the Buyer or its representatives
with the corresponding Lease.
(i) Each Lease is in full force and effect. Neither the Company
nor any other party to a Lease has given to the other party to such Lease
written notice of any breach or default that remains uncured as of the date
hereof. The Company is not in default under any Lease and, to the Knowledge of
the Company, no other party to a Lease is in default. To the Knowledge of the
Company, there are no events which with the passage of time or the giving of
notice or both would constitute a default by the Company or by any other party
to such Lease.
(j) Neither the Company nor any Subsidiary is party to any
sublease, license or other agreement granting to any Person or entity any right
to the use, occupancy or enjoyment of any Leased Property or any portion
thereof.
(k) There are no guaranties from any of the Sellers, the Company,
or any Subsidiary in favor of the lessors with respect to any Leased Property.
(l) To the Knowledge of the Company and any Subsidiary (as
applicable), no Leased Property is subject to a fee mortgage, deed of trust,
other security interest or similar encumbrance, nor to a ground lease.
4.9. Personal Property.
The Company and each Subsidiary has good, valid and marketable title in
and to the personal property owned by it, free and clear of all Encumbrances,
except for any Permitted Encumbrances. All leased personal property used in the
Business is used pursuant to valid, subsisting and enforceable leases,
subleases, licenses and other agreements binding upon the parties thereto in
accordance with their terms, except as would not reasonably be likely to have a
Material Adverse Effect.
4.10. Taxes.
(a) The Company and each Subsidiary has filed (or joined in the
filing of) when due all Tax Returns required by applicable law to be filed with
respect to the Company and each Subsidiary and all Taxes shown to be due on such
Tax Returns have been paid; (b) all such Tax Returns were true, correct and
complete in all material respects as of the time of each such filing; (c) all
material Taxes relating to periods ending on or before the Closing Date owed by
the Company and each Subsidiary (whether or not shown on any Tax Return) at any
time on or prior to the Closing Date, if required to have been paid, have been
paid (except for Taxes which are being contested in good faith); (d) any
liability of the Company and each Subsidiary for Taxes not yet due and payable,
or which are being contested in good faith, has been provided for on the
financial statements of the Company in accordance with generally accepted
accounting principles; (e) there is no action, suit, proceeding, investigation,
audit or claim now pending against, or with respect to, the Company or any
Subsidiary in respect of any Tax or assessment, nor is any claim for additional
Tax or assessment asserted by any Tax authority; (f) since
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January 1, 2000, no claim has been made by any Tax authority in a jurisdiction
where the Company or any Subsidiary does not currently file a Tax Return that
the Company or any Subsidiary is or may be subject to Tax by such jurisdiction,
nor to the Sellers' Knowledge is any such assertion threatened; (g) there is no
outstanding request for any extension of time within which to pay any Taxes or
file any Tax Returns; (h) there has been no waiver or extension of any
applicable statute of limitations for the assessment or collection of any Taxes
of the Company or any Subsidiary; (i) the Company and each Subsidiary are not
parties to any agreement, whether written or unwritten, providing for the
payment of Taxes, payment for Tax losses, entitlements to refunds or similar Tax
matters; (j) the Company and each Subsidiary has withheld and paid all material
Taxes required to be withheld in connection with any amounts paid or owing to
any employee, creditor, independent contractor or other third party; (k) the
Company and each Subsidiary has not been a United States real property holding
companies within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(i)(A)(ii) of the Code; and (l)
neither the Company nor any Subsidiary has any liability for Taxes under Treas.
Reg. (section)1.1502-6 (or any similar provision of state, local, or foreign
law), as a member of any consolidated, combined or unitary group other than one
for which the Company was the common parent.
4.11. Litigation.
There are no Proceedings against either the Company or any Subsidiary
or their respective Affiliates, directors (or persons in similar positions),
officers, shareholders, partners or members in their capacities as such, pending
or, to the Knowledge of the Company and each Seller, threatened. Neither the
Company nor any Subsidiary is bound by any judgment, award, determination,
order, writ, injunction or decree of any court or federal, state, municipal or
governmental department or any commission, board, bureau, agency,
instrumentality, administrator or arbitrator.
4.12. Labor Matters.
With respect to labor matters: (a) neither the Company nor any
Subsidiary is a party to any labor or collective bargaining agreement and there
are no labor or collective bargaining agreements which pertain to, or cover,
employees of the Company or any Subsidiary; (b) no employees of the Company or
any Subsidiary are represented by any labor organization, no labor organization
or group of employees has made a pending demand for recognition or
certification, and there are no representation or certification proceedings
presently pending or, to the Knowledge of the Company, threatened to be brought
or filed with the National Labor Relations Board or any other labor relations
tribunal or authority; (c) there are no strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances or other material labor
disputes pending or, to the Knowledge of the Company, threatened against or
involving the Company or any Subsidiary, and there are no unfair labor practice
charges, grievances or complaints pending or threatened in writing by or on
behalf of any employee or group of employees; (d) there are no complaints,
charges or claims against the Company or any Subsidiary pending or, to the
Knowledge of the Company, threatened to be brought or filed with any public or
governmental authority, arbitrator or court based on, arising out of, in
connection with, or otherwise relating to the employment of, or termination of
employment by, the Company or any Subsidiary of any individual; and (e) the
Company and each Subsidiary (i) have
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complied in all material respects with all applicable federal, state, and local
legal requirements relating to its employees, arising from statutes relating to
wages, hours, collective bargaining, unemployment insurance, worker's
compensation, equal employment opportunity, age and disability discrimination
and the payment and withholding of Taxes, and (ii) have complied with all
applicable federal, state and local legal requirements relating to its employees
arising from statutes relating to immigration and I-9 compliance.
4.13. Intellectual Property Rights.
(a) The Company and/or the Subsidiaries own all right, title and
interest in and to, or have valid licenses to use, all Intellectual Property. To
the Knowledge of the Company and each Seller, (i) none of the Intellectual
Property owned by the Company or any Subsidiary has been wrongfully used,
disclosed or appropriated to the detriment of the Company or any Subsidiary for
the benefit of any other Person; and (ii) no employee, independent contractor or
agent of any Seller, the Company, or any Subsidiary has misappropriated any
trade secrets or other confidential information of any other Person in the
course of the performance of his or her duties as an employee, independent
contractor or agent of such Seller, the Company, or any Subsidiary.
(b) Neither the Company nor any Seller has any Knowledge of, or
has received any notice alleging, that the Company or any Subsidiary has
violated or infringed any intellectual property rights of any other Person. To
the Knowledge of the Company and each Seller, no third party is challenging the
Company's or any Subsidiary's ownership or use of, or the validity or
enforceability of, any Intellectual Property owned by the Company or any
Subsidiary. To the Knowledge of the Company and each Seller, no third party is
infringing upon or violating any of the Intellectual Property owned by the
Company or any Subsidiary.
(c) Section 4.13( c) of the Disclosure Schedule shall set forth a
true, accurate, complete and current list of all patents, patents pending,
trademark/service mark applications and registrations, copyright applications
and registrations, domain name registrations that are owned by the Company or
any Subsidiary, and agreements pertaining to the Intellectual Property (other
than "shrink-wrap" or "click through" agreements). All renewal fees, maintenance
fees, and other fees in respect of the material Intellectual Property owned by
the Company or any Subsidiary that have fallen due on or prior to the date of
this Agreement (and the Closing Date) have been (and as of the Closing Date will
have been) paid in full except to the extent that Company or Sellers have
intentionally abandoned or otherwise failed to maintain such Intellectual
Property. The consummation of the transactions contemplated hereby will not
materially alter or impair any of the Company's or any Subsidiary's rights in or
to any Intellectual Property.
(d) Neither the Company nor any Subsidiary is under any obligation
to pay royalties or other payments in connection with any agreement, nor is it
restricted from assigning its rights respecting Intellectual Property, nor will
it be, as a result of the execution, delivery, or performance of this Agreement
and the transactions contemplated hereby, in breach of any agreement relating to
the Intellectual Property. The Company and each Subsidiary is in material
compliance with all license or other agreements pertaining to the Intellectual
Property.
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(e) Other than as part of the Business, neither any Seller nor, to
the Knowledge of the Company, any third party has used or currently uses any
Trademarks or any other trademark or service mark containing "Bicycle" in
connection with goods or services identical or similar to, or otherwise in
competition with, those provided in the Business.
(f) Section 4.13(f) of the Disclosure Schedule shall set forth a
true, accurate, complete and current list of all Software used in the operation
of the Business. No unlicensed copies of any mass market Software that is
available in consumer retail stores or otherwise commercially available and
subject to "shrink-wrap" or "click-through" license agreements are installed on
any of the Company's or any Subsidiary's computers or computer systems.
4.14. Contracts and Commitments.
Section 4.14 of the Disclosure Schedule shall set forth a complete and
accurate list of:
(a) For the two (2) year period ended on September 28, 2003, each
Contract (other than purchase orders) with, and a complete and correct list of:
(i) the top ten (10) customers of the Company (together with any Subsidiary) in
the United States, and the aggregate sales to such customers (identifying the
approximate percent of total sales derived from each such customer), (ii) the
top ten (10) customers of the Company (together with any Subsidiary) outside of
the United States, and the aggregate sales to such customers (identifying the
approximate percent of total sales derived from each such customer), (iii) the
top ten (10) suppliers in the United States, by dollar volume of the Business
and the aggregate dollar volume of purchases (broken down by principal
categories) by the Business from such suppliers for such period; and (iv) the
top ten (10) suppliers outside of the United States, by dollar volume of the
Business and the aggregate dollar volume of purchases (broken down by principal
categories) by the Business from such suppliers for such period;
(b) Each Contract (other than open sales orders) that involves the
performance of services for or the delivery of goods or materials to the Company
and/or any Subsidiary during the Company's most recently completed fiscal year
of amount or value in excess of $100,000 or pursuant to which the Company or any
Subsidiary is obligated to purchase future services, goods or materials in an
amount or value that is reasonably expected to exceed $100,000;
(c) Each Contract that was not entered into in the ordinary course
of business that involves future expenditures or receipts in excess of $50,000
to which the Company and/or any Subsidiary is a party or is otherwise bound;
(d) Each license or other Contract with respect to the
Intellectual Property to which the Company and/or any Subsidiary is a party or
is otherwise bound other than with respect to commercially available,
off-the-shelf software;
(e) Each Contract relating to the borrowing of money or a line of
credit to which the Company and/or any Subsidiary is a party or pursuant to
which the Company and/or any Subsidiary has guaranteed any indebtedness or
obligation of any other Person;
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(f) Each Contract with respect to environmental investigation,
removal, remediation or monitoring at any facility or property (including,
without limitation, any Property);
(g) Each representative, distribution, marketing or sales agency
Contract which is not terminable within sixty (60) days after the date hereof to
which the Company and/or any Subsidiary is a party or is otherwise bound;
(h) Each Contract containing covenants limiting the freedom of the
Company and/or any Subsidiary to engage in any line of business or to compete
with any Person or covenants of another Person not to compete with the Company
or any Subsidiary;
(i) Each sole source supply Contract for the purchase of any
material, raw material, component or product that is otherwise not generally
available and that is used in the manufacture of any product of the Business;
(j) Each guaranty and indemnity by the Company and/or any
Subsidiary to any Person in connection with the supply of components or raw
materials to the Business;
(k) All agreements with respect to the proposed acquisition of any
other entity, business, line of business or material amount of assets to which
the Company and/or any Subsidiary is a party or is otherwise bound;
(l) All employment, severance or change of control agreements with
employees of the Company or any Subsidiary and all consulting agreements to
which the Company or any Subsidiary is a party (other than unwritten employment
arrangements terminable at will without payment of any contractual severance or
other amount);
(m) Each agreement to which the Company or any Subsidiary is a
party or is otherwise bound with respect to the sharing, contingent or
otherwise, of profits, revenues, losses, costs or liabilities of any Person or
entity;
(n) All standard warranties made with respect to the Business; and
(o) Any other Contract to which the Company and/or any Subsidiary
is a party or is otherwise bound that is material to the condition (financial or
otherwise), results of operations, assets, properties, liabilities and business
(including, without limitation, the Business) of the Company or any Subsidiary.
Neither the Company nor any Subsidiary is in breach or default with
respect to any of the above Contracts (except for such breaches or defaults as
would not reasonably be likely to have a Material Adverse Effect) and, to the
Knowledge of the Company, no other party thereto is in breach or default with
respect to any of the above Contracts (except for such breaches or defaults as
would not reasonably be likely to have a Material Adverse Effect), and no event
has occurred which, with due notice or lapse of time or both, would constitute
such a default. Neither the Company nor any Subsidiary has received any written
notice since September 28, 2003 of any breach or default with respect to any of
the above Contracts. Neither
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the Company nor any Subsidiary is a party to, or is otherwise bound by or under,
any contract, agreement, binding bid, binding proposal, or binding quotation
with any Governmental Entity.
4.15. Existing Condition.
(a) Since the date of the Balance Sheet, there has not occurred:
(i) any Material Adverse Effect or any event, change or effect which would
reasonably be likely to have a Material Adverse Effect; (ii) any damage to,
destruction or loss of any material asset of the Company or any Subsidiary not
covered by insurance in excess of $50,000; (iii) any waiver of any material
right, forbearance of any material debt or release of any material claim, except
in each case in the ordinary course of business; (iv) any adoption of or change
in any Plan (as defined below) or, except in the ordinary course of business,
labor policy; (v) any entry into, or any amendment, termination or receipt of
notice of termination of, any agreement which is required to be disclosed in the
Disclosure Schedule, or any material transaction (including, without limitation,
any such relating to capital expenditures); (vi) any sale (other than sales of
inventory in the ordinary course of business), assignment, conveyance, transfer,
lease, or other disposition of any material asset or property of the Company or
any Subsidiary or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company or any Subsidiary,
except, in each case, as specifically permitted hereunder; (vii) any capital
expenditure in excess of $75,000, or additions made to property, plant and
equipment used in the operations of the Business other than in the ordinary
course of business; (viii) any loss or receipt of notice of any potential loss
of any customer of the Company or any Subsidiary described in Section 4.14(a),
or of a reduction in aggregate orders from any such customer, except in the
ordinary course of business, or as would otherwise not be reasonably likely to
represent a material reduction from budgeted sales by the Company or any
Subsidiary to such customer; or (ix) any binding agreement to do or otherwise
suffer or incur any of the foregoing by the Company or any Subsidiary.
(b) From and after the date of the Balance Sheet until the date
hereof there has not occurred: (i) any change by the Company or any Subsidiary
in its accounting principles or policies; (ii) any material revaluation by the
Company or any Subsidiary of any of its assets, including, without limitation,
any write off or write down of notes, accounts receivable or inventory, other
than in the ordinary course of business and consistent with past practice; or
(iii) any binding agreement to do or otherwise suffer or incur any of the
foregoing by the Company or any Subsidiary.
(c) Since January 15, 2004, there has not occurred any increase in
compensation payable to any stockholder, director (or person in a similar
position), officer or employee, or entry into (or amendment of) any employment,
severance or similar agreement with any stockholder, director (or person in a
similar position), officer or employee, in any such case who earns compensation
in excess of $75,000 per annum.
4.16. Employee Benefit Plans.
(a) Section 4.16 of the Disclosure Schedule shall contain a true,
accurate and complete list of (i) all employee benefit plans, policies and
arrangements, including, but not limited to, all "employee benefit plans" (as
defined in Section 3(3) of ERISA), sponsored,
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maintained or contributed to, or required to be contributed to, by the Company
or any Subsidiary, and (collectively, the "Plans") and (ii) all "employee
benefit pension plans" (as defined in Section 3(2) of ERISA) sponsored,
maintained or contributed to, or required to be contributed to, by any entity
required to be aggregated with the Company under Section 414(b), (c), (m), or
(o) of the Code (each, an "ERISA Affiliate") whether or not for the benefit of
employees or former employees of the Company or any Subsidiary (such employee
benefit pension plans are collectively the "ERISA Affiliate Plans").
(b) With respect to each Plan, the Company has made available to
Purchaser a true and correct copy of, as applicable, (i) the Plans and all
amendments thereto, (ii) the most recent annual report of each Plan on Form
5500, (iii) each trust agreement and group annuity contract, if any, relating to
such Plan, (iv) the most recent actuarial report or valuation relating to any
Plan subject to Title IV of ERISA, (v) the most recent IRS determination or
opinion letter with respect to any such Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code, and (vi) the most recent
summary plan descriptions.
(c) With respect to each Plan: (i) if intended to qualify under
Section 401(a) of the Code, such plan has received a determination letter from
the Internal Revenue Service stating that it so qualifies and that its trust is
exempt from taxation under Section 501(a) of the Code, and, to the Knowledge of
the Company, nothing has occurred since the date of such determination that
could reasonably be expected to result in the loss of such qualification or
exempt status; (ii) such plan has been administered and operated in all material
respects in accordance with its terms and applicable law (including ERISA and
the Code, and all rules and regulations promulgated thereunder); (iii) neither
the Company nor any Subsidiary has any material liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Plan; (iv) no disputes
are pending, or, to the best knowledge of the Company and each Seller,
threatened by any governmental agency or authority or by any participant or
beneficiary against any Plan, the assets of any trust under any Plan or the Plan
sponsor or the Plan administrator, or against any fiduciary of any of any Plan
with respect to the design or operation of such Plan, other than routine claims
for benefits thereunder; (v) no non-exempt prohibited transaction (within the
meaning of Section 406 of ERISA) has occurred that gives rise to or might
reasonably be expected to give rise to material liability on the part of the
Company or any of its Subsidiaries; and (vi) all contributions due and payable
by or under any Plan (or trust or fund established thereunder or in connection
therewith) or any related collective bargaining agreement as of the date hereof
(taking into account any extensions of time for the making of such
contributions) have been made in full.
(d) No Plan or ERISA Affiliate Plan has incurred an accumulated
funding deficiency, as defined in Section 302 of ERISA or Section 412 of the
Code, whether or not waived. Except for liabilities for premiums due to the
Pension Benefit Guaranty Corporation ("PBGC"), no liability has been or is
reasonably expected to be incurred by the Company, any Subsidiary or any ERISA
Affiliate (either directly or indirectly) under or pursuant to Title IV of
ERISA, and no event, transaction or condition has occurred or exists that has
resulted in or would reasonably be expected to result in any such liability to
the Company, any Subsidiary, any ERISA Affiliate or any Plan. There has been no
"reportable event" within the meaning of Section 4043 of ERISA with respect to
any Plan or ERISA Affiliate Plan subject to Title IV of
-22-
ERISA which would require the giving of notice or any other event requiring
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(e) No Plan or ERISA Affiliate Plan is a "multiemployer plan" as
defined in Section 3(37) of ERISA, and none of the Company, any Subsidiary or
any ERISA Affiliate has withdrawn at any time within the preceding six years
from any multiemployer plan, or incurred any withdrawal liability which remains
unsatisfied, and no events have occurred and no circumstances exist that could
reasonably be expected to result in any such liability to the Company, any
Subsidiary or any ERISA Affiliate.
(f) Except as set forth in the Disclosure Schedule, none of the
Plans provide retiree health or life insurance benefits except as may be
required by Section 4980B of the Code and Section 601 of ERISA, any other
applicable law or at the expense of the participant or the participant's
beneficiary. There has been no violation of the "continuation coverage
requirement" of "group health plans" as set forth in Section 4980B of the Code
and Part 6 of Subtitle B of Title I of ERISA with respect to any Plan to which
such continuation coverage requirements apply that could reasonably be expected
to result in any material liability to the Company or any Subsidiary.
(g) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, either by itself or
in conjunction with a subsequent event: (i) result in any payment becoming due
to any current employee or former employee of the Company, (ii) increase any
benefits otherwise payable under any of the Plans, (iii) result in any payment
that will not be deductible under Section 280G of the Code or (iv) result in the
acceleration of the time of payment or vesting of any benefits provided under
any of the Plans.
4.17. Directors and Officers.
Section 4.17 of the Disclosure Schedule shall set forth the names and
positions of all directors (or persons in similar positions) and officers of the
Company and each Subsidiary.
4.18. Compliance with Laws.
Except for the matters covered by Sections 4.12, 4.16 and 4.19, as to
which matters the provisions of such Sections shall govern, the Company and each
Subsidiary is in compliance in all material respects with, and during the two
(2) year period ended on the date hereof, has not received any notice of any
violation or delinquency with respect to, any Laws applicable to the Business.
The Company and each Subsidiary (as applicable) possesses all material licenses,
permits, registrations and government approvals (collectively, "Permits") which
are required in order for the Company and any Subsidiary (as applicable) to
conduct the Business as presently conducted. Section 4.18 of the Disclosure
Schedule shall set forth a true, accurate and complete list of all of the
Permits of the Company and any Subsidiary, together with a description
(including the date of issuance and expiration, if any, and the status) thereof.
Each Permit is valid and in full force and effect, and is not subject to any
pending or, to the Knowledge of the Company, threatened administrative or
judicial proceeding to revoke, cancel or declare such Permit invalid in any
respect.
-23-
4.19. Environmental.
(a) The Company and each Subsidiary is and has been in material
compliance with all applicable Environmental Laws and has no written notice of
any unresolved potential liability, violation or delinquency with respect to any
Environmental Law, including, without limitation, any agreement with any Person,
or any Permit or order from, any governmental, regulatory or administrative
authority. Neither the Company, any Subsidiary, nor any of the Properties, is or
has been subject to any material claim, judgment, decree, order, arbitration
award, lien or deed restriction by any federal, state or local governmental,
regulatory or administrative authority relating to Environmental Laws. The
Company and each Subsidiary has obtained all Permits required under
Environmental Laws for the conduct of the Business and such Permits shall be set
forth in Section 4.19 of the Disclosure Schedule.
(b) There is no Environmental Claim pending or, to the Knowledge
of the Company and each Seller, threatened against the Company or any Subsidiary
or otherwise relating to any of the Properties. There are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Hazardous Materials, that would reasonably be expected to form the basis of
any Environmental Claim relating to the Business or any of the Properties or
against the Company or any Subsidiary.
(c) Neither the Company nor any Subsidiary owns or operates, nor
has the Company or any Subsidiary ever owned or operated, (i) an "underground
storage tank" containing a "regulated substance," as such terms are defined in
Subchapter IX of the Resource Conservation and Recovery Act, 42 U.S.C.
(section)6991 et seq. or (ii) an impoundment or landfill or a gas or oil well.
(d) To the Knowledge of the Company and each Seller, none of the
Company and the Subsidiaries is or will be required to incur material cost or
expense within the next five (5) years in order to cause its operations or
properties to achieve or maintain compliance applicable Environmental Laws.
(e) There has been no release or threatened release of any
Hazardous Material at any location which could reasonably be expected to give
rise to any actual or alleged liability on the part of the Company or any
Subsidiary for personal injury, property damage, natural resource damage or
environmental response action.
(f) To the Knowledge of the Company and each Seller, none of the
Properties contain or formerly contained any polychlorinated biphenyls,
asbestos, asbestos-containing material or urea formaldehyde insulation.
(g) None of the Company, the Subsidiaries and, to the Knowledge of
the Company and each Seller, their respective predecessors has manufactured,
used, processed, distributed, fabricated, incorporated into any other material,
or sold any asbestos-containing material at any time and there is no pending or,
to the Knowledge of the Company and each Seller, threatened claim against any of
them arising out of, any asbestos-containing material or the exposure to or
release thereof.
-24-
(h) Neither the Company nor any Subsidiary has any obligation
under any agreement with any Person or pursuant to an order of a Governmental
Entity for conducting any site investigation or cleanup. Neither the Company nor
any Subsidiary has, either expressly or by operation of law, assumed or
undertaken any liability or corrective, investigatory or remedial obligation of
any other Person relating to any Environmental Law.
4.20. Transactions With Affiliates.
Section 4.20 of the Disclosure Schedule shall set forth for each Person
who is an Affiliate every agreement, undertaking, understanding or compensation
arrangement of any Affiliate with the Company and/or any Subsidiary (other than
normal employment arrangements) and any interest of any Affiliate in any
property, real, personal or mixed, tangible or intangible, used in or pertaining
to the Business. To the Knowledge of the Company and each Seller, none of the
Affiliates, executive officers or directors (or persons in similar positions) of
the Company or any Subsidiary has been a director (or person in a similar
position) or executive officer of, or has had any direct or indirect interest in
(excluding the ownership of no more than 2% of the outstanding securities in any
publicly traded company), any firm, corporation, association or business
enterprise which during such period was a customer of the Company or any
Subsidiary.
4.21. Insurance.
Section 4.21(a) of the Disclosure Schedule sets forth a true, correct
and complete list of all insurance policies of the Company and any Subsidiary
for the ten (10) year period ended on the date hereof, which policies will be
made available to the Buyer promptly after the execution and delivery of this
Agreement. The Company and each Subsidiary maintains insurance under various
insurance policies, as shall be set forth in Section 4.21(b) of the Disclosure
Schedule. The Company and each Subsidiary has complied with all terms and
conditions of such policies, including premium payments, and such policies are
in full force and effect. Neither the Company nor any Subsidiary has received:
(i) any notice of cancellation of any policy or binder of insurance required to
be identified in Section 4.21(a) or (b) of the Disclosure Schedule or refusal of
coverage thereunder; (ii) any notice that any issuer of such policy or binder
has filed for protection under applicable bankruptcy or insolvency laws or is
otherwise in the process of liquidating or has been liquidated; or (iii) any
other indication that any such policy or binder may no longer be in full force
or effect or that the issuer of any such policy or binder may be unwilling or
unable to perform its obligations thereunder. There is no claim pending by or on
behalf of the Company or any Subsidiary against any of the insurance carriers
under any of such policies and, to the Knowledge of the Company, there has been
no actual or alleged occurrence of any kind which would be reasonably likely to
give rise to any such claim. Neither the Company nor any Subsidiary has made any
claims under any such policy at any time since September 29, 2001.
4.22. Brokers.
No Person acting on behalf of the Company, any Subsidiary, any Seller
or any Affiliate thereof or under the authority of any of the foregoing is or
will be entitled to any brokers' or finders' fee or any other commission or
similar fee with respect to which the Buyer,
-25-
the Company or any of its respective Affiliates will be liable in connection
with any of the transactions contemplated by this Agreement.
4.23. Product Liability.
There has not been any recall of any product, substance or material
produced, distributed or sold by or on behalf of the Business (each, a
"Product"). To the Knowledge of the Company and each Seller, no Product contains
a design or manufacturing defect that would reasonably be likely to have a
Material Adverse Effect.
4.24. Possession of Assets and Operation of Equipment.
The tangible assets (including real and personal property) that are
currently used in the Business are owned or leased by the Company or any
Subsidiary and are in the possession or under the control of the Company or such
Subsidiary. The material equipment of the Company is operating in the ordinary
course of the Business, subject to normal maintenance and repair.
4.25. Absence of Certain Business Practices.
To the Knowledge of the Company and each Seller, neither the Company,
any Subsidiary, nor any of its respective directors (or persons in similar
positions) or executive officers, acting alone or together, has: (a) received,
directly or indirectly, any rebates, payments, commissions, promotional
allowances or any other economic benefits, regardless of their nature or type,
from any customer, supplier, trading company, shipping company, governmental
employee or other Person with whom the Company or any Subsidiary has done
business; or (b) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company, shipping company,
governmental employee or other Person with whom the Company or any Subsidiary
has done business, except where (i) such actions have not subjected, or would
not reasonably be expected to subject the Company, any Subsidiary, or its
respective executive officers or directors (or persons in similar positions) to
any fine or penalty in any criminal or governmental litigation or proceeding,
(ii) if not given in the past, such actions would not reasonably be likely to
have a Material Adverse Effect or (iii) if not continued in the future, such
actions would not reasonably be likely to have a Material Adverse Effect.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to each Seller and the Company to enter into
and perform its respective obligations under this Agreement, the Buyer hereby
represents and warrants to each Seller and the Company as of the date of this
Agreement and, except as otherwise provided herein, the Closing Date as follows:
5.1. Incorporation and Good Standing.
The Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to conduct its business as presently conducted and
to own and lease the properties and assets used in connection therewith.
-26-
5.2. Power and Authorization.
The Buyer has all requisite corporate power and authority to enter into
and perform its obligations under this Agreement and under any other agreement,
instrument or other document necessary to consummate the transactions
contemplated herein (the "Buyer Closing Documents"). The execution, delivery and
performance by the Buyer of this Agreement and the Buyer Closing Documents have
been duly authorized by all necessary corporate action. This Agreement has been
duly and validly executed and delivered by the Buyer and constitutes the legal,
valid and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms and, when executed and delivered as contemplated
herein, each of the Buyer Closing Documents shall constitute the legal, valid
and binding obligations of the Buyer, enforceable against the Buyer in
accordance with its terms, in each case, subject to applicable bankruptcy,
insolvency and similar laws affecting the enforceability of creditors' rights
generally, general equitable principles, the discretion of courts in granting
equitable remedies and matters of public policy.
5.3. Validity of Contemplated Transactions.
Neither the execution and delivery of this Agreement nor any other
agreement, instrument or other document necessary to consummate the transactions
contemplated herein by Buyer nor the consummation by the Buyer of the
transactions provided for herein or therein will conflict with, violate, or
result in a breach of or default under any material contract or agreement to
which the Buyer is a party or by which it is bound or any law, permit, license,
order, judgment or decree applicable to the Buyer or any provision of the
charter or bylaws of the Buyer, except in each case, for such violations,
conflicts, breaches, defaults or losses as would not adversely affect the
Buyer's ability to consummate the transactions contemplated hereby in any
material respect.
5.4. Consents.
Except for filings under the HSR Act and consents from the Buyer's
lenders (the "Bank Consents") and certain Governmental Entities that regulate
gaming, no consent, authorization, waiver by or filing with any governmental
agency, administrative body or other third party is required in connection with
the execution or performance of this Agreement by the Buyer or the consummation
by the Buyer of the transactions contemplated hereby, except for such consents,
authorizations, waivers or filings, as to which the failure to obtain would not
adversely affect the Buyer's ability to consummate the transactions contemplated
hereby in any material respect.
5.5. Relocation of Operations.
The Buyer does not intend to relocate any significant portion of the
operations of the Business currently located in Cincinnati, Ohio.
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5.6. Litigation.
As of the date hereof, there is no pending action or Proceeding that
has been commenced or, to the knowledge of the Buyer, threatened against the
Buyer that may have the effect of preventing, delaying, or making illegal the
transactions contemplated herein.
5.7. Sufficient Funds.
As of the Closing Date, the Buyer will have sufficient funds
to effect the Closing as contemplated hereby.
5.8. Brokers.
No Person acting on behalf of the Buyer or any of its Affiliates or
under the authority of any of the foregoing is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee with respect to
which the Company, any Seller or any of their respective Affiliates will be
liable in connection with any of the transactions contemplated by this
Agreement.
5.9. SEC Filings; Financial Statements.
(a) Except as set forth on Schedule 5.9 attached hereto, the Buyer
has timely filed all forms, reports and documents required to be filed with the
SEC since December 31, 2002 (collectively, the "SEC Reports"). The SEC Reports
(i) were prepared in accordance in all material respects with the requirements
of the Securities Act or the Securities Exchange Act of 1934, as amended, as the
case may be, as in effect at the time they were filed and (ii) did not at the
time they were filed 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 the light of the circumstances under which they
were made, not misleading.
(b) The financial statements contained in the SEC Reports were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and fairly present in all material respects the financial
position of the Buyer as at the respective dates thereof and the statements
operations and cash flows of the Buyer for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal
year-end adjustments.
5.10. Investment Representations.
(a) The Buyer is acquiring the Purchased Securities for its own
account for purposes of investment and not for the account of any other Person,
not for resale to any other Person, and not with a view to or in connection with
a sale or distribution of the Securities. Buyer has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment for
the disposition of the Securities by Buyer.
(b) Buyer understands that (i) the Purchased Securities have not
been registered under the Securities Act, or the securities laws of any state or
other jurisdiction, (ii) the
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Purchased Securities may not be sold, transferred, or otherwise disposed of
without registration under the Securities Act and under any applicable state or
other jurisdiction's respective securities laws, or an exemption therefrom, and
that without an effective registration statement covering the Purchased
Securities or an available exemption from registration under the aforementioned
securities laws (including, without limitation, the Securities Act), the
Purchased Securities must be held indefinitely and (iii) the Sellers do not have
any obligation to register the Purchased Securities.
(c) The Buyer acknowledges that the Buyer has sufficient knowledge
and experience in finance and business matters that it is capable of evaluating
the risks and merits of its investment in the Purchased Securities and the Buyer
is able financially to bear the risks thereof. Buyer acknowledges that the
representations and warranties contained in this Agreement, as modified by the
Disclosure Schedule, shall be deemed to be the only representations and
warranties made with respect to the Sellers, the Company, its Subsidiaries or
the Bicycle Business.
SECTION 6. COVENANTS OF THE PARTIES UNTIL CLOSING
6.1. Conduct of Business Pending Closing.
Except as shall be set forth in Section 6.1 of the Initial Disclosure
Schedule or as otherwise expressly provided in this Agreement, between the date
hereof and the Closing, without the prior written consent of the Buyer, the
Company shall, and shall cause each Subsidiary to, operate its respective
business only in the ordinary course consistent with past practices and shall,
and shall cause each Subsidiary, to use commercially reasonable efforts to
preserve intact its business organization and goodwill in all material respects,
including, without limitation, the good will and relationships of the Company's
and each Subsidiary's customers, suppliers, employees and vendors, and shall,
and shall cause each Subsidiary to:
(a) maintain its respective existence, and discharge debts,
liabilities and obligations as they become due, and operate in the ordinary
course in a manner consistent with past practice and in compliance in all
material respects with all applicable Laws, authorizations, and Contracts
(including, without limitation, those identified in the Disclosure Schedule);
(b) maintain its respective facilities and assets in the same
state of repair, order and condition as they were on the date hereof, reasonable
wear and tear excepted;
(c) maintain its respective books and records in accordance with
past practice, and use commercially reasonable efforts to maintain in full force
and effect all authorizations and all insurance policies and binders;
(d) use commercially reasonable efforts to maintain its respective
relations and goodwill with the landlords, suppliers, customers, employees and
others having a business relationship with the Company or any Subsidiary; and
(e) file, when due or required, federal, state, foreign and other
Tax Returns and other reports required to be filed and pay when due all Taxes,
assessments, fees and other
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charges lawfully levied or assessed against them, unless the validity thereof is
contested in good faith and by appropriate proceedings diligently conducted.
6.2. Negative Covenants.
Except as shall be set forth in Section 6.2 of the Initial Disclosure
Schedule, as otherwise expressly provided in this Agreement or as required by
applicable Law, between the date hereof and the Closing, without the prior
written consent of the Buyer, the Company shall not, and shall cause each
Subsidiary not to:
(a) other than issuances of shares of Common Stock upon exercise
of the Outstanding Options or conversion of the Convertible Note, make any
change in the Company's or such Subsidiary's authorized or issued capital stock
or other securities, grant any option, warrant or other right to purchase or
otherwise acquire any securities of the Company or any Subsidiary, issue or make
any security convertible into capital stock, grant any registration rights, or
purchase, redeem, retire or make any other acquisition of any shares of capital
stock or other securities, declare or pay any dividend or other distribution
upon any shares of capital stock or on any securities other than to the Sellers
in an amount not to exceed, in the aggregate (together with any such dividends
or distributions made from and after September 28, 2003), Four Million Five
Hundred Thousand Dollars ($4,500,000);
(b) amend (as applicable) the articles or certificate of
incorporation, bylaws, articles or certificate of formation or organization,
limited liability company or operating agreement, partnership agreement or other
organizational document of the Company or any Subsidiary;
(c) fail to pay or discharge when due any material liability or
obligation of the Company or any Subsidiary, except any such liability or
obligation that shall be contested in good faith;
(d) make, enter into, amend in any material respect, renew, extend
or terminate any agreement, commitment or transaction, including, without
limitation, any Contract that shall be set forth in Section 4.14 of the
Disclosure Schedule, other than (i) in the ordinary course of business and
consistent with past practice, and (ii) where such agreement, commitment or
transaction either (A) contemplates aggregate payments by the Company (together
with any Subsidiary) thereunder of less than One Hundred Thousand Dollars
($100,000) or (B) is a casino contract or (C) has a term of less than one year;
(e) enter into any Contract with any Seller or any Affiliate of
any Seller;
(f) make any material change in the conduct of the Business;
(g) make any sale, assignment, transfer, abandonment or other
conveyance of the assets of the Company or any Subsidiary or any part thereof,
except transactions pursuant to existing contracts, as shall be set forth in the
Disclosure Schedule, and dispositions of inventory or of worn-out or obsolete
equipment and machinery, in each case in the ordinary course of business and
consistent with past practice;
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(h) subject any of the assets of the Company or any Subsidiary, or
any part thereof, to any Encumbrance, other than such Encumbrances as may arise
in the ordinary course of business consistent with past practice by operation of
law and that will not, individually or in the aggregate, interfere materially
with the use, operation, enjoyment or marketability of any of the assets of the
Company or any Subsidiary;
(i) acquire any assets, raw materials or properties other than in
the ordinary course of business and consistent with past practice;
(j) enter into any new (or amend any existing) Plan or employment,
severance or consulting agreement, grant any general increase in the
compensation of officers or employees (including any such increase pursuant to
any Plan), or grant any increase in the compensation payable or to become
payable to any employee whose base compensation is in excess of $75,000 per
annum, except in accordance with pre-existing contractual provisions;
(k) without notifying the Buyer in writing at least five (5)
business days prior thereto, except in the ordinary course of business and
consistent with past practice, make any material revaluation of any of the
assets, including, without limitation, writing off or writing down the value of
notes, accounts receivable or inventory;
(l) make, change or revoke, or permit to be made, changed or
revoked, any material election or method of accounting with respect to Taxes;
(m) enter into, or permit to be entered into, any closing or other
agreement or settlement with respect to Taxes affecting or relating to the
Company;
(n) settle, release or forgive any claim or litigation or waive
any right, in an amount greater than $50,000, in each case in the ordinary
course of business and consistent with past practice;
(o) enter into any real property lease, sublease or occupancy
agreement or assign or sublet any existing real property lease, sublease or
occupancy agreement;
(p) make any distributions or payments to any Seller or any of its
Affiliates, including, without limitation, any director (or person in a similar
position), officer, employee, agent, consultant or vendor of any Seller or any
of its Affiliates, or of the Company or any Subsidiary (to the extent that any
such Person is an Affiliate of any Seller), in each case, except in accordance
with pre-existing contractual provisions and consistent with past practice;
(q) make any change in the accounting principles or policies of
the Company or any Subsidiary;
(r) make (in a single transaction or a series of transactions) any
capital expenditures in excess of $75,000, or make additions to property, plant
and equipment used in the operations of the Business other than in the ordinary
course of business and consistent with past practice; or
(s) agree or commit to do any of the foregoing.
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6.3. Access.
The Buyer and its respective officers, directors, attorneys,
accountants and representatives, and the Buyer's lenders and their officers,
directors, attorneys, accountants and representatives, shall be permitted to
examine the property, books and records of the Company and each Subsidiary, and
such officers, directors, attorneys, accountants and representatives shall be
afforded reasonable access during normal business hours to such property, books
and records upon reasonable prior notice and each Seller shall furnish promptly
to the Buyer all other information concerning the Business, its properties and
its personnel as the Buyer may reasonably request.
6.4. Consents.
(a) Prior to the Closing, the Company and the Buyer shall use
commercially reasonable efforts to obtain all consents, permits, approvals of,
and exemptions by, any Governmental Entity or third party necessary or desirable
for the consummation of the transactions contemplated by this Agreement as shall
be set forth in Section 6.4 of the Disclosure Schedule (the "Material
Consents"). The Company shall diligently assist and cooperate with the Buyer in
preparing and filing all documents required to be submitted by the Buyer to any
Governmental Entity in connection with such transactions and in obtaining any
governmental consents, waivers, authorizations or approvals which may be
required to be obtained by the Buyer in connection with such transactions (which
assistance and cooperation shall include, without limitation, the timely
furnishing to the Buyer of all information concerning any such Seller, the
Company, or any Subsidiary that counsel to the Buyer determines is required to
be included in such documents or would be helpful in obtaining any such required
consent, waiver, authorization or approval).
(b) In the event that (i) as of the Termination Date (as defined
below), the Governmental Entity primarily responsible for regulating gaming in
the State of Louisiana shall have not approved the consummation of the
transactions contemplated hereby, (ii) the Closing shall have not occurred as of
the Termination Date, (iii) not less than five (5) business prior to the
Termination Date, the Seller Representative notifies the Buyer in writing that
the Sellers wish to extend the term of this Agreement beyond the Termination
Date (in which notice the Seller Representative shall certify to the Buyer as to
the amount of the aggregate Material Consent Costs incurred by the Sellers as of
the date of such notice), and (iv) the Buyer refuses to so extend the term of
this Agreement due to its unwillingness to wait until such approval of such
Governmental Entity is obtained, the Buyer shall pay to the Company an amount
equal to the aggregate Material Consent Costs incurred by the Company as of the
Termination Date.
6.5. HSR Act.
Each party hereto hereby undertakes and agrees to file as soon as
practicable, and in any event within thirty (30) days after the date hereof, a
Notification and Report Form under the HSR Act with the United States Federal
Trade Commission (the "FTC") and the United States Department of Justice,
Antitrust Division (the "Antitrust Division"), and to make any other applicable
competition filing or notifications required by any other governmental authority
as promptly as practicable. Each party hereto shall (as applicable): (a) respond
in a commercially
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reasonable manner and as promptly as practicable to any formal or informal
inquiries received from the FTC or the Antitrust Division for additional
information or documentary materials, and to all inquiries and requests received
from any State Attorney General or other governmental authority in connection
with antitrust or competition matters; (b) take all commercially reasonable
steps to seek early termination of any applicable waiting period under the HSR
Act or any similar laws and to obtain all required approvals; and (c) refrain
from entering into any agreement with the FTC or the Antitrust Division or any
governmental authority not to consummate or delay consummation of or to give
notice of consummation other than as required by law, of the transactions
contemplated by this Agreement, except with the prior written consent of the
other parties hereto (which shall not be unreasonably withheld or delayed). Each
party hereto shall promptly notify each other party hereto of any written or
oral communication to that party from the FTC, the Antitrust Division, any State
Attorney General or any other governmental authority and shall permit each such
other party or its counsel to review in advance any proposed written
communication or response to any of the foregoing. Notwithstanding the foregoing
or any other covenant herein contained, in connection with the receipt of any
necessary approvals under the HSR Act, neither the Buyer, any Seller, the
Company, any Subsidiary nor any of its respective Affiliates shall be required
to: (a) divest or hold separate or otherwise take or commit to take any action
that limits the Buyer's freedom of action with respect to, or its ability to
retain, the Company or any Subsidiary or any material portions thereof or any of
the businesses, product lines, properties or assets of the Buyer, the Company,
or any Subsidiary, without the Buyer's prior written consent; or (b) commence
any litigation against any entity in order to facilitate the consummation of any
of the transactions contemplated hereby.
6.6. No Solicitation.
(a) Neither any Seller, the Company, any Subsidiary nor any of its
or their respective Affiliates shall, and each of the foregoing shall not allow
any Person acting on its behalf to, directly or indirectly, continue, initiate
or participate in discussions or negotiations with, or provide any nonpublic
information to, any Person (other than the Buyer and its representatives in
connection with the transactions contemplated by this Agreement) concerning any
sale of assets (other than in the ordinary course of its business and consistent
with past practice) or any securities of the Company (including, without
limitation, the Purchased Securities and the Put/Call Shares) or any Subsidiary
or any merger, consolidation, recapitalization, liquidation or similar
transaction involving the Company or any Subsidiary (collectively, an
"Acquisition Transaction").
(b) Each Seller and the Company shall, and the Company shall cause
each Subsidiary to, promptly communicate to the Buyer the terms of any proposal
that it may receive after the date of this Agreement in respect of an
Acquisition Transaction. Any notification under this Section 6.6 shall include
the identity of each Person making such proposal, the terms of such proposal and
any other information with respect thereto as the Buyer may request.
(c) The Company and each Seller hereby agree that a monetary
remedy for a breach of the agreements set forth in this Section 6.6 will be
inadequate and impracticable, and that any such breach would cause the Buyer and
its Affiliates irreparable harm. In the event of a breach of this Section 6.6,
in addition to any other remedies available to the Buyer, the Buyer shall be
entitled to seek equitable remedies in a court of competent jurisdiction,
including,
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without limitation, the equitable remedy of specific performance with respect to
the transactions set forth in this Agreement, and shall be entitled to such
injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, as a court of competent jurisdiction
shall determine.
6.7. Interest in Purchased Securities.
From and after the date hereof, without the prior written
consent of the Buyer, no Seller shall in any manner sell, assign, convey,
transfer, lease, pledge, mortgage or dispose of, or otherwise take any action
that may result in the incurrence or suffering of any Encumbrance on or relating
to, any Purchased Securities.
6.8. Custody of Purchased Securities.
As soon as practicable, but in no event more than thirty (30)
days, after the date that the Buyer accepts the contents of the Initial
Disclosure Schedules pursuant to Section 6.9, each Seller shall place in the
custody of the Seller Representative for the purpose of effecting the Closing as
contemplated hereby all of the Purchased Securities set forth opposite such
Seller's name on Schedule I attached hereto, together with all items required
pursuant to Section 9.2(a).
6.9. Disclosure Schedule.
(a) On or before March 25, 2004, the Company and the Seller
Representative shall deliver an initial Disclosure Schedule (the "Initial
Disclosure Schedule") to the Buyer, which Initial Disclosure Schedule shall,
subject to the provisions of this Section 6.9, be updated from time to time up
to the Closing (the Initial Disclosure Schedule, as so updated as of the
Closing, the "Closing Disclosure Schedule"). Each exception set forth in any
Disclosure Schedule and each other response to this Agreement set forth in any
Disclosure Schedule shall be in reasonable detail and identified by reference
to, or shall be grouped under a heading referring to, a specific individual
section of this Agreement and, except as otherwise specifically stated with
respect to such exception or if the application to another section is clearly
apparent from such disclosure, shall relate only to such section. The inclusion
of any information in any Disclosure Schedule shall not be deemed an admission
or acknowledgement, in and of itself or solely by virtue of the inclusion of
such information in such Disclosure Schedule, that such information is required
to be set forth therein or that such information is material to the Company, the
Sellers or the Business. Capitalized terms used and not otherwise defined in any
Disclosure Schedule shall have the respective meanings ascribed to them in this
Agreement.
(b) The Buyer shall notify the Company and the Seller
Representative of the Buyer's acceptance of the contents of the Initial
Disclosure Schedule on or before the later of (i) March 10, 2004 or (ii) five
(5) business days after the Buyer's receipt of the Initial Disclosure Schedule
(in accordance with Section 6.9(a)). In the event that the Buyer notifies the
Company and the Seller Representative of its refusal to accept the Initial
Disclosure Schedule, the Buyer, the Company and the Seller Representative shall
negotiate in good faith as to the manner in which the Initial Disclosure
Schedule or the terms of this Agreement may be revised so as to be acceptable to
the Buyer. In the event that such parties agree as to the contents of the
Initial Disclosure Schedule, whether or not revised in accordance with this
Section 6.9(b), such Initial
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Disclosure Schedule, as so agreed, shall be deemed the Initial Disclosure
Schedule for all purposes hereunder. In the event that such parties are unable
to agree as to the contents of the Initial Disclosure Schedule and the Buyer
continues to have good faith objections to the contents of the Disclosure
Schedule, either the Buyer or both the Company and the Seller Representative may
terminate this Agreement.
(c) From and after the delivery of the Initial Disclosure Schedule
(as finally agreed upon pursuant to Section 6.9(b)), until the delivery of the
Closing Disclosure Schedule to the Buyer as provided in Section 6.9(d), within
five (5) business days after the Company or the Seller Representative obtains
Knowledge of any change in facts or circumstances, or of any event, that has
occurred since the date of such delivery, required to be set forth in the
Disclosure Schedule to make any representation or warranty of the Company or the
Sellers contained herein true and correct, the Company and the Seller
Representative shall deliver to the Buyer an updated Disclosure Schedule (each,
an "Updated Disclosure Schedule") disclosing such changes or events.
(d) Not less than five (5) business days prior to the Closing, the
Company and the Seller Representative shall deliver to the Buyer the Closing
Disclosure Schedule. Within two (2) business days after the Buyer's receipt of
the Closing Disclosure Schedule, the Buyer shall notify the Company and the
Seller Representative if the Buyer believes that any matters disclosed in the
Closing Disclosure Schedule (and that was not previously disclosed in the
Initial Disclosure Schedule) constitute Events Outside of the Ordinary Course.
In the event that such notice is so given, the Buyer, the Company and the Seller
Representative shall seek in good faith to determine whether such item is an
Event Outside of the Ordinary Course, but the failure to complete such
determination prior to the Closing shall not delay the Closing.
(e) The Closing Disclosure Schedule shall modify the
representations and warranties made by the Sellers and the Company as of the
Closing Date for the purposes of (i) satisfying the closing conditions set forth
in Section 7.2; and (ii) determining the accuracy and completeness of (A) the
representations and warranties made by the Company or the Sellers herein as of
the Closing Date and (B) the certificates delivered by the Company and the
Sellers pursuant to Sections 7.2 and 9.2(e) certifying that such representations
and warranties are correct as of the Closing Date. Notwithstanding the preceding
sentence in this Section 6.9(e), without the prior written consent of the Buyer,
nothing contained in any Updated Disclosure Schedule or the Closing Disclosure
Schedule shall: (i) prohibit the Buyer from exercising or otherwise affect any
rights it may otherwise have under Section 7.6 or 7.9; or (ii) cure any breach
hereunder existing at the time of the Buyer's acceptance of the Initial
Disclosure Schedule (as provided in Section 6.9(b)), it being understood that
the Buyer's acceptance of any Updated Disclosure Schedule or the Closing
Disclosure Schedule shall not be deemed a waiver of any such breach.
(f) In the event of any inconsistency between statements in the
body of this Agreement and statements in any Disclosure Schedule (excluding
exceptions expressly set forth in such Disclosure Schedule with respect to
representations or warranties herein, which, subject to Section 6.9(e), shall
modify such representations or warranties to the extent set forth in Section
6.9(a)), the statements in the body of this Agreement shall control.
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6.10. Monthly Financials.
The Company shall, no later than the tenth day following completion of
each calendar month commencing with February, 2004, and prior to the Closing
Date, deliver to the Buyer its internally generated profit and loss statement,
balance sheet and cash flow statement, each prepared in accordance with GAAP
(except for normal year-end adjustments and the omission of footnote disclosures
required by GAAP) on a monthly basis (the "Monthly Statements"), in each case in
a form consistent with past practice.
6.11. Preservation of Earnings.
From and after the Earnings Preservation Date, the Company shall not
pay any dividends.
6.12. Estimate of Closing Date Deductions.
Not less than two (2) business days prior to the Closing Date, the
Company shall deliver to the Buyer a good faith estimate of the Closing Date
Deduction (a "Closing Estimate"), which shall be used for the calculation of the
Purchase Price. Following the Closing Date, either the Buyer or the Seller
Representative may seek to adjust the Closing Estimate pursuant to the
procedures set forth in Exhibit A hereto (the provisions of which Exhibit A
shall be as agreed upon in good faith by the Buyer, the Company and the Seller
Representative promptly after the date hereof), and any such adjustment and
corresponding adjustment, if any, to the Adjusted Equity Value and Purchase
Price will be governed by such procedures set forth in such Exhibit A.
6.13. Outstanding Options.
The Company and the Sellers holding Outstanding Options shall use their
respective commercially reasonable efforts to cause all Outstanding Options to
be exercised, converted or otherwise cancelled or extinguished as of the
Closing.
6.14. Indebtedness.
The Company shall use commercially reasonable efforts to obtain payoff
letters and other written documents evidencing the complete and irrevocable
release, as of the Closing Date and after giving effect to the payments
contemplated by the Payment Instructions (as defined below) in accordance with
Section 9.4, of the Company and each Subsidiary (other than the Spanish
Subsidiary) from any and all obligations and Encumbrances under and in
connection with any Indebtedness, including, without limitation, the release of
all liens or security interests upon or in any of the respective properties and
assets of the Company or any Subsidiary (other than the Spanish Subsidiary)
arising under or in connection with such Indebtedness.
6.15. Withholdings.
The Buyer shall have the right to withhold from the Contingent Payment
(if any) and, after consultation with professional advisors, will pay out of
such Contingent Payment to the relevant Tax authority, any and all Taxes
required to be withheld in connection with the
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Contingent Payment pursuant to applicable Law. The Buyer shall pay out of the
Contingent Payment (if any) to the relevant Tax authority the employer's share
of any employment taxes due in connection with the Contingent Payment pursuant
to applicable Law.
SECTION 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Unless waived by the Buyer, the obligation of the Buyer to consummate
the transactions contemplated hereunder is subject to the fulfillment, prior to
or at the Closing, of each of the following conditions:
7.1. Deliveries at Closing.
Each Seller shall have delivered, or caused to be delivered, to the
Buyer all items required pursuant to Section 9.2.
7.2. Representations and Warranties.
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct at and as of the Closing Date as though
such representations and warranties were made at and as of the Closing Date
(except for representations and warranties (i) made as of a specified date,
which shall be true and correct in all material respects as of the specified
date, and (ii) containing a specific reference to a materiality qualification,
which, giving effect to such specific reference, shall be true and correct in
all respects), and the Buyer shall have received a certificate, dated the
Closing Date to that effect, signed, on behalf of the Company, by the Chief
Executive Officer or President of the Company.
(b) The representations and warranties of each Seller contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date as though such representations and warranties were made at and
as of the Closing Date (except for representations and warranties (i) made as of
a specified date, which shall be true and correct in all material respects as of
the specified date, and (ii) containing a specific reference to a materiality
qualification, which, giving effect to such specific reference or qualification,
shall be true and correct in all respects), and the Buyer shall have received a
certificate, dated the Closing Date to that effect, signed, on behalf of the
Sellers, by the Seller Representative.
7.3. Performance of Covenants.
(a) The Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing, and the Buyer shall
have received a certificate dated the Closing Date to that effect signed, on
behalf of the Company, by the Chief Executive Officer or President of the
Company.
(b) Each Seller shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing, and the Buyer shall
have received a certificate dated the Closing Date to that effect signed, on
behalf of the Sellers, by the Seller Representative.
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7.4. Approvals.
(a) All Material Consents shall have been obtained in form and
substance reasonably satisfactory to the Buyer and shall be in full force and
effect on the Closing Date;
(b) All waiting periods applicable under the HSR Act shall have
expired or been terminated; and
(c) Any other governmental consent, authorization or filing
requirement required for the Buyer to consummate the transactions contemplated
by this Agreement shall have been obtained or otherwise complied with.
7.5. Legal Matters.
The Closing shall not violate any order or decree of any court or
governmental body of competent jurisdiction and no Proceeding shall have been
brought by any Person (other than the Buyer or an Affiliate of the Buyer) which
questions the validity or legality of this Agreement or the transactions
contemplated herein.
7.6. Closing Disclosure Schedule.
The Company and the Seller Representative shall have delivered the
Closing Disclosure Schedule to the Buyer in accordance with Section 6.9, which
Closing Disclosure Schedule shall have not revealed any event, change or effect
since the date of the Initial Disclosure Schedule (as finally agreed upon
pursuant to Section 6.9(b)) that has had or would reasonably be likely to have a
material adverse effect on the operations, properties, prospects or condition
(financial or otherwise) of the Company and any Subsidiary, taken as a whole.
7.7. Derivative Securities.
All Outstanding Options shall have been exercised, converted or
otherwise cancelled or extinguished.
7.8. Release of Indebtedness.
The Buyer shall have received evidence reasonably satisfactory to it of
the payoff of the Indebtedness in accordance with Section 9.4, and of the
complete and irrevocable release, as of the Closing Date and after giving effect
to the payments contemplated by the Payment Instructions in accordance with
Section 9.4, of the Company and each Subsidiary (other than the Spanish
Subsidiary) from any and all obligations or Encumbrances under and in connection
with the any Indebtedness including, without limitation, the release of all
liens or security interests upon or in any of the respective properties and
assets of the Company or any Subsidiary (other than the Spanish Subsidiary)
arising under or in connection with such Indebtedness.
7.9. No Material Adverse Effect.
Without regard to any matter disclosed or otherwise set forth in any
Disclosure Schedule (other than any matter disclosed or otherwise set forth in
the Initial Disclosure
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Schedule, as finally agreed upon pursuant to Section 6.9(b)), since the date
hereof, there shall not have occurred any event or condition which has had or
would reasonably be expected to have a Material Adverse Effect.
7.10. Stockholders Agreement.
The Company's Stockholders Agreement, as amended and in effect as of
the date hereof, shall have been terminated and shall have no force or effect.
SECTION 8. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S
OBLIGATIONS
Unless waived by the Seller Representative the obligation of any Seller
to consummate the transactions contemplated hereunder is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions:
8.1. Deliveries at Closing.
The Buyer shall have delivered, or caused to be delivered, to the
Seller Representative all items required pursuant to Section 9.3.
8.2. Representations and Warranties.
The representations and warranties of the Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as though such representations and warranties were made at and as
of the Closing Date (except for representations and warranties (i) made as of a
specified date, which shall be true and correct in all material respects as of
the specified date, and (ii) containing a specific reference to a materiality
qualification, which, giving effect to such specific reference, shall be true
and correct in all respects), and the Seller Representative shall have received
a certificate dated the Closing Date to that effect, signed, on behalf of the
Buyer, by an authorized officer of the Buyer.
8.3. Performance of Covenants.
The Buyer shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing, and the Seller Representative
shall have received a certificate dated the Closing Date to that effect signed,
on behalf of the Buyer, by an authorized officer of the Buyer.
8.4. Approvals.
(a) All waiting periods applicable under the HSR Act shall have
expired or been terminated; and
(b) Any other material governmental consent, authorization or
filing requirement for the Sellers to consummate the transactions contemplated
by this Agreement shall have been obtained or otherwise complied with.
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8.5. Legal Matters.
The Closing shall not violate any order or decree of any court or
governmental body of competent jurisdiction, and no Proceeding questioning the
validity or legality of the Put and Call Agreement or Buyer's ability to
consummate the transactions set forth therein, shall have been brought, or to
the Knowledge of Buyer or the Company, threatened.
SECTION 9. CLOSINGS
9.1. Time and Place of Closing.
The closing of the purchase and sale of the Purchased Securities (the
"Closing") pursuant to this Agreement shall take place at the offices of Willkie
Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019, within two
(2) business days following the satisfaction or waiver of the conditions to the
Closing set forth in Section 7 and Section 8, or at such other date, time or
place as may be agreed to by the Buyer and the Seller Representative (the date
on which the Closing occurs, the "Closing Date"). Subject to Section 10, failure
to consummate the Closing shall not result in the termination of this Agreement
or relieve any Person of any obligation hereunder.
9.2. Deliveries at the Closing by the Sellers.
At the Closing, in addition to the other actions contemplated elsewhere
herein, each Seller and the Company (as applicable) shall deliver or cause to be
delivered to the Buyer:
(a) all certificates and other instruments evidencing or otherwise
representing the Purchased Securities to be purchased from such Seller at the
Closing (as set forth on Schedule I attached hereto), free and clear of all
Encumbrances, accompanied by a power duly executed in blank and sufficient to
convey to the Buyer good and valid title in and to such Purchased Securities,
together with all accrued benefits and rights attaching thereto;
(b) a counterpart of a non-compete agreement, in a form
satisfactory to the Buyer, duly executed by each Person who shall be set forth
on Exhibit B hereto (the contents of which Exhibit B shall be as agreed upon in
good faith by the Buyer, the Company and the Seller Representative promptly
after the date hereof);
(c) a counterpart of an employment agreement, in a form
satisfactory to the Buyer, duly executed by each Person who shall be set forth
on Exhibit C hereto (the contents of which Exhibit C shall be as agreed upon in
good faith by the Buyer, the Company and the Seller Representative promptly
after the date hereof);
(d) a certificate, dated the Closing Date, executed, on behalf of
the Company, by the Secretary or an Assistant Secretary of the Company and, on
behalf of the Sellers, by the Seller Representative certifying as of the Closing
Date the following: (i) copies, certified by the appropriate governmental
authority as of a date not more than thirty (30) days prior to the Closing Date,
of the certificate of incorporation of the Company and all amendments thereto;
(ii) copies of the bylaws of the Company, as amended; (iii) copies of
resolutions of the board of directors the Company authorizing the execution and
delivery of this Agreement and
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any other agreement, instrument or other document necessary for the Company to
consummate the transactions contemplated hereby; (iv) the due authorization of
each Seller to execute and deliver this Agreement and any other agreement,
instrument or other document necessary for the Sellers to consummate the
transactions contemplated hereby; (v) the name, title and incumbency of, and
bearing the signatures of, the officers of the Company authorized to execute and
deliver this Agreement and any other agreement, instrument or document necessary
for the Company to consummate the transactions contemplated hereby; and (vi) the
name, title and incumbency of, and bearing the signature of, the Seller
Representative;
(e) the certificates required as conditions to the Buyer's
obligation to effect the Closing under Sections 7.2 and 7.3;
(f) a legal opinion from Kohnan & Patton LLP, counsel to certain
of the Sellers, dated as of the Closing Date, stating that such opinion may be
relied upon by the Buyer's lenders and in form and substance reasonably
satisfactory to the Buyer;
(g) a certificate, dated the Closing Date, executed, on behalf of
the Company, by the Chief Executive Officer and Chief Financial Officer of the
Company certifying as of the Closing Date that the Company EBITDA for the twelve
(12) month period ending on the last day of the calendar month immediately
preceding the Closing Date was not less than Thirty Million Dollars
($30,000,000); and
(h) such other documents and instruments as the Buyer may
reasonably request.
9.3. Deliveries at the Closing by the Buyer.
At the Closing, in addition to the other actions contemplated elsewhere
herein, the Buyer shall deliver or cause to be delivered to the Seller
Representative:
(a) in accordance with Section 2.l(b), the Purchase Price, by wire
transfer in immediately available funds or by certified or bank cashiers' check
payable to the order of the Seller Representative;
(b) a certificate, dated the Closing Date, executed, on behalf of
the Buyer, by the Secretary or an Assistant Secretary of the Buyer certifying as
of the Closing Date the following: (i) copies of resolutions of board of
directors of the Buyer authorizing the execution and delivery of this Agreement
and any other agreement, instrument or other document necessary to consummate
transactions contemplated hereby; and (ii) the name, title and incumbency of,
and bearing the signatures of, the officers of the Buyer authorized to execute
and deliver this Agreement and any other agreement, instrument or document
necessary to consummate the transactions contemplated hereby; and
(c) the certificate required as a condition to the Seller's
obligation to close under Sections 8.2 and 8.3 (the "Buyer Closing
Certificate");
(d) the fully executed, operational Irrevocable Letter of Credit
(as defined below) in a form acceptable to the Company; and
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(e) a legal opinion from Willkie Farr & Gallagher LLP, counsel to
Buyer, stating that such opinion may be relied upon by the Sellers and in form
and substance reasonably satisfactory to the Seller Representative.
9.4. Indebtedness Payoff.
Two (2) business days prior to the Closing Date, the Company and the
Seller Representative shall provide written payment instructions to the Buyer,
together with a payoff letter from each lender in respect of the Indebtedness
(together, the "Payment Instructions"), directing the Buyer to (a) pay an amount
equal to the Indebtedness (other than the indebtedness of the Spanish
Subsidiary) (such amount to be paid, the "Pay-Off Amount") to such account or
accounts of any such lenders as Seller shall designate in the Payment
Instructions, and (b) pay the balance of the Purchase Price (in accordance with
Section 2.1(b)) to such account of the Sellers as the Seller Representative
shall designate in the Payment Instructions. In such event, the Closing shall be
deemed to have occurred in the following order: (i) the Pay-Off Amount shall be
deemed to have first been paid by the Buyer to the Sellers; (ii) the Sellers
shall be deemed to have remitted the Pay-Off Amount to the Company, and the
Company shall be deemed to have next remitted the Pay-Off Amount to each such
lender in order to satisfy the Indebtedness; (iii) the Buyer shall be deemed to
have next paid the balance of the Purchase Price (in accordance with Section
2.1(b)) to the Sellers; and (iv) the Sellers shall be deemed to have next
delivered the Purchased Securities to the Buyer.
SECTION 10. TERMINATION AND ABANDONMENT
10.1. Termination.
This Agreement may be terminated and the transactions contemplated
herein may be abandoned at any time prior to the Closing:
(a) by the Buyer or the Seller Representative if the Closing has
not occurred by August 31, 2004 or such other date agreed upon by the Buyer and
the Seller Representative (the actual date of such termination, the "Termination
Date");
(b) by mutual written consent of the Buyer, the Company and the
Seller Representative;
(c) by the Buyer, if there has been a material breach of any
representation, warranty, agreement or covenant of any Seller or the Company,
which breach shall have not been cured within thirty (30) days after written
notice thereof from the Buyer;
(d) by the Company and the Seller Representative, if there has
been a material breach of any representation, warranty, agreement or covenant of
the Buyer, which breach shall have not been cured within thirty (30) days after
written notice thereof from the Seller Representative or the Company;
(e) by either the Buyer or both the Company and the Seller
Representative pursuant to Section 6.9(b); or
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(f) by the Buyer or the Company if, on or before March 25, 2004
(or such later date agreed upon by the Buyer and the Company), (i) the Sellers
and the Put/Call Holders holding Purchased Securities and Put/Call Shares (as
applicable) representing, in the aggregate, 100% of the outstanding capital
stock of the Company (on a fully diluted basis) shall have not executed and
delivered the Power of Attorney, or (ii) the Seller Representative shall have
not duly executed and delivered this Agreement or the Put and Call Agreement.
10.2. Procedure for Termination.
Each party hereto terminating this Agreement pursuant to Section 10.1
shall give written notice thereof to each other party hereto, whereupon this
Agreement (other than this Section 10.2 and Section 12.3 and Section 14
(excluding Section 11.1)) shall terminate and the transactions contemplated
herein shall be abandoned without further action by any party and there shall be
no liability on the part of any party; provided, however, that if such
termination is by the Buyer or the Company and Sellers pursuant to Section
10.1(c), 10.1(d) or 10.1(e), as the case may be, and results from (a) the
deliberate failure of any party to fulfill a condition of performance of the
obligations of the other party under this Agreement, (b) the failure of any
party to perform a material covenant under this Agreement, or (c) the material
breach by any party of any representation or warranty contained in this
Agreement, and, at the time of termination the terminating party was not in
breach of its obligations under this Agreement such that the non-terminating
party would have been entitled to terminate this Agreement, such non-terminating
party shall be liable for any damages incurred or suffered by the other party as
a result of such failure or breach; and provided, further, that if the Closing
does not occur, no party may bring any legal action, suit or Proceeding relating
to any claimed breach or violation of this Agreement, excluding a breach of
Section 6.6, unless such party has first terminated this Agreement in accordance
with this Section 10. No claim for indemnification may be asserted by Buyer
after the expiration of the applicable representation, warranty or covenant, but
any such claim theretofore asserted may be pursued after such expiration.
SECTION 11. INDEMNIFICATION
11.1. Survival of Representations, Warranties and Covenants and Certain
Claims.
The representations and warranties contained in this Agreement shall
survive the Closing solely for the purposes of Sections 11.2(a), 11.2(b) and
11.2(c) until March 31, 2006 and shall thereafter terminate (and any claim
relating to the subject matter of any such representation or warranty must be
made on or before such date or such claim shall be deemed to have been waived),
except that (a) the representations and warranties contained in Sections 4.10
shall survive the Closing until all claims relating to the subject matter
thereof shall have been barred by the relevant statutes of limitations (by which
time any such claim shall have been made or such claim shall be deemed to have
been waived), and (b) the representations and warranties contained in Sections
3.2, 3.4, 4.2, 4.3, 4.22, 5.2 and 5.8 shall survive the Closing (and any claim
with respect to the subject matter thereof may be made) indefinitely. The
covenants contained in this Agreement shall survive the Closing indefinitely or
until, by their respective terms, they are no longer operative, except that any
monetary claim for a breach of any covenant to be performed prior to the Closing
must be made on or before March 31, 2006 or such monetary claim shall be deemed
to have been waived. No claim for indemnification hereunder may be
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asserted after the expiration of the period during which such claim may be made
as provided herein, but any such claim theretofore asserted may be pursued after
such expiration. In the event that the Buyer is entitled to indemnification with
respect to any such claim, the Buyer shall promptly provide written notice to
the Seller Representative of such claim as provided in Section 14.4; provided,
however, that except as provided in the immediately preceding sentence or to the
extent that the indemnifying party is otherwise prejudiced thereby, failure or
delay to give such written notice shall not affect an indemnifying party's
liability under this Section 11.
11.2. Indemnity.
(a) Subject to any applicable limitations set forth in this
Section 11, each Seller shall severally, but not jointly, indemnify and hold
harmless the Buyer and its officers, directors, employees, stockholders,
representatives, agents, Affiliates, successors and assigns (collectively, the
"Buyer Indemnified Parties") from and against any Loss or Losses (each, an
"Individual Loss") sustained or required to be paid by any of such Buyer
Indemnified Parties resulting from or in connection with (i) any
misrepresentation or breach of any representation or warranty made by such
Seller in Section 3 or in such Seller's Closing Documents or (ii) such Seller's
breach of the covenants contained in Section 6.6, 6.7 or 6.8.
(b) Subject to any applicable limitations set forth in this
Section 11, each Seller shall severally, but not jointly, indemnify and hold
harmless the Buyer Indemnified Parties from and against any Loss or Losses
(each, a "Several Loss") sustained or required to be paid by any of such Buyer
Indemnified Parties resulting from or in connection with: (i) with respect to
any period up to and including the Closing Date, any misrepresentation or breach
of any representation or warranty made by the Company in this Agreement or in
the Company Closing Documents; (ii) any breach of or failure to perform any
covenant, agreement or obligation of the Company contained in this Agreement
with respect to any period up to and including the Closing Date; (iii) any
liability of the Company or any Subsidiary under or in connection with (A) any
employee change-in-control payments arising solely as a result of the
transactions contemplated hereby (except in the case of an involuntary
termination (other than for cause) by the Company of any relevant employee's
employment with the Company) after the Closing, (B) the litigation that shall be
described in items (a) and (b) of Section 4.11 of the Disclosure Schedule, (C)
Events Outside of the Ordinary Course, and (D) the Deposit Expenses, (iv) an
amount equal to any positive Closing Deduction Adjustment; and (v) all
liabilities for Taxes of the Company or any Subsidiary attributable to a
Pre-Closing Tax Period (as defined below), to the extent that such Tax was not
taken into account in the determination of the Purchase Price pursuant to
Section 2.l(a), by virtue of being reflected in one or more elements of the
Closing Date Deduction, as ultimately determined after taking into account the
Closing Deduction Adjustment. The liability of the Sellers pursuant to the
foregoing clause (v) shall be reduced by the present value of any reduction in
Taxes realized in a Post-Closing Tax Period arising from the adjustments that
gave rise to the indemnified taxes. For purposes of this Agreement,
"Post-Closing Tax Period" shall mean any taxable period commencing after the
Closing Date and the portion commencing after the Closing Date of any taxable
period that includes (but does not end on) the Closing Date. The present value
of any such reduction shall be determined (i) for completed years based on the
Tax Returns as filed, taking into account any Tax benefits actually realized
from the adjustments, (ii) for other years, by assuming that the Company will
utilize any deductions in the first year available and will pay Tax at the
highest marginal rates applicable to corporations, taking into
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account the deductibility of such Taxes, and (iii) using a discount rate equal
to the federal underpayment rate as in effect from time to time.
(c) Subject to any applicable limitations set forth in this
Section 11, the Buyer and, from and after the Closing, the Company shall jointly
and severally indemnify and hold harmless each Seller and its officers,
directors, employees, stockholders, members, representatives, agents, successors
and assigns (collectively, the "Seller Indemnified Parties") from and against
any Loss or Losses sustained or required to be paid by any of such Seller
Indemnified Parties resulting from or in connection with: (i) any
misrepresentation or breach of any representation or warranty made by the Buyer
in this Agreement, the Buyer Closing Documents or the Buyer Closing Certificate;
(ii) any breach of any covenant, agreement or obligation of the Buyer contained
in this Agreement; (iii) any breach, only to the that such breach shall have
occurred after the Closing, of any covenant, agreement or obligation of the
Company contained in this Agreement; (iv) an amount equal to any negative
Closing Deduction Adjustment; and (v) any breach of the covenants set forth in
Section 6.15.
(d) In the event that any Buyer Indemnified Party or Seller
Indemnified Party hereunder is entitled to indemnification with respect to any
Loss or potential Loss arising from any Proceeding, judicial or administrative,
instituted by any third party (any such third-party Proceeding being referred to
as a "Third-Party Claim"), the indemnified party shall give the indemnifying
party prompt notice thereof (in the case of any Seller, such notice shall be
provided to the Seller Representative), together with copies of all notices and
documents (including court papers) in the possession of the indemnified party
relating to such Third-Party Claim. Any failure or delay on the part of the
indemnified party to give such notice shall not affect whether an indemnifying
party is liable hereunder except and to the extent that the indemnifying party
is prejudiced thereby (or if the time to assert any claim for indemnity
hereunder that is the subject of such notice has expired as provided herein).
The indemnifying party shall be entitled to control, contest and defend such
Third-Party Claim; provided that the indemnifying party provides evidence
reasonably satisfactory to the indemnified party that the indemnifying party has
(and will continue to have) adequate financial resources to pay the costs
associated with defending such Third-Party Claim. Within fifteen (15) days
following the receipt of notice by the indemnifying party of any Third-Party
Claim and such additional documentation or information relating to such
Third-Party Claim in the possession of the indemnified party that the
indemnifying party requests, the indemnifying party shall provide notice to the
indemnified party of its election to assume control of the defense of such
Third- Party Claim in accordance with the provisions of this Section 11.2. The
indemnifying party shall conduct the defense of such claim through counsel
reasonably acceptable to the indemnified party. So long as the indemnifying
party is conducting the defense of the Third-Party Claim in accordance with this
Section 11.2, the indemnified party shall be entitled, at its own cost and
expense (which expense shall not constitute a Loss unless counsel for the
indemnified party advises in writing that there is a conflict of interest, and
only to the extent that such expenses are reasonable) to participate in, but not
control, such contest and defense and to be represented by attorneys of its or
their own choosing. In the event that the indemnifying party (i) elects not to
control, contest and defend such Third-Party Claim, or (ii) fails to notify the
indemnified party within the required time period of its election as provided in
this Section 11.2, the indemnified party may control, contest and defend such
Third-Party Claim at the cost and expense of the indemnifying party, provided
that the indemnified party shall defend the Third-Party Claim in good faith; and
provided,
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further, that the indemnifying party may assume within a reasonable period of
time under the circumstances its right to control, contest and defend such
Third-Party Claim upon providing written notice thereof to the indemnified
party, and thereafter the indemnifying party shall not be liable for the fees
and expenses of the indemnified party's counsel (except for such reasonable fees
and expenses as are incurred in the transition of such defense to the
indemnifying party). If the indemnifying party assumes the defense of any
Third-Party Claim, (i) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
(which consent shall not be unreasonably withheld) unless (A) there is no
finding or admission of any violation of Law and no effect on any other claims
that may be made against the indemnified party and (B) the sole relief provided
is monetary damages that are paid in full by the indemnifying party; and (ii)
the indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. Notwithstanding anything
in this Section 11.2(d) to the contrary, with respect to the Third-Party Claim
specified in Section 11.2(b )(iii )(B ), (1) no Seller shall be permitted to
control, contest and defend such claim, (2) the Sellers shall be entitled, at
their own cost and expense, to participate in the contest and defense of such
claim and to be represented by attorneys of their own choosing, and (3) no
compromise or settlement of such claim may be effected by the indemnified party
without the consent of the Seller Representative, which consent shall not be
unreasonably withheld. Each party hereto shall cooperate and cause their
respective Affiliates to cooperate in the defense or prosecution of any
Third-Party Claim and shall furnish or cause to be furnished such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials or appeals, as may be reasonably requested in connection
therewith.
(e) Subject to any applicable limitations set forth in this
Section 11, with respect to claims under or relating to this Agreement pursuant
to which the Sellers shall be obligated to indemnify any Buyer Indemnified Party
under this Section 11, each Seller shall be liable only for that portion of such
Losses relating to such claims in an amount equal to: (i) with respect to
Individual Losses, all such Individual Losses attributable to such Seller; and
(ii) with respect to Several Losses, all such Several Losses multiplied by such
Seller's Indemnification Percentage.
(f) Subject to any applicable limitations set forth in this
Section 11, at the time that any Buyer Indemnified Party is entitled (in
accordance with the terms and conditions of this Section 11) to indemnity
pursuant to Section 11.2(a) or 11.2(b), it shall recover or collect any amounts
to be paid by one or more Sellers under this Section 11 as follows:
(i) With respect to any Individual Loss, the Buyer
Indemnified Party shall first seek to recover such Loss directly from the Seller
or Sellers responsible for such Individual Loss (each a "Liable Seller"). If any
amount of such Loss remains unsatisfied after the Buyer Indemnified Party has
used its commercially reasonable efforts to fully recover the entirety of such
Loss directly from the Liable Seller or Sellers, the Buyer Indemnified Party may
recover some or all of any such Loss still outstanding from the Holdback Amount,
subject to the following conditions:
(A) Any such recovery against the Holdback Amount can
only occur at the time a release payment of the Holdback Amount is to be made
pursuant to Section 12.6.
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(B) The Buyer Indemnified Party may withhold from a
release payment in respect of any claim for such Loss up to, but not more than,
the full amount of any Liable Seller's pro-rata share of that release payment. A
Liable Seller's pro-rata share of any release payment shall be equal to the
product of (1) the total amount of the release payment to be made to all
Sellers, multiplied by (2) such Liable Seller's Indemnification Percentage. The
Buyer Indemnified Party may not withhold any amount of the Liable Seller's
pro-rata share above what is reasonably necessary or estimated to fully satisfy
the unsatisfied portion of the Individual Loss.
(C) At the time any release payment is made to the
Seller Representative pursuant to Section 12.6, the Buyer Indemnified Party
shall provide the Seller Representative with a written notice identifying any
amounts withheld from such release payment to satisfy an Individual Loss. The
notice shall identify the Liable Seller or Sellers responsible for the
Individual Loss and shall list with respect to each such Liable Seller both the
amount of the release payment that (to the Knowledge of the Buyer) such Liable
Seller was entitled to and the amount that the Buyer Indemnified Party withheld
from such release payment. Upon distributing the release payment to the Sellers,
the Seller Representative shall only pay any Liable Seller so identified the
difference, if any, between the amount of the release payment such Liable Seller
was to receive and the amount that the Buyer Indemnified Party withheld.
(D) To satisfy an Individual Loss, the Buyer Indemnified
Party may withhold a Liable Seller's portion of more than one Holdback Amount
release payment, but following the final release of the Holdback Amount, the
Buyer Indemnified Party may only recover any portion of an Individual Loss that
remains unsatisfied directly from a Liable Seller.
(ii) With respect to any claim for any Several Loss resulting
from or in connection with any breach of any representation, warranty or
covenant contained in any Excluded Provision, the Buyer Indemnified Party will
first seek to recover such Loss from the Holdback Amount, and then to the extent
the entire Loss has not been satisfied (any such unsatisfied Loss, an "Excess
Loss"), the Buyer Indemnified Party may seek to recover from each individual
Seller, an amount equal to the product of (A) the Excess Loss, multiplied by (B)
such Seller's Indemnification Percentage; and
(iii) With respect to any claim for any Several Loss (other
than any such claim with respect to any breach of any representation, warranty
or covenant contained in any Excluded Provision), the Buyer Indemnified Party
may recover such Loss only from the Holdback Amount.
(g) (i) The Sellers' aggregate liability for all claims under this
Section 11 (other than claims with respect to any breach of any representation,
warranty or covenant contained in any Excluded Provision) shall not exceed, in
the aggregate, the then existing Holdback Amount, which, subject to the
provisions of this Section 11.2(g)(i), shall be Buyer's sole source for recovery
under such claims. If prior to April 1, 2006 (A) any amount (the "Shortfall
Amount") of the Holdback Amount is applied towards the satisfaction of the
Closing Deduction Adjustment and the Holdback Amount (after giving effect to
such application) has been reduced to zero at such time, each Seller shall
continue to have potential several, but not joint, liability for claims under
this Section 11 equal to (but not exceeding) the Shortfall Amount,
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multiplied by such Seller's Indemnification Percentage, and (B) any amount of
the Holdback Amount is applied towards the satisfaction of any Deposit Expense
and such Deposit Expense is subsequently collected by the Company prior to such
date (such collected Deposit Expenses, the "Recouped Deposit Expenses"), the
Holdback Amount shall be increased by an amount equal to the Recouped Deposit
Expenses (as reflected in the release payment made on such date pursuant to
Section 12.6); and
(ii) The Sellers shall not be liable for any Losses arising
under Section 11.2(b) unless the aggregate amount of all such Losses (other than
any Losses in respect of the Excluded Provisions, any breach of any
representation or warranty contained in Section 4.13 or 4.19, or the litigation
and other matters that shall be described in items (a) and (b) of Section 4.11
of the Disclosure Schedule, which shall not be subject to any threshold amount,
and shall not be counted for the purpose of reaching any threshold amount for
Losses other than the foregoing) exceeds $1,000,000, in which case the Sellers
shall be liable, subject to the other applicable terms and limitations of this
Section 11, for all such Losses (from the first dollar of such Losses).
Notwithstanding anything in this Section 11, (A) the aggregate amount of
indemnification claims payable by any Seller for the Excluded Provisions and for
indemnification under Section 11.2(a) shall not exceed the Purchase Price
received by such Seller hereunder; and (B) for all other claims against any such
Seller under this Section 11, the sole remedy will be such Seller's portion of
the then existing Holdback Amount (as adjusted by the Shortfall Amount and the
Recouped Deposit Expenses).
(h) No claim for indemnity for a breach of a particular
representation, warranty or covenant shall be made after the Closing if the
Buyer had Knowledge (including by virtue of any Disclosure Schedule) of such
breach as of the Closing, except for claims with respect to any Events Outside
of the Ordinary Course.
(i) Notwithstanding anything herein to the contrary, any Loss
otherwise indemnifiable hereunder shall be reduced by any amount actually
received in connection therewith under any such insurance or other contract
providing for insurance coverage or indemnification.
(j) If an indemnifying party makes any payment under this Section
11 in respect of any Losses, such indemnifying party shall be subrogated, to the
extent of such payment, to the rights of the indemnified party against any third
party with respect to such Losses; provided, however, that such indemnifying
party shall not have any rights of subrogation with respect to any other party
hereto or any of their respective Affiliates or their Affiliates' respective
officers, directors (or persons in similar positions), agents or employees.
(k) The Buyer and each Seller hereby agree to take and cause its
respective Affiliates (including, in the case of the Buyer after the Closing has
occurred, the Company and any Subsidiary) to take commercially reasonable steps
to mitigate Losses upon the executive officers of the Buyer, the Company or any
Seller, as applicable, becoming aware of any event which would reasonably be
expected to, or does, give rise to any rights under this Section 11, including
incurring costs only to the extent commercially reasonable to remedy the breach
which gives rise to the Loss.
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(l) All payments by an indemnifying party under this Section 11
shall be treated as an adjustment to the Purchase Price for all foreign,
federal, state and local income tax purposes.
(m) The parties hereto hereby acknowledge and agree that although
the representations and warranties set forth in Section 4 are made jointly by
the Company and the Sellers, the Company shall not be jointly responsible for
such representations and warranties and shall not be required to contribute in
any manner to any amounts charged against the Holdback Amount or otherwise
required to be paid by one or more of the Sellers pursuant to this Agreement.
11.3. Exclusive Remedy.
The Buyer and each Seller hereby acknowledge and agree that the
foregoing indemnification provisions in this Section 11 shall be the sole and
exclusive rights and remedy of the Buyer, the Seller and the Company with
respect to the transactions contemplated by this Agreement, including, without
limitation, with respect to (a) any misrepresentation, breach or default of or
under any of the representations, warranties, covenants and agreements contained
in this Agreement or (b) any failure duly to perform or observe any term,
provision, covenant or agreement contained in this Agreement; provided, however,
that nothing set forth herein shall be deemed to limit any party's rights or
remedies in the event that the other party has committed fraud in connection
therewith; provided, further, that nothing set forth herein shall be deemed to
limit the right of the Buyer to seek equitable relief pursuant to Section
12.3(f). Without limiting the generality of the preceding sentence, no legal
action sounding in contribution, tort or strict liability may be maintained by
any party hereto, or any of their respective officers, directors, employees,
stockholders, representatives, agents, successors or assigns, against any other
party hereto or any of their respective officers, directors, employees,
stockholders, representatives, agents, successors or assigns with respect to any
matter that is the subject of this Section 11.
SECTION 12. CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS
12.1. Tax Matters.
(a) Any sales, recording, transfer, stamp, conveyance, value
added, use, or other similar Taxes, duties, excise, governmental charges or fees
("Transfer Taxes") imposed as a result of the sale of the Purchased Securities
to the Buyer pursuant to this Agreement shall be shared equally among the
Sellers, on the one hand, and the Buyer, on the other hand. The Buyer shall
promptly remit 50% of any refunds of such items to the Seller Representative.
The Seller Representative and the Buyer, to the extent required by Applicable
Law, shall prepare and file all Tax Returns on a timely basis with respect to
any such Taxes or fees.
(b) The Buyer shall prepare and file, or cause to be prepared and
filed, all Tax Returns (each, a "Pre-Closing Tax Return") for a Tax year
commencing before the Closing Date and not yet filed on the Closing Date, and
shall cause the Company to pay the Taxes shown to be due thereon. The Sellers
shall promptly reimburse the Buyer for the portion of such Tax that relates to a
Pre-Closing Tax Period, to the extent that such Tax was not taken into account
in
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the determination of the Purchase Price pursuant to Section 2.l(a), by virtue of
being reflected in one or more elements of the Closing Date Deduction, as
ultimately determined after taking into account the Closing Deduction
Adjustment. The Buyer shall prepare Pre-Closing Tax Returns on a basis that is
consistent with past practice, provided there is at least "substantial
authority" (as referred to in Section 6662 of the Code) for any positions taken
on such past returns. Each Seller and the Seller Representative will furnish to
the Buyer all information and records in such Seller's or the Seller
Representative's possession that is reasonably requested by the Buyer for use in
preparation of any Pre-Closing Tax Returns. The Buyer shall provide a copy of
each Pre-Closing Tax Return, completed in draft form, to the Seller
Representative at least forty five (45) days before the due date thereof for its
review, comment and reasonable approval, not to be unreasonably delayed. The
Buyer and each of the Sellers agree to cause the Company to file all Tax Returns
for any period that includes the Closing Date on the basis that the relevant
taxable period ended as of the close of business on the Closing Date, unless the
relevant Tax authority will not accept a Tax Return filed on that basis. For
purposes of this Agreement, "Pre-Closing Tax Period" shall mean any taxable
period ending on or before the Closing Date and the portion ending on and
including the Closing Date of any taxable period that includes (but does not end
on) the Closing Date ("Straddle Period"). The Sellers shall be entitled to the
benefit of all Tax refunds for Pre-Closing Tax Periods, and Buyer shall promptly
pay all such refunds, together with any interest received in respect of such
refunds, to the Seller Representative.
(c) The Sellers shall be entitled to the benefit of all Tax
refunds for Pre-Closing Tax Periods, net of the present value of all Tax costs
of the adjustments that gave rise to such refunds, and Buyer shall promptly pay
such net amount, together with any net interest received in respect of such
refunds, to the Seller Representative. The present value of the Tax costs of
adjustments giving rise to a refund shall be determined (i) for completed years
based on the Tax Returns as filed taking into account any Tax costs actually
resulting from the adjustments, (ii) for other years, by assuming that the
Company will pay Tax at the highest marginal rates applicable to corporations,
taking into account the deductibility of such Taxes, and (iii) using a discount
rate equal to the federal underpayment rate as in effect from time to time. The
Buyer shall provide the Seller Representative with a schedule setting forth in
reasonable detail its calculation of the net amount of the refund payable.
(d) In the case of any Straddle Period, (i) real, personal and
intangible property Taxes ("Property Taxes") of the Company for the Pre-Closing
Tax Period shall be equal to the amount of such Property Taxes for the entire
Straddle Period multiplied by a fraction, the numerator of which is the number
of days during the Straddle Period that are in the Pre-Closing Tax Period and
the denominator of which is the number of days in the Straddle Period; and (ii)
the Taxes of the Company (other than Property Taxes) for the portion of the
Straddle Period that constitutes a Pre-Closing Tax Period shall be computed as
if such taxable period ended as of the close of business on the Closing Date
based on an interim closing of the books, equitably apportioning the benefit of
lower tax rates, and treating all amounts of compensation expense resulting from
the exercise of options and redemption premium relating to the redemption of the
subordinated debt described in Exhibit D hereto (the contents of which Exhibit D
shall be as agreed upon in good faith by the Buyer, the Company and the Seller
Representative promptly after the date hereof) as deductible in the Pre-Closing
Tax Period. To the extent that such deductions result in a net loss for the
Pre-Closing Tax Period (without regard to earnings after the Earnings
Preservation Date), the Buyer (i) shall pay to the Seller Representative the
amount
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of any tax benefit realized as a result of such loss in the period between the
Closing Date and the end of the taxable year of the Company (determined on the
basis of interim closing of the books as of the relevant dates) and (ii) if the
Company has a net loss for such year, shall cause the Company to carryback such
loss, to the extent that such carryback produces a Tax refund (without regard to
the provisions of Section 12.1(c)).
12.2. Employee Benefits Matters.
(a) The Buyer agrees that, following the Closing, employees who
continue their employment with the Company or any Subsidiary ("Continuing
Employees") will continue to be provided with compensation and benefits under
employee benefit plans that are the same or substantially comparable in the
aggregate to either (i) those currently provided by the Company or any
Subsidiary to such employees as of the Closing Date or (ii) those provided by
Buyer to similarly situated employees from time to time. With respect to any
employee benefits that are provided to Continuing Employees under Buyer's
employee benefits plans, Buyer shall cause service by Continuing Employees to be
taken into account for purposes of eligibility to participate, eligibility to
commence benefits, vesting and, solely for purposes vacation benefits, benefit
accruals (except to the extent such treatment would result in duplicative
accrual of benefits for the same period of service) under the Plans or any other
benefit plans of Buyer in which such employees participate.
(b) From and after the Closing, with respect to any welfare
benefits that are provided to Continuing Employees under the Buyer's employee
benefits plans, the Buyer shall cause to be (i) waived any pre-existing
condition limitations and (ii) credited any deductibles and out-of-pocket
expenses incurred by such employees and their beneficiaries and dependents
during the portion of the calendar year prior to participation in the benefit
plans provided by the Buyer.
12.3. General Confidentiality; Non-Competition, Non-Solicitation;
Non-Disparagement.
(a) Each Seller hereby acknowledges that the Buyer would not enter
into this Agreement without the following assurances related to the confidential
and proprietary information with respect to the business and operations of the
Company and each Subsidiary and, accordingly, each Seller hereby agrees that
such Seller shall not, without the prior written consent of the Buyer, disclose,
directly or indirectly, to any Person or use, whether or not for such Seller's
own benefit, any confidential or proprietary information with respect to the
Company, any Subsidiary or the Business, including (i) trade secrets,
confidential or proprietary designs, formulae, drawings, diagrams, techniques,
research and development, specifications, data, know-how, formats, marketing
plans, business plans, budgets, strategies, forecasts and client data; (ii)
confidential or proprietary information relating to Products; (iii) the names of
customers and contacts, the names of its vendors and suppliers, the cost of its
materials and labor, the prices obtained for services sold (including the
methods used in price determination, manufacturing and sales costs), lists or
other written records used in the Business, compensation paid to employees and
consultants and other terms of employment, confidential or proprietary
production or operation techniques or any other confidential or proprietary
information of, about or pertaining to the Business, and any other confidential
or proprietary information and material
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relating to any customer, vendor, licensor, licensee, or other party transacting
business with the Company or any Subsidiary; (iv) all confidential and
proprietary records, files, memoranda, reports, price lists, drawings, plans,
sketches and other written and graphic records, documents, equipment, and the
like, relating to the Business as it is currently conducted; and (v) any
confidential or proprietary information or trade secrets relating to the
business or affairs of the Buyer or any of its Affiliates which such Seller may
acquire or develop in connection with or as a result of the performance of the
terms and conditions of this Agreement, excepting only such information that (A)
is required to be disclosed by subpoena, court order or other similar process or
otherwise required by Law, provided that such Seller shall have used its best
efforts to notify the Buyer in time to afford the Buyer a reasonable opportunity
to contest such process or order, or (B) as is already known to the public or
which may become known to the public without any fault of any Seller.
(b) Each Seller hereby acknowledges that the agreements and
covenants contained in this Section 12.3 are essential to protect the value of
the Business being acquired by the Buyer. Each of the Sellers (each, a
"Restricted Seller") to be listed on Exhibit E hereto (the contents of which
Exhibit E shall be as agreed upon in good faith by the Buyer, the Company and
the Seller Representative promptly after the date hereof) hereby agrees that
during the period commencing on the Closing Date and ending on the second
anniversary of the Closing Date (such period is hereinafter referred to as the
"Restricted Period"), such Restricted Seller shall not, anywhere that the
Company or any Subsidiary conducts business or otherwise sells products,
participate or engage, for itself or through or on behalf of or in conjunction
with any Person, whether as an agent, consultant, shareholder, director (or
person in a similar position), officer, member, manager, partner, joint
venturer, investor or in any other capacity, in any activity that competes with
the Company, any Subsidiary or the Business; provided, however, that the
foregoing shall not prohibit the ownership by any Seller of equity securities of
a public company in an amount not to exceed 2% of the issued and outstanding
shares of such company.
(c) During the Restricted Period, each Restricted Seller shall not
at any time or for any reason (i) solicit or divert any business or clients or
customers away from the Company or any Subsidiary; (ii) induce any customers,
clients, suppliers, agents or other Persons under contract or otherwise
associated or doing business with the Company or any Subsidiary, to reduce or
alter any such association or business with the Company or any Subsidiary; (iii)
hire any Person employed by the Company or any Subsidiary or any Person who
leaves the employ of the Company or any Subsidiary after the date hereof (other
than any such Person whose employment with the Company or any Subsidiary has
been terminated by the Company or such Subsidiary); and (iv) solicit any person
in the employment of the Company or any Subsidiary to (A) terminate such
employment, and/or (B) accept employment, or enter into any consulting
arrangement, with any Person other than the Buyer or any of its Affiliates;
provided, however, that, for the purposes of this Section 12.3(c), such
solicitation, diversion or inducement described in the foregoing (i), (ii) and
(iv) shall not include any general advertisement by any Restricted Seller for
employment by it or with respect to the sale or provision of such Restricted
Seller's goods or services, to the extent that such general advertisement is
directed at the general public and not at any (A) director, officer, employee of
the Company or any Subsidiary, or (B) customers, clients, suppliers, agents or
other Persons under contract or otherwise associated or doing business with the
Company or any Subsidiary.
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(d) Except as necessary to enforce its rights hereunder, no Seller
shall (i) make or cause to be made, directly or indirectly, any disparaging or
derogatory statements which later become public concerning the Company, any
Subsidiary or its respective businesses, services or reputations, or its past or
present officers, directors (or persons in similar positions), employees,
attorneys, and agents or (ii) intentionally do or say anything to damage any of
the business, supplier, or customer relationships of the Company or any
Subsidiary nor in any way, directly or indirectly, assist any Person in inducing
or otherwise counseling, advising, encouraging, or soliciting any Person to
terminate or in any way diminish its relationship with the Company or any
Subsidiary.
(e) Except as necessary to enforce its rights hereunder or
otherwise in connection with its commercial activities or in the ordinary course
of its business, no Seller shall make or cause to be made, directly or
indirectly, any disparaging or derogatory statements which later become public
concerning the Buyer or any of its Affiliates or their respective businesses,
services or reputations, or its past or present officers, directors (or persons
in similar positions), employees, attorneys, and agents.
(f) Each Seller hereby agrees that a monetary remedy for a breach
of the agreements set forth in this Section 12.3 will be inadequate and
impracticable and further agrees that such a breach would cause the Buyer and
its Affiliates irreparable harm, and that the Buyer and its Affiliates shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving actual damages. In the event of such a breach, each Seller hereby agrees
that the Buyer and its Affiliates shall be entitled to such injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions, as a court of competent jurisdiction shall determine.
(g) If any Restricted Seller breaches the covenant set forth in
Section 12.3(b), the running of the Restricted Period described therein shall be
tolled for so long as such breach continues. If any provision of this Section
12.3 is held by a court of competent jurisdiction to be invalid in part, it
shall be curtailed, as to time, location or scope, to the minimum extent
required for its validity under the laws of the United States or any applicable
law and shall be binding and enforceable with respect to each Seller as so
curtailed. In addition, if any party brings an action to enforce this Section
12.3 or to obtain damages for a breach thereof, the prevailing party in such
action shall be entitled to recover from the non-prevailing party all attorney's
fees and expenses incurred by the prevailing party in such action.
(h) If any provision of this Section 12.3 is adjudicated to be
invalid or unenforceable, the invalid or unenforceable provisions shall be
deemed amended (with respect only to the jurisdiction in which such adjudication
is made) in such manner as to render them enforceable and to effectuate as
nearly as possible the original intentions and agreement of the parties.
(i) Notwithstanding anything to the contrary contained herein,
nothing contained in this Section 12.3 shall be deemed to alter the Buyer's
rights and obligations under that certain Non-Disclosure and Confidentiality
Agreement, dated January 16, 2004 (the "Confidentiality Agreement"), between the
Company and the Buyer.
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12.4. Seller Representative.
(a) Each Seller (by virtue of its execution and delivery of this
Agreement) hereby appoints Dudley S. Taft as agent and attorney-in-fact, with
full power of substitution and re-substitution, as the "Seller Representative"
for and on behalf of such Seller, to, in accordance with this Agreement and the
Power of Attorney: (i) serve as custodian of the Purchased Securities (as
contemplated by Section 6.8); (ii) give and receive payments, notices and
communications hereunder and under the Seller Closing Documents and any of the
other agreements or instruments contemplated hereby; (iii) authorize any and all
actions on behalf of the Sellers related to the payment or allocation of the
Holdback Amount and the Contingent Payment, (iv) agree to, negotiate, enter into
settlements and compromises of, and comply with orders of courts with respect to
the payment of Contingent Payment, and (v) take all actions necessary or
appropriate in the judgment of the Seller Representative for the accomplishment
of the foregoing or implementation of any provision of this Agreement or the
Power of Attorney for which the Seller Representative is authorized hereby,
thereby or otherwise.
(b) A decision, act, consent or instruction of the Seller
Representative shall constitute a decision of all the Sellers and shall be
final, binding and conclusive upon each of the Sellers, and the Buyer and any
other Person may rely upon any such decision, act, consent or instruction of the
Seller Representative as being the decision, act, consent or instruction of each
Seller. The Buyer and any other Person (except any Seller) are hereby relieved
from any liability to any Person for any acts done by them in accordance with
any such decision, act, consent or instruction of the Seller Representative.
(c) In the event that the Seller Representative is unable or
unwilling to serve as such, the Sellers shall, within five (5) business days
following notice of such inability or unwillingness, appoint a successor Seller
Representative, which person shall be a resident of the United States of
America, in accordance with the Power of Attorney.
(d) The Seller Representative shall not be liable for any act done
or omitted hereunder as the Seller Representative unless it is proved by clear
and convincing evidence that his action or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to Sellers or the
Put/Call Holders or undertaken with reckless disregard to the best interests of
the Sellers or Put/Call Holders. Except as provided in this Section 12.4(d), the
Sellers and the Put/Call Holders (as provided in Section 9(d) of the Put and
Call Agreement) shall, severally and pro rata to the number of shares of the
capital stock of the Company to be sold or subject to sale by them to the Buyer
pursuant to the terms of this Agreement and the Put and Call Agreement,
indemnify and hold the Seller Representative harmless from and against any loss,
liability or expense incurred on the part of the Seller Representative and
arising out of or in connection with the acceptance or administration of the
Seller Representative's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Seller Representative.
12.5. Purchase of Put/Call Shares.
From and after the purchase by the Buyer of any Put/Call Shares
pursuant to the Put and Call Agreement:
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(a) such purchased Put/Call Shares shall for all purposes
hereunder be deemed Purchased Securities (and shall no longer be deemed Put/Call
Shares);
(b) each Put/Call Holder that sold such Put/Call Shares to Buyer
shall be deemed a Seller for all purposes under this Agreement, and as such
shall, without limitation, (i) be entitled to share in any Contingent Payment
(in accordance with the written instructions of the Seller Representative set
forth in the notice to the Buyer given pursuant to Section 2.2(d) or (e), as
applicable), and (ii) be subject to the Sellers' rights and obligations
hereunder (including, without limitation, Section 11 (and all of the terms,
conditions, and limitations set forth therein), as though such Put/Call Holder
had been a Seller as of the Closing Date;
(c) the Aggregate Call Holdback Amount or Individual Put Holdback
Amounts retained by the Buyer in connection with its purchase of such Put/Call
Shares shall be added to the Holdback Amount and thereafter treated in all
respects hereunder as a portion of the Holdback Amount. Upon any such addition
to the Holdback Amount, the Irrevocable Letter of Credit issued in favor of the
Seller's pursuant to Section 12.6 shall be adjusted (if reasonably necessary) so
that it secures the Buyer's performance of its obligations under the Holdback
Amount, as increased by such addition; and
(d) any ratio or calculation determined under this Agreement at
any given time (including, without limitation, any Indemnification Percentage or
Proportionate Interest or the Purchased Securities Percentage) shall be updated
to reflect the conversions provided for in Sections 12.5(a) through (c), and for
the purposes of such ratios or calculations, such Put/Call Shares shall be
deemed Purchased Securities.
12.6. Holdback Amount.
The Initial Holdback Amount shall be withheld by the Buyer from the
Purchase Price (as provided herein) and, subject to the terms of this Agreement,
shall be available to satisfy any claims for indemnity made pursuant to Section
11.2(a) and Section 11.2(b). An irrevocable letter of credit from a reputable
bank shall be obtained by the Buyer and delivered to the Seller Representative
to secure the performance by the Buyer of its obligations hereunder in respect
of the Initial Holdback Amount, and such additional amounts added to the
Holdback Amount from time to time pursuant to Section 12.5(c) (the "Irrevocable
Letter of Credit"). No interest shall be paid to the Sellers in respect of the
Holdback Amount prior to April 1, 2006. Any remaining portion of the Holdback
Amount that is withheld by the Buyer after April 1, 2006 and is released to the
Seller Representative in accordance herewith shall accrue interest from and
after such date at the rate of 1.5% per annum. On April 1, 2005, an amount equal
to the product of (a) (i) Ten Million Dollars ($10,000,000), less (ii) the sum
of (A) any amounts by which the Holdback Amount has been reduced to satisfy
indemnity claims as provided herein and (B) an estimate of any amounts necessary
to satisfy pending indemnity claims hereunder (as evidenced by a written notice
from the Buyer to the Seller Representative), multiplied by (b) the Purchased
Securities Percentage shall be paid by the Buyer to the Seller Representative
out of the Holdback Amount, without any interest thereon. On April 1, 2006, an
amount equal to (a) the Initial Holdback Amount, plus (b) any amounts added to
the Holdback Amount from time to time pursuant to Section 11.2(g)(i) or 12.5(c),
less (c) the sum of (i) any amounts previously paid out of the Holdback Amount
to satisfy indemnity claims as provided herein (including, without
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limitation, any amounts withheld from release payments to satisfy Individual
Losses under Section 11.2(f)), (ii) any amounts previously released out of the
Holdback Amount to the Seller Representative, and (iii) an estimate of any
amounts necessary to satisfy pending indemnity claims hereunder (as evidenced by
a written notice from the Buyer to the Seller Representative), shall be paid by
the Buyer to the Seller Representative out of the then remaining Holdback
Amount, without any interest thereon; provided, however, that a portion of such
Holdback Amount may continue to be retained by the Buyer beyond such time to
satisfy any pending or unresolved claims for indemnity hereunder; provided,
further, that promptly after the satisfaction or resolution of all such pending
claims, any then remaining portion of the Holdback Amount shall be paid by the
Buyer to the Seller Representative, without any interest thereon (except as
otherwise specifically provided herein).
SECTION 13. DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, as used
in herein, the following terms and phrases shall have the following respective
meanings:
"Accrued Earnings" means the net income after taxes (determined by
taking into account ordinary course items based on interim closings of the books
as of the Earnings Preservation Date and the Closing Date) of the Company and
each Subsidiary between the Earnings Preservation Date and the Closing Date.
"Accrued Tax Amount" means an amount equal to all accrued and unpaid
liabilities for Taxes in respect of taxable income of the Company or any
Subsidiary attributable to a Pre-Closing Tax Period.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls such Person, and (b) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person. For the purpose of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"Aggregate Call Holdback Amount" shall have the meaning set forth in
the Put and Call Agreement.
"Business" means the business of the Company and each Subsidiary as
currently conducted and contemplated to be conducted, including, but not limited
to, the manufacture, distribution and sale of playing cards, puzzles and playing
card-related games.
"Cash" means the cash on hand of the Company and any Subsidiary, plus
an amount equal to the Deposit, as of the Closing.
"Closing Date Deduction" means the sum of (A) the Indebtedness, (B) the
Accrued Tax Amount; (C) the Accrued Earnings; (D) the Seller Costs; and (E) the
Working Capital Negative Adjustment, if any; less (F) the Working Capital
Positive Adjustment, if any.
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"Closing Deduction Adjustment" shall have the meaning set forth in
Exhibit A hereto (as finally agreed upon as provided herein).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company EBITDA" means, as to the Company, with respect to any period,
the Company's net income for such period, plus an amount which, in the
determination of such net income for such period, has been deducted for (a)
interest expense for such period, (b) total Taxes (including Transfer Taxes) for
such period, (c) depreciation and amortization expense for such period, (d) any
legal, accounting, investment banking and other expenses incurred in connection
with the transactions contemplated hereby, and (e) any compensation expenses
relating to the issuance, conversion, exercise, cancellation and payments with
respect to the Outstanding Options or stock, in each case determined in
accordance with GAAP.
"Contingent Payment" means the consideration, in addition to the
Purchase Price, of up to $10,000,000, determined and payable in accordance with
the terms set forth in Section 2.2.
"Contract" means any contract, undertaking, agreement, arrangement,
commitment, indemnity, indenture, instrument, lease or understanding, including
any and all amendments, supplements, and modifications thereto, to or under
which the Company or any Subsidiary or any of their respective assets is legally
bound.
"Disclosure Schedule" means each of the Initial Disclosure Schedule and
the Closing Disclosure Schedule and any Updated Disclosure Schedule with respect
to the representations, warranties and covenants contained in this Agreement, in
each case, executed by an authorized officer of the Company and the Seller
Representative and prepared and delivered to the Buyer in accordance with
Section 6.9.
"Deposit" means the deposit in the amount of Two Hundred Fifty Thousand
Dollars ($250,000) paid by the Company to MindPlay, LLC.
"Deposit Expenses" means any expenses, including, without limitation,
reasonable attorneys' fees, incurred by the Company or any Subsidiary in
connection with the Company's or any Subsidiary's recovery of the Deposit, and
if any portion of the Deposit is not so recovered, the amount of such portion of
the Deposit not so recovered.
"Earnings Preservation Date" shall be the date ninety (90) days
following the date on which the Buyer files with the Governmental Entity
primarily responsible for regulating gaming in the State of Mississippi all
filings required by applicable Law to be made therewith, if, as of the
expiration of such 90-day period, either
(a) the Louisiana Approval has been obtained, but the Closing
shall have not occurred and the Mississippi Approval has not been obtained, or
(b) the Closing shall have not occurred and (i) the Louisiana
Approval shall have not been obtained, but (ii) the Buyer waives the obligation
to obtain the Louisiana Approval; provided, however, that if the Louisiana
Approval has not been obtained and the
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Buyer does not waive the Louisiana Approval requirement, then the Earnings
Preservation Date shall be the date ninety (90) days following the date upon
which all required filings have been made in both Mississippi and Louisiana if
as of the expiration of such 90-day period, the Closing shall not have occurred
and either the Mississippi Approval or the Louisiana Approval has not been
obtained.
"Encumbrance" means any mortgage, pledge, security interest,
encumbrance, lien, limitation, restriction, assessment, encroachment, defect in
title or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising by
statute or other laws, which secures the payment of a debt (including, without
limitation, any Tax) or the performance of an obligation.
"Environmental Claim" means any Proceeding by any Person alleging
personal injury, property damage or other potential liability, including,
without limitation, any cleanup liability, arising out of, based on, or
resulting from any actual or threatened (a) release or disposal, or the presence
in, the environment, including, without limitation, the indoor environment, of
any Hazardous Materials by or attributable to the Company or any Subsidiary, or
any of their respective predecessors, at any location, (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Laws by
or attributable to the Company or any Subsidiary or (c) exposure to any
Hazardous Materials attributable to the Company, any Subsidiary or any of their
respective predecessors.
"Environmental Laws" means all federal, state, local or foreign laws,
statutes, regulations, orders, ordinances, judgments or decrees (a) related to
releases or threatened releases of any Hazardous Materials in soil, surface
water, groundwater or air, (b) governing the use, treatment, storage, disposal,
transport, or handling of Hazardous Materials or (c) related to the protection
of the environment, human health or natural resources. Such Environmental Laws
shall include, but are not limited to, the Resource Conservation and Recovery
Act, and the Comprehensive Environmental Response, Compensation and Liability
Act, the Toxic Substances Control Act, the Occupational Safety and Health Act,
the Clean Water Act, the Clean Air Act, the Safe Drinking Water Act, and the
Emergency Planning and Community Right-to-Know Act, and their respective state,
local or foreign analogs.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or a successor law, and the regulations and rules issued pursuant to
that act or to any successor law.
"Events Outside of the Ordinary Course" means any change in facts or
circumstances, or any event, outside of the ordinary course the business of the
Company or any Subsidiary, occurring from and after the delivery of the Initial
Disclosure Schedule (as finally agreed upon pursuant to Section 6.9(b)), that is
set forth in the Disclosure Schedule.
"Excluded Provisions" means the provisions contained in Sections 3.4,
3.5, 4.3, 4.10 and 4.22 and the Closing Deduction Adjustment.
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"GAAP" means generally accepted accounting principles in the United
States as in effect on the date hereof, applied on a basis that is consistent
with the past practices of the Company in connection with the preparation of the
Financial Statements.
"Governmental Entity" means any domestic, international, foreign,
national, multinational, territorial, regional, state or local governmental
authority, quasi-governmental authority, instrumentality, court, commission or
tribunal or any regulatory, administrative or other agency, or any political or
other subdivision, department or branch of any of the foregoing.
"Hazardous Materials" means any product, substance, gas, chemical,
material, waste, mold, fungi or toxic growth whose presence, nature, quantity or
concentration, either by itself or in combination with other materials is (a)
potentially injurious to human health or safety, the environment or natural
resources; (b) regulated, monitored or subject to reporting by any Governmental
Authority; or (c) a basis for potential liability to any Governmental Authority
or third party under any statute or common law theory.
"Implied Interest" means an amount equal to the interest, at an annual
rate of 1.5%, that would accrue from the Earnings Preservation Date through the
Closing Date on an amount equal to (a) the Purchase Price (without regard to any
Implied Interest), less (b) the Holdback Amount.
"Indebtedness" means, with respect to the Company and any Subsidiary,
net of Cash, as of the time immediately prior to the Closing, without
duplication: (a) any liability for borrowed money, or evidenced by an instrument
for the payment of money, or incurred in connection with the acquisition of any
property, services or assets (including securities), or relating to a
capitalized lease obligation, other than accounts payable or any other
indebtedness to trade creditors created or assumed by the Company or any
Subsidiary in the ordinary course of business in connection with the obtaining
of materials or services; (b) obligations under exchange rate contracts or
interest rate protection agreements; (c) any obligations to reimburse the issuer
of any letter of credit, surety bond, performance bond or other guarantee of
contractual performance, in each case to the extent drawn or otherwise not
contingent; and (d) any payments, fines, fees, penalties or other amounts
applicable to or otherwise incurred in connection with or as a result of any
prepayment or early satisfaction of any obligation described in clauses (a)
through (c) above.
"Indemnification Percentage" means, with respect to any Seller, the
percentage figure (as adjusted from time to time pursuant to Section 12.5(d) or
any exercise of the Outstanding Options) which expresses the ratio, on a fully
diluted basis, between (a) the amount of Purchased Securities sold by such
Seller hereunder, plus the amount of such Seller's Put/Call Shares that are
subject to the Put and Call Agreement, and (b) the aggregate amount of Purchased
Securities and Put/Call Shares.
"Intellectual Property" means all of the following owned or used in the
Business: (i) United States and foreign trademarks, service marks, and trademark
and service mark registrations and applications, trade names, assumed names,
logos, designs indicating source and slogans, and all goodwill related to the
foregoing (collectively, "Trademarks"); (ii) patent applications, patents,
inventions, improvements, know-how, formula methodology, research and
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development, business methods, processes, technology and Software in any
jurisdiction, including re-issues, continuations, divisions,
continuations-in-part, renewals or extensions (collectively, the "Patents");
(iii) trade secrets, including confidential information and the right in any
jurisdiction to limit the use or disclosure thereof; (iv) copyrights in
writings, designs, Software, mask works or other works, applications or
registrations in any jurisdiction for the foregoing, other original works of
authorship and all moral rights related thereto; (v) database rights; (vi)
Internet web sites, web pages, domain names and applications and registrations
pertaining thereto (the "Domain Names") and all intellectual property used in
connection with or contained in all versions of the Company's, any Subsidiary's
or any of its respective Affiliate's web sites; (vii) all rights under
agreements relating to the foregoing; (viii) books and records pertaining to the
foregoing; and (ix) claims or causes of action arising out of or related to
past, present or future infringement or misappropriation of the foregoing.
"Individual Put Holdback Amount" shall have the meaning set forth in
the Put and Call Agreement.
"Knowledge" means (a) with respect to any Seller or the Seller
Representative, the actual knowledge of such Seller or the Seller
Representative, (b) with respect to the Company or any Subsidiary, the actual
knowledge of Gregory Simko, Susan Fox, Jason Lockwood, Jennifer McClure, David
Sommerkamp, Doug Wilson, Javier Arteche, Joseph Robinette, Scott Kling, Mark
Blaha and Juan Alfaro Allona, and (c) with respect to the Buyer, the actual
knowledge of Martin E. Franklin or Ian G. H. Ashken, in the case of each of (a),
(b) and (c) without any obligation to perform any inquiry or investigation.
"Law" means any law (including without limitation the Foreign Corrupt
Practices Act), statute (including, without limitation, those relating to
zoning, gaming, land use, the Americans with Disabilities Act and similar laws
and regulations), ordinance, regulation, Permit, license, certificate, judgment,
order, award or other decision or requirement of any arbitrator, court,
government or governmental agency or instrumentality (domestic or foreign).
"Loss" or "Losses" means all damages, losses, liabilities, obligations,
fines, penalties, costs and expenses (including settlement costs, court costs
and any reasonable legal, expert and consultant fees and expenses incurred in
connection with defending any actions but excluding indirect, punitive, special
or exemplary damages and unforeseen or other consequential damages) less the net
Tax benefit, if any, realized in cash by the Person suffering such Loss (net of
any Tax liability resulting from the indemnification payment hereunder with
respect to such Loss).
"Louisiana Approval" means the approval of the transactions
contemplated hereby by the Governmental Entity primarily responsible for
regulating gaming in the State of Louisiana.
"Material Adverse Effect" means a material adverse effect on the
operations, properties or condition (financial or otherwise) of the Company and
all Subsidiaries, taken as a whole, except any such effect resulting from or
arising in connection with changes in economic, regulatory or political
conditions generally, including acts of war or terrorism.
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"Mississippi Approval" means the approval of the transactions
contemplated hereby by the Governmental Entity primarily responsible for
regulating gaming in the State of Mississippi.
"Outstanding Options" means outstanding options to purchase, in the
aggregate, 190.9551 shares of Company Common Stock.
"Person" means an individual, a partnership (general or limited), a
corporation, a limited liability company, an association, a joint stock company,
Governmental Entity, a business or other trust, a joint venture, any other
business entity or an unincorporated organization.
"Power of Attorney" means that certain Limited Power of Attorney
Agreement, dated as of February 24, 2004, by and among each of the stockholders
and option holders of the Company listed on Schedule I(a) thereto, each of the
stockholders of the Company listed on Schedule I(b) thereto, and the Seller
Representative, as such Seller Representative may be substituted or replaced as
provided herein and therein.
"Proceeding" means any action, suit, proceeding, arbitration, claim,
complaint, decree, lawsuit or any notice of violation or notice of investigation
before or involving any Governmental Entity.
"Proportionate Interest" means, with respect to any Seller, the
percentage figure (as adjusted from time to time pursuant to Section 12.5(d) or
any exercise of the Outstanding Options) which expresses the ratio, on a fully
diluted basis, between (a) the amount of Purchased Securities sold by such
Seller hereunder, and (b) the aggregate amount of Purchased Securities and
Put/Call Shares.
"Purchased Securities Percentage" means the percentage figure (as
adjusted from time to time pursuant to Section 12.5(d) or any exercise of the
Outstanding Options) which expresses the ratio, on a fully diluted basis,
between (a) the aggregate amount of Purchased Securities, and (b) the aggregate
amount of Purchased Securities and Put/Call Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means any holder of certain securities of the Company who is
party to the this Agreement as a Seller by virtue of the Power of Attorney or
otherwise.
"Seller Costs" means, to the extent outstanding as of the Closing Date,
all costs, expenses and liabilities incurred by the Company or any Subsidiary on
or prior to the Closing Date arising in connection with the negotiation,
preparation, execution and delivery of this Agreement, the Seller Closing
Documents, the Company Closing Documents and any other instruments and
agreements entered into or otherwise delivered by the Company or any Seller
pursuant to this Agreement, and any amendments to the same.
"Software" means any and all (a) computer programs, including any and
all software implementations of algorithms, models and methodologies, whether in
source code or object code form, and all off-the-shelf or "shrink-wrap"
software, (b) databases, compilations,
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and any other electronic data files, including any and all collections of data,
whether machine readable or otherwise, (c) descriptions, flow-charts, technical
and functional specifications, and other work product used to design, plan,
organize, develop, test, troubleshoot and maintain any of the foregoing, (d)
without limitation to the foregoing, the software technology supporting any
functionality contained on the Company's, any Subsidiary's or any of its
respective Affiliate's Internet web sites, and (e) all documentation, including
technical, end-user, training and troubleshooting manuals and materials,
relating to any of the foregoing.
"Spanish Subsidiary" means Heracleo Naipes Fournier, a Subsidiary of
the Company.
"Subsidiary" means any Person (other than an individual) with respect
to which the Company (or any Subsidiary thereof) has the power to vote or direct
the voting of sufficient securities or other interests to elect a majority of
the directors (or persons in similar positions) thereof.
"Tax" or "Taxes" means all federal, state local or foreign taxes of any
kind, including, without limitation, all net income, gross receipts, ad valorem,
value added, transfer, gains, franchise, profits, inventory, net worth, capital
stock, assets, sales, use, license, estimated, withholding, payroll, premium,
capital employment, social security, workers compensation, unemployment, excise,
severance, stamp, occupation and property taxes, together with any interest and
penalties, fines, additions to tax or additional amounts imposed by any Tax
authority.
"Tax Return" means any return, report, declaration, statement,
extension, form or other documents or information filed with or submitted to, or
required to be filed with or submitted to, any governmental body in connection
with the determination, assessment, collection or payment of any Tax.
"Working Capital" has the meaning set forth on Exhibit A (as finally
agreed upon as provided herein).
"Working Capital Estimate" means the good faith estimate of the Working
Capital of the Company on the Closing Date, as delivered by the Company to the
Buyer two Business Days prior to the scheduled Closing Date.
"Working Capital Negative Adjustment" means the difference resulting
from subtracting (i) Working Capital Estimate from (ii) the Working Capital
Target. If the Working Capital Estimate is greater than the Working Capital
Target, the Working Capital Negative Adjustment shall be deemed to be $0.00.
"Working Capital Positive Adjustment" means the difference resulting
from subtracting (i) Working Capital Target from (ii) the Working Capital
Estimate. If the Working Capital Target is greater than the Working Capital
Estimate, the Working Capital Positive Adjustment shall be deemed to be $0.00.
"Working Capital Target" means the amount of Eighteen Million One
Hundred Thousand Dollars ($18,100,000).
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SECTION 14. MISCELLANEOUS
14.1. Construction.
Within this Agreement and all other documents required to consummate
the transactions contemplated herein, including, without limitation, the Seller
Closing Documents, the Company Closing Documents and the Buyer Closing
Documents, the singular shall include the plural and the plural shall include
the singular, and any gender shall include all other genders, all as the meaning
and the context of this Agreement shall require. Unless otherwise specified,
references to section numbers contained herein shall mean the applicable section
of this Agreement and references to exhibits and schedules shall mean the
applicable exhibits and schedules to this Agreement. The parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or Law shall be
deemed also to refer to all rules and regulations promulgated thereunder and any
successor statute or Law thereto, unless the context requires otherwise.
14.2. Further Assurances.
Each party hereto shall use its commercially reasonable efforts to
comply with all requirements imposed hereby on such party and to cause the
transactions contemplated herein to be consummated as contemplated herein and
shall, from time to time and without further consideration, either before or
after the Closing, execute such further instruments and take such other actions
as any other party hereto shall reasonably request in order to fulfill its
obligations under this Agreement and to effectuate the purposes of this
Agreement and to provide for the orderly and efficient transition to the Buyer
of the ownership of the Purchased Securities. Each party shall promptly notify
the other parties of any event or circumstance known to such party that could
prevent or delay the consummation of the transactions contemplated herein or
which would indicate a breach or non-compliance with any of the terms,
conditions, representations, warranties or agreements of any of the parties to
this Agreement.
14.3. Costs and Expenses.
Except as otherwise expressly provided herein, each party shall bear
its own expenses in connection herewith; provided, however, that Seller Costs
shall be borne solely by the Sellers. The Company shall be responsible for the
payment of half, and the Buyer shall be responsible for the payment of the other
half, of all fees and expenses ("HSR and Material Consent Costs") payable in
connection with any filings required by the HSR Act ("HSR Fees") or associated
with obtaining the Material Consents ("Material Consent Costs"); provided,
however, that the Buyer shall initially satisfy all HSR Fees and the Company
shall initially satisfy all Material Consent Costs, and immediately prior to the
Closing, either the Buyer or the Seller Representative shall have the right to
request that the other party, and at the Closing the other party shall,
reimburse it (or cause such reimbursement to be made) for a portion of the HSR
Fees or Material Consent Costs, as applicable, so that the HSR and Material
Consent Costs are borne equally by the Buyer, on the one hand, and the Company,
on the other hand.
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14.4. Notices.
All notices or other communications permitted or required under this
Agreement shall be in writing and shall be sufficiently given if and when hand
delivered or sent by facsimile to the Persons set forth below or if sent by
documented overnight delivery service or certified mail, postage prepaid, return
receipt requested, addressed as set forth below or to such other Person or
Persons and/or at such other address or addresses (or facsimile number) as shall
be furnished in writing by any party hereto to the others. Any such notice or
communication shall be deemed to have been given as of the date received, in the
case of personal delivery, or on the date shown on the receipt or confirmation
therefor in all other cases.
To Buyer (or the Company after the Closing):
Jarden Corporation
555 Theodore Fremd Avenue
Rye, NY 10580
Attn: Martin E. Franklin
With copies to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attn: William J. Grant, Esq.
Michael A. Schwartz, Esq.
To any Seller or the Seller Representative:
Dudley S. Taft
312 Walnut St.,
Suite 3550
Cincinnati, OH 45202
With copies to:
Kohnen & Patton LLP
PNC Center, Suite 800
201 East Fifth Street
Cincinnati, OH 45202
Attn: Joseph Beech III, Esq.
and
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Gibson, Dunn & Crutcher LLP
1801 California Street
Suite 4100
Denver, CO 80202
Attn: Steven K. Talley, Esq.
To the Company (prior to the Closing):
Bicycle Holding, Inc.
4950 Beech Street
Cincinnati, OH 45212
Attn: Gregory Simko
With copies to:
Gibson, Dunn & Crutcher LLP
1801 California Street
Suite 4100
Denver, CO 80202
Attn: Steven K. Talley, Esq.
and
Kohnen & Patton LLP
PNC Center, Suite 800
201 East Fifth Street
Cincinnati, OH 45202
Attn: Joseph Beech III, Esq.
14.5. Assignment and Benefit.
(a) This Agreement shall be binding upon and inure to the benefit
of the parties and their respective permitted successors and permitted assigns.
Neither this Agreement, nor any of the rights hereunder or thereunder, may be
assigned by any party, nor may any party delegate any obligations hereunder or
thereunder, without the written consent of the other party hereto or thereto,
provided, that (i) the Buyer may assign its rights hereunder to one or more of
its Affiliates if the Buyer delivers to the Seller Representative a written
instrument pursuant to which the Buyer agrees to remain liable for all of its
obligations under this Agreement and (ii) following the Closing Date, any Seller
may assign its rights, but not its obligations, hereunder (collectively the
"Permitted Assignees"). Any assignment or attempted assignment other than in
accordance with this Section 14.5(a) shall be void ab initio.
(b) Except as otherwise provided in Section 11, this Agreement
shall not be construed as giving any Person, other than the parties hereto and
their permitted successors, heirs and assigns, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any of the provisions
herein contained, this Agreement and all provisions and conditions hereof being
intended to be, and being, for the sole and exclusive benefit of such parties,
and permitted successors, heirs and assigns and for the benefit of no other
Person or entity.
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14.6. Amendment, Modification and Waiver.
The parties hereto may amend or modify, or may waive any right or
obligation under, this Agreement in any respect, provided that any such
amendment, modification or waiver (other than the Updated Disclosure Schedules
or the Closing Disclosure Schedules, in each case, as provided herein) shall be
in writing and executed by the Buyer, the Company and the Seller Representative.
The waiver of any breach of any provision of this Agreement shall not constitute
or operate as a waiver of any other breach of such provision or of any other
provision hereof, nor shall any failure to enforce any provision hereof operate
as a waiver of such provision or of any other provision hereof.
14.7. Governing Law; Consent to Jurisdiction.
This Agreement is made pursuant to, and shall be construed and enforced
in accordance with, the laws of the State of Delaware (and United States federal
Law, to the extent applicable), irrespective of the principal place of business,
residence or domicile of the parties hereto, and without giving effect to
otherwise applicable principles of conflicts of law. Any legal action, suit or
Proceeding arising out of or relating to this Agreement (other than in
connection with the dispute resolved by the Arbitrating Accountant pursuant to
Sections 2.2(b)) shall be instituted in any federal court or in any state court
in the State of Delaware, and each party waives any objection which such party
may now or hereafter have to the laying of the venue of any such action, suit or
Proceeding, and irrevocably submits to the jurisdiction of any such court. Any
and all service of process and any other notice in any such action, suit or
Proceeding shall be effective against any party if given as provided herein.
Nothing herein contained shall be deemed to affect the right of any party to
serve process in any other manner permitted by Law.
14.8. Section Headings and Defined Terms.
The section headings contained herein are for reference purposes only
and shall not in any way affect the meaning and interpretation of this
Agreement. Except as otherwise indicated, all agreements defined herein refer to
the same as from time to time amended or supplemented or the terms thereof
waived or modified in accordance herewith and therewith.
14.9. Severability.
The invalidity or unenforceability of any particular provision, or part
of any provision, of this Agreement shall not affect the other provisions or
parts hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions or parts were omitted.
14.10. Effectiveness and Counterparts.
(a) This Agreement shall become effective, and shall be binding
upon the Buyer, the Company, the Sellers and the Seller Representative, at such
time as it shall have been executed and delivered by the Buyer, the Company and
the Seller Representative (for himself, as the Seller Representative, and on
behalf of the Sellers (including himself) holding Purchased Securities
representing, in the aggregate, at least 75% of the outstanding capital stock of
the Company (on a fully diluted basis), as the Seller Representative); provided,
however, that if such
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execution shall have not occurred on or before March 25, 2004 (or such later
date agreed upon by the Buyer and the Company), this Agreement shall have no
force or effect.
(b) This Agreement and the other documents required to consummate
the transactions contemplated herein may be executed in one or more
counterparts, each of which shall be deemed an original (including facsimile
signatures), and any Person may become a party hereto by executing a counterpart
hereof, but all of such counterparts together shall be deemed to be one and the
same instrument. The parties hereto may deliver this Agreement and the other
documents required to consummate the transactions contemplated herein by
telecopier machine/facsimile and each party shall be permitted to rely upon the
signatures so transmitted to the same extent and effect as if they were original
signatures.
14.11. Entire Agreement.
This Agreement, together with the Initial Disclosure Schedule (as
finally agreed upon in accordance with Section 6.9(b)), the Closing Disclosure
Schedule and the exhibits hereto, all of which shall be incorporated herein, the
Seller Closing Documents, the Company Closing Documents and the Buyer Closing
Documents, and the schedules and certificates referred to herein or delivered
pursuant hereto, and the Confidentiality Agreement and the Power or Attorney (as
applicable), constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings with respect to such subject matter. The submission of a draft of
this Agreement or portions or summaries thereof does not constitute an offer to
purchase or sell the Purchased Securities or the Put/Call Shares, it being
understood and agreed that neither the Buyer, any Seller nor the Company shall
be legally obligated with respect to such a purchase or sale or to any other
terms or conditions set forth in such draft or portion or summary unless and
until this Agreement has been duly executed and delivered by all parties hereto.
14.12. Retention of Counsel.
In any dispute or proceeding arising under or in connection with this
Agreement, including, without limitation, Sections 2.2 and 11, the Sellers shall
have the right, at their election, to retain the firm of Gibson Dunn & Crutcher
LLP and/or Kohnan & Patton LLP to represent any of them in such matter, and the
Buyer, for itself and the Company and for its and the Company's successors and
assigns, hereby irrevocably waives and consents to any such representation in
any such matter and the communication by such counsel to the Sellers in
connection with any such representation of any fact known to such counsel
arising by reason of such counsel's prior representation of the Sellers or the
Company. The Buyer, for itself and the Company and for its and the Company's
successors and assigns, hereby irrevocably acknowledges and agrees that all
communications between the Sellers and its counsel, including, without
limitation, Gibson Dunn & Crutcher LLP and/or Kohnan & Patton LLP, made in
connection with the negotiation, preparation, execution, delivery and closing
under, or any dispute or proceeding arising under or in connection with, this
Agreement which, immediately prior to the Closing, would be deemed to be
privileged communications of the Sellers and its counsel and would not be
subject to disclosure to the Buyer in connection with any process relating to a
dispute arising under or in connection with, this Agreement or otherwise, shall
continue after the Closing to be communications between the Sellers and such
counsel and
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neither the Buyer nor any Person purporting to act on behalf of or through the
Buyer shall seek to obtain the same by any process on the grounds that the
privilege attaching to such communications belongs to the Company and not the
Sellers. Other than as explicitly set forth in this Section 14.12, the parties
acknowledge that any attorney-client privilege attaching as a result of legal
counsel representing the Company prior to the Closing shall survive the Closing
and continue to be a privilege of the Company, and not the Sellers, after the
Closing.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first above written.
COMPANY:
BICYCLE HOLDING, INC.
By: /s/ Gregory S. Simko
----------------------------------
Name: Gregory S. Simko
Title: President
BUYER:
JARDEN CORPORATION
By: /s/ Martin E. Franklin
----------------------------------
Name: Martin E. Franklin
Title: Chief Executive Officer
[Counterpart signature page to Securities Purchase Agreement]
SELLER REPRESENTATIVE:
---------------------
By:
----------------------------------
Name: Dudley S. Taft, for himself,
as the Seller
Representative, and for the
Sellers (including himself),
as the Seller Representative
[Counterpart signature page to Securities Purchase Agreement]