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EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
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BY AND AMONG
FRESH INTERNATIONAL CORP., A DELAWARE CORPORATION (THE "COMPANY"),
PERFORMANCE FOOD GROUP COMPANY, A TENNESSEE CORPORATION ("PARENT"),
AND
PFGC ACQUISITION CORP., DELAWARE CORPORATION AND A
WHOLLY OWNED SUBSIDIARY OF PARENT ("ACQUISITION SUB")
DATED AS OF AUGUST 9, 2001
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AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
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I. CLOSING........................................................................1
II. THE MERGER.....................................................................1
2.1 Stockholders' Approval..............................................1
2.2 The Merger..........................................................1
2.3 Consummation of the Merger; Effects of Merger.......................2
2.4 Certificate of Incorporation and Bylaws; Directors and
Officers of the Surviving Corporation..............................2
2.5 Closing Payments....................................................2
2.6 Conversion of Outstanding Capital Stock.............................3
2.7 Net Worth Adjustment................................................4
2.8 Contingent Payment..................................................5
2.9 Appraisal Rights....................................................6
2.10 Exchange of Certificates............................................6
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................7
3.1 Corporate Status....................................................7
3.2 Capitalization......................................................8
3.3 Authority...........................................................8
3.4 No Conflict.........................................................9
3.5 Financial Statements................................................9
3.6 Real Property.......................................................9
3.7 Assets.............................................................10
3.8 Material Contracts.................................................11
3.9 Intellectual Property..............................................12
3.10 Litigation, Claims and Proceedings.................................12
3.11 Environmental and Safety and Health Matters........................12
3.12 Permits............................................................13
3.13 Compliance with Law................................................13
3.14 Consents...........................................................14
3.15 Employee Matters and Benefit Plans.................................14
3.16 Insurance..........................................................18
3.17 Taxes..............................................................18
3.18 Absence of Undisclosed Liabilities.................................20
3.19 Conduct in the Ordinary Course.....................................20
3.20 Absence of Questionable Payments...................................21
3.21 Accounts Receivable................................................21
3.22 Customers and Suppliers............................................21
3.23 Inventory..........................................................21
3.24 Corporate Records..................................................22
3.25 Product Warranties.................................................22
3.26 Relationships With Related Persons.................................22
3.27 Full Disclosure....................................................22
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3.28 Finder's Fee.......................................................22
3.29 Labor Matters......................................................22
3.30 Orders, Commitment and Returns.....................................23
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB..................23
4.1 Corporate Status...................................................23
4.2 Authority..........................................................23
4.3 No Conflict........................................................23
4.4 Compliance with Law................................................24
4.5 Consents...........................................................24
4.6 Adequate Funds.....................................................24
4.7 Finder's Fee.......................................................24
4.8 No Prior Activities................................................24
4.9 No Reliance........................................................24
V. COVENANTS AND AGREEMENTS......................................................25
5.1 Conduct of Business Prior to Closing...............................25
5.2 Access to Records and Properties...................................26
5.3 Consents...........................................................27
5.4 Public Announcements...............................................28
5.5 Non-Solicitation...................................................28
5.6 Further Action.....................................................28
5.7 Insurance, Indemnity...............................................28
5.8 Benefit Plans......................................................29
5.9 No Financing Contingency...........................................30
5.10 Tax Returns........................................................31
5.11 Review of Parent Change of Control Agreements......................31
5.12 Environmental Diligence and Reimbursement..........................31
5.13 Texas Operations...................................................31
5.14 Benefit Filings....................................................31
5.15 Unsigned Leases....................................................32
5.16 Modification of Escrow Agreement...................................32
VI. CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB.......................32
6.1 No Litigation......................................................32
6.2 Truth of Representations and Warranties............................32
6.3 Fulfillment of Covenants...........................................33
6.4 Certified Resolutions..............................................33
6.5 Documents..........................................................33
6.6 Consents and Approvals.............................................34
6.7 Termination of Pension Plan........................................34
VII. CONDITIONS TO OBLIGATIONS OF THE COMPANY......................................34
7.1 Legality of Merger.................................................34
7.2 Truth of Representations and Warranties............................35
7.3 Fulfillment of Covenants...........................................35
7.4 Certified Resolutions..............................................35
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7.5 Documents..........................................................35
7.6 Consents and Approvals.............................................36
7.7 Evidence of Insurance..............................................36
VIII.TERMINATION; EFFECT OF TERMINATION............................................36
8.1 Termination........................................................36
8.2 Effect of Termination..............................................37
IX. REIMBURSEMENT AND INDEMNIFICATION.............................................38
9.1 Reimbursement from Escrow Fund.....................................38
9.2 Time Limitation; Common Stockholders...............................38
9.3 Other Limitations; Escrow Amount...................................39
9.4 Tax Treatment......................................................41
9.5 Assignment of Claims...............................................41
9.6 Indemnification by Parent..........................................41
9.7 Time Limitation; Parent............................................41
9.8 Limitation on Amount; Parent.......................................41
9.9 Procedure..........................................................42
9.10 Survival of Representations and Warranties.........................42
9.11 Common Stockholders' Representatives...............................42
9.12 Payments out of Escrow Fund........................................43
X. MISCELLANEOUS.................................................................44
10.1 Assignability......................................................44
10.2 Binding Effect.....................................................44
10.3 Notices............................................................44
10.4 Counterparts and Fax...............................................45
10.5 Disclosure Schedule and Exhibits...................................45
10.6 Governing Law and Forum............................................45
10.7 Headings...........................................................45
10.8 Amendment..........................................................45
10.9 Entire Agreement...................................................45
10.10 Waivers............................................................45
10.11 Third-Party Rights.................................................46
10.12 Severability.......................................................46
10.13 Arbitration........................................................46
10.14 Knowledge..........................................................47
10.15 Expenses...........................................................47
XI. DEFINITIONS...................................................................47
11.1 Defined Terms......................................................47
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EXHIBITS
1. Form of Voting Agreement
2. Form of Escrow Agreement
3. Calculation of Net Worth
4. Purchase Price Adjustments
5. Procedures for Calculating Fruit Sales and Synergies
6. Form of Parent Employment Agreement
7. Form of Non-Competition Agreement
8. Form of Non-Investment Agreement
9. Form of Release
10. Legal Opinions
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DISCLOSURE SCHEDULE
3.2(a) Capitalization
3.2(b) Subsidiaries
3.4 Non-Contravention
3.6(a) Real Property
3.6(b) Exceptions to Owned Real Property
3.6(c) Exceptions to Leased Real Property
3.7 Title to Assets
3.8(a) Material Contracts
3.8(b) Material Contract Defaults
3.9 Intellectual Property
3.10 Litigation
3.11 Environmental Matters
3.12 Permits
3.13 Compliance With Law
3.14 Governmental Consents
3.15(a) Employment Agreements
3.15(b) Benefit Plans
3.15(c) Liability Relating to Specified Plans
3.15(e) Other Employee Matters
3.16 Insurance
3.17(a) Tax Returns; Tax Penalty, Interest or Deficiency Assessments;
Pending Audits
3.17(d) Tax Code Section 481(a)
3.17(k) Qualified Subchapter S Subsidiaries
3.19 Conduct of Business
3.21 Accounts Receivable
3.22 Customers and Suppliers
3.23 Inventory
3.25 Product Warranties
3.26 Relationships with Related Persons
3.29 Labor Matters
5.1(a) Conduct of Business in the Ordinary Course
5.12 Environmental Diligence
9.11 Alternate Representatives
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of this 9th day of August,
2001 by and among Fresh International Corp., a Delaware corporation (the
"Company"), Performance Food Group Company, a Tennessee corporation ("Parent"),
and PFGC Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Parent ("Acquisition Sub").
WITNESSETH:
WHEREAS, Parent has formed Acquisition Sub for the purposes of merging
with and into the Company (the "Merger") and acquiring the Company as a wholly
owned subsidiary;
WHEREAS, the Boards of Directors of Acquisition Sub and the Company,
and Parent as the sole stockholder of Acquisition Sub, have each approved the
terms of the Merger; and
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, certain Common Stockholders
have entered into a Voting Agreement (the "Voting Agreement"), the form of which
is attached hereto as Exhibit 1, pursuant to which each such Common Stockholder
agrees, among other things, to vote any and all of such Common Stockholder's
shares of Common Stock in favor of the Merger and the other transactions
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto hereby agree as follows:
I. CLOSING. Upon the terms and subject to the conditions of this
Agreement, the closing of the transactions contemplated under this Agreement
(the "Closing") shall take place at the offices of Gibson, Dunn & Crutcher LLP,
located at 333 South Grand Avenue, Los Angeles, California, on the commencement
of business on the fourth Business Day following (a) the satisfaction or waiver
of all of the conditions to the obligations of the parties set forth herein
(other than conditions that by their terms are to be satisfied on the Closing
Date) and (b) the first to occur of (i) the date and time that Parent notifies
the Company that it has sufficient funds for the payment of the Initial Merger
Consideration and the Closing Date Payments and (ii) November 9, 2001, or at
such other place and on such other date and time as the parties may mutually
agree in writing (the time and date on which the Closing occurs hereinafter is
referred to as the "Closing Date").
II. THE MERGER.
2.1 Stockholders' Approval. The Company shall, promptly following
execution of this Agreement and in no event later than forty (40) days after the
date hereof, submit this Agreement and the terms of the Merger to the Common
Stockholders for approval in accordance with the applicable provisions of the
DGCL.
2.2 The Merger. Subject to the terms and conditions of this
Agreement and the Agreement of Merger, and in accordance with the DGCL, at the
Effective Time, Acquisition Sub shall be merged with and into the Company
pursuant to the Agreement of Merger, with the Company as the surviving
corporation (in such capacity, the "Surviving Corporation"), the
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separate existence of Acquisition Sub shall thereupon cease and the Company, as
the Surviving Corporation in the Merger, shall continue its corporate existence
under the laws of the State of Delaware.
2.3 Consummation of the Merger; Effects of Merger. Pursuant to the
DGCL, the parties hereto shall cause the Agreement of Merger and related
certificates to be filed, as promptly as practicable on the Closing Date, in the
offices of the Secretary of State for the State of Delaware. The Merger shall
become effective immediately upon the filing of the Agreement of Merger and
related certificates with the office of the Secretary of State for the State of
Delaware in accordance with the DGCL (the date and time of such filing being the
"Effective Time"). At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and
Acquisition Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and Acquisition Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
2.4 Certificate of Incorporation and Bylaws; Directors and
Officers of the Surviving Corporation.
(a) At the Effective Time, the certificate of
incorporation and bylaws of the Surviving Corporation shall be amended to be
identical to the certificate of incorporation and bylaws, respectively, of
Acquisition Sub, as in effect immediately prior to the Effective Time, until
amended or repealed as provided therein or by applicable law.
(b) The directors of Acquisition Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation until
their successors are elected or appointed and qualified in accordance with the
certificate of incorporation and bylaws of the Surviving Corporation.
(c) The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation and shall hold
office until the earlier of their death, resignation or removal.
2.5 Closing Payments.
(a) At the Closing, the Company shall (i) pay, or cause
to be paid, the Company Indebtedness, (ii) except as otherwise agreed in writing
among the Parent, the Company and any holder (each, a "Unit Holder") of a
phantom stock unit (a "Unit") issued under the Phantom Stock Plan, pay to the
Disbursement Agent for distribution to the Unit Holders the aggregate amount
owed on the Closing Date under each vested and unvested Unit that is outstanding
immediately prior to the Effective Time (the "Phantom Deferred Compensation"),
(iii) pay, or cause to be paid, the aggregate amount owed under the Company's
value creation pool (the "Other Deferred Compensation" and together with the
Phantom Deferred Compensation, the "Deferred Compensation") and (iv) pay, or
cause to be paid, all fees and expenses incurred by the Company in connection
with the transactions contemplated by this Agreement including without
limitation the fees payable to Morgan Stanley & Co. Incorporated (the "Closing
Fees" and, collectively with the Company Indebtedness and the Deferred
Compensation, the "Closing Date Payments"). The amount of the Closing Date
Payments shall
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be transferred on the Closing Date from Parent to the Company on behalf of and
for the benefit of the Common Stockholders or, at the Representatives' option,
Parent shall satisfy the Company's obligations set forth in this Section 2.5 by
paying such amounts directly to the recipients thereof on the Closing Date. Not
less than two (2) Business Days prior to the Closing, the Company shall deliver
to Parent a statement (the "Closing Payment Statement") setting forth the amount
of the Closing Date Payments.
(b) At the Closing, Parent shall deposit cash in the
amount of Fifteen Million Dollars ($15,000,000) (the "Escrow Amount") in an
escrow account to be maintained with Wilmington Trust Company (the "Escrow
Agent"), which shall be held in connection with (i) any potential payments to
Parent by the Common Stockholders pursuant to Section 2.7 of this Agreement and
(ii) any potential reimbursement of Parent from the Escrow Fund pursuant to
Section 9.1 of this Agreement. The Escrow Amount shall be held under the terms
of an escrow agreement (the "Escrow Agreement") substantially in the form of
Exhibit 2 attached hereto.
2.6 Conversion of Outstanding Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of Parent,
Acquisition Sub, the Company or the holder of any of the following securities:
(a) Each share of Common Stock that is issued and
outstanding immediately prior to the Effective Time (other than shares as to
which appraisal rights are perfected under Section 262 of the DGCL and any
shares of Common Stock that are owned by the Company or any Subsidiary) shall be
canceled and extinguished and be converted automatically into and become a right
to receive an amount, payable without interest at the Closing, in cash equal to
the quotient of the Initial Merger Consideration divided by the number of Common
Shares Outstanding (the "Initial Per Share Merger Consideration"). The "Initial
Merger Consideration" shall equal Two Hundred Ninety Million Dollars
($290,000,000) (i) minus the Closing Date Payments, (ii) plus the amount by
which (A) ninety-five percent (95%) of the Estimated Closing Date Net Worth
exceeds (B) the net worth of the Company on July 31, 2001 calculated in
accordance with the methodology set forth in Exhibit 3 (it being acknowledged by
all parties that the numbers contained in Exhibit 3 are for illustrative
purposes only) and otherwise calculated in accordance with GAAP (the "Baseline
Net Worth") or minus the amount by which (x) the Baseline Net Worth exceeds (y)
ninety-five percent (95%) of the Estimated Closing Date Net Worth, (iii) less
the Escrow Amount, (iv) plus the amount of cash and cash equivalents held by the
Company as of the close of business on July 31, 2001 and (v) less the principal
and any accrued but unpaid interest on the items set forth in Exhibit 4,
calculated as of July 31, 2001.
(b) Each share of Common Stock that is owned by the
Company or by any Subsidiary and issued and outstanding immediately prior to the
Effective Time shall be canceled without any conversion thereof, and no payment
shall be made with respect thereto.
(c) Each share of the common stock, par value $1.00 per
share, of Acquisition Sub that is issued and outstanding immediately prior to
the Effective Time shall be converted into and become one validly issued, fully
paid and nonassessable share of common stock, no par value, of the Surviving
Corporation, so that after the Effective Time Parent shall be the holder of all
of the issued and outstanding shares of the Surviving Corporation's common
stock.
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2.7 Net Worth Adjustment.
(a) Not later than three (3) Business Days prior to the
Closing, the Company will in good faith estimate, on a reasonable basis using
the Company's then available financial information, the Closing Date Net Worth
(such estimate, the "Estimated Closing Date Net Worth").
(b) As soon as practicable after the Closing Date, and in
any event no later than forty-five (45) days thereafter, Parent shall prepare in
good faith and on a reasonable basis a closing statement reflecting the Closing
Date Net Worth (the "Closing Statement"), and furnish to the Representatives the
Closing Statement together with the Parent's underlying workpapers pertaining
thereto. The Representatives shall have the right to review the Closing
Statement and such underlying work papers and to dispute or disagree with the
Closing Statement. The Closing Statement shall become final and binding for
purposes of this Agreement unless the Representatives shall have furnished
written notice to Parent of any dispute or disagreement with the Closing
Statement within thirty (30) days after the Representatives' receipt of the
same. Such notice shall specify, in reasonable detail, the nature and extent of
such dispute or disagreement.
(c) If the Representatives timely notify Parent of any
dispute or disagreement with the Closing Statement, the Representatives and
Parent shall negotiate to resolve such dispute or disagreement in good faith. If
the Representatives and Parent are unable to resolve such dispute or
disagreement within thirty (30) days after receipt by Parent of the
Representatives' written notice of dispute or disagreement, Parent or the
Representatives shall jointly retain an independent accounting firm of
recognized national standing, other than any such accounting firm having a
relationship with any of the parties hereto (the "Firm"), to resolve any
remaining disputes. The Firm shall act as an arbitrator to determine and resolve
such dispute or disagreement, based solely on the presentations by the
Representatives and Parent and not by independent audit. The Firm shall make its
determination regarding such dispute or disagreement within thirty (30) days
after the date upon which the Representatives and Parent submit the dispute or
disagreement, together with their presentation and evidence, and in that
undertaking shall not be required to follow any particular procedure but shall
proceed in a manner designed to achieve a prompt and economic resolution of the
dispute. The Firm shall set forth its determination, which shall be binding and
conclusive, in a written statement delivered to Parent and the Representatives,
stating its reasons therefor.
(d) Promptly following the date upon which the Closing
Statement becomes final and binding in accordance with the procedures set forth
in this Section 2.7, but not later than five (5) Business Days after such date,
(i) Parent shall pay to the disbursement agent designated by the Representatives
(the "Disbursement Agent"), for immediate distribution to the Common
Stockholders and the Unit Holders pursuant to a disbursement agent agreement
(the "Disbursement Agent Agreement") in form and substance reasonably
satisfactory to the Company and Parent, as additional Merger Consideration, (A)
the amount, if any, by which the Closing Date Net Worth, as reflected on the
final and binding Closing Statement (the "Final Closing Date Net Worth"),
exceeds ninety-five percent (95%) of the Estimated Closing Date Net Worth used
to determine the Initial Merger Consideration pursuant to Section 2.6 plus (B)
an amount equal to 38% of the portion of the amount owed pursuant to Section
2.7(d)(i)(A) which is to be paid, pursuant to the Phantom Stock Plan and/or the
Company's value creation pool, to the beneficiaries thereof as calculated by the
Representatives, which portion shall in no event be
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greater than 12.5% of the aggregate amount owed pursuant to Section
2.7(d)(i)(A), or (ii) the Representatives shall cause the Escrow Agent to pay to
Parent from the Escrow Fund, the amount, if any, by which ninety-five percent
(95%) of the Estimated Closing Date Net Worth used to determine the Initial
Merger Consideration pursuant to Section 2.6 exceeds the Final Closing Date Net
Worth; provided, however, that interest at the rate of four and one-half percent
(4.5%) per annum shall accrue on, and be payable with respect to, the amount of
any payment under this Section 2.7 from the Closing Date until the date upon
which such payment is actually made.
2.8 Contingent Payment.
(a) As additional Merger Consideration, Parent shall pay
to the Disbursement Agent, for immediate distribution to the Common Stockholders
and Unit Holders pursuant to the Disbursement Agent Agreement, (i) an amount
(the "Contingent Payment") equal to (A) Ten Million Dollars ($10,000,000)
multiplied by the sum of (I) a fraction, so long as such fraction is 1/2 or
greater, the numerator of which is gross revenues from sales of fresh fruit
("Fruit Sales") by the Company (determined in accordance with the procedures set
forth in Section 2.8(c)) during any consecutive twelve (12) month period
beginning on or after the Closing Date as set forth in any Final Calculation and
the denominator of which is Ten Million Dollars ($10,000,000), (II) a fraction,
so long as such fraction is 1/2 or greater, the numerator of which is the
aggregate value of realized synergies (determined in accordance with the
procedures set forth in Section 2.8(c)) ("Synergies") during any consecutive
twelve (12) month period beginning on or after the Closing Date as set forth in
any Final Calculation and the denominator of which is Two Million Dollars
($2,000,000) and (III) provided that the Company's operating income for a given
calendar year calculated in accordance with Exhibit 5 ("Operating Income") is in
excess of the operating income targets for that calendar year as set forth on
Exhibit 5, 100%, less (B) the aggregate amount previously paid pursuant to
Section 2.8(a)(i) plus (ii) an amount equal to 38% of the portion of the amount
owed pursuant to Section 2.8(a)(i) which is to be paid, pursuant to the Phantom
Stock Plan and/or the Company's value creation pool, to the beneficiaries
thereof as calculated by the Representatives, which portion will in no event be
greater than 12.5% of the aggregate amount owed pursuant to Section 2.8(a)(i).
In no event shall the Contingent Payment exceed Ten Million Dollars
($10,000,000).
(b) The Contingent Payment shall be paid to the
Disbursement Agent within ten (10) days after determination of the Final
Calculation pursuant to Section 2.8(c) below and at the written request of the
Representatives in cash or immediately available funds by wire transfer to an
account designated by the Disbursement Agent.
(c) Not later than forty-five (45) days after the end of
the calendar quarter ending December 31, 2001 and each of the calendar quarters
ending on the last day of March, June, September and December of 2002, 2003 and
2004 (the "Quarterly Periods"), Parent will prepare and present to the
Representatives the calculations of Fruit Sales, Synergies and Operating Income
for each month since the Closing Date for each Quarterly Period ending December
31, 2001, March 31, 2002, June 30, 2002 and September 30, 2002 and, for all
other Quarterly Periods, each twelve (12) month period ending on each month
during such Quarterly Period (the "Proposed Calculations"). The parties agree
that each Proposed Calculation shall be prepared so that it presents fairly the
Fruit Sales, Synergies and Operating Income for such periods using practices and
procedures specified in Exhibit 5 hereto. The Representatives and
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the Representative's auditors shall have the right to review and copy, promptly
upon request, the workpapers of Parent utilized in preparing the Proposed
Calculations for purposes of verifying the accuracy of the Proposed
Calculations. The Proposed Calculations shall be binding upon the parties to
this Agreement unless the Representatives give written notice of disagreement
with any of said values or amounts or items in the Proposed Calculations to
Parent within thirty (30) Business Days after their receipt of the Proposed
Calculations, specifying in reasonable detail the nature and extent of such
disagreement. If Parent and the Representatives mutually agree upon the Proposed
Calculations within thirty (30) Business Days after Parent's receipt of such
notice from the Representatives, such agreement shall be binding upon the
parties to this Agreement. If the Representatives timely notify Parent of any
dispute or disagreement with the Proposed Calculations, the Representatives and
Parent shall negotiate in good faith to resolve such dispute or disagreement. If
the Representatives and Parent are unable to resolve such dispute within thirty
(30) days after receipt by Parent of the Representatives' written notice of
dispute or disagreement, Parent and the Representatives shall jointly retain a
Firm to resolve any remaining disputes. The Firm shall act as an arbitrator to
determine and resolve such dispute or disagreement, based solely on the
presentations by the Representatives and Parent and not by independent audit.
The Firm shall make its determination regarding such dispute or disagreement
within thirty (30) days after the date upon which the Representatives and Parent
submit the dispute or disagreement, together with their presentation and
evidence, and in that undertaking shall not be required to follow any particular
procedure but shall proceed in a manner designed to achieve a prompt and
economic resolution of the dispute. The Firm shall set forth its determination,
which shall be binding and conclusive, in a written statement delivered to
Parent and the Representatives, stating its reasons therefor. The Proposed
Calculations as finally determined pursuant to the method described in this
Section 2.8(c) with respect to any Quarterly Period shall be referred to as the
"Final Calculation."
2.9 Appraisal Rights. Common Stockholders who have complied with
all requirements for demanding and perfecting appraisal rights as set forth in
Section 262 of the DGCL ("Dissenting Stockholders") are entitled to their rights
under such laws. Each share of Common Stock held by Dissenting Stockholders
shall not be converted into or represent the right to receive the Per Share
Merger Consideration set forth herein. Dissenting Stockholders shall be entitled
to receive payment of the appraised value of such shares held by them in
accordance with the provisions of Section 262 of the DGCL. Each share of Common
Stock held by holders who shall have failed to perfect or who effectively shall
have withdrawn or lost their rights to appraisal of such shares under Section
262 shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Per Share
Merger Consideration, when and as payable under the terms of this Agreement,
without any interest thereon, upon surrender, in the manner provided in Section
2.10, of the certificate or certificates that formerly evidenced such shares.
The Company shall give Parent prompt written notice of any assertions of
appraisal rights or withdrawals of assertions of appraisal rights, and any other
instrument in respect thereof received by the Company and the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL.
2.10 Exchange of Certificates.
(a) Upon the surrender to the Surviving Corporation of
each certificate representing shares of Common Stock and a duly executed letter
of transmittal (each, a "Letter of Transmittal") related thereto, the holder of
such certificate shall be entitled to receive in
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exchange therefor by check or wire transfer (as selected by such holder) an
amount in cash equal to the product of (i) the number of shares of Common Stock
evidenced by such certificate and (ii) the Per Share Merger Consideration, when
and as payable under the terms of this Agreement, and such certificate shall,
after such surrender, be marked as canceled.
(b) If any consideration is to be paid to a Person other
than the Person in which the certificate or option surrendered in exchange
therefor is registered, it shall be a condition to such exchange that the Person
requesting such exchange shall pay to the Surviving Corporation any transfer or
other taxes required by reason of the payment of such consideration to a Person
other than that of the registered holder of the certificate or option so
surrendered, or such Person shall establish to the reasonable satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
(c) At the Effective Time, the stock transfer books of
the Company shall be closed and thereafter there shall be no transfers of any
shares of Common Stock. If, after the Effective Time, certificates previously
representing the Common Stock are presented to the Surviving Corporation, they
shall be canceled and exchanged for the appropriate Merger Consideration, when
and as payable under the terms of this Agreement.
(d) The Company shall request each Common Stockholder to
submit to Parent, not later than three (3) Business Days prior to Closing,
instructions for delivery of the Initial Merger Consideration. At the Closing,
and upon the surrender by each Common Stockholder of all of such Common
Stockholder's certificates representing shares of Common Stock, along with a
duly executed and delivered Letter of Transmittal related thereto, Parent shall
cause Acquisition Sub to pay the Initial Merger Consideration calculated in
accordance with Section 2.10(a) to the Disbursement Agent for disbursement to
the respective Common Stockholders, in each case in accordance with the terms of
this Agreement, the Disbursement Agent Agreement and the payment instructions
delivered to Parent.
(e) Any portion of the Merger Consideration that would
have been paid with respect to shares held by a Dissenting Stockholder shall be
deposited with the Disbursement Agent for distribution in accordance with the
terms of the Disbursement Agent Agreement.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Parent and Acquisition Sub as
follows:
3.1 Corporate Status. Each of 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 each (a) has all requisite
corporate power and authority to own, operate or lease all of its properties and
assets and to carry on its business as it is now being conducted, and (b) is
duly qualified to do business and is in good standing in each of the
jurisdictions in which the ownership, operation or leasing of its properties and
assets and the conduct of its business requires it to be so qualified, licensed
or authorized, except where the failure to be so qualified, licensed or
authorized would not have a Material Adverse Effect. The Company has delivered
to Parent a true and complete copy of the certificate of incorporation and
bylaws (or similar organization document), and all amendments thereto, of the
Company and each Subsidiary, each as in effect on the date hereof.
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3.2 Capitalization.
(a) The Company's authorized capital stock consists
solely of 40,000 shares of Common Stock, of which 5,976.5 shares are issued and
outstanding. All of the Company's issued and outstanding Common Stock is validly
issued, fully paid and nonassessable. The issued and outstanding Common Stock
constitutes all of the issued and outstanding capital stock of the Company.
Except as set forth in Section 3.2(a) of the Disclosure Schedule, there are (i)
no outstanding obligations, options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any kind relating to the
capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or any other interest in, the Company, (ii) no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of its capital stock or to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, any other Person or (iii) no voting trusts, stockholder agreements, proxies
or other agreements or understandings in effect with respect to the voting or
transfer of any of its capital stock. Section 3.2(a) of the Disclosure Schedule
sets forth a true and correct list of the Common Stockholders.
(b) Section 3.2(b) of the Disclosure Schedule sets forth
a true and complete list of all Subsidiaries, listing for each Subsidiary its
name, its jurisdiction of organization and the percentage of stock or other
equity interest of each subsidiary owned by the Company or a Subsidiary. Other
than the Subsidiaries or as otherwise set forth in Section 3.2(b) of the
Disclosure Schedule, there are no other corporations, partnerships, joint
ventures, associations or other similar entities in which the Company owns, of
record or beneficially, any direct or indirect equity or other similar interest
or any right (contingent or otherwise) to acquire the same. All of the issued
and outstanding shares (or voting securities) of each of the Subsidiaries are
validly issued, fully paid and nonassessable. Except as set forth in Section
3.2(b) of the Disclosure Schedule, (i) the Company owns directly or indirectly
all of the outstanding shares of capital stock (or voting securities) of each
Subsidiary free and clear of any Encumbrances, (ii) there are no outstanding
obligations, options, warrants, convertible securities or other rights,
agreements, arrangements or commitments of any kind relating to the capital
stock (or voting securities) of any Subsidiary or obligating the Company or any
Subsidiary to issue or sell any shares of capital stock (or voting securities)
of, or any interest in, any Subsidiary, (iii) no Subsidiary is a member of, nor
is any of its business conducted through, any partnership nor is any Subsidiary
a participant in any joint venture or similar arrangement, and (iv) there are no
voting trusts, stockholder arrangements, proxies or other arrangements or
understandings in effect with respect to the voting or transfer of any shares of
capital stock (or voting securities) of or any other interests in any
Subsidiary.
3.3 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Company and no other
corporate proceedings are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby, other than approval and adoption of this
Agreement by the requisite number of holders of Common Shares Outstanding. The
Common Stockholders who have executed the Voting Agreement beneficially own in
the aggregate the number of shares of Common Stock necessary to approve this
Agreement and the Merger. This Agreement has been duly executed and delivered by
the Company, and (assuming due
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authorization and delivery by the other parties hereto) this Agreement
constitutes a legal, valid and binding obligation of the Company enforceable
against it in accordance with its terms, subject to general principles of equity
and except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws of general
application relating to creditors' rights.
3.4 No Conflict. Neither the execution, delivery and performance
of this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will, assuming the approval and adoption of
this Agreement by the requisite number of holders of Common Shares Outstanding,
(a) violate, conflict with or result in the breach of any term or provision of
the certificate of incorporation or bylaws (or similar organizational documents)
of the Company or any of the Subsidiaries, (b) to the knowledge of the Company,
conflict with or violate any Law applicable to the Company or any Subsidiary or
any of their respective assets, properties or businesses, or (c) except as set
forth in Section 3.4 of the Disclosure Schedule, conflict with or violate,
result in the breach of any term or provision of, or constitute a default (or
event which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrances on any of the Company Stock or on any of the assets
or properties of the Company or any Subsidiary pursuant to, any Material
Contract.
3.5 Financial Statements.
(a) The Company has previously provided to Parent true
and complete copies of (i) the consolidated balance sheet as of February 28,
2001 and related consolidated statements of operations for the Company and its
Subsidiaries for the three-year period ended February 28, 2001, in each case
audited by Deloitte & Touche LLP, and (ii) the unaudited consolidated balance
sheet as of June 30, 2001 and related unaudited consolidated statements of
operations for the Company and its Subsidiaries for the three-month period ended
June 30, 2001 (the "Financial Statements"). The June 30, 2001 balance sheet is
referred to herein as the "Reference Balance Sheet."
(b) Each of the Financial Statements (i) has been
prepared based on the books and records of the Company and its Subsidiaries in
accordance with GAAP and the Company's normal accounting practices, consistent
with past practice and with each other, and (ii) presents fairly, in all
material respects, the consolidated financial condition, consolidated results of
operations and consolidated statements of cash flow of the Company and its
Subsidiaries as of the dates indicated or for the periods indicated.
3.6 Real Property.
(a) Section 3.6(a) of the Disclosure Schedule sets forth
a true and complete list of all of the Real Property used in the Business or
owned or leased by the Company or any Subsidiary, including:
(i) with respect to the Owned Real Property, (a)
if available, the street address of each parcel of Owned Real Property,
(b) the current owner of each such parcel of Owned Real Property, and
(c) a brief and general statement on the current use of each such
parcel of Owned Real Property; and
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(ii) with respect to the Leased Real Property,
(a) if available, the street address of each parcel of Leased Real
Property, (b) the identity of the lessor and lessee of each such parcel
of Leased Real Property, (c) the term of the leases pertaining to each
such parcel of Leased Real Property and (d) a brief and general
statement on the current use of each such parcel of Leased Real
Property.
(b) Except as otherwise set forth in Sections 3.6(b) or
3.7 of the Disclosure Schedule, (i) the Company or one of its Subsidiaries has
good and marketable fee simple title to all of the Owned Real Property owned by
it, free and clear of all Encumbrances, except Permitted Encumbrances, (ii)
there are no leases, subleases, licenses, concessions or other agreements
(written or oral) granting to any Person the right to use or occupy the Owned
Real Property, and (iii) there are no outstanding options, rights of first offer
or rights of first refusal to purchase the Owned Real Property or any portion
thereof or interest therein.
(c) Except as otherwise set forth in Sections 3.6(c) or
3.7 of the Disclosure Schedule, to the Company's knowledge, all material Leased
Real Property is held by the Company and the Subsidiaries under valid and
outstanding leases or subleases (as the same may have been amended or modified)
which are in full force and effect and neither the Company nor any Subsidiary
has received notices of any material breach or default, or cancellation or
termination thereunder, or has knowledge that any condition, event or
circumstance with notice of lapse of time, or both, would constitute a material
breach or default under such lease or sublease.
(d) Except as otherwise set forth in Sections 3.6(b) or
3.6(c) of the Disclosure Schedule, to the knowledge of the Company, the Company
and its Subsidiaries have the legal right to use the Owned Real Property and the
Leased Real Property in the operation of the Business as presently conducted.
(e) To the knowledge of the Company, all of the Owned
Real Property have direct, perpetual vehicular access to and from public roads,
and all of the Leased Real Property have direct vehicular access to and from
public roads during the term of the Lease therefor.
3.7 Assets. Except as disclosed in Section 3.7 of the Disclosure
Schedule, either the Company or a Subsidiary, as the case may be, owns, leases
or has the legal right to use all the properties and assets, including, without
limitation, the Company Intellectual Property and the assets reflected in the
Reference Balance Sheet (except for inventory or other assets disposed of in the
ordinary course of business as presently conducted), but excluding the Real
Property, used or intended to be used by the Company or a Subsidiary in the
conduct of the Business (all such properties and assets being the "Assets"),
except where the failure to own, lease or have such legal rights would not have
a Material Adverse Effect. Either the Company or a Subsidiary, as the case may
be, has good, valid and marketable title to, or in the case of leased or
subleased Assets, valid and subsisting leasehold interests in, all the Assets,
free and clear of all Encumbrances, except (a) as disclosed in Section 3.7 of
the Disclosure Schedule, (b) for Permitted Encumbrances and (c) where the
failure to have good, valid and marketable title to or valid and subsisting
leasehold interests in such Assets would not have a Material Adverse Effect.
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3.8 Material Contracts.
(a) Section 3.8(a) of the Disclosure Schedule sets forth
a true and complete list of all the Material Contracts of the Company and the
Subsidiaries. As used herein, "Material Contracts" means all of the following:
(i) each agreement or arrangement of the Company
or any Subsidiary of the Company that requires the payment or
incurrence of Liabilities, or the rendering of services, by the Company
or any Subsidiary, subsequent to the date of this Agreement of more
than One Hundred Fifty Thousand Dollars ($150,000);
(ii) each agreement relating to, evidencing
guaranteeing, or providing security for, Indebtedness in an amount in
excess of One Hundred Fifty Thousand Dollars ($150,000);
(iii) each material sale, supply, distribution,
commission, marketing or similar agreement to which the Company or any
Subsidiary is a party or by which any of them is otherwise bound;
(iv) each material partnership, joint venture or
other similar agreement to which the Company or any Subsidiary is a
party or by which any of them is otherwise bound;
(v) each agreement, arrangement, contract or
commitment of the Company restricting or otherwise affecting the
ability of the Company to compete in the Business or otherwise in any
jurisdiction;
(vi) each lease or sublease of Leased Real
Property, Capital Lease and material lease or sublease of Assets;
(vii) each Employment Agreement;
(viii) each material license or other agreement
relating to the use of Intellectual Property, except for any of the
foregoing related to the use of generally available computer software;
(ix) each agreement for the sale of a material
Asset or material Real Property that has not yet been consummated and
was not entered into in the ordinary course of business as presently
conducted; and
(x) each other existing agreement, not otherwise
covered by clauses (i) through (ix), (A) that requires payments by or
to the Company or any Subsidiary in excess of $150,000 during any one
year and has not been entered into in the ordinary course of business
as presently conducted or (B) the loss of which would result in a
Material Adverse Effect.
(b) Except as disclosed in Section 3.8(b) of the
Disclosure Schedule:
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(i) neither the Company nor any Subsidiary party
to any Material Contract, nor, to the knowledge of the Company, any
other party thereto, is in material breach thereof or material default
thereunder, or has given notice of material breach or material default
to any other party thereunder;
(ii) each Material Contract is valid and binding
on the Company and its relevant Subsidiaries and, to the knowledge of
the Company, each respective counterparty thereto, and each Material
Contract is in full force and effect, subject to general principles of
equity and except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
of general application relating to creditors' rights; and
(iii) Since January 1, 2001, no counterparty to a
Material Contract has made a written demand to the Company or a
Subsidiary to renegotiate the amounts to be paid by or payable to the
Company or its Subsidiaries under such Material Contract.
3.9 Intellectual Property. Section 3.9 of the Disclosure Schedule
sets forth a true and complete list of all Intellectual Property owned or used
by the Company or any Subsidiary in the conduct of the Business ("Company
Intellectual Property"). Immediately after the Closing, the Company will have
the same rights to all of the Company Intellectual Property on the same terms
and conditions as in effect prior to the Closing, except where the failure to
have such rights would not have a Material Adverse Effect. There are no pending
Actions that assert that the Company violates or infringes the trade names,
trademarks, trademark registrations, service names, service marks or copyrights
of others. To the knowledge of the Company, neither the Company nor any
Subsidiary infringes upon or unlawfully or wrongfully uses any Intellectual
Property owned by another Person. Since January 1, 1998, neither the Company nor
any Subsidiary has received any notice alleging any infringement upon or
unlawful or wrongful use of any Intellectual Property owned or claimed by
another Person that remains unresolved on the date hereof.
3.10 Litigation, Claims and Proceedings. Except as set forth in
Section 3.10 of the Disclosure Schedule, there are no Actions that have been
brought by or against any Governmental Authority or any other Person pending or,
to the knowledge of the Company, threatened, (i) against or by the Company, any
Subsidiary, any Assets, any Owned Real Property, any Leased Real Property or the
Business which could result in liability to the Company or any Subsidiary in
excess of Two Hundred Seventy-Five Thousand Dollars ($275,000) or (ii) which
seeks to enjoin or rescind the transactions contemplated by this Agreement.
There are no existing Governmental Orders naming the Company or any Subsidiary
as an affected party. The Company makes no representation in this Section 3.10
as to any matter specifically covered by Sections 3.9, 3.11 or 3.17 of this
Agreement.
3.11 Environmental and Safety and Health Matters. Except as
disclosed in Section 3.11 of the Disclosure Schedule:
(a) The Company and its Subsidiaries have obtained all
material Permits that are required under any Environmental Law for the operation
of the Business as the Business is currently being conducted. All such Permits
are valid, in full force and effect, and will survive the Closing without
material modification.
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(b) The Company and its Subsidiaries are in material
compliance with all material Permits required under all Environmental Laws that
are used in the operation of the Business as the Business is currently being
conducted. To the knowledge of the Company, no circumstances exist which could
cause any such Permit to be revoked, modified or rendered non-renewable upon
payment of the permit fee.
(c) The Company, its Subsidiaries and the Real Property
are in material compliance with all Environmental Laws. No Hazardous Substance
is located on any Real Property, except in material compliance with all
Environmental Laws. To the knowledge of the Company, no fact or circumstance
exists which could reasonably be expected to involve the Company or any
Subsidiary in any environmental litigation, or impose upon the Parent or
Surviving Corporation any environmental liability which could have a Material
Adverse Effect.
(d) Neither the Company nor any Subsidiary has had a
material disposal or release of any Hazardous Substances on, under, in, from or
about the Real Property.
(e) Neither the Company nor any Subsidiary has disposed
or arranged for the disposal of Hazardous Substances on any third party property
that has subjected or may subject the Company or its Subsidiaries to material
liability under any Environmental Law.
(f) The Company has not received any written notice,
demand, letter, claim or request for information relating to the Real Property
alleging violation of or liability under any Environmental Law and the Company
is subject to no proceedings, actions, orders, decrees, injunctions or other
claims alleging liability under any Environmental Law.
(g) The Company has delivered to Parent copies of all
environmental assessments, audits, studies, and other environmental reports in
its possession relating to the Company and the Real Property.
(h) Except for such expenditures which are scheduled on
Section 5.1(a) of the Disclosure Schedule, the Company is not required to make
any capital or other expenditures to comply with any Environmental Law exceeding
One Hundred Fifty Thousand Dollars ($150,000).
3.12 Permits. Except as disclosed in Sections 3.11(a) and 3.12 of
the Disclosure Schedule, the Company and the Subsidiaries have all material
Permits which are necessary to own and operate the Assets and the Real Property
and to conduct the Business as it is presently being conducted.
3.13 Compliance with Law. Except as disclosed in Section 3.13 of
the Disclosure Schedule, the Company and the Subsidiaries, to the knowledge of
the Company, have conducted since January 1, 1998, and are currently conducting
the Business in all material respects, in accordance with all Laws and
Governmental Orders applicable to the Company or any Subsidiary or any of the
Assets, the Real Property or the Business. Except as disclosed in Section 3.13
of the Disclosure Schedule, neither the Company nor any Subsidiary has received
any outstanding or uncured written notice alleging any material default or
material violation of any Law or Governmental Order. The Company makes no
representation in this Section 3.13 as to any matter specifically covered by
Section 3.9, 3.11 or 3.17 of this Agreement.
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3.14 Consents. Except for the notification requirements of the HSR
Act and as disclosed in Section 3.14 of the Disclosure Schedule, no action,
approval, consent or authorization by, or any other order of, filing with or
notification to any Governmental Authority is or will be necessary to make this
Agreement or any of the agreements or instruments to be executed, performed and
delivered by the Company pursuant hereto a legal, valid and binding obligation
of the Company, subject to general principles of equity and except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws of general application relating to
creditors' rights, or to consummate the transactions contemplated hereunder.
3.15 Employee Matters and Benefit Plans.
(a) Section 3.15 of the Disclosure Schedule identifies
all consulting or employment agreements and other agreements with individual
consultants, directors or employees to which the Company or any Subsidiary is a
party and which are either currently effective or will become effective at the
Closing Date and in which the Company is obligated to make annual cash payments
in an amount exceeding $100,000 (the "Employment Agreements"). Copies of all
such written agreements as well as any employee handbooks, personnel manuals and
job application forms used by the Company or its Subsidiaries have been
delivered to Parent.
(b) Section 3.15 of the Disclosure Schedule contains a
complete list of "Plans" and identifies whether the Plan is maintained,
administered or contributed to by the Company, a Subsidiary or an ERISA
Affiliate, consisting of each:
(i) "employee welfare benefit plan," as defined
in Section 3(1) of ERISA, which is maintained or administered by the
Company, any Subsidiary or any ERISA Affiliate, to which the Company,
any Subsidiary or any ERISA Affiliate contributes, and which covers any
employee or former employee of the Company, any Subsidiary or any ERISA
Affiliate (a "Welfare Plan");
(ii) "voluntary employee beneficiary association"
as defined in Section 501(c)(9) of the Code, which is maintained,
administered or contributed to by the Company, any Subsidiary or any
ERISA Affiliate (a "VEBA)";
(iii) "cafeteria plan," as defined in Section 125
of the Code, which is maintained by the Company, any Subsidiary or any
ERISA Affiliate (a "Cafeteria Plan");
(iv) "employee pension benefit plan," as defined
in Section 3(2) of ERISA which is maintained or administered by the
Company, any Subsidiary or any ERISA Affiliate, to which the Company,
any Subsidiary or any ERISA Affiliate contributes, and which covers any
employee or former employee of the Company, any Subsidiary or any ERISA
Affiliate (a "Pension Plan"); and
(v) each severance, termination, change in
control or other similar contract, arrangement or policy (written or
oral) and each plan, program or arrangement (written or oral) providing
for insurance coverage (including self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits,
vacation, holiday or paid time off benefits, employee education, legal
services or adoption assistance benefits, dependent care benefits,
employment outplacement benefits,
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retirement benefits or deferred compensation, profit sharing, bonuses,
stock options, stock appreciation rights, stock purchases, phantom
stock or other forms of incentive or equity compensation or
post-employment insurance, compensation or benefits (other than that
provided pursuant to COBRA healthcare continuation coverage
requirements under Code Section 4980B(g) and ERISA Section 607 or
similar state law) which (a) is not a Welfare Plan, Cafeteria Plan,
VEBA or Pension Plan, (b) is entered into, maintained, contributed to
or required to be contributed to, as the case may be, by the Company or
any Subsidiary, and (c) covers any employee or former employee or any
director or former director of the Company or any Subsidiary
(collectively, "Benefit Arrangements"), except for any terminated
Benefit Arrangements under which the Company and any Subsidiary has no
liability.
An "ERISA Affiliate" is any Person, entity, trade or business (whether or not
incorporated) other than the Company or any Subsidiary, that is part of the same
controlled group, under common control with, or part of any affiliated service
group that includes the Company or any Subsidiary, within the meaning of section
414(b), (c), (m) or (o) of the Code).
(c) Except as disclosed in Section 3.15 of the Disclosure
Schedule, neither the Company, any Subsidiary nor any ERISA Affiliate
contributes to, has maintained, contributed to or participated in during the
last six years, or has any current or prospective liability to the Pension
Benefit Guaranty Corporation ("PBGC") or any other person, plan or entity under
or with respect to (i) a Pension Plan subject to Title IV of ERISA or Section
412 of the Code, (ii) a multiemployer pension plan, as defined in Section 3(37)
of ERISA, (iii) a Welfare Plan or Welfare Benefits Fund that is a "multiple
employer welfare arrangement," as defined in Section 3(40) of ERISA, (iv) a Plan
that is a multiple employer plan within the meaning of Section 413(c) of the
Code, or (v) a Plan or funding arrangement for a Plan which is a "welfare
benefits fund," as defined in Section 419 of the Code ("Welfare Benefit Fund").
(d) With respect to the Plans, a copy of each Plan and
any amendment(s) thereto, together with (i) summary plan descriptions thereof,
(ii) all trust agreements, insurance contracts, annuity contracts or other
funding instruments, (iii) the last two annual reports (IRS Form 5500 Series,
together with all required schedules and accountant's reports or opinions)
prepared in connection with any such Plan, (iv) all third party administrative
agreements and administrative fee schedules, (v) for any Plan which is intended
to be qualified under Section 401 of the Code, a copy of the latest
determination letter from the IRS, (vi) for any VEBA which is intended to be
exempt under Section 501(c)(9) of the Code, a copy of the latest exemption
letter from the IRS, (vii) any audit findings by or communications in connection
with any investigation by, and voluntary correction filing with, the IRS, the
United States Department of Labor ("DOL"), or the PBGC with respect to any Plan
during the last three years, and (viii) any pending determination, exemption or
voluntary corrections request for any Plan with the IRS or DOL have been
forwarded to Parent.
(e) Except as set forth on Section 3.15 of the Disclosure
Schedule:
(i) any Plan intended to be qualified under
Section 401(a) of the Code has been determined by the IRS to be so
qualified nothing has occurred that would reasonably be expected to
adversely affect the qualification of such Plan;
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(ii) any VEBA which is intended to be exempt
under Section 501(c)(9) of the Code has been determined by the IRS to
be so exempt and nothing has occurred that would reasonably be expected
to adversely affect the exemption of such Plan;
(iii) any Plan which is intended to be a Cafeteria
Plan is maintained in writing and has been operated in accordance with
the requirements of Section 125 of the Code;
(iv) all reporting and disclosure requirements
under applicable law or the plan documents has with respect to each
Plan have been complied with in all material respects, and all
statements, notices and disclosure distributed to participants and
beneficiaries have been true, accurate and correct in all material
respects;
(v) with respect to any Welfare Plan, the
fiduciaries or other responsible persons have complied in all material
respects with any applicable notice and contribution requirements of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
("COBRA") and the regulations thereunder and the Health Insurance
Portability and Accountability Act of 1986 ("HIPAA") and the
regulations thereunder;
(vi) neither the Company, any Subsidiary nor any
ERISA Affiliate has incurred any material liability, penalty or tax
under Chapter 43 of Subtitle D of the Code or Section 502(i) of ERISA,
and there has been no prohibited transaction (as defined in Section
4975 of the Code or Section 406 of ERISA) with respect to any of the
Plans that could result in any material liability to the Company or any
Subsidiary;
(vii) each of the Plans has in all material
respects been maintained and administered in accordance with its terms
and with the requirements prescribed by any and all statutes, orders,
rules and regulations including, but not limited to, ERISA and the Code
which are applicable to such Plans;
(viii) to the knowledge of the Company, no event
has occurred for which, and no condition or set of circumstances exists
under which the Company or any Subsidiary, or any of the Plans,
reasonably could be subject to any liability, penalty or lost income
tax deduction of a material nature whether or not assessed, pending or
threatened, directly or indirectly, under any applicable statute, order
or governmental rules and regulations including, but not limited to,
ERISA and the Code;
(ix) to the knowledge of the Company, there are
no pending or anticipated claims against or otherwise involving any of
the Plans, and no suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of plan activities) has
been brought or threatened against or with respect to any of the Plans,
and no state of facts or conditions exists which could be expected to
subject the Company or any Subsidiary to any material liability (other
than such claims for benefits) with respect to any Plan;
(x) all contributions, premiums, fees or charges
due and owing to or with respect to any Plan from the Company and each
Subsidiary have been paid or are reflected in the Financial Statements,
and will as of the Closing be paid or reflected in the Financial
Statements, in a timely manner as required by each Plan and applicable
law;
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(xi) no Plan provides, and neither the Company
nor any Subsidiary has any current or prospective liability with
respect to, any health, medical, life insurance or other welfare
benefits for retired or former employees or their spouses or dependents
(other than that provided pursuant to COBRA healthcare continuation
coverage requirements under Code Section 4980B(g) and ERISA Section 607
or similar state laws);
(xii) neither the Company nor any Subsidiary has
made or committed to make any material increase in contributions or
benefits under any Plan which would become effective prior to or after
the Closing;
(xiii) the consummation of this Agreement will not
by itself trigger, or entitle any current or former employee of the
Company or any Subsidiary to, severance, termination, change in control
or similar payments, will not accelerate vesting under any Plan (other
than with respect to any Plan which is required by this Agreement to be
terminated), and will not result in any tax or other liability payable
with respect to any Plan by the Company or any Subsidiary;
(xiv) no employer other than the Company, a
Subsidiary or an ERISA Affiliate participates in any Plan;
(xv) to the knowledge of the Company based upon
the facts known by the Company on the date hereof, each Person who
provides services to the Company or any Subsidiary is properly included
or excluded, as the case may be, with respect to participation in any
Plan;
(xvi) all assets of any Plan are either cash,
securities (excluding securities of the Company, Subsidiary or any
ERISA Affiliate) that are readily tradable on an established market,
loans to participants, or insurance or annuity contracts; and
(xvii) no Plan is currently under audit or
investigation by the IRS, DOL or PBGC.
Neither the Company, any Subsidiary nor any ERISA Affiliate has ever
participated in or withdrawn from a multi-employer plan as defined in Section
4001(a)(3) of Title IV of ERISA or a single-employer plan which has two or more
contributing sponsors at least two of whom are not under common control as
contemplated in Section 4063 or 4064 of ERISA. Neither the Company, any
Subsidiary nor any ERISA Affiliate has incurred or owes any liability as a
result of any partial or complete withdrawal by any employer from a
multi-employer plan or single-employer plans as described under Sections 4201,
4203, or 4205 of ERISA or from such a single-employer plans as described under
Sections 4063 or 4064 of ERISA. For purposes of this subsection, materiality
means any financial exposure in excess of $25,000 with respect to an individual
item, error or deficiency or $100,000 in the aggregate.
(f) There are no material controversies pending or, to
the knowledge of the Company, threatened between the Company or any Subsidiary
and any of their respective employees.
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3.16 Insurance. Section 3.16 of the Disclosure Schedule sets forth
a true and complete list of all material insurance policies in force with
respect to the Company and the Subsidiaries. To the knowledge of the Company,
all such policies are valid, outstanding and enforceable and will remain in
effect through the termination dates set forth in such policies. To the
knowledge of the Company, none of such policies will terminate by reason of the
transactions contemplated by this Agreement. The Company has heretofore provided
Parent with a true, correct and complete copy of each of the policies listed in
Section 3.16 of the Disclosure Schedule. The Company has not been refused any
insurance, nor has its coverage been limited, by any insurance carrier to which
it has applied for insurance or with which it has carried insurance during the
last five years. Section 3.16 of the Disclosure Schedule identifies all material
risks which the Company has designated as being self-insured and the amount of
reserve set aside by the Company to cover such risk. Except as indicated in
Section 3.16 of the Disclosure Schedule, the Company has no material insurance
claim or investigation pending or threatened in writing, and has not, since
January 1, 1999, had any insurance claim denied or rejected.
3.17 Taxes.
(a) All Tax Returns required to be filed by each of the
Company and the Subsidiaries have been duly and accurately prepared and timely
filed by the Company and the Subsidiaries, taking into account all extensions
granted or filed with respect to such due dates. True and correct copies of all
federal, state and local income tax returns filed by each of the Company and the
Subsidiaries for all periods since March 1, 1997, have been heretofore made
available to Parent. All Taxes (whether or not shown on any Tax Returns) due and
payable by the Company and the Subsidiaries have been timely paid. All Taxes not
yet due and payable by the Company and the Subsidiaries have been properly
accrued on the books of account of the Company in accordance with GAAP. There
are no existing or proposed penalty, interest or deficiency assessments or
pending audits relating to Taxes with respect to the Company and the
Subsidiaries, except as set forth in Section 3.17(a) of the Disclosure Schedule.
Neither the Company nor any Subsidiary will have any liability for Taxes with
respect to any period ending on or before the Closing Date which has not been
paid or will not be fully reserved for as of the Closing Date in the books of
account of the Company and reflected in the final and binding Closing Statement.
(b) Neither the Company nor any Subsidiary is a party to
any tax allocation or sharing agreement.
(c) There are no liens for Taxes upon the assets or
properties of the Company or any Subsidiary (whether real, personal or mixed,
tangible or intangible) except for statutory liens for Taxes not yet due or
payable.
(d) Except as indicated on Section 3.17(d) of the
Disclosure Schedule, neither the Company nor any Subsidiary is required (or will
be required as a result of this transaction) to include in income any amount for
an adjustment pursuant to section 481(a) of the Code or the regulations
thereunder or any similar provision of state law.
(e) Neither the Company nor any Common Stockholder is a
"foreign person" for purposes of section 1445 of the Code.
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(f) To the knowledge of the Company, no claim has been
made during the last five years by an authority in a jurisdiction where the
Company or any Subsidiary does not file Tax Returns that the Company or any
Subsidiary is or may be subject to Taxation by that jurisdiction.
(g) Neither the Company nor any Subsidiary has filed a
consent under Code section 341(f) concerning collapsible corporations.
(h) Neither the Company nor any Subsidiary has been a
United States real property holding corporation within the meaning of Code
section 897(c)(2) during the applicable period specified in Code section
897(c)(1)(A)(ii).
(i) Except with respect to the affiliated group of
corporations of which the Company or a Subsidiary is the common parent, neither
the Company nor any Subsidiary (i) has been a member of an affiliated group of
corporations within the meaning of section 1504 of the Code and (ii) has any
liability for the Taxes of any Person under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise.
(j) The Company was a validly electing S Corporation
within the meaning of Sections 1361 and 1362 of the Internal Revenue Code of
1986, as amended (the "Code") at all times from March 1, 1998 up to and
including July 31, 2001.
(k) Section 3.17(k) of the Disclosure Schedule identifies
each Company that was a "qualified subchapter S subsidiary" within the meaning
of Code Section 1361(b)(3)(B) on July 31, 2001. Each Company so identified was a
qualified subchapter S subsidiary at all times since the date shown on such
schedule up to and including July 31, 2001.
(l) Each of the Company and the Subsidiaries has withheld
and/or paid all Taxes required to have been withheld and/or paid in connection
with amounts paid or owed to any employee, independent contractor, creditor,
stockholder, member or other third party.
(m) Each of the Company and the Subsidiaries has
disclosed on its federal income tax returns all positions taken therein that
could give rise to a substantial understatement of federal income tax within the
meaning of Code Section 6662.
(n) Each of the Company and the Subsidiaries has complied
with all sales Tax resale certificate exemption requirements.
(o) There is no Plan or employment agreement covering any
employee or former employee or other Person who is a "disqualified individual"
as defined in section 280G(c) of the Code with respect to the Company or any
Subsidiary that, individually or collectively, could give rise to the payment of
an amount that would not be deductible pursuant to the terms of section 280G of
the Code or create any excise tax liability under section 4999 of the Code.
(p) There is, and since January 1, 1994 has been, no Plan
or employment agreement covering any employee or former employee of the Company
or any Subsidiary that, individually or collectively, could give rise to the
payment of an amount that would not be deductible pursuant to the terms of
section 162 of the Code.
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(q) To the knowledge of the Company, the records of each
of the Company and the Subsidiaries contain all material information and
documentation necessary to support in all material respects the Tax Returns
filed by it since January 1, 1997.
(r) Neither the Company nor any Subsidiary (at any time
since the date the Company acquired an interest therein) has constituted either
a "distributing corporation" or a "controlled corporation" (within the meaning
of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
Tax-free treatment under Section 355 of the Code.
3.18 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which are accrued or reserved against in the Reference Balance Sheet
(or reflected in the notes thereto), or which were incurred after the date of
the Reference Balance Sheet in the ordinary course of business and consistent
with past practices or in connection with the transactions contemplated by this
Agreement, including, without limitation, the Closing Fees, the Company and the
Subsidiaries do not have any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of a nature required by GAAP to be reflected
in, reserved against or otherwise described in the Reference Balance Sheet (or
reflected in the notes thereto). At the time of delivery of the Closing Payment
Statement pursuant to Section 2.5(a) hereof, the Closing Payment Statement will
accurately reflect the Closing Date Payments. The Company makes no
representation in this Section 3.18 as to any matter specifically covered by
Sections 3.9, 3.11 or 3.17 of this Agreement.
3.19 Conduct in the Ordinary Course. Since February 28, 2001,
except as disclosed in Section 3.19 of the Disclosure Schedule, the Business has
been conducted, in all material respects, in the ordinary course of business
consistent with past practice and the Company has not:
(a) made any material change in its business or
operations or in the manner of conducting its business other than changes in the
ordinary course of business;
(b) incurred any material obligations or liabilities
(whether absolute, accrued, contingent or otherwise and whether due or to become
due), except items incurred in the ordinary course of business and consistent
with past practice, or experienced any material change in any assumptions
underlying or methods of calculating any bad debt, contingency or other
reserves;
(c) written down the value of any inventory, or written
off as uncollectible any notes or accounts receivable or any portion thereof,
except for immaterial write-downs and write-offs made in the ordinary course of
business, consistent with past practice and at a rate no greater than during the
twelve (12) months ended February 28, 2001 or canceled any material debts except
for debts canceled in the ordinary course of business consistent with past
practice;
(d) sold, transferred or conveyed any of its Assets or
Owned Real Property, except in the ordinary course of business and consistent
with past practice;
(e) made any capital expenditures or commitments in
excess of One Million Dollars ($1,000,000) in the aggregate for replacements or
additions to property, plant, equipment or intangible capital assets;
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(f) declared, paid or made or set aside for payment or
making, any dividend or other distribution in respect of its capital stock or
other securities, or directly or indirectly redeemed, purchased or otherwise
acquired any of its capital stock or other securities;
(g) made any material change in any method of accounting
or accounting practice;
(h) paid, discharged or satisfied any liability or
obligation (whether absolute, accrued, contingent or otherwise) since February
28, 2001 other than in the ordinary course of business consistent with past
practice;
(i) granted any increase in compensation of any officer,
director or employee (including, without limitation, any increase pursuant to
any bonus, pension, profit sharing or other plan or commitment) outside of the
ordinary course of business;
(j) suffered any Material Adverse Effect; or
(k) agreed, whether in writing or otherwise, to take any
action described in this Section 3.19.
3.20 Absence of Questionable Payments. The Company has not and, to
the knowledge of the Company, its directors, officers, employees and affiliates
have not, at any time since January 1, 1998 used funds for any illegal purpose,
including without limitation, the making of any improper political contribution,
bribe or kickback.
3.21 Accounts Receivable. Except as disclosed in Section 3.21 of
the Disclosure Schedule, as of the date of Reference Balance Sheet all accounts
receivable of the Company ("Accounts Receivables") represent sales actually made
in the ordinary course of business consistent with past practice; none of the
Accounts Receivables is subject to any material counterclaim or set-off other
than normal sales adjustments or allowances consistent with past practice.
3.22 Customers and Suppliers. Section 3.22 of the Disclosure
Schedule contains a true and complete list of the names of the 10 largest
customers to whom the Company and its Subsidiaries have sold products during the
year ended February 28, 2001 and the 10 largest suppliers or service providers
from whom the Company and its Subsidiaries have purchased supplies or services
during the year ended February 28, 2001. Except as set forth in Section 3.22 of
the Disclosure Schedule, neither the Company nor any Subsidiary has received any
written statement from any customer or supplier whose name appears on such list
that such customer or supplier will not continue as a customer or supplier of
the Company or such Subsidiary, as applicable, after the Closing.
3.23 Inventory. All inventory of the Company and its Subsidiaries,
whether reflected in the Financial Statements or otherwise, is of good and
merchantable quality and is usable and saleable in the ordinary course of
business, except where the failure of such inventory to be of such quality would
not have Material Adverse Effect and except for obsolete materials and materials
of below standard quality, which have been written down in the Financial
Statements to realizable market value or for which adequate reserves have been
provided therein. Except as disclosed in Section 3.23 of the Disclosure
Schedule, neither the Company nor any Subsidiary is
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under any material liability or obligation with respect to the return of
inventory or merchandise in the possession of wholesalers, retailers or other
customers other than such liabilities or obligations that are incurred in the
ordinary course of business consistent with past practice.
3.24 Corporate Records. The Company has provided to Parent for its
review true complete and correct copies of the following applicable items or
items substantially similar thereto, to the extent that such items exist, as
amended and presently in effect, for the Company and each of its Subsidiaries:
(a) charter or organization documents including certificates of incorporation
and bylaws and (b) minute book.
3.25 Product Warranties. Except as disclosed in Section 3.25 to the
Disclosure Schedule and except for warranties imposed by law, neither the
Company nor any Subsidiary has given or made any warranties to third parties
with respect to any products supplied which may still be in effect at any time
after the date hereof. Except as disclosed in Section 3.25 of the Disclosure
Schedule, there have been no material claims made with respect to any such
product warranties that have not been fully settled and resolved.
3.26 Relationships With Related Persons. Except as disclosed in
Section 3.26 of the Disclosure Schedule and except for such Persons interest as
a Common Stockholder of the Company, to the knowledge of the Company, (i) no
Common Stockholder has any interest in any property used in or pertaining to the
Business, (ii) no Common Stockholder has, or is the beneficial owner of an
equity interest in any firm, corporation or any other Person which has, (A)
business dealings with the Company or any Subsidiary, or (B) which is in
competition with the Company or any Subsidiary in any market presently served by
the Company or such Subsidiary.
3.27 Full Disclosure. Neither this Agreement, the Disclosure
Schedule, nor any exhibit, list, certificate or other instrument or document
furnished or to be furnished to the Parent by the Company pursuant to this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact required to be stated herein or therein or necessary to make
the statements and information contained herein or therein not misleading. The
Company has not withheld from Parent disclosure of any event, condition or fact
that, to the knowledge of the Company, would have a Material Adverse Effect.
3.28 Finder's Fee. Except for fees payable to Morgan Stanley & Co.
Incorporated, neither the Company nor any Subsidiary has incurred any liability
to any party for any brokerage or finder's fee or agent's commission, or the
like, in connection with the transaction contemplated by this Agreement based
upon arrangements made by or on behalf of the Company or any Subsidiary.
3.29 Labor Matters. Section 3.29 of the Disclosure Schedule lists
each collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or any Subsidiary. There is no labor strike,
slowdown or stoppage in progress or, to the knowledge of the Company,
threatened, against or involving the Company or any Subsidiary. During the last
five years, neither the Company nor any Subsidiary has experienced any labor
strike, slowdown or stoppage. The Company does not have knowledge of any
material activities or proceedings of any labor union to organize any employees
of the Company or its Subsidiaries. During the past seven years, there has been
no request for collective bargaining or for a representation election from any
employee, union or the National Labor Relations Board.
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Except as set forth in Section 3.29 of the Disclosure Schedule, no private
agreement restricts the Company or any Subsidiary from relocating, closing or
terminating any of its operations or facilities.
3.30 Orders, Commitment and Returns. Other than as a result of
fluctuations in raw product availability experienced in the ordinary course of
business, (a) the aggregate of all unfilled orders does not materially exceed
what may be filled in the ordinary course of business on a schedule reasonably
satisfactory to customers, (b) the aggregate of all contracts for purchase of
product by the Company does not materially exceed an amount that is reasonable
for its anticipated volumes of business, (c) to the knowledge of the Company,
there are no asserted material claims by customers to return merchandise as a
result of overshipments, defective merchandise or otherwise, and (d) there is no
material amount of merchandise in the hands of customers that is returnable
other than pursuant to the Company's standard return policies.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB.
4.1 Corporate Status. Each of Parent and Acquisition Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and each (a) has all
requisite corporate power and authority to own, operate or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and (b) is duly qualified to do business and is in good standing in each of the
jurisdictions in which the ownership, operation or leasing of its properties and
assets and the conduct of its business requires it to be so qualified, licensed
or authorized, except where the failure to be so qualified, licensed or
authorized would not have a Parent Material Adverse Effect. Parent has delivered
to the Company a true and complete copy of the certificate of incorporation and
bylaws, and all amendments thereto, of each of Parent and Acquisition Sub, each
as in effect on the date hereof.
4.2 Authority. Each of Parent and Acquisition Sub has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Parent and Acquisition Sub and the consummation by
each of the transactions contemplated hereby have been duly and validly
authorized by the board of directors of Acquisition Sub and by Parent as sole
stockholder of Acquisition Sub and no other corporate proceedings are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of Parent
and Acquisition Sub, and (assuming due authorization and delivery by the
Company) this Agreement constitutes a legal, valid and binding obligation of
each of Parent and Acquisition Sub, enforceable against each of them in
accordance with its terms, subject to general principles of equity and except as
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws of general application relating to
creditors' rights.
4.3 No Conflict. Neither the execution, delivery and performance
of this Agreement by Parent or Acquisition Sub nor the consummation by Parent or
Acquisition Sub of the transactions contemplated hereby will (a) violate,
conflict with or result in the breach of any term or provision of the
certificate of incorporation or bylaws of either of Parent or Acquisition Sub,
(b) to the knowledge of Parent, conflict with or violate, in any material
respect, any Law
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applicable to Parent or Acquisition Sub or any of their respective assets,
properties or businesses, or (c) conflict with or violate, result in the breach
of any term or provision of, or constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrances on
any of the assets or properties of Parent of Acquisition Sub pursuant to, any
material note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Parent or Acquisition Sub or any of
Parent's other subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound, except, with respect to each of
Sections 4.3(b) and (c), for any conflict, violation, breach, default or other
event the occurrence or existence of which would not have a Parent Material
Adverse Effect.
4.4 Compliance with Law. Each of Parent and Acquisition Sub has
complied with and is not in violation of applicable Laws or Governmental Orders
which would affect their respective abilities to perform their respective
obligations hereunder. There is no Action pending, or to the knowledge of Parent
or Acquisition Sub, threatened against Parent or Acquisition Sub, affecting
their respective abilities to perform its obligations hereunder.
4.5 Consents. Except for the notification requirements of the HSR
Act, no action, approval, consent or authorization, including but not limited to
any action, approval, consent or authorization by, or any other order of, filing
with or notification to any Governmental Authority, is or will be necessary to
make this Agreement or any of the agreements or instruments to be executed,
performed and delivered by Parent or Acquisition Sub pursuant hereto a legal,
valid and binding obligation of each of Parent and Acquisition Sub, subject to
general principles of equity and except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws of general application relating to creditors' rights, or to consummate the
transactions contemplated hereunder, except where the failure to obtain such
actions, approvals, consents or authorizations or orders of, or the failure to
make such filings or notifications, would not have a Parent Material Adverse
Effect.
4.6 Adequate Funds. Parent has provided the Company with true and
complete copies of the commitment letters which it has obtained to provide funds
for the transactions contemplated by this Agreement.
4.7 Finder's Fee. Neither Parent nor Acquisition Sub has done
anything to cause the Company or any of its stockholders, option holders,
directors, officers or other Affiliates to incur any liability to any party for
any brokerage or finder's fee or agent's commission, or the like, in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of either of Parent or Acquisition Sub.
4.8 No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
Acquisition Sub has neither incurred any obligation or liability nor engaged in
any business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any Person.
4.9 No Reliance. Parent acknowledges that neither the Company, the
Common Stockholders nor any other Person has made any representation or
warranty, express or implied, as to the accuracy or completeness of any
information regarding the Company, the Business or
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other matters that is not included in this Agreement or the Disclosure Schedule
hereto. Without limiting the generality of the foregoing, neither the Company,
the Common Stockholders nor any other Person has made a representation or
warranty to Parent with respect to (i) any projections, estimates or budgets for
the Business, (ii) any material, documents or information relating to the
Business made available to Parent or its counsel, accountants or advisors in the
Company's data room or otherwise, except as expressly covered by a
representation or warranty set forth in Article III, or (iii) the information
contained in the Company's Offering Memorandum dated February 2001.
V. COVENANTS AND AGREEMENTS.
5.1 Conduct of Business Prior to Closing.
(a) Except as expressly set forth in this Agreement or as
consented to in writing by Parent, during the period from the date of this
Agreement until the Closing Date or earlier termination of this Agreement
pursuant to its terms, the Company shall continue to operate and conduct the
Business in the ordinary course of business consistent with past practice, and
shall not, without the prior written approval of Parent (which approval shall
not be unreasonably withheld or delayed) or as otherwise contemplated by this
Agreement and Section 5.1(a) of the Disclosure Schedule take any of the
following actions:
(i) with respect to the Company or any
Subsidiary, (A) amend its constituent documents in any material
respect, (B) issue or agree to issue any additional shares of its
capital stock (or voting securities), (C) issue or agree to issue any
securities convertible into or exercisable or exchangeable for shares
of its capital stock (or voting securities), (D) sell, transfer or
otherwise dispose of or encumber any shares of its capital stock (or
voting securities), (E) declare, set aside, make or pay any dividend or
other distribution in respect of its capital stock (or voting
securities), in cash or otherwise, or (F) purchase or redeem shares of
its capital stock (or voting securities);
(ii) sell, transfer or otherwise dispose of or
encumber any of the Assets or Real Property, other than (A) in the
ordinary course of business consistent with past practice or (B) any
properties or assets the value of which does not exceed in the
aggregate One Hundred Thousand Dollars ($100,000);
(iii) except as required by Law or contractual
obligations and except for borrowings under any existing lines of
credit in the ordinary course of business, (A) create, incur or assume
any material long-term or short-term debt, except loans and advances
among the Company and its Subsidiaries, (B) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly,
contingently or otherwise) for any material obligations of any Person
other than any Subsidiary, except in the ordinary course of business
consistent with past practice or (C) make any material loans, advances
or capital contributions to or investments in any Person other than its
Subsidiaries (except for loans or advances to employees made in the
ordinary course of business consistent with past practice);
(iv) except as required by Law, (A) grant any
increase in the compensation of employees of the Company or its
Subsidiaries, except for increases in the compensation of employees in
the ordinary course of business consistent with past practice, (B) hire
new employees other than in the ordinary course of business consistent
with past
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practice, (C) enter into any employment, severance, consulting or other
compensation agreement with any existing or new director, officer or
any other employee that has the title "Group Manager" or any title more
senior thereto or (D) commit to any additional pension, profit-sharing,
deferred compensation, group insurance, severance pay, retirement or
other employee benefit plan, fund or similar arrangement or amend or
commit itself to amend any of such plans, funds or similar arrangements
other than in the ordinary course of business consistent with past
practice;
(v) acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire
any assets (other than inventory) which are material, individually or
in the aggregate, to the Business taken as a whole; or
(vi) make any capital expenditure not listed in
Section 5.1(a) of the Disclosure Schedule, or enter into any commitment
to make any capital expenditure in excess of Two Hundred Thousand
Dollars ($200,000);
(vii) enter into or terminate any contract, other
than in the ordinary of business consistent with past practice, that
would be material to the Company or the Business;
(viii) settle any litigation or other proceeding in
any manner that would result in the Company or any Subsidiary paying
any Person in excess of One Hundred Fifty Thousand Dollars ($150,000);
(ix) fail to comply in any material respect with
(A) all Laws applicable to it and the Business and (B) all Laws
compliance with which is required for the valid consummation of the
transactions contemplated by this Agreement; or
(x) agree, whether in writing or otherwise, to
do any of the foregoing.
(b) The Company covenants and agrees that, prior to the
Closing, it shall, to the extent that it has knowledge of any of the following,
promptly notify Parent in writing of all events, circumstances, facts and
occurrences arising subsequent to the date of this Agreement which could
reasonably be expected to result in any material breach of a representation or
warranty or covenant of the Company in this Agreement.
(c) The Company will use reasonable efforts to maintain
and preserve and keep in full force and effect the existence and material rights
of the Company and its Subsidiaries, to preserve the material business
organizations of the Company and its Subsidiaries, to keep available to Parent
the officers and key employees of the Company and its Subsidiaries, and to
preserve the present relationships of the Company with its material suppliers
and customers.
5.2 Access to Records and Properties. From the date hereof until
the Closing Date or earlier termination of this Agreement, the Company will, and
will cause each Subsidiary to:
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(a) upon notice by Parent and permission granted by the
Company, which shall not be unreasonably withheld, provide Parent and
Acquisition Sub and their officers, counsel and other representatives with
reasonable access during normal business hours to the facilities of the Company
and such Subsidiary, their principal personnel and representatives, and such
books and records pertaining to Company and such Subsidiary as Parent and
Acquisition Sub may reasonably request, provided that Parent and Acquisition Sub
agree that such access will give due regard to minimizing interference with the
operations, activities or employees of Company and such Subsidiary and provided
that such access and disclosure would not violate the terms of any agreement to
which the Company or any such Subsidiary is bound or any applicable Law;
(b) furnish to Parent and Acquisition Sub or their
representatives such additional financial and operating data and other
information relating to the Company and each Subsidiary as may be reasonably
requested, to the extent that such access and disclosure would not violate the
terms of any agreement to which the Company or any such Subsidiary is bound or
any applicable Law.
5.3 Consents.
(a) Each of the Company and Parent shall, in no event
later than five (5) Business Days following the date hereof, file with the
United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the notification and report form pursuant to
the HSR Act), required for the transactions contemplated hereby. Each of the
Company and Parent shall, as promptly as practicable, substantially comply with
any request for additional information and documents pursuant to the HSR Act.
Each of Parent and the Company shall inform the other promptly of any
communication made by or on behalf of such party to, or received from, the FTC
or the DOJ and shall furnish to the other such information and assistance as the
other may reasonably request in connection with its preparation of any filing,
submission or other act that is necessary or advisable under the HSR Act. The
Company and Parent shall keep each other timely apprised of the status of any
communications with, and any inquiries or requests for additional information
from, the FTC or the DOJ, and shall comply promptly with any such inquiry or
request. The parties hereto acknowledge that time shall be of the essence in
this Agreement and agree not to take any action or omit to take any action that
will have the effect of unreasonably delaying, impairing or impeding the receipt
of any required authorizations, consents, orders or approvals.
(b) The parties hereto shall cooperate with one another
in determining whether any action by or in respect of, or filing with, any
Governmental Authority (excluding the actions and filings described in clause
(a) above) is required or reasonably appropriate, or any action, consent,
approval or waiver from any party to any Material Contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement and the Confidentiality Agreement, in taking such actions or making
any such filings, the parties hereto shall furnish information required in
connection therewith and timely seek to obtain any such actions, consents,
approvals or waivers.
(c) Without limiting the generality of Parent's
undertakings pursuant to Section 5.3(a), Parent shall use reasonable commercial
efforts to obtain any clearance under the
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HSR Act or to resolve any objections that may be asserted by any Governmental
Authority with jurisdiction over the enforcement of any applicable antitrust,
anti-competition or similar Law, in each case as promptly as practicable;
provided, however, that nothing contained herein shall require Parent to take
any such action if the taking of such action could reasonably be expected to
have a Material Adverse Effect, a Parent Material Adverse Effect or deprive
Parent of the economic benefit of the transactions contemplated by this
Agreement in any material respect.
5.4 Public Announcements. On and after the date hereof and through
the Closing Date, the Company, Acquisition Sub and Parent shall consult with
each other before issuing any press releases or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
hereby, and none of the parties shall issue any press release or make any public
statement prior to obtaining the other parties' written approval, which approval
shall not be unreasonably withheld; provided, however, in the event of any press
release or public statement that is required by Law, the parties will use their
reasonable best efforts to consult with each other before issuing, and to
provide each other the opportunity to review and comment upon, any such press
release or other public statement.
5.5 Non-Solicitation. After the date hereof and prior to the
Closing Date, the Company agrees (i) that it shall, and shall direct its
directors, officers, employees, advisors, accountants and attorneys, not to
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer with respect to a merger,
acquisition, consolidation or similar transaction involving the Company, or any
purchase of all or any significant portion of the assets or any equity
securities of the Company (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal") or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any Person relating to an Acquisition Proposal, or otherwise facilitate any
effort to attempt to make or implement an Acquisition Proposal; (ii) that it
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties other than Parent conducted
heretofore with respect to any of the foregoing; and (iii) that it will notify
Parent immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it. Parent agrees that this Section
5.5 shall be of no force and effect in the event of termination of this
Agreement or in the event the transactions contemplated by this Agreement are
consummated.
5.6 Further Action. Each of the parties hereto shall use all
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper and advisable under
applicable Law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
5.7 Insurance; Indemnity.
(a) For a period of six (6) years following the Effective
Time, Parent shall indemnify, defend and hold harmless to the fullest extent
permitted under applicable Law (and shall advance expenses as incurred to the
fullest extent permitted under applicable Law to) each Person who is now or has
been an officer, director, employee or agent of the Company (or any Subsidiary),
including, without limitation, each Person controlling any of the foregoing
persons
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(individually, an "Indemnified Individual" and collectively, the "Indemnified
Individuals"), against (i) all losses, claims, damages, liabilities, costs or
expenses (including reasonable attorneys' fees and expenses), judgments, fines,
penalties and amounts paid in settlement in connection with any Action arising
out of or pertaining to acts or omissions (including negligent acts or
omissions), or alleged acts or omissions (including alleged negligent acts or
omissions), by them in their capacities as such, whether commenced, asserted or
claimed before or after the Effective Time ("Indemnified Liabilities") and (ii)
all Indemnified Liabilities based in whole or in part on or arising out of or
pertaining to this Agreement or the transactions contemplated hereby.
(b) Immediately before the Effective Time, Parent shall
purchase and maintain or cause the Surviving Corporation to purchase and
maintain, for a period of six (6) years following the Effective Time, policies
of directors' and officers' liability insurance covering the Indemnified
Individuals who are currently covered by the Company's existing directors and
officers liability insurance with respect to claims arising from facts or events
that occurred on or prior to the Effective Time and providing at least the same
coverage and amounts and containing terms that are no less advantageous to the
insured parties as those in effect on the date hereof; provided that in no event
shall Parent, after using its reasonable best efforts to obtain a policy with
the same coverage and terms at the lowest cost, be required to expend for the
policy or policies an aggregate amount in excess of $90,000, and provided
further that if the aggregate costs of such insurance are less than $90,000, the
Parent shall be obligated to obtain a policy with the greatest coverage it can
obtain upon the exercise of its reasonable best efforts for an amount not
exceeding $90,000.
(c) The provisions of this Section 5.7 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Individual and
each party entitled to insurance coverage under Section 5.7(b), respectively,
and his or her heirs and legal representatives, and shall be in addition to any
other rights an Indemnified Individual may have under the certificate or
articles of incorporation or bylaws (or similar organizational document) of the
Surviving Corporation or any Subsidiary, under the DGCL or otherwise. The
obligations of the Company, the Surviving Corporation and Parent contained in
this Section 5.7 shall be binding on the successors and assigns of Parent and
the Surviving Corporation. If Parent, the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.7.
5.8 Benefit Plans.
(a) For one year after the Effective Time, at the option
of Parent (which may be applied on a plan basis and/or separately to different
groups of employees), Parent shall or shall cause the Surviving Corporation to
offer to those Persons employed by the Company or any Subsidiary and eligible to
participate in the employee benefit plans (other than the Company's Phantom
Stock Plan or any other nonqualified deferred compensation plans) ("Benefit
Plans") maintained by the Company or any Subsidiary immediately prior to the
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Effective Time (determined without regard to any termination of the same
pursuant to Section 5.8(c)) ("Company Persons") and dependents thereof, either:
(i) continued rights to participate in the
Benefit Plans on substantially the same basis as in effect immediately
prior to the Effective Time, subject to any changes required by
applicable law, and to the right to convert the vesting schedule for
matching contributions in the Company's 401(k) plan to the vesting
schedule for matching contributions in the Parent's 401(k) plan, or
(ii) rights to participate in Parent's or the
Surviving Corporation's employee benefit plans ("Parent Benefit Plans")
on substantially the same basis as similarly situated employees (taking
into account all applicable factors including, without limitation,
position, location of employment, employment classification, age,
length of service, pay, part time or full time status), provided that
with respect to any health insurance plan, such participation for all
Company Persons and dependents thereof who were participating in the
Company's health insurance plans shall be available without exclusions
for pre-existing conditions, and provided further that expenses that
were taken into account under a Benefit Plan providing medical or
dental benefits in which the Company Persons participated immediately
prior to commencing participation in a Parent Benefit Plan providing
medical or dental benefits shall be taken into account to the same
extent under such Parent Benefit Plan, in accordance with the terms of
such Parent Benefit Plan, for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions and
life-time benefit limits;
provided, however, that the value of coverages and benefits offered to each of
such Company Persons and dependents thereof shall be, in the aggregate,
substantially equivalent to the value of coverages and benefits of the Benefit
Plans in which each of such Company Persons and dependents thereof participated
immediately prior to the Effective Time. For purposes of participation in any
Parent Benefit Plan, Parent and the Surviving Corporation shall recognize the
past service of Company Persons with the Company and its Subsidiaries for
vesting and eligibility purposes only.
(b) Notwithstanding any other provision of this Section
5.8 and in lieu of providing participation in employee benefit plans pursuant to
Section 5.8(a), Parent shall or shall cause the Surviving Corporation to provide
to those Persons employed by the Company and any Subsidiary under (i) the
collective bargaining agreements which the Company and its Subsidiaries are
subject to, the benefits required under those collective bargaining agreements,
and (ii) employment agreements, the benefits (other than participation in the
Company's Phantom Stock Plan after the Closing) required under such agreements.
(c) The Company will terminate and will cause each
Subsidiary to terminate effective as of the Closing each and any Pension Plan of
the Company or any Subsidiary that is subject to Section 401(k) of the Code, on
or before the Closing Date if so directed in writing by Parent, which
termination may be contingent on Closing and which direction may include a
requirement that all benefits be paid out prior to or at Closing in which case
Parent and Acquisition Sub shall assume no liability therefor.
5.9 No Financing Contingency. Parent will have at the Effective
Time sufficient funds for the payment of the Initial Merger Consideration and
the Closing Date Payments and to
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perform its obligations with respect to the transactions contemplated by this
Agreement. Notwithstanding anything contained elsewhere herein, the parties
acknowledge and agree that it shall not be a condition to the obligations of
Parent or Acquisition Sub to effect the Initial Merger that Parent has
sufficient funds for the payment of the Initial Merger Consideration and the
Closing Date Payments and to perform its obligations with respect to the
transactions contemplated by this Agreement.
5.10 Tax Returns. With respect to any Tax Returns of the Company
due after the Closing Date with respect to any year or period during which the
Company was an S Corporation within the meaning of Sections 1361 and 1362 of the
Code, Parent shall prepare such Tax Returns and shall report all items with
respect to any such periods in accordance with the instructions of the
Representatives, provided that such instructions shall be consistent with past
practice of the Company and that Parent shall have reasonable opportunity to
provide reasonable input to the Representatives with respect to such Tax Returns
and the Representatives shall consider such input in good faith. With respect to
any other Tax Returns of the Company and the Subsidiaries with respect to any
year or period ending on or prior to the Closing Date, Parent shall prepare such
Tax Returns in a manner consistent with past practice (with the Company electing
to file a consolidated federal income tax return with the Subsidiaries), shall
cause the Company to consult with the Representatives concerning such Tax
Returns and shall provide the Representatives reasonable opportunity to provide
reasonable input to Parent with respect to such Tax Returns. Parent agrees that
it shall not, and it shall cause the Company not to, amend any Tax Return of the
Company or any Subsidiary with respect to any year or period ending on or prior
to the Closing Date without the prior consent of the Representatives (which
consent shall not be unreasonably withheld), unless required to do so by
applicable law.
5.11 Review of Parent Change of Control Agreements. Parent agrees
that, as soon as may be practicable following the Closing and in any event
within one year of the Closing, it will review in good faith the existing
policies and agreements regarding compensation and benefits to its employees
following a change of control of Parent and make such changes or modifications,
if any, as it, in its discretion, may determine.
5.12 Environmental Diligence and Reimbursement. Parent shall be
entitled to conduct continued environment diligence with respect to the
properties identified in Section 5.12 of the Disclosure Schedule in accordance
with the terms set forth in Section 5.2. On or before August 30, 2001, Parent
shall submit to the Company all of the data and materials it has or its
representatives have collected as a result of such diligence together with a
good faith estimate of the aggregate cost of fully remediating all environmental
issues identified as a result of such environmental diligence (the "Remediation
Cost"). Within five (5) Business Days of receipt of such data and estimate, the
Company shall decide, in its sole discretion, to (a) agree that the Initial
Merger Consideration shall be reduced by the amount of the Remediation Cost or
(b) after negotiating in good faith with Parent as to amount of the Remediation
Cost, terminate this Agreement.
5.13 Texas Operations. Parent will not use and will not permit the
use of any of the assets used in the Business in a manner that would violate
Section 22.3 of the Taylor Agreement.
5.14 Benefit Filings. Prior to Closing, the Company shall file or
supplement a previous filing for any due and not yet filed annual return/report
(Form 5500 Series, with related
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schedules) or statements in lieu of such annual return/report relating to any
Plan. The Company shall be liable for all costs associated with such filings,
including any excise taxes, penalties, or fees. The Company shall be liable for
any and all costs, including taxes, penalties and interest, associated with any
failure by it or any Subsidiary to comply with the written plan document
requirement under Section 125 of the Code for any contributions erroneously
treated by it or any Subsidiary as pretax contributions excluded from an
employee's income and wages for income and employment tax purposes for any
period prior to Closing; and the Company at its expense shall use its best
efforts to correct or cause any affected Subsidiary to correct any such written
plan document deficiency prior to Closing.
5.15 Unsigned Leases. For each lease identified in Section 3.6(c)
of the Disclosure Schedule as being unsigned on the date hereof, any definitive
lease agreement entered into by the Company or any Subsidiary prior to the
Closing shall be on substantially the same terms as those in effect on the date
hereof or on terms approved by Parent, which approval shall not be unreasonably
withheld.
5.16 Modification of Escrow Agreement. As soon as practicable, but
in no event later than twenty (20) Business Days prior to Closing, the Company
and Parent will agree as to the maximum exposure of the Company and its
Subsidiaries for Tax liabilities attributable to the nondeductibility under
Section 280G and/or 162 of the Code with respect to payments of Deferred
Compensation and other payments to or for the benefit of Unit Holders pursuant
to this Agreement. In the event the Company and Parent cannot agree, Parent and
the Company shall jointly retain a Firm to determine such amount, such
determination to be not less five (5) Business Days prior to the Closing, and
such amount (or the amount agreed by the Company and Parent) shall be the
"Exposure Amount". In the event the Exposure Amount is more than $250,000, the
Company and Parent shall amend the form of Escrow Agreement to be executed and
delivered at Closing to provide that the amount of Escrow Funds to be released
by the Escrow Agent on the first Business Day following the first anniversary of
Closing shall be reduced by the Exposure Amount.
VI. CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB.
The obligations of Parent and Acquisition Sub to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment,
in all material respects, of each of the following conditions by the Company on
or before the Closing Date, unless waived by Parent and Acquisition Sub:
6.1 No Litigation. No litigation brought by a Governmental
Authority shall be pending, and no litigation shall be threatened by any
Governmental Authority, which seeks to enjoin or prohibit the consummation of
the Merger, and no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect.
6.2 Truth of Representations and Warranties.
(a) Subject to Section 6.2(b), (i) the representations
and warranties of the Company contained in this Agreement or in any certificate
or document delivered to Parent and Acquisition Sub pursuant hereto that are
qualified by materiality shall be true and correct in all
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respects when made and on the Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date (other than for such representations and warranties made as of
another date, which shall, in all respects, be true and correct as of such
date), and the representations and warranties of the Company contained in this
Agreement or in any certificate or document delivered to Parent and Acquisition
Sub pursuant hereto that are not qualified by materiality shall be true and
correct in all material respects when made and on the Closing Date, with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date (other than for such representations and
warranties made as of another date, which shall, in all material respects, be
true and correct as of such date), (ii) except where the failure of any of such
representations and warranties referenced in this Section 6.2(a) to be true and
correct would not have a Material Adverse Effect. The Company shall deliver a
certificate of an appropriate officer thereof relating to such representations
and warranties, as well as the covenants made herein by the Company, as provided
in Section 6.3.
(b) In the event of a failure to satisfy the conditions
set forth in clause (i) of Section 6.2(a), the conditions set forth in Section
6.2(a) will be deemed satisfied in all respects only if, prior to Closing, the
Company either (i) reimburses Parent to its reasonable satisfaction for any Loss
resulting from or arising out of any breaches of representations or warranties
that would otherwise cause the conditions set forth in clause (i) of Section
6.2(a) not to be met whether or not any such breach would have a Material
Adverse Effect, or (ii) cures any such breach to the reasonable satisfaction of
Parent, with Parent acting in good faith in each of clause (i) and (ii) above;
provided, however, that the Representatives will not have to so agree and the
conditions set forth in Section 6.2(a) will still be met if Parent had actual
knowledge on or before the date hereof that the representation or warranty that
would otherwise cause the conditions set forth in Section 6.2(a)(i) not to be
met was or would be inaccurate.
6.3 Fulfillment of Covenants. The Company shall have performed or
complied with, in all material respects, all of the covenants, obligations and
agreements contained in this Agreement to be performed and complied with by it
prior to the Closing Date.
6.4 Certified Resolutions. Parent and Acquisition Sub shall have
received a true and complete copy, certified by the Secretary or an Assistant
Secretary of the Company, as applicable, of the resolutions duly and validly
adopted by the Board of Directors and the Common Stockholders, evidencing the
authorization of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
6.5 Documents.
(a) Parent and Acquisition Sub shall have received a copy
of (i) the certificates of incorporation, as amended (or similar organizational
documents), of the Company and each Subsidiary, certified by the secretary of
state of the relevant jurisdiction, as of a date not unreasonably prior to the
Closing Date and accompanied by a certificate of the Secretary or Assistant
Secretary of each such entity, dated as of the Closing Date, stating that no
amendments have been made to such certificate of incorporation (or similar
document) since such date, and (ii) the bylaws (or similar organizational
documents) of the Company and of each Subsidiary, certified by the Secretary or
Assistant Secretary of each such entity.
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(b) Parent and Acquisition Sub shall have received good
standing certificates for the Company and for each Subsidiary from the secretary
of state of the jurisdiction in which each such entity is incorporated or
organized and from the secretary of state in each other jurisdiction in which
any of the Company or any Subsidiary is qualified to do business as a foreign
corporation or organization in each case dated as of a date not unreasonably
prior to the Closing Date.
(c) Parent shall have received from those individuals
identified on Attachment A to Exhibit 6 executed employment agreements
substantially in the form of Exhibit 6 (the "Parent Employment Agreements").
(d) Parent and the Company shall have entered into the
Escrow Agreement.
(e) Parent shall have received from the individual
identified on Attachment A to Exhibit 7 an executed non-competition agreement
substantially in the form of Exhibit 7 (the "Non-Competition Agreement").
(f) Parent shall have received from those individuals
identified on Attachment A to Exhibit 8 executed non-investment agreements
substantially in the form of Exhibit 8 (the "Non-Investment Agreements").
(g) Parent shall have received pay-off letters from each
of the Lenders of the Company Indebtedness other than from the parties to any
Capital Leases.
(h) Parent shall have received releases substantially in
the form of Exhibit 9 from each Unit Holder.
(i) Parent shall have received a legal opinion from each
of Gibson, Dunn & Crutcher LLP and the Company's in-house counsel as to the
respective matters specified for each of them in Exhibit 10.
6.6 Consents and Approvals. The consents and approvals disclosed
in Section 3.14 of the Disclosure Schedule shall have been obtained and the
waiting periods under the HSR Act applicable to the Merger contemplated hereby
shall have expired or otherwise been terminated.
6.7 Termination of Pension Plan. The Company shall have terminated
or caused any Subsidiary to terminate any Pension Plan if so directed pursuant
to Section 5.8(c).
VII. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, in all
material respects, of each of the following conditions by Parent and Acquisition
Sub on or before the Closing Date, unless waived by the Company:
7.1 No Litigation. No litigation brought by a Governmental
Authority shall be pending, and no litigation shall be threatened by any
Governmental Authority, which seeks to enjoin or prohibit the consummation of
the Merger, and no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction
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or other legal restraint or prohibition preventing the consummation of the
Merger shall be in effect.
7.2 Truth of Representations and Warranties. The representations
and warranties of Parent and Acquisition Sub contained in this Agreement or in
any certificates or documents delivered to the Company pursuant hereto that are
qualified by materiality shall be true and correct in all respects when made and
on the Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date
(other than for such representations and warranties made as of another date,
which shall, in all respects, be true and correct as of such date), and the
representations and warranties of Parent and Acquisition Sub contained in this
Agreement or in any certificates or documents delivered to the Company pursuant
hereto that that are not qualified by materiality shall be true and correct in
all material respects when made and on the Closing Date, with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date (other than for such representations and warranties made as of
another date, which shall, in all material respects, be true and correct as of
such date), except where the failure of any of such representations and
warranties to be true and correct would not have a Parent Material Adverse
Effect. Parent and Acquisition Sub shall each deliver a certificate of an
appropriate officer thereof relating to such representations and warranties, as
well as the covenants made herein by Parent and Acquisition Sub, as provided in
Section 7.3.
7.3 Fulfillment of Covenants. Parent and Acquisition Sub shall
have performed, in all material respects, all of their covenants, obligations
and agreements contained in this Agreement to be performed and complied with by
them prior to the Closing Date.
7.4 Certified Resolutions. The Company shall have received a true
and complete copy, certified by the Secretary or an Assistant Secretary of
Acquisition Sub, of the resolutions duly and validly adopted by the Board of
Directors of Acquisition Sub and by Parent as the sole stockholder of
Acquisition Sub, evidencing their authorization of the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
7.5 Documents.
(a) The Company shall have received a copy of (i) the
certificates of incorporation, as amended (or similar organizational documents),
of Parent and Acquisition Sub, certified by the secretary of state of the
relevant jurisdiction, as of a date not unreasonably prior to the Closing Date
and accompanied by a certificate of the Secretary or Assistant Secretary of each
such entity, dated as of the Closing Date, stating that no amendments have been
made to such certificate of incorporation (or similar document) since such date,
and (ii) the bylaws of Parent and Acquisition Sub, certified by the Secretary or
Assistant Secretary of each such entity.
(b) The Company shall have received good standing
certificates for Parent and Acquisition Sub and from the secretary of state of
the jurisdiction in which each such entity is incorporated, dated as of a date
not unreasonably prior to the Closing Date.
(c) The individuals identified on Attachment A to Exhibit
6 shall have received from Parent executed Parent Employment Agreements.
(d) Parent and the Company shall have entered into the
Escrow Agreement.
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(e) The individual identified on Attachment A to Exhibit
7 shall have received from Parent an executed Non-Competition Agreement.
(f) The individuals identified on Attachment A to Exhibit
8 shall have received from Parent executed Non-Investment Agreements.
(g) The Company shall have received a legal opinion from
Troutman Sanders Mays & Valentine LLP as to the matters specified for it in
Exhibit 10.
7.6 Consents and Approvals. The consents and approvals disclosed
in Section 3.14 of the Disclosure Schedule shall have been obtained and the
waiting periods under the HSR Act applicable to the Merger contemplated hereby
shall have expired or otherwise been terminated.
7.7 Evidence of Insurance. The Representatives shall have been
furnished with evidence, reasonably satisfactory to it, of the insurance
coverage described in Section 5.7 hereof.
VIII. TERMINATION; EFFECT OF TERMINATION.
8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Parent and the Company,
if the Board of Directors of each so determines by the affirmative vote of a
majority of the members of its entire Board of Directors;
(b) by Parent (provided that Parent is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein), upon a material breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case continuing twenty (20) days following notice to the Company of such
breach or untruth and of a nature such that the conditions set forth in Section
6.2 or Section 6.3, as the case may be, would be incapable of being satisfied by
November 15, 2001;
(c) by the Company (provided that the Company is not then
in material breach of any representation, warranty, covenant or other agreement
contained herein), upon a material breach of any representation, warranty,
covenant or agreement on the part of Parent or Acquisition Sub set forth in this
Agreement, or if any representation or warranty of Parent or Acquisition Sub
shall have become untrue, in either case continuing twenty (20) days following
notice to Parent of such breach or untruth (provided that in no event shall
Parent be entitled to notice of or to cure a breach of Section 5.9 before the
Company can exercise its right to terminate pursuant to this Section 8.1(c)) and
of a nature such that the conditions set forth in Section 7.2 or Section 7.3, as
the case may be, would be incapable of being satisfied by November 15, 2001;
(d) by either Parent or the Company if any Governmental
Authority shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the consummation of
the Merger and such order, decree or ruling or other action shall have become
final and nonappealable;
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(e) by either Parent or the Company, if the Merger shall
not have occurred by November 15, 2001, unless the failure to consummate the
Merger is the result of a breach of covenant set forth in this Agreement or a
material breach of any representation or warranty set forth in this Agreement by
the party seeking to terminate this Agreement;
(f) By the Company (provided that the Company is not then
in material breach of any representation, warranty, covenant or other agreement
contained herein), if the Merger shall not have occurred as a result of Parent
not having by November 15, 2001 sufficient funds for the payment of the Initial
Merger Consideration and the Closing Date Payments; or
(g) by the Company in accordance with Section 5.12.
8.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section
8.1, (i) this Agreement shall forthwith become void and of no further force and
effect, except as provided in Sections 8.2(b), (c) and (d), and (ii) except as
provided in Section 8.2(d), none of the parties hereto (nor any of their
respective Affiliates, directors, shareholders, officers, employees, agents,
consultants, attorneys-in-fact or other representatives or any Affiliate,
director, officer, stockholder, partner (limited or general), employees, agents,
consultants, attorneys-in-fact or other representatives thereof) shall have any
liability in respect of such termination; provided, however, that nothing in
this Section 8.2(a) shall relieve either party from liability for any willful or
intentional breach of this Agreement or for any breach of a covenant of this
Agreement.
(b) Except as otherwise specifically provided herein, the
parties hereto shall bear their respective expenses incurred in connection with
the preparation, negotiation, execution and performance of this Agreement and
the transactions contemplated hereby, including, without limitation, all fees
and expenses of counsel and accountants.
(c) If this Agreement is terminated pursuant to Section
8.1, the parties agree that all provisions of the Confidentiality Agreement
shall remain in full force and effect and each party shall comply with its
obligations thereunder and each of the Company, Parent and Acquisition Sub
agrees that it shall be bound by the terms thereof as if it were a signatory
thereto.
(d) If this Agreement is terminated by the Company
pursuant to Section 8.1(f) of this Agreement, then not later than two (2)
Business Days after the Company has given Parent notice of such termination, the
Company shall be entitled to cause the escrow agent of the Termination Fee
Escrow Account to pay to the Company a termination fee in the amount of Five
Million Dollars ($5,000,000) (the "Termination Fee"). The Termination Fee shall
be paid from an escrow account (the "Termination Fee Escrow Account") to be
established with Wilmington Trust Company as escrow agent, or with such other
escrow agent as Parent and the Company may reasonably agree acting in good
faith, pursuant to the terms of an escrow agreement reasonably satisfactory to
Parent and the Company acting in good faith. By not later than the close of
business on August 16, 2001, the Termination Fee Escrow Account shall be
established and Parent shall deposit into the Termination Fee Escrow Account
cash in the amount of the Termination Fee. If Closing occurs, the funds held in
the Termination Fee Escrow Account shall be released to Parent or, at Parent's
direction, paid to the Disbursement Agent and applied to payment of the Initial
Merger Consideration. If the Termination Fee becomes payable to the
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Company as a result of termination of this Agreement pursuant to Section 8.1(f),
the Termination Fee shall be treated as a non-exclusive source of recovery for
damages incurred by the Company as a result of such termination of this
Agreement, and shall not preclude the Company or the Common Stockholders from
asserting a claim against Parent for any damages in excess of the amount of the
Termination Fee which are incurred as a result of such termination.
IX. REIMBURSEMENT AND INDEMNIFICATION.
9.1 Reimbursement from Escrow Fund. Parent and Acquisition Sub,
and each director, officer, employee, agent, affiliate and successor and assign
thereof (the "Parent Parties"), shall be reimbursed from the Escrow Fund for
each claim, loss, liability, cost and expense (including without limitation,
interest, assessments, levies, fines, penalties, reasonable costs of preparation
and investigation, and the reasonable fees, disbursements and expenses of
attorneys, accountants and other professional advisors) (collectively,
"Losses"), directly or indirectly relating to, resulting from or arising out of
(a) any untrue representation, misrepresentation, breach of warranty or
nonfulfillment of any covenant, agreement or other obligation by the Company
contained herein, in the Disclosure Schedule or in any certificate, document or
instrument delivered by the Company to Parent pursuant hereto, provided that
with respect to any breach of or misrepresentation in Section 3.17 or in Section
3.17 of the Disclosure Schedule, the Parent Parties shall be reimbursed only for
Losses (i) attributable to liabilities for Taxes for periods ending on or prior
to the Closing Date that arise out of such breach or misrepresentation or (ii)
that result from the nondeductibility (A) under Section 280G or Section 162 of
the Code of payments to or for the benefit of the Unit Holders pursuant to
Sections 2.7, 2.8, 9.3(c), 9.3(d), 9.5 or 9.12 hereof, (B) of any portion of the
Closing Date Payments the Tax benefit from the deductibility of which was taken
into account in the final and binding Closing Statement, or (C) in any period
ending after the Closing Date, of any net operating loss carryforward from a
period ending on or prior to the Closing Date which net operating loss
carryforward was taken into account in the final and binding Closing Statement,
(b) any liability to Parent for (i) indemnification obligations under that
certain Asset Purchase Agreement dated May 25, 2000 between Fresh Express Dallas
Incorporated, Taylor Farms Texas, Inc. and Bruce C. Taylor (the "Taylor
Agreement") or for (ii) any breach of Section 22.3 thereof provided that Parent
has complied with Section 5.13 hereof and (c) the Company's obligation under
Section 5.14 to the extent such obligations are not satisfied prior to the
Closing.
9.2 Time Limitation; Common Stockholders. If the Closing occurs,
there shall be no payments pursuant to Section 9.1, unless on or before that
date which is twelve (12) months from the Closing Date, Parent notifies the
Representatives of a Loss specifying the factual basis of that Loss in
reasonable detail to the extent then known by Parent. Notwithstanding the
foregoing, with respect to any Losses by Parent for any breach of or
misrepresentation in Sections 3.11 or 3.17 or for any breach of a covenant in
Section 5.14, Parent shall be reimbursed from the Escrow Fund if (i) Parent
provides the Representatives with notice of such Loss specifying the factual
basis of that Loss in reasonable detail to the extent known by Parent on or
before that date which is four (4) years from the Closing Date (the "Fourth
Anniversary") or (ii) in the case of a Tax liability arising out of an audit
that commences on or before the Fourth Anniversary, if Parent provides notice of
the commencement of the audit to the Representatives on or before the Fourth
Anniversary. Notwithstanding the foregoing, with respect to any Losses by Parent
under clause (b)(i) of Section 9.1, Parent shall be reimbursed from the Escrow
Fund if Parent provides
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the Representatives with notice of such Loss specifying the factual basis of
that Loss in reasonable detail to the extent known by Parent on or before July
1, 2003.
9.3 Other Limitations; Escrow Amount.
(a) The Escrow Funds shall constitute the sole and
exclusive source for the satisfaction of the obligations set forth in Section
9.1 and all other liabilities or obligations of the Common Stockholders under
this Agreement, and, except as otherwise expressly provided therein, any other
closing or ancillary document executed and delivered pursuant to the provisions
hereof or thereof, other than the Parent Employment Agreements, the
Non-Investment Agreements and the Non-Competition Agreement, and in no event
shall the aggregate amount of Loss for which Parent may seek reimbursement
pursuant to Section 9.1 exceed the amount of the Escrow Fund. Notwithstanding
the foregoing or any other provisions of this Agreement, however, this Section
9.3 shall not apply to any claim based on fraud to the extent determined by a
final judgment by a court of competent jurisdiction.
(b) There shall not be any reimbursement obligations
under Section 9.1 until the Parent Parties have suffered aggregate Losses under
Section 9.1 in excess of Seven Hundred Fifty Thousand Dollars ($750,000) (the
"Loss Threshold"), provided that once the Parent Parties' aggregate Losses
exceed the Loss Threshold, the Parent Parties shall be reimbursed from the
Escrow Fund for all Losses that exceed the Loss Threshold; provided, however,
that where the aggregate amount of Losses arising out of a claim or series of
related claims pursuant to Section 9.1 does not exceed Ten Thousand Dollars
($10,000), such claim or series or related claims shall not count as Losses for
purposes of the indemnification provisions hereunder, provided this Ten Thousand
Dollar threshold shall not apply with respect to any claims arising out of a
breach of Section 3.17 or a breach of any representation or warranty that is
specifically qualified by materiality.
(c) Any payment made pursuant to Section 9.1 from the
Escrow Fund in respect of any event shall be net of any insurance proceeds
recovered or recoverable by Parent Party in respect such claim. Such Parent
Party shall use its reasonable efforts to make insurance claims relating to an
event for which it is seeking indemnification pursuant to Section 9.1. In the
event that an insurance recovery is made by a Parent Party with respect to any
Loss for which a Parent Party has previously been indemnified hereunder and such
recovery is (i) within one year from the Closing Date or (ii) one year or more
after the Closing Date and the amount of the Escrow Fund (A) immediately
following the distribution required by Section 2(b) of the Escrow Agreement and
(B) on the date of such recovery is less than Five Million Dollars ($5,000,000),
then the Parent Parties shall promptly deposit with the Escrow Agent, to be
added to the Escrow Fund, an amount (the "Recovered Amount") equal to the lesser
of (x) the amount of such insurance recovery (net of collection expenses) and
(y) the amount previously paid on behalf of the Common Stockholders as
indemnification for such Loss. In the event that an insurance recovery is made
by a Parent Party with respect to any Loss for which a Parent Party has
previously been indemnified hereunder and the amount is not required to be
deposited in the Escrow Fund pursuant to the foregoing sentence, then the Parent
Parties shall promptly make pay an amount equal to the sum of (a) the Recovered
Amount and (b) an amount equal to 38% of the portion of the Recovered Amount to
be paid, pursuant to the Phantom Stock Plan and/or the Company's value creation
pool, to the beneficiaries thereof as calculated by the Representatives, which
portion shall in no event be greater than 12.5% of the aggregate Recovered
Amount, to the
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Disbursement Agent, for distribution to the Common Stockholders and the Unit
Holders pursuant to the Disbursement Agent Agreement.
(d) If the reimbursement obligation under Section 9.1
arises in respect of any event (i) for which a Parent Party receives
reimbursement pursuant to Section 9.1 (A) within one year from the Closing Date
or (B) one year or more after the Closing Date and the amount of the Escrow Fund
(x) immediately following the distribution required by Section 2(b) of the
Escrow Agreement and (y) on the date of such reimbursement is less than Five
Million Dollars ($5,000,000) and (ii) which results in any Tax benefit to such
Parent Party for any taxable period (or portion thereof) ending after the
Closing Date which would not, but for such event, be available, such Parent
Party shall deposit with the Escrow Agent, to be added to the Escrow Fund, an
amount equal to the actual Tax savings produced by such Tax benefit reduced by
the amount of any Tax detriment to such Parent Party as a result of the receipt
of such reimbursement (the "Net Tax Savings"). If the reimbursement obligation
under Section 9.1 arises in respect of any event (i) for which a Parent Party
receives reimbursement pursuant to Section 9.1 and is not required to be
deposited in the Escrow Fund pursuant to the foregoing sentence and (ii) which
results in any Tax benefit to such Parent Party for any taxable period (or
portion thereof) ending after the Closing Date which would not, but for such
event, be available, such Parent Party shall pay, or shall cause to be paid, to
the Disbursement Agent, for distribution to the Common Stockholders and the Unit
Holders pursuant to the Disbursement Agent Agreement, an amount equal to the sum
of (a) the Net Tax Savings and (b) an amount equal to 38% of the portion of the
Net Tax Savings to be paid, pursuant to the Phantom Stock Plan and/or the
Company's value creation pool, to the beneficiaries thereof as calculated by the
Representatives, which portion shall in no event be greater than 12.5% of the
aggregate Net Tax Savings. Tax benefits and detriments shall be taken into
account in calculating the Net Tax Savings as and when actually realized. The
amount of any such Tax Saving for any taxable period shall be the amount of the
reduction in Taxes payable to a Tax authority by such Parent Party with respect
to such Tax period (net of any Tax detriment resulting from the receipt of the
reimbursement payment) as compared to the Taxes that would have been payable to
a Tax authority by such Parent Party with respect to such Tax period in the
absence of such Tax benefit.
(e) Notwithstanding any other provision to this Agreement
to the contrary other than Section 6.2(b), if on the Closing Date a Parent Party
has actual knowledge that one or more of the representations and warranties made
by the Company was inaccurate as of the date made, the Parent Party shall have
no right or remedy after the Closing with respect to such inaccuracy and shall
be deemed to have waived its rights to reimbursement in respect thereof.
(f) Except as otherwise expressly provided in this
Agreement, and except in the case of fraud, neither the affiliates, directors,
stockholders, officers, employees, agents, consultants, attorneys-in-fact or
other representatives of the parties hereto, nor any of their respective
affiliates, directors, officers, stockholders, partners (limited or general),
employees, agents, consultants, attorneys-in-fact or other representatives,
shall have any liability whatsoever, whether in tort or otherwise, in respect of
this Agreement or the transactions contemplated hereby or any certificate,
opinion or statement given or made by any of them in connection with this
Agreement or the transactions contemplated hereby or to the transactions
contemplated hereby. Except with respect to third-party claims or actions, any
recovery by a Parent Party from the Escrow Fund or by the Representatives or a
Common Stockholder from Parent shall be
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limited to actual direct losses, and shall not include punitive damages,
consequential damages, lost profits or rents, diminution in the value of real
property or business interruption losses incurred by the Parent Party or the
Representatives or Common Stockholders, as the case may be.
9.4 Tax Treatment. Amounts paid from the Escrow Fund or to the
Common Stockholders as indemnification shall be treated as adjustments to the
Merger Consideration for Tax purposes.
9.5 Assignment of Claims. If a Parent Party receives any payment
from the Escrow Fund in respect of any Losses pursuant to Section 9.1 and the
Parent Party could have recovered all or a part of such Losses from a third
party (a "Potential Contributor") based on the underlying claim asserted against
the Company or the Common Stockholder(s), the Parent Party shall assign, on a
non-recourse basis and without any representation or warranty, such of its
rights to proceed against the Potential Contributor as are necessary to permit
the Representatives to recover from the Potential Contributor the amount of such
payment. Any payment received in respect of such claim shall be distributed (i)
first (A) to the Escrow Agent, to be added to the Escrow Fund, if such payment
is received (I) within one year from the Closing Date or (II) or one year or
more after the Closing Date and the amount of the Escrow Fund (x) immediately
following the distribution required by Section 2(b) of the Escrow Agreement and
(y) on the date of such receipt is less than $5,000,000, or (B) to the
Disbursement Agent together with an amount equal to 38% of the portion of the
Contribution Amount to be paid, pursuant to the Phantom Stock Plan and/or the
Company's value creation pool, to the beneficiaries thereof as calculated by the
Representatives, which portion shall in no event shall exceed 12.5% of the
aggregate Contribution Amount, for distribution to the Common Stockholders and
the Unit Holders pursuant to the Disbursement Agent Agreement, if such payment
is not required to be deposited in the Escrow Fund pursuant to clause (A) above,
an amount (the "Contribution Amount") equal to the aggregate payments made to
the Parent Party, in respect of such claim, plus costs and expenses incurred in
investigating, defending or otherwise incurred in connection with addressing
such claim and (ii) the balance, if any, to the Parent Party.
9.6 Indemnification by Parent. Parent hereby agrees to defend,
indemnify and hold harmless the Common Stockholders, and shall reimburse the
Common Stockholders for, from and against Losses directly or indirectly relating
to, resulting from or arising out of any untrue representation,
misrepresentation, breach of warranty or nonfulfillment of any covenant,
agreement or other obligation by Parent or Acquisition Sub contained herein or
in any certificate, document or instrument delivered to the Company pursuant
hereto.
9.7 Time Limitation; Parent. If the Closing occurs, Parent shall
have no liability with respect to any representation or warranty or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before that date which is twelve (12) months from the Closing Date, the
Common Stockholders notify Parent of a Loss specifying the factual basis of that
Loss in reasonable detail to the extent then known by the Common Stockholders.
9.8 Limitation on Amount; Parent. Parent shall be liable to the
Common Stockholders with respect to the matters described in 9.6 in an amount
not exceeding $5,000,000, for any Losses sustained by the Common Stockholders;
provided that there shall not be any reimbursement obligations under Section 9.6
until the Common Stockholders have suffered
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aggregate Losses under Section 9.6 in excess of Two Hundred Fifty Thousand
Dollars ($250,000) (the "Parent Loss Threshold"). Once the Common Stockholders
aggregate Losses exceed the Parent Loss Threshold, the Parent shall reimburse
the Common Stockholders for all Losses in excess of the Parent Loss Threshold.
9.9 Procedure. The Parent Parties, on the one hand, or the
Representatives, on the other hand, seeking reimbursement or indemnification
pursuant to Section 9.1 or 9.6, as the case may be (the "Initiating Party"),
shall promptly notify the Representative or the Parent, as the case may be (the
"Receiving Party"), of any claim, demand, action or proceeding for which
reimbursement or indemnification will be sought under Sections 9.1 or 9.6 of
this Agreement, and, if such claim, demand, action or proceeding is a
third-party claim, demand, action or proceeding, the Receiving Party will have
the right (except with respect to any audit, administrative appeal or other
claim, demand, action or proceeding relating to Taxes, which shall be under the
control of Parent, at its option, subject to the last sentence of this Section
9.9) at its expense to assume the defense thereof using counsel reasonably
acceptable to the Initiating Party. The Initiating Party shall have the right to
participate, at its own expense, with respect to any such third-party claim,
demand, action or proceeding. In connection with any such third-party claim,
demand, action or proceeding, Parent and the Representatives shall cooperate
with each other and provide each other with access to relevant books and records
in their possession. No such third-party claim, demand, action or proceeding
shall be settled without the prior written consent of the Initiating Party,
which shall not be unreasonably withheld. If a firm written offer is made to
settle any such third-party claim, demand, action or proceeding and the
Receiving Party proposes to accept such settlement and the Initiating Party
refuses to consent to such settlement, then: (i) the Receiving Party shall be
excused from, and the Initiating Party shall be solely responsible for, all
further defense of such third-party claim, demand, action or proceeding and all
of the costs and expenses associated therewith; and (ii) the maximum obligation
of the Receiving Party to reimburse from the Escrow Fund or indemnify the
Initiating Party relating to such third-party claim, demand, action or
proceeding shall be the amount of the proposed settlement if the amount
thereafter recovered from the Initiating Party on such third party claim,
demand, action or proceeding is greater than the amount of the proposed
settlement. In the case of any audit, administrative appeal or other claim,
demand, action or proceeding relating to Taxes in connection with which the
Parent Parties are seeking reimbursement or indemnification pursuant to Section
9.1, if Parent elects to retain control of such audit or other proceeding as
permitted above, Parent shall permit the Representative to participate in the
defense thereof at its expense, and Parent shall not settle or otherwise
compromise such audit, administrative appeal, claim, demand, action or other
proceeding without the consent of the Representative unless settlement or
compromise would result in no reimbursement from the Escrow Fund.
9.10 Survival of Representations and Warranties. All
representations and warranties by the parties contained in this Agreement shall
survive the Closing for a period of one year, except that the representations
and warranties made in Sections 3.11 and 3.17 shall survive the Closing for four
(4) years.
9.11 Common Stockholders' Representatives. Each Common Stockholder,
as a result of the approval of this Agreement by the requisite number of Common
Stockholders required to approve the Merger pursuant to the DGCL, hereby
appoints and designates, and, pursuant to a Stockholder Representative Agreement
will appoint and designate, Art Melton and Tom Holland (the "Representatives")
as representatives and attorneys-in-fact of the Common Stockholder
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under this Agreement and the Escrow Agreement, who shall be authorized and
empowered to act jointly for each Common Stockholder under this Agreement,
including, without limitation, to (i) represent each Common Stockholder at the
Closing, (ii) authorize any payment to Parent from the Escrow Fund, (iii)
interpret the provisions of this Agreement and the Escrow Agreement, (iv)
resolve any disputes that may arise under this Agreement or the Escrow
Agreement, (v) agree as to the amounts payable under Sections 2.7 and 2.8 and in
connection with all other transactions contemplated hereby. In such capacity,
neither of the Representatives shall have any liability to Parent unless Parent
suffers any loss, damage or expense as a result of the gross negligence or
willful misconduct of the Representatives. If at any time a Representative for
any reason shall die, become disabled or resign, the alternate member who is
closest to the top of the list of Alternate Representative appearing in Section
9.11 of the Disclosure Schedule and who is able and willing to serve as a
Representative shall so serve. All consents, instructions, resolutions,
decisions and actions by the Representatives shall be binding upon all of the
Common Stockholders, and no Common Stockholder shall have the right to object
to, dissent from, protest or otherwise contest the same. Parent shall not have
the right to object to, protest or otherwise contest any matter related to the
authority of the Representatives. The Representatives shall be entitled to
reimbursement from Parent of all documented reasonable expenses incurred in the
performance of their duties hereunder in connection with the arbitration or
litigation of any disputes under this Agreement including, without limitation,
those resulting from the employment of financial advisors, attorneys, auditors
and other advisors and agents assisting in the assessment of any such
arbitration or litigation, provided that the Representatives have prevailed in
such arbitration or litigation. As a result of the approval of this Agreement by
the requisite number of Common Stockholders required to approve the Merger
pursuant to the DGCL, the Common Stockholders shall be deemed to have agreed
that (a) the provisions of this Section 9.11 are independent and severable, are
irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies any Common Stockholder may have in
connection with the transactions contemplated by this Agreement, (b) the remedy
at law for any breach of the provisions of this Section 9.11 would be
inadequate, (c) any Common Stockholder shall be entitled to temporary and
permanent injunctive relief without the necessity of proving damages if such
Common Stockholder brings an action to enforce the provisions of this Section
9.11, (d) the provisions of this Section 9.11 shall be binding upon the
successors and assigns of each Common Stockholder and (e) any references in this
Agreement to a Common Stockholder or the Common Stockholders shall mean and
include the successor to the Common Stockholders' rights hereunder. In addition,
by their approval of this Agreement, the Common Stockholders shall be deemed to
have waived any claims they may have or assert, including those that may arise
in the future, against either of the Representatives for any action or inaction
taken or not taken by such Representatives in connection with such persons'
capacity as Representatives except to the extent that such action or inaction
shall have been held by a court of competent jurisdiction to constitute gross
negligence or willful misconduct. The Escrow Agent, Parent and the Company are
hereby relieved from any liability for any acts done by them (except for acts
constituting fraud or negligence) in accordance with any resolution, action,
decision or instruction of the Representatives.
9.12 Payments out of Escrow Fund. For each distribution from the
Escrow Fund to the Disbursement Agent, Parent will pay an additional amount to
the Disbursement Agent equal to 38% of the portion of such distribution that is
to be distributed, pursuant to the Phantom Stock Plan and/or the Company's value
creation pool, to the beneficiaries thereof as calculated by the
Representatives, which portion shall in no event exceed 12.5% of the aggregate
distribution.
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X. MISCELLANEOUS.
10.1 Assignability. This Agreement shall not be assignable by
either party without the express written consent of the other except for
assignments to subsidiaries or Affiliates of the parties hereto, provided that
any such assignment or assignments shall not relieve the assigning party of any
obligation or liability under this Agreement.
10.2 Binding Effect. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the successors and permitted assigns of
the parties hereto.
10.3 Notices. All notices or other communications required or
permitted to be given hereunder shall be (as elected by the party giving such
notice): (i) personally delivered against receipt to the party to whom it is to
be given with copies to all others listed, (ii) sent by telex, facsimile, or
other wire transmission, (iii) transmitted by postage prepaid certified or
registered mail, return receipt requested, or (iv) deposited with a reputable
overnight courier, as follows:
(a) If to the Company prior to Closing:
Fresh International Corp.
1020 Merrill Street
Salinas, California 93901
Telecopier: (831) 775-2320
Attn: Brian McLaughlin
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Telecopier: (213) 229-7520
Attn: Jonathan K. Layne
(b) If to Parent or Acquisition Sub:
Performance Food Group Company
12500 West Creek Parkway
Richmond, Virginia 23238
Telecopier: (804) 484-7701
Attn: John D. Austin
with a copy to:
Troutman Sanders Mays & Valentine LLP
1111 East Main Street
Richmond, Virginia 23219
Telecopier: (804 697-1339
Attn: F. Claiborne Johnston, Jr.
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All notices and other communications shall be deemed to have been given (i) when
received if given in person, (ii) on the date of electronic confirmation of
receipt if sent by telex, facsimile, or other wire transmission, (iii) three
days after being deposited in the U.S. mail, certified or registered mail,
postage prepaid, or (iv) one day after being deposited with a reputable
overnight courier. Any party hereto may change its address for purposes hereof
by notice to all other parties.
10.4 Counterparts and Fax. This Agreement may be executed by fax
and simultaneously in two (2) or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute and be the same
instrument.
10.5 Disclosure Schedule and Exhibits. The Disclosure Schedule and
all Exhibits attached hereto are incorporated herein and expressly made a part
of this Agreement as though completely set forth herein. All references to this
Agreement herein or in the Disclosure Schedule or any Exhibits shall be deemed
to refer to this entire Agreement, including the Disclosure Schedule and all
Exhibits. Any item included in one Section of the Disclosure Schedule shall be
deemed included on each other Section of the Disclosure Schedule.
10.6 Governing Law and Forum. This Agreement shall in all respects
be interpreted, construed, and governed by and in accordance with the laws of
the State of Delaware, disregarding any conflict of laws provisions which may
require the application of the law of another jurisdiction. In the event that
arbitration is unavailable with respect to any action to enforce or that arises
out of or in any way relates to any of the provisions of this Agreement, or in
the event any action is brought to enforce the provisions of Section 10.13, such
action shall be brought and prosecuted exclusively in a Federal or state court
located in the State of California; and the parties hereto hereby consent to the
jurisdiction of any said court and to the service of process by registered mail,
return receipt requested, or by any other manner provided by the laws of such
State.
10.7 Headings. The headings and subheadings hereof are inserted for
convenience of reference only and shall not affect the interpretation of this
Agreement.
10.8 Amendment. This Agreement may be amended only in a writing
signed by all parties hereto.
10.9 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the Merger and, except for the
Confidentiality Agreement and the Voting Agreement, all of which survive the
execution hereof, supersedes all previous agreements, understandings or
discussions with respect to the subject matter hereof. Other than as
specifically set forth herein or in the Voting Agreement, no representations or
warranties as to the Company, the Business or otherwise have been made to Parent
or Acquisition Sub by the Company or any of its Affiliates, directors, officers,
stockholders, employees, agents, consultants, attorneys-in-fact or other
representatives.
10.10 Waivers. Any waiver of rights hereunder must be set forth in
writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Agreement shall not in any way affect, limit or waive either
party's rights at any time to enforce strict compliance thereafter with every
term or condition of this Agreement.
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10.11 Third-Party Rights. Except as set forth in Section 5.7, the
provisions of this Agreement are intended for the sole benefit of the Company,
Parent and Acquisition Sub and, where the context so indicates, their respective
subsidiaries and Affiliates, and shall not inure to the benefit of any other
Person (other than permitted assigns of the parties hereto) either as a third
party beneficiary or otherwise.
10.12 Severability. If and to the extent that any court of competent
jurisdiction holds any provisions (or any part thereof) of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
10.13 Arbitration.
(a) Except as set forth in Sections 2.7 and 2.8, any
dispute or difference between or among the parties (such parties being referred
to individually as a "Disputing Party," and, together, as the "Disputing
Parties") arising out of this Agreement or the transactions contemplated hereby,
which the parties are unable to resolve themselves shall be submitted to and
resolved by arbitration as herein provided. Any Disputing Party may request the
American Arbitration Association (the "AAA") to designate one arbitrator, who
shall be qualified as an arbitrator under the standards of the AAA, who shall be
a retired or former judge of any appellate or trial court of the State of
California any United States appellate court or the United States District Court
for any California District, who is, in any such case, not affiliated with any
party in interest to such arbitration, and who has substantial professional
experience with regard to corporate legal matters.
(b) The arbitrator shall consider the dispute at issue in
San Francisco, California at a mutually agreed upon time within sixty (60) days
(or such longer period as may be acceptable to the Disputing Parties or as
directed by the arbitrator) of the designation of the arbitrator. The
arbitration proceeding shall be held in accordance with the rules for commercial
arbitration of the AAA in effect on the date of the initial request by the
Disputing Party, that gave rise to the dispute to be arbitrated (as such rules
are modified by the terms of this Agreement or may be further modified by mutual
agreement of the Disputing Parties) and shall include an opportunity for the
parties to conduct discovery in advance of the proceeding. Notwithstanding the
foregoing, the Disputing Parties shall agree that they will attempt, and they
intend that they and the arbitrator should use its best efforts in that attempt,
to conclude the arbitration proceeding and have a final decision from the
arbitrator within one hundred twenty (120) days from the date of selection of
the arbitrator; provided, however, that the arbitrator shall be entitled to
extend such one hundred twenty (120) day period for a total of two one hundred
twenty (120) day periods. The arbitrator shall deliver a written award with
respect to the dispute to each of the parties, who shall promptly act in
accordance therewith. Each Disputing Party to such arbitration agrees that any
award of the arbitrator shall be final, conclusive and binding and that they
will not contest any action by any other party thereto in accordance with an
award of the arbitrator. It is specifically understood and agreed that any party
may enforce any award rendered pursuant to the arbitration provisions of this
Section 10.13 by bringing suit in any court of competent jurisdiction.
(c) All costs and expenses attributable to the arbitrator
shall be allocated among the parties to the arbitration in such manner as the
arbitrator shall determine to be
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appropriate under the circumstances. Except as provided in the preceding
sentence, each party to the arbitration shall bear its own costs and expenses.
10.14 Knowledge. Whenever used in this Agreement, "to the knowledge"
of the Company shall be the actual knowledge of the officers and directors of
the Company.
10.15 Expenses. Except as otherwise provided herein, each party
hereto shall bear its own costs and expenses.
XI. DEFINITIONS.
11.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"AAA" shall have the meaning set forth in Section 10.13(a) of this
Agreement.
"Accounts Receivable" shall have the meaning set forth in Section 3.21
of this Agreement.
"Acquisition Proposal" shall have the meaning set forth in Section 5.5
of this Agreement.
"Acquisition Sub" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Action" means any written claim, action, or suit, by or before any
Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person. With respect to the Company and the Subsidiaries, Affiliates of the
Company and its Subsidiaries shall mean its and their Affiliates prior to the
Effective Time.
"Agreement of Merger" means the certificate of merger or certificate of
ownership to be filed with the Secretary of State of the State of Delaware, in
such form as is required by, and executed in accordance with, the relevant
provisions of the DGCL.
"Agreement" or "this Agreement" means this Agreement and Plan of
Merger, dated as of August 9, 2001, by and among the Company, Parent and
Acquisition Sub (including the Exhibits hereto and the Disclosure Schedule) and
all amendments hereto made in accordance with the provisions set forth in
Section 10.8.
"Assets" shall have the meaning set forth in Section 3.7 of this
Agreement.
"Baseline Net Worth" shall have the meaning set forth in Section 2.6(a)
of this Agreement.
"Benefit Arrangements" shall have the meaning set forth in Section
3.15(b) of this Agreement.
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"Benefit Plans" shall have the meaning set forth in Section 5.8(a) of
this Agreement.
"Business" means the manufacture and distribution of packaged salads
and the provision of controlled and modified atmosphere technology and related
services as conducted by the Company and the Subsidiaries as of the Closing
Date.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in Los
Angeles, California.
"Cafeteria Plan" shall have the meaning set forth in Section 3.15(b) of
this Agreement.
"Capital Leases" means all lease obligations that are treated as
liabilities on the balance sheet of the Company or any Subsidiary in accordance
with GAAP.
"Closing" shall have the meaning set forth in Article I of this
Agreement.
"Closing Date" shall have the meaning set forth in Article I of this
Agreement.
"Closing Date Net Worth" means, as of the close of business, San
Francisco time, on the Closing Date, the book value of the Company's total
assets minus the book value of the Company's total liabilities calculated using
the methodologies set forth in Exhibit 3 (it being acknowledged by all parties
that the numbers contained in Exhibit 3 are for illustrative purposes only) and
otherwise consistent with past practice and determined on a consolidated basis
in accordance with GAAP.
"Closing Date Payments" shall have the meaning set forth in Section
2.5(a) of this Agreement.
"Closing Fees" shall have the meaning set forth in Section 2.5(a) of
this Agreement.
"Closing Payment Statement" shall have the meaning set forth in Section
2.5(a) of this Agreement.
"Closing Statement" shall have the meaning set forth in Section 2.7(b)
of this Agreement.
"COBRA" shall have the meaning set forth in Section 3.15(e) of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Shares Outstanding" means the number of shares of the Common
Stock outstanding immediately prior to the Effective Time.
"Common Stock" means the Company's Common Stock, no par value.
"Common Stockholders" means the Persons who, on the Closing Date,
beneficially own shares of Common Stock.
"Company" shall have the meaning set forth in the introductory
paragraph of this Agreement.
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"Company Indebtedness" means the aggregate amount (i) of the principal
of, any accrued but unpaid interest on, the Company's bank line of credit,
short- and long-term indebtedness for borrowed money (including any Capital
Leases with respect to which there is a Required Consent which has not been
obtained by the date which is two (2) Business Days prior to Closing and any
Capital Leases which Parent elects, by written notice to the Company at least
twenty (20) Business Days prior to the Closing not to assume, but not including
any other Capital Leases or any operating leases), calculated as of July 31,
2001, and (ii) any prepayment penalties associated with the payment by or on
behalf of the Company at Closing, or acceleration as a result of the
consummation of the transactions contemplated by this Agreement, of any amounts
described in (i) hereof.
"Company Intellectual Property" shall have the meaning set forth in
Section 3.9 of this Agreement.
"Company Persons" shall have the meaning set forth in Section 5.8 of
this Agreement.
"Confidentiality Agreement" means the letter agreement dated as of
January 10, 2001 between the Company and Parent.
"Contingent Payment" shall have the meaning set forth in Section 2.8(a)
of this Agreement.
"Contribution Amount" shall have the meaning set forth in Section 9.5
of this Agreement.
"Control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Deferred Compensation" shall have the meaning set forth in Section
2.5(a) of this Agreement.
"DGCL" means the Delaware General Corporation Law as in effect at the
Closing Date.
"Disbursement Agent" shall have the meaning set forth in Section 2.7(d)
of this Agreement.
"Disbursement Agent Agreement" shall have the meaning set forth in
Section 2.7(d) of this Agreement.
"Disclosure Schedule" means the Disclosure Schedule agreed to by the
parties and incorporated as a part of this Agreement.
"Disputing Party" shall have the meaning set forth in Section 10.13(a)
of this Agreement.
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"Dissenting Stockholders" shall have the meaning set forth in Section
2.9 of this Agreement.
"DOJ" shall have the meaning set forth in Section 5.3(a) of this
Agreement.
"DOL" shall have the meaning set forth in Section 3.15(d) of this
Agreement.
"Effective Time" shall have the meaning set forth in Section 2.3 of
this Agreement.
"Employment Agreement" shall have the meaning set forth in Section
3.15(a) of this Agreement.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership, other than
restrictions imposed by securities laws.
"Environmental Law" means any applicable Law in effect on the Closing
Date relating to: (i) the protection, investigation or restoration of the
environment or natural resources; or (ii) the handling, use, presence, disposal,
treatment, storage, release or threatened release of any Hazardous Substance,
including but not limited to the Comprehensive Environmental Liability,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Federal Water Pollution Control Act and the Clean Air Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" shall have the meaning set forth in Section 2.5(b) of
this Agreement.
"Escrow Agreement" shall have the meaning set forth in Section 2.5(b)
of this Agreement.
"Escrow Amount" shall have the meaning set forth in Section 2.5(b) of
this Agreement.
"Escrow Fund" means the funds held by the Escrow Agent from time to
time pursuant to the Escrow Agreement.
"Estimated Closing Date Net Worth" shall have the meaning set forth in
Section 2.7(a) of this Agreement.
"Final Calculation" shall have the meaning set forth in Section 2.8(c)
of this Agreement.
"Final Closing Date Net Worth" shall have the meaning set forth in
Section 2.7(d) of this Agreement.
"Financial Statement" shall have the meaning set forth in Section
3.5(a) of this Agreement.
"Firm" shall have the meaning set forth in Section 2.7(c) of this
Agreement.
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"Fruit Sales" shall have the meaning set forth in Section 2.8(a) of
this Agreement.
"FTC" shall have the meaning set forth in Section 5.3(a) of this
Agreement.
"GAAP" means United States generally accepted accounting principles and
practices as in effect from time to time and applied consistently throughout the
periods involved.
"Government Antitrust Authority" shall have the meaning set forth in
Section 5.3(c) of this Agreement.
"Governmental Authority" means any United States federal, state or
local governmental, regulatory or administrative agency or any court.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Substance" means any substance that is: (i) listed,
classified or regulated pursuant to any Environmental Law; (ii) any petroleum
product or by-product; and (iii) any other substance which is the subject of
regulatory action by any Governmental Authority pursuant to any Environmental
Law.
"HIPPA" shall have the meaning set forth in Section 3.15(e) of this
Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations (contingent or otherwise) of such Person for the deferred purchase
price of assets, property or services other than trade payables incurred in the
ordinary course of business, (c) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (d) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all obligations of
such Person as lessee under leases that have been, in accordance with GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise, of
such Person to purchase, redeem, retire, defease or otherwise acquire for value
any capital stock of such Person or any warrants, rights or options to acquire
such capital stock, valued, in the case of redeemable preferred stock, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends, (g) all Indebtedness of others referred to in clauses (a)
through (f) above guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Indebtedness or to advance or supply funds
for the payment or purchase of such Indebtedness, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell services, primarily
for the purpose of enabling the debtor to make payment of such Indebtedness or
to assure the holder of such Indebtedness against loss, (iii) to supply funds to
or in any manner invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a creditor against loss, and
(h) all Indebtedness referred to in clauses (a) through (f) above secured by (or
for which the holder of
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such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Encumbrance on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness, in each case together
with all accrued interest and accrued fees thereon.
"Indemnified Individual(s)" shall have the meaning set forth in Section
5.7(a) of this Agreement.
"Indemnified Liabilities" shall have the meaning set forth in Section
5.7(a) of this Agreement.
"Initial Merger Consideration" shall have the meaning set forth in
Section 2.6(a) of this Agreement.
"Initial Per Share Merger Consideration" shall have the meaning set
forth in Section 2.6(a) of this Agreement.
"Initiating Party" shall have the meaning set forth in Section 9.9 of
this Agreement.
"Intellectual Property" means all material patents, trade marks, trade
names, trademark registrations, service names, service marks, copyrights and
applications therefor.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any Governmental Order or any law, statute, ordinance, rule
or regulation of any Governmental Authority, or any binding agreement with any
Governmental Authority.
"Leased Real Property" means the real property leased by the Company or
any Subsidiary, as tenant, together with, to the extent leased by the Company or
any Subsidiary, all buildings and other structures, facilities or improvements
currently located thereon.
"Letter of Transmittal" shall have the meaning set forth in Section
2.10 of this Agreement.
"Liabilities" means any and all debts, liabilities and obligations,
including those arising under any Law, Action or Governmental Order and those
arising under any contract.
"Losses" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Loss Threshold" shall have the meaning set forth in Section 9.3(b) of
this Agreement.
"Material Adverse Effect" means any circumstance, change in, or effect
on the Business, the Company or any Subsidiary that, individually or in the
aggregate with any other circumstances, changes in or effects on the Business,
the Company or any Subsidiary, is materially adverse to the business or the
financial condition of the Company and the Subsidiaries taken as a whole, other
than any circumstance, change in or effect arising out of (a) general economic
conditions, (b) conditions generally affecting industries in which the Company
operates, (c) the financial markets, or (d) the entering into or the public
announcement or disclosure of this Agreement or the transactions contemplated
hereby.
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"Material Contracts" shall have the meaning set forth in Section 3.8 of
this Agreement.
"Merger" shall have the meaning set forth in the recitals of this
Agreement.
"Merger Consideration" shall mean the Initial Merger Consideration, net
of adjustment pursuant to Section 2.7 of this Agreement, plus any amount paid by
the Parent pursuant to Section 2.8 of this Agreement and any portion of the
Escrow Fund released to the Common Stockholders or Unit Holders pursuant to the
Escrow Agreement.
"Net Tax Savings" shall have the meaning set forth in Section 9.3(d) of
this Agreement.
"Non-Competition Agreement" shall have the meaning set forth in Section
6.5(e) of this Agreement.
"Non-Investment Agreements" shall have the meaning set forth in Section
6.5(f) of this Agreement.
"Operating Income" shall have the meaning set forth in Section 2.8(a)
of this Agreement.
"Other Deferred Compensation" shall have the meaning set forth in
Section 2.5(a) of this Agreement.
"Owned Real Property" means the real property owned by the Company or
any Subsidiary, together with all buildings and other structures, facilities or
improvements currently located thereon.
"Parent Benefit Plans" shall have the meaning set forth in Section 5.8
of this Agreement.
"Parent Material Adverse Affect" means any circumstance, change in, or
effect on the business of Parent that, individually or in the aggregate with any
other circumstances, changes in or effects on such business, is materially
adverse to the business or the financial condition of the Parent and its
subsidiaries taken as a whole, other than any circumstance, change in or effect
arising out of (a) general economic conditions, (b) conditions generally
affecting industries in which Parent operates, (c) the financial markets, or (d)
the entering into or the public announcement or disclosure of this Agreement or
the transactions contemplated hereby.
"Parent" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"Parent Employment Agreements" shall have the meaning set forth in
Section 6.5(c) of this Agreement.
"Parent Loss Threshold" shall have the meaning set forth in Section 9.8
of this Agreement.
"Parent Parties" shall have the meaning set forth in Section 9.1 of
this Agreement.
"PBGC" shall have the meaning set forth in Section 3.15(c) of this
Agreement.
"Pension Plan" shall have the meaning set forth in Section 3.15(b) of
this Agreement.
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"Per Share Merger Consideration" means the quotient of the Merger
Consideration divided by the number of Common Shares Outstanding.
"Percentage of Dissenting Stockholders" means the fraction, expressed
as a percentage, the numerator of which is the number of Common Shares
Outstanding held by Common Stockholders other than Dissenting Stockholders, and
the denominator of which is the number of Common Shares Outstanding.
"Permit" means any permit, franchise, authorization or other license or
approval issued or granted by any Governmental Authority.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable for which adequate reserves are maintained on the
financial statements of the Company and the Subsidiaries as of the Closing Date;
(b) Encumbrances imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the ordinary
course of business securing obligations that are not overdue for a period of
more than sixty (60) days or which are being contested in good faith by
appropriate proceedings (and for which adequate reserves are maintained on the
financial statements of the Company and the Subsidiaries as of the Closing Date
in conformity with GAAP consistently applied); (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or to secure
public or statutory obligations; (d) deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business consistent with past practice
and (e) minor survey exceptions, reciprocal easement agreements and other
customary encumbrances on title to real property that (i) were not incurred in
connection with any Indebtedness, (ii) do not render title to the property
encumbered thereby unmarketable and (iii) do not, individually or in the
aggregate, materially adversely affect the value or use of such property for its
current and anticipated purposes.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity.
"Phantom Deferred Compensation" shall have the meaning set forth in
Section 2.5(a) of this Agreement.
"Phantom Stock Plan" means the Company's Phantom Stock Plan, as amended
from time to time.
"Plans" shall have the meaning set forth in Section 3.15(b) of this
Agreement.
"Potential Contributors" shall have the meaning set forth in Section
9.1 of this Agreement.
"Proposed Calculations" shall have the meaning set forth in Section
2.8(c) of this Agreement.
"Quarterly Periods" shall have the meaning set forth in Section 2.8(c)
of this Agreement.
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"Real Property" means, collectively, the Leased Real Property and the
Owned Real Property.
"Receiving Party" shall have the meaning set forth in Section 9.9 of
this Agreement.
"Recovered Amount" shall have the meaning set forth in Section 9.3(c)
of this Agreement.
"Reference Balance Sheet" shall have the meaning set forth in Section
3.5(a) of this Agreement.
"Remediation Cost" shall have the meaning set forth in Section 5.12 of
this Agreement.
"Representatives" shall have the meaning set forth in Section 9.11 of
this Agreement.
"Required Consents" means the consents, approvals and waivers
identified in Section 3.4 of the Disclosure Schedule.
"Subsidiaries" means any and all corporations, partnerships, joint
ventures, associations and other entities in which the Company, directly or
indirectly through one or more intermediaries, owns any capital stock or equity
interest. The Subsidiaries are listed in Section 3.2(b) of the Disclosure
Schedule.
"Surviving Corporation" shall have the meaning set forth in Section 2.2
of this Agreement.
"Synergies" shall have the meaning set forth in Section 2.8(a) of this
Agreement.
"Tax" or "Taxes" means any and all United States federal, state, county
or local, or foreign or provincial taxes, assessments, duties, levies or similar
charges of any kind including, without limitation, all income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll, value
added, alternative or added minimum, ad valorem or transfer tax, or any other
tax, custom, duty or governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty imposed by any
Governmental Authority.
"Tax Returns" means all federal, state, local, provincial and foreign
Tax returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes.
"Taylor Agreement" shall have the meaning set forth in Section 9.1 of
this Agreement.
"Unit" shall have the meaning set forth in Section 2.5(a) of this
Agreement.
"Unit Holder" shall have the meaning set forth in Section 2.5(a) of
this Agreement.
"VEBA" shall have the meaning set forth in Section 3.15(b) of this
Agreement.
"Voting Agreement" shall have the meaning set forth in the recitals of
this Agreement.
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"Welfare Benefit Fund" shall have the meaning set forth in Section
3.15(c) of this Agreement.
"Welfare Plan" shall have the meaning set forth in Section 3.15(b) of
this Agreement.
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IN WITNESS WHEREOF, the duly authorized officers or representatives of
the parties hereto have duly executed this Agreement and Plan of Merger on the
date first written above.
THE COMPANY
FRESH INTERNATIONAL CORP.,
a Delaware corporation
By:
-------------------------------------------
Name:
Title:
PARENT
PERFORMANCE FOOD GROUP COMPANY,
a Tennessee corporation
By:
-------------------------------------------
Name:
Title:
ACQUISITION SUB
PFGC ACQUISITION CORP.,
a Delaware corporation
By:
-------------------------------------------
Name:
Title:
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