Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
Dated as of July 21, 2004
Among
FUSION ACQUISITION LLC
AHC MERGER, INC.
And
AHC I ACQUISITION CORP.
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER....................................................2
SECTION 1.01. The Certificate of Designations Amendment and
the Merger............................................2
SECTION 1.02. Closing...............................................2
SECTION 1.03. Effective Time........................................2
SECTION 1.04. Effects of the Merger.................................2
SECTION 1.05. Certificate of Incorporation and By-laws..............3
SECTION 1.06. Directors.............................................3
SECTION 1.07. Officers..............................................3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
AND THE COMPANY STOCK OPTIONS.................................3
SECTION 2.01. Effect on Capital Stock...............................3
SECTION 2.02. Exchange of Certificates..............................5
SECTION 2.03. Company Stock Options.................................7
SECTION 2.04. Closing Date and Post-Closing Merger
Consideration Adjustment..............................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................10
SECTION 3.01. Organization, Standing and Corporate Power...........10
SECTION 3.02. Capital Structure....................................10
SECTION 3.03. Authority; Noncontravention..........................11
SECTION 3.04. Governmental Approvals...............................12
SECTION 3.05. Litigation...........................................12
SECTION 3.06. Compliance with Laws; Permits........................13
SECTION 3.07. Affiliate Transactions...............................13
SECTION 3.08. Subsidiaries.........................................14
SECTION 3.09. No Brokers...........................................14
SECTION 3.10. SEC Reports; Financial Statements....................14
SECTION 3.11. Undisclosed Liabilities..............................15
TABLE OF CONTENTS
(continued)
Page
SECTION 3.12. Intellectual Property................................15
SECTION 3.13. Contracts and Commitments............................16
SECTION 3.14. Employee Benefits....................................16
SECTION 3.15. Absence of Certain Changes...........................18
SECTION 3.16. Taxes................................................21
SECTION 3.17. Insurance............................................23
SECTION 3.18. Environmental Matters................................24
SECTION 3.19. Real Property........................................25
SECTION 3.20. Labor Relations......................................27
SECTION 3.21. Inventories; Receivables; Payables...................27
SECTION 3.22. Customers, Suppliers and Sales Representatives.......28
SECTION 3.23. No Other Representations or Warranties...............28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......28
SECTION 4.01. Organization, Standing and Corporate Power...........28
SECTION 4.02. Authority; Noncontravention..........................28
SECTION 4.03. Governmental Approvals...............................29
SECTION 4.04. Litigation...........................................29
SECTION 4.05. Brokers and Other Advisors...........................30
SECTION 4.06. Interim Operations of Merger Sub.....................30
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS....................30
SECTION 5.01. Conduct of Business..................................30
ARTICLE VI ADDITIONAL AGREEMENTS........................................33
SECTION 6.01. Section 262 Notice and Information Statement;
Section 228(e) Notice................................33
SECTION 6.02. Access to Information; Confidentiality...............33
SECTION 6.03. Efforts..............................................34
SECTION 6.04. Indemnification, Exculpation and Insurance...........34
SECTION 6.05. Cooperation..........................................35
SECTION 6.06. Fees and Expenses....................................36
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TABLE OF CONTENTS
(continued)
Page
SECTION 6.07. Public Announcements.................................37
SECTION 6.08. Stock Option Plan....................................37
SECTION 6.09. Further Assurances...................................37
SECTION 6.10. Termination of Affiliate Arrangements................37
SECTION 6.11. Equity Commitment....................................37
ARTICLE VII CONDITIONS PRECEDENT.........................................37
SECTION 7.01. Conditions to Each Party's Obligation to
Effect the Merger....................................37
SECTION 7.02. Conditions to Obligations of Parent and
Merger Sub...........................................38
SECTION 7.03. Conditions to Obligations of the Company.............39
SECTION 7.04. Frustration of Closing Conditions....................39
SECTION 7.05. Documents to be Delivered by the Company.............39
SECTION 7.06. Documents to be Delivered by Parent and
Merger Sub...........................................39
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................40
SECTION 8.01. Termination..........................................40
SECTION 8.02. Effect of Termination................................40
SECTION 8.03. Amendment............................................40
SECTION 8.04. Extension; Waiver....................................40
ARTICLE IX GENERAL PROVISIONS...........................................41
SECTION 9.01. Nonsurvival..........................................41
SECTION 9.02. Remedies; Specific Enforcement.......................41
SECTION 9.03. Notices..............................................41
SECTION 9.04. Definitions..........................................43
SECTION 9.05. Interpretation.......................................44
SECTION 9.06. Counterparts.........................................44
SECTION 9.07. Entire Agreement; Third-Party Beneficiaries..........45
SECTION 9.08. Governing Law........................................45
SECTION 9.09. Assignment...........................................45
SECTION 9.10. Consent to Jurisdiction..............................45
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TABLE OF CONTENTS
(continued)
Page
SECTION 9.11. Waiver of Jury Trial.................................45
SECTION 9.12. No Recourse..........................................45
SECTION 9.13. Severability.........................................45
EXHIBIT A - Contribution Agreement
EXHIBIT B - Certificate of Designations Amendment
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Table of Defined Terms
----------------------
Term Section
- ---- -------
Affiliate...................................................... 9.04(a)
Affiliate Agreement............................................ 3.07
Agreement...................................................... Preamble
AKI............................................................ 2.01(c)
Appraisal Shares............................................... 2.01(d)
Business Day................................................... 9.04(b)
Certificate.................................................... 2.01(c)
Certificate of Designations.................................... 1.01
Certificate of Designations Amendment.......................... 1.01
Certificate of Merger.......................................... 1.03
Closing........................................................ 1.02
Closing Date................................................... 1.02
Closing Working Capital........................................ 2.04(f)
Code........................................................... 2.02(f)
Company........................................................ Preamble
Company By-laws................................................ 3.03(b)
Company Cash................................................... 2.01(c)
Company Certificate............................................ 3.03(b)
Company Common Stock........................................... 2.01
Company Disclosure Schedule.................................... Article III
Company Indebtedness........................................... 2.01(c)
Company Preferred Stock........................................ 1.01(a)
Company Real Property.......................................... 3.19(a)
Company Stock Options.......................................... 3.02
Company Stock Plan............................................. 2.03
Confidential Information....................................... 6.02(b)
Contract....................................................... 9.04(c)
Contribution Agreement......................................... Recitals
Credit Facility................................................ 2.01(c)
Debt Tender Offer.............................................. 6.05
DGCL........................................................... 1.01
Effective Time................................................. 1.03
Environmental Claims........................................... 3.18(a)(v)
Environmental Laws............................................. 3.18(d)(i)
Environmental Liabilities...................................... 3.18(d)(ii)
ERISA.......................................................... 3.14(a)
Estimated Working Capital...................................... 2.04(b)
Estimated Working Capital Statement............................ 2.04(b)
Exchange Act................................................... 9.04(d)
Financial Statements........................................... 3.10(b)
Former Company Real Property................................... 3.18(d)(iii)
GAAP........................................................... 2.01(c)
Table of Defined Terms
----------------------
Term Section
- ---- -------
Governmental Authority......................................... 9.04(e)
Hazardous Substances........................................... 3.18(d)(iv)
HSR Act........................................................ 3.04
Independent Accounting Firm.................................... 2.04(e)
Intellectual Property.......................................... 3.12
IRS............................................................ 3.16(b)
JHC............................................................ Preamble
Knowledge...................................................... 9.04(f)
Laws........................................................... 3.03(b)
Leased Real Property........................................... 3.19(a)
Liens.......................................................... 9.04(g)
Material Adverse Effect........................................ 9.04(h)
Merger......................................................... Recitals
Merger Consideration........................................... 2.01(c)
Merger Sub..................................................... Preamble
Multi-Employer Plan............................................ 3.14(d)
Objection Notice............................................... 2.04(d)
Objection Period............................................... 2.04(d)
Owned Real Property............................................ 3.19(a)
Parent......................................................... Preamble
Payment Fund................................................... 2.02(a)
Per Share Merger Consideration................................. 2.01(c)
Permits........................................................ 3.06(b)
Permitted Exceptions........................................... 3.19(e)
person......................................................... 9.04(i)
PIK Notes...................................................... 2.01(c)
Plans.......................................................... 3.14(a)
Real Property Leases........................................... 3.19(a)
Restraints..................................................... 7.01(b)
SEC............................................................ 3.10(a)
SEC Reports.................................................... 3.10(a)
Section 262.................................................... 2.01(d)
Securities Act................................................. 9.04(j)
Senior Notes................................................... 2.01(c)
Stockholder Approvals.......................................... Recitals
Stockholder Representative..................................... 2.04(a)
Subsidiary..................................................... 9.04(k)
Subsidiary Shares.............................................. 3.08(b)
Surviving Corporation.......................................... 1.01(b)
Surviving Corporation Representative........................... 2.04(a)
Target Working Capital......................................... 2.01(c)
Tax............................................................ 3.16
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Table of Defined Terms
----------------------
Term Section
- ---- -------
Tax Returns.................................................... 3.16
Title IV Plan.................................................. 3.14(d)
Transaction Expenses........................................... 6.06
Transactions................................................... Recitals
VHH............................................................ Recitals
VHH Merger Agreement........................................... Recitals
WC Difference.................................................. 2.04(g)
Working Capital................................................ 2.04(f)
Working Capital Escrow Amount.................................. 2.02(a)
Working Capital Statement...................................... 2.04(c)
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 21,
2004, is among FUSION ACQUISITION LLC, a Delaware limited liability company
("Parent"), AHC MERGER, INC., a Delaware corporation and a wholly-owned
Subsidiary of Parent ("Merger Sub"), and AHC I ACQUISITION CORP., a Delaware
corporation (the "Company").
WHEREAS, the Board of Directors of each of Merger Sub and the Company has
approved and declared advisable, and the Board of Directors of Parent has
approved, this Agreement and the merger of Merger Sub with and into the Company
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement.
WHEREAS, the Board of Directors of the Company has approved and declared
advisable the Certificate of Designations Amendment as defined and further
described below.
WHEREAS, the holders of a majority of the outstanding shares of Company
Common Stock and Company Preferred Stock have executed a written consent
approving and adopting this Agreement, and the holders of a majority of the
outstanding shares of Company Preferred Stock have executed a written consent
approving and adopting the Certificate of Designations Amendment (the
"Stockholder Approvals").
WHEREAS, concurrently herewith, Parent has entered into that certain
Agreement and Plan of Merger, dated as of even date herewith, among Parent, VHH
Merger, Inc. and Von Hoffmann Holdings Inc. ("VHH"), pursuant to which VHH
Merger, Inc. will merge with and into VHH (the "VHH Merger Agreement").
WHEREAS, concurrently herewith, Parent has entered into that certain
Contribution Agreement among Parent and Jostens Holding Corp. ("JHC") (the
"Contribution Agreement") substantially in the form attached hereto as Exhibit
A.
WHEREAS, the transactions contemplated by this Agreement, the VHH Merger
Agreement and the Contribution Agreement are collectively referred to herein as
the "Transactions").
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
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ARTICLE I
THE MERGER
SECTION 1.01 The Certificate of Designations Amendment and the Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, as soon as is reasonably practicable after the date hereof, the
Company shall file with the Secretary of State of the State of Delaware a
Certificate of Amendment to the Certificate of Designations, Rights and
Preferences (the "Certificate of Designations") of the 15% Senior Preferred
Stock, par value $0.01 per share, of the Company ("Company Preferred Stock")
effecting the amendment to the Certificate of Designations set forth on Exhibit
B hereto (such amendment, the "Certificate of Designations Amendment") (which
Certificate of Amendment shall provide for the effectiveness of the Certificate
of Designations Amendment upon the filing of such Certificate of Amendment).
(b) Upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), Merger Sub shall be merged with and into the Company at
the Effective Time. Following the Effective Time, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Merger Sub in accordance
with the DGCL.
SECTION 1.02 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the tenth day after satisfaction or waiver
of the conditions set forth in Article VII (other than those conditions that by
their terms are to be satisfied at the Closing, but subject to the satisfaction
or waiver of those conditions), at the offices of Weil, Gotshal & Manges LLP,
767 Fifth Avenue, New York, New York 10153, unless another date or place is
agreed to by the parties hereto.
SECTION 1.03 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall file a certificate
of merger (the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and, as soon as practicable on or after the Closing Date,
shall make all other filings or recordings required under the DGCL. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such other time as
Parent and the Company shall agree and shall specify in the Certificate of
Merger (the time the Merger becomes effective being the "Effective Time").
SECTION 1.04 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
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SECTION 1.05 Certificate of Incorporation and By-laws.
(a) The Certificate of Incorporation of the Surviving Corporation shall be
the Certificate of Incorporation of the Company in effect immediately prior to
the Effective Time until thereafter changed or amended as provided therein and
by applicable Law.
(b) The By-laws of the Surviving Corporation shall be the By-laws of the
Company in effect immediately prior to the Effective Time until thereafter
changed or amended as provided therein and by applicable Law.
SECTION 1.06 Directors. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.07 Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
AND THE COMPANY STOCK OPTIONS
SECTION 2.01 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holders of any shares of
common stock, par value $0.01 per share, of the Company ("Company Common
Stock"), any shares of Company Preferred Stock or any shares of capital stock of
Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock, par value $0.01 per
share, of the Surviving Corporation.
(b) Cancellation of Company Common Stock and Treasury Stock. Each share of
Company Common Stock shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor. Each
share of Company Preferred Stock that is owned by the Company shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Preferred Stock. Each issued and outstanding
share of Company Preferred Stock other than the Appraisal Shares) shall be
converted into the right to receive an amount in cash, without interest, equal
to the Merger Consideration divided by the number of shares of Company Preferred
Stock
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issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.01(b)) (the "Per Share Merger
Consideration"). At the Effective Time, all such shares of Company Preferred
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate which
immediately prior to the Effective Time represented any such shares of Company
Preferred Stock (each, a "Certificate") shall cease to have any rights with
respect thereto, except the right to receive the Per Share Merger Consideration
with respect to such shares. The Merger Consideration to be received by any
holder of Company Preferred Stock will be reduced by any outstanding amounts
owing by such holder to the Company pursuant to any loans or advances, to the
extent not repaid prior to the Closing Date.
"Merger Consideration" means an amount equal to (a) $250,000,000 plus
(b) the aggregate amount of Transaction Expenses actually paid by the
Company prior to the determination of Company Cash minus (c) the aggregate
amount of all Company Indebtedness net of Company Cash minus (d) an amount
not to exceed $2,000,000 to be determined by the Board of Directors of the
Company or a committee thereof for transaction success or retention bonuses
to be paid to employees of the Company minus (e) a transaction advisory fee
in the amount of $2,000,000 to be paid to DLJ Merchant Banking II, Inc.
minus (f) any amount payable to Renaissance Brands LLC as set forth in
Section 3.07(iii) of the Company Disclosure Schedule plus (g) the amount,
if any, by which the Closing Working Capital exceeds $16,292,000 (the
"Target Working Capital") minus (h) the amount, if any, by which the Target
Working Capital exceeds the Closing Working Capital.
"Company Cash" means, collectively, the aggregate amount held as of
the close of business on the day immediately preceding the Closing Date by
the Company and its Subsidiaries in cash, cash equivalents and other liquid
short-term investments, minus any unpaid checks, drafts and wire transfers
issued on or prior to the close of business on the day immediately
preceding the Closing Date.
"Company Indebtedness" means, collectively, as of the close of
business on the day immediately preceding the Closing Date, (i) all
amounts, including accrued but unpaid interest, required to repay, redeem
or repurchase (by tender offer or otherwise), whether prior to, at or
following the Closing, the Company's Floating Rate Exchangeable PIK Notes
due 2009 (the "PIK Notes") and AKI's 10.5% Senior Notes due 2008 (the
"Senior Notes"), and all costs and expenses arising from or relating
thereto including any termination or prepayment penalties, repayment or
redemption premiums or consent solicitation costs (including related fees
and expenses of counsel, advisors, consultants, investment bankers, dealer
managers, actuaries, auditors and accountants in connection with such
repayments, redemptions or repurchases, including such tender offers and
consent solicitations), and (ii) all amounts outstanding under the Credit
Agreement, dated December 18, 2001, among AKI, Inc. ("AKI"), as borrower,
Heller Financial, Inc., as agent, issuing lender and a lender and the
lenders party thereto, as amended (the "Credit Facility") and all costs and
expenses arising from
4
or relating thereto, including any accrued and unpaid interest and any
termination or prepayment penalties, (iii) any other indebtedness for
borrowed money (including any notes, bonds, debentures, drawn letters of
credit or similar instruments or obligations but excluding any undrawn
letters of credit) of the Company outstanding, in each case including
accrued and unpaid interest and any termination or prepayment penalties or
premiums relating thereto, and (v) the amount of all obligations of the
Company under leases required to be capitalized in accordance with
generally accepted accounting principles in the United States as of the
date hereof ("GAAP") that would be required to be set forth as a liability
on a balance sheet prepared in accordance with GAAP.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, shares (the "Appraisal Shares") of Company Common Stock and Company
Preferred Stock issued and outstanding immediately prior to the Effective Time
that are held by any holder who is entitled to demand and properly demands
appraisal of such shares pursuant to, and who complies in all respects with, the
provisions of Section 262 of the DGCL ("Section 262") shall be entitled to
payment of the fair value of such shares in accordance with the provisions of
Section 262. At the Effective Time, all Appraisal Shares shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each holder of Appraisal Shares shall cease to have any rights with respect
thereto, except the right to receive the fair value of such Appraisal Shares in
accordance with the provisions of Section 262. Notwithstanding the foregoing, if
any such holder shall fail to perfect or otherwise shall waive, withdraw or lose
the right to appraisal under Section 262 or a court of competent jurisdiction
shall determine that such holder is not entitled to the relief provided by
Section 262, then the right of such holder to be paid the fair value of such
holder's Appraisal Shares under Section 262 shall cease and such Appraisal
Shares shall be deemed to have been canceled and retired at the Effective Time
as provided in Section 2.01(b) or converted at the Effective Time as provided in
Section 2.01(c). The Company shall serve prompt notice to Parent of any demands
for appraisal of any shares of Company Common Stock or Company Preferred Stock,
and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle or offer to settle, any such demands, or agree to do
any of the foregoing.
SECTION 2.02 Exchange of Certificates.
(a) At the Closing, Parent will contribute to the Surviving Corporation, by
wire transfer of immediately available funds denominated in U.S. dollars to the
account designated in writing to Parent by the Company prior to the Closing, an
amount in cash equal to the Merger Consideration determined based on the
Estimated Working Capital Statement (such amount, the "Payment Fund"). The
Surviving Corporation shall, pursuant to irrevocable instructions, pay, at the
Closing, the Merger Consideration payable to each holder of Company Preferred
Stock, determined based upon the Estimated Working Capital Statement, less the
Working Capital Escrow Amount, in accordance with Section 2.01(c) out of the
Payment Fund. The Surviving Corporation shall deposit $5,000,000 (the "Working
Capital Escrow Amount") with an
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escrow agent and pursuant to an escrow agreement, each to be agreed upon by the
parties hereto, and any adjustment as determined pursuant to Section 2.04 shall
be applied against the Working Capital Escrow Amount.
(b) Exchange Procedures. As soon as reasonably practicable after the date
hereof, the Surviving Corporation shall mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Surviving Corporation and
which shall be in such form (including representations and warranties) as Parent
and the Company may reasonably agree to use) and (ii) instructions for use in
surrendering the Certificates in exchange for the Merger Consideration. At the
Effective Time, the Surviving Corporation shall pay to each holder of Company
Preferred Stock that has delivered to the Surviving Corporation at the Closing a
Certificate and a Letter of Transmittal the amount of cash into which the shares
of Company Preferred Stock formerly represented by such Certificate shall have
been converted pursuant to Section 2.01(c), and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of shares
of Company Preferred Stock that is not registered in the transfer records of the
Company, the proper amount of cash may be paid in exchange therefor to a person
other than the person in whose name the Certificate so surrendered is registered
if such Certificate shall be properly endorsed or otherwise be in proper form
for transfer and the person requesting such issuance shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of such Certificate or establish to the reasonable
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.02(b), each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration. No
interest will be paid or will accrue on the cash payable upon surrender of any
Certificate.
(c) No Further Ownership Rights in Company Preferred Stock. All cash paid
upon the surrender of Certificates in accordance with the terms of this ARTICLE
II shall be deemed to have been in full satisfaction of all rights pertaining to
the shares of Company Preferred Stock previously represented by such
Certificates. At the close of business on the day on which the Effective Time
occurs, the stock transfer books of the Company shall be closed and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock or Company Preferred
Stock that were outstanding immediately prior to the Effective Time. Subject to
Section 2.02(d), if, at any time after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this ARTICLE II.
(d) No Liability. None of Parent, Merger Sub or the Company shall be liable
to any person in respect of any cash delivered to a public official pursuant to
any applicable abandoned property, escheat or similar Law.
(e) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation,
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the posting by such person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any successful claim that may be
made against it with respect to such Certificate, the Surviving Corporation will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration to which such holder would be entitled pursuant to this ARTICLE
II.
(f) Withholding Rights. The Surviving Corporation shall be entitled to
deduct and withhold from the consideration otherwise payable to any holder of
shares of Company Preferred Stock pursuant to this Agreement such amounts as may
be required to be deducted and withheld with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the "Code"), and
the rules and regulations promulgated thereunder, or under any provision of
state or foreign tax Law. To the extent that amounts are so withheld by the
Surviving Corporation, as the case may be, such withheld amounts will be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Preferred Stock in respect of which such deduction and
withholding was made.
SECTION 2.03 Company Stock Options. Each Company Stock Option granted under
the Company's 1998 Stock Option Plan (the "Company Stock Plan") outstanding
immediately prior to the Effective Time shall be canceled and extinguished and
no consideration will be paid thereon.
SECTION 2.04 Closing Date and Post-Closing Merger Consideration Adjustment.
The Merger Consideration shall be subject to adjustment following the Closing as
follows:
(a) DLJ Merchant Banking II, Inc. shall serve as representative of the
stockholders of the Company (prior to the Merger) (the "Stockholder
Representative")for purposes of this Section 2.04 and the Company will be bound
by all actions taken by the Stockholder Representative in connection with this
Section 2.04. In performing its functions hereunder, the Stockholder
Representative will not be liable to the Company or the stockholders of the
Company in the absence of gross negligence or willful misconduct. The parties
further agree that neither Parent nor the Surviving Corporation shall owe any
indemnification obligation to the Stockholder Representative under this Section
2.04. Parent shall serve as representative of the Surviving Corporation (the
"Surviving Corporation Representative") for purposes of this Section 2.04 and
the Surviving Corporation will be bound by all actions taken by the Surviving
Corporation Representative in connection with this Section 2.04. In performing
its functions hereunder, the Surviving Corporation Representative will not be
liable to the Surviving Corporation or the stockholders of the Surviving
Corporation in the absence of gross negligence or willful misconduct. The
parties further agree that the Surviving Corporation shall not owe any
indemnification obligation to the Surviving Corporation Representative under
this Section 2.04.
(b) Not later than two (2) Business Days prior to the Closing Date, Company
management and Marc Reisch shall agree on a statement setting forth the
estimated Working Capital of the Company as of the Closing Date (but without
giving
7
effect to the Closing) ("Estimated Working Capital"), prepared in good faith in
accordance with GAAP applied consistently with the Company's past practices (the
"Estimated Working Capital Statement"). In the event Company management and Marc
Reisch cannot agree, the Estimated Working Capital shall be the average of the
Estimated Working Capital as determined by Company management and as determined
by Marc Reisch and such average shall be reflected as the Estimated Working
Capital on the Estimated Working Capital Statement.
(c) The Surviving Corporation Representative shall use its reasonable best
efforts to have prepared and delivered to the Stockholder Representative, within
30 days after the Closing Date, a statement setting forth the Closing Working
Capital (but without giving effect to the Closing) (the "Working Capital
Statement"), prepared in accordance with GAAP applied consistently with the
calculation and preparation of the Target Working Capital.
(d) On or prior to the fifth Business Day after receipt by the Stockholder
Representative of the Working Capital Statement (such five-Business Day period,
the "Objection Period"), the Stockholder Representative may give the Surviving
Corporation Representative a written notice (the "Objection Notice") stating in
reasonable detail its objections, if any, to the Working Capital Statement. Any
Objection Notice shall specify in reasonable detail the dollar amount and nature
of any objection and the basis therefor. Except to the extent the Stockholder
Representative makes a specific objection to a specific determination set forth
on the Working Capital Statement pursuant to the Objection Notice delivered to
the Surviving Corporation Representative within the Objection Period, the
Working Capital Statement will be conclusive and binding upon the parties
hereto.
(e) If the Stockholder Representative delivers a timely Objection Notice as
described in Section 2.04(c) above, then the Stockholder Representative and the
Surviving Corporation Representative will negotiate in good faith to resolve
their disputes regarding the Working Capital Statement. If the Stockholder
Representative and the Surviving Corporation Representative are unable to
resolve all disputes regarding the Working Capital Statement on or prior to the
tenth Business Day after the Surviving Corporation Representative's receipt of
the Objection Notice, then the Stockholder Representative and the Surviving
Corporation Representative will retain the New York City office of KPMG LLP or,
if KPMG LLP is unable or unwilling to participate, then such other independent
accounting firm as may be mutually agreed upon by the Surviving Corporation
Representative and the Stockholder Representative (KPMG LLP or such other
independent accounting firm, the "Independent Accounting Firm") to resolve the
dispute as soon as practicable, and in any event within 20 days. The Stockholder
Representative and the Surviving Corporation Representative shall provide the
Independent Accounting Firm with necessary documents as soon as possible after
its appointment, and the Independent Accounting Firm shall grant the Stockholder
Representative and the Surviving Corporation Representative the opportunity to
state their viewpoints. Upon request by the Stockholder Representative and the
Surviving Corporation Representative, there shall be a hearing before the
Independent Accounting Firm; provided, however that the Independent Accounting
Firm shall not decide any
8
issues regarding the interpretation of this Agreement or the compliance of the
parties with their obligations under this Agreement, in particular, in
connection with this Section 2.04. The scope of the disputes to be resolved by
the Independent Public Accounting Firm shall be limited to whether the Closing
Working Capital as set forth on the Working Capital Statement was prepared in
accordance with GAAP and using accounting principles consistent with those used
in the determination of the Target Working Capital and whether there were errors
of fact or mathematical errors in the Working Capital Statement. The Independent
Accounting Firm shall render a written report as to the resolution of the
dispute and the resulting computation of Closing Working Capital. The Closing
Working Capital as determined by the Independent Accounting Firm will, absent
manifest error, be conclusive and binding upon the parties hereto and will
constitute the Closing Working Capital for all purposes of this Section 2.04. In
resolving any disputed item, the Independent Accounting Firm (x) shall be bound
by the provisions of this Section 2.04 and (y) may not assign a value to any
item greater than the greatest value for such item claimed by either party or
less than the smallest value for such item claimed by either party. The fees,
costs and expenses of the Independent Accounting Firm shall be borne by the
Surviving Corporation.
(f) If the Working Capital of the Company as of the Closing Date (as
finally determined pursuant to this Section 2.04, the "Closing Working Capital")
exceeds the Estimated Working Capital, the Surviving Corporation will pay, or
cause to be paid, in respect of each share of Company Preferred Stock that was
issued and outstanding immediately prior to the Effective Time, an amount equal
to (i) the amount of such excess plus the full amount of the Working Capital
Escrow Amount divided by (ii) the number of shares of Company Preferred Stock
(other than shares to be canceled in accordance with Section 2.01(b)) issued and
outstanding immediately prior to the Effective Time.
"Working Capital" means (i) accounts receivable, net inventories, prepaid
expenses and other current assets (but excluding cash, cash equivalents, other
short-term investments, income taxes receivable and deferred income taxes),
minus (ii) accounts payable and accrued expenses (other than income taxes
payable and deferred income taxes and accrued interest) and other current
liabilities (but excluding the current portion of long-term debt), determined in
accordance with GAAP and to the extent consistent with GAAP using the same
accounting methods, practices, principles, policies, and procedures, with
consistent classification, judgments and valuation and estimation methodologies
that were used in the preparation of the Target Working Capital.
(g) If the Closing Working Capital is less than the Estimated Working
Capital (the "WC Difference") the amount of the WC Difference shall reduce the
Working Capital Escrow Amount and such difference shall be paid by the escrow
agent out of the Working Capital Escrow Amount to the Surviving Corporation, and
if any amount is remaining in the Working Capital Escrow Account after payment
of the WC Difference to the Surviving Corporation, the escrow agent shall pay an
amount equal to (i) such remaining amount divided by (ii) the number of shares
of Company Preferred Stock (other than shares to be canceled in accordance with
Section 2.01(b)) issued and outstanding immediately prior to the Effective Time
in respect of each share of Company
9
Preferred Stock. In no event shall the Merger Consideration be reduced by an
amount in excess of the Working Capital Escrow Amount.
(h) All payment under this Section 2.04 shall be made in immediately
available funds. No interest shall be payable with respect to the Working
Capital Escrow Amount or any other amounts payable pursuant to this Section
2.04.
(i) Any amount to be paid pursuant to this Section 2.04 will be treated as
an adjustment to the Merger Consideration for all purposes (including for Tax
purposes), unless a contrary treatment is required by applicable Law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the disclosure schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent and Merger Sub as
follows:
SECTION 3.01. Organization, Standing and Corporate Power. Each of the
Company and its Subsidiaries is a corporation or limited liability company, as
the case may be, duly organized, validly existing and in good standing under the
Laws of the jurisdiction in which it is incorporated or formed, as the case may
be, and has all requisite corporate or limited liability company, as the case
may be, power and authority to own, lease and operate its properties and assets
and to carry on its business as now being conducted. The Company and each of its
Subsidiaries is duly qualified to do business and in good standing in the
jurisdictions where the nature of the property owned or leased by it, or the
nature of the business conducted by it, makes such qualification necessary,
except where the failure to be so in good standing or to have such qualification
would not reasonably be likely to have a Material Adverse Effect. The Company
has made available, or will make available to Parent and Merger Sub prior to the
Closing Date, true and complete copies of (i) the certificates of incorporation
and by-laws (or equivalent governing instruments), as currently in effect, of
the Company and each Subsidiary, (ii) the minute books of the Company and, to
the extent in existence, each Subsidiary covering the period beginning no
earlier than January 1, 2001, and (iii) to the extent in the Company or any
Subsidiary's possession, stock certificate books and stock transfer ledgers of
the Company and its Subsidiaries since January 1, 2001.
SECTION 3.02. Capital Structure. The authorized capital stock of the
Company consists of 200,000 shares of Company Common Stock and 50,000 shares of
Company Preferred Stock. As of the date hereof, (a) 161,111.11 shares of Company
Common Stock are issued and outstanding, (b) no shares of Company Common Stock
are held by the Company in its treasury, (c) 16,500 shares of Company Common
Stock are reserved for issuance upon the exercise of outstanding options to
purchase shares of Company Common Stock granted under the Company Stock Plan
("Company Stock Options")), (d) 20,311.11 shares of Company Preferred Stock are
issued and outstanding and (e) no shares of Company Preferred Stock are held by
the Company in its treasury.
10
Except as set forth above in this Section 3.02, as of the date hereof, no shares
of capital stock or other voting securities of the Company are issued, reserved
for issuance or outstanding. Section 3.02 of the Company Disclosure Schedule
sets forth a complete and accurate schedule, as of the date hereof, of all
holders of record of the issued and outstanding capital stock of the Company and
all holders of Company Stock Options and Warrants. Except as set forth above in
this Section 3.02, there are no authorized or outstanding stock appreciation
rights, phantom stock, profit participation rights, rights to receive shares of
Company Common Stock or Company Preferred Stock, as the case may be, on a
deferred basis or other rights that are linked to the value of Company Common
Stock or Company Preferred Stock, as the case may be, granted under the Company
Stock Plan or otherwise by the Company. There are no bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. All outstanding shares of capital
stock of the Company: (i) have been duly authorized and validly issued; (ii) are
fully paid and non-assessable; and (iii) were not issued in violation of, or
subject to, any preemptive, subscription or other similar rights of any person.
Except as set forth above in this Section 3.02 or in Section 3.02 of the Company
Disclosure Schedule, (i) there are not issued, reserved for issuance or
outstanding as of the date hereof (A) any securities of the Company or any of
its Subsidiaries convertible into, exchangeable or exercisable for shares of
capital stock or equity securities of the Company or any of its Subsidiaries, or
(B) any subscriptions, warrants, calls, options, rights, commitments, proxies,
voting trusts, arrangements or undertakings of any kind to which the Company or
any of its Subsidiaries is a party or by which any of them is bound obligating
the Company or any of its Subsidiaries to issue, sell, transfer, redeem or
otherwise acquire, dispose or vote any shares of capital stock or other equity
securities of the Company or any of its Subsidiaries and (ii) the Company is not
a party to or bound by any agreement or commitment pursuant to which the Company
is or could be required to register any securities under the Securities Act.
SECTION 3.03. Authority; Noncontravention.
(a) The Company has all requisite corporate power and authority to execute
and deliver this Agreement, including the Stockholder Approval, and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action on the part of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by each of the other parties
hereto, constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms (subject to
applicable bankruptcy, insolvency, moratorium, or other similar Laws affecting
creditors' rights generally and general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law)).
11
(b) The execution, performance and delivery of this Agreement do not, and
the consummation of the Merger and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not, require
any consent, approval or notice under, conflict with, or result in any
violation, termination, suspension or breach of, or default (with or without
notice or lapse of time or both) under, or give rise to a right of termination,
suspension, cancellation or acceleration of any obligation or to the loss of a
benefit under, (i) the Company's Certificate of Incorporation, as amended (the
"Company Certificate"), the Company's By-laws, as amended (the "Company
By-laws"), or the organizational documents of any Subsidiary, (ii) except as set
forth in Section 3.03 of the Company Disclosure Schedule, any Contract to which
the Company or any of its Subsidiaries is a party or (iii) subject to the
governmental filings and other matters referred to in Section 3.04, any statute,
law, rule, regulation, order or ordinance of any Governmental Authority
(collectively, "Laws") applicable to the Company or any of its Subsidiaries,
other than, in the case of clauses (ii) and (iii), with respect to matters that
are not reasonably likely to (A) result in a Material Adverse Effect, (B) impair
the ability of the Company to perform its obligations under this Agreement in
any material respect or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by this Agreement.
SECTION 3.04. Governmental Approvals. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Governmental Authority is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
Merger or the other transactions contemplated by this Agreement, except for (a)
the filing of a premerger notification and report form by the Company, and the
expiration or termination of all waiting periods, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the regulations promulgated
thereunder (the "HSR Act"), or any other applicable filings and approvals under
similar foreign antitrust Laws, (b) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and appropriate documents with
the relevant authorities of other states in which the Company is qualified to do
business, (c) such filings as may be required by applicable state securities or
"blue sky" laws or state takeover laws, (d) consents, approvals, authorizations,
declarations or filings set forth in Section 3.04 of the Company Disclosure
Schedule and (e) consents, approvals, orders, authorizations, actions,
registrations, declarations or filings that, if not obtained or made, would not
reasonably be expected to (A) result in a Material Adverse Effect, (B) impair
the ability of the Company to perform its obligations under this Agreement in
any material respect or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by this Agreement.
SECTION 3.05. Litigation. Except as set forth in the SEC Reports filed
prior to the date hereof, or in Section 3.05 of the Company Disclosure Schedule:
(i) there is no claim, suit, action, arbitration, investigation or proceeding
pending or, to the Knowledge of the Company, threatened against the Company or
any of its Subsidiaries which if adversely determined would, individually or in
the aggregate, reasonably be expected to result in damages payable by the
Company or any Subsidiary in excess of $250,000 or injunctive relief against the
Company or any of its Subsidiaries, or that
12
would materially and adversely affect the ability of the Company to consummate
the transactions contemplated hereby or which seeks to enjoin the consummation
of the transactions contemplated hereby; and (ii) there is no judgment, decree,
award, injunction, rule or order of any Governmental Authority or arbitrator
outstanding against the Company or any of its Subsidiaries that would reasonably
be expected to materially and adversely affect the ability of the Company to
consummate the transactions contemplated hereby.
SECTION 3.06. Compliance with Laws; Permits.
(a) Except as set forth in Section 3.06(a) of the Company Disclosure
Schedule, the conduct of the business by the Company and each of its
Subsidiaries since January 1, 2001 has not violated or breached and does not
currently violate or breach (and no event has occurred which with notice or the
lapse of time, or both, would constitute a violation or breach of) any Laws
applicable to the Company or any of its Subsidiaries, their respective
properties or other assets, except for violations and breaches which have not
given and would not reasonably be expected to give rise to a material liability.
Except as set forth in the SEC Reports filed prior to the date hereof or as set
forth in Section 3.06(a) of the Company Disclosure Schedule, there are no
unresolved notices of deficiency or charges of violation with respect to the
matters covered by this Section 3.06(a) brought or, to the Knowledge of the
Company, threatened or pending against the Company which have given or would
reasonably be expected to give rise to a material liability.
(b) Except as disclosed in Section 3.06(b) of the Company Disclosure
Schedule, each of the Company and its Subsidiaries have obtained all permits,
licenses, authorizations, grants, consents, certificates, registrations,
qualifications, variances, exemptions, orders, franchises, exceptions,
identification and registration numbers, approvals or orders of any Governmental
Authority necessary to own, lease and to operate its properties or otherwise to
carry on each of their respective businesses as it is now being conducted
(collectively, the "Permits"), except those the absence of which has not
materially impaired and would not reasonably be expected to materially impair
the ability of the Company and its Subsidiaries to conduct their businesses as
currently conducted. Neither the Company nor any of its Subsidiaries has
received any notice or claim pertaining to the failure to obtain any Permit,
except for any such notice or claim that has not given and would not reasonably
be expected to give rise to a material liability.
SECTION 3.07. Affiliate Transactions. Except as disclosed in the SEC
Reports filed prior to the date hereof or as set forth in Section 3.07 of the
Company Disclosure Schedule, none of the Company or any of its Subsidiaries is a
party to any Contract with any (i) officer, director or employee of the Company
or any of its Subsidiaries, (ii) record or beneficial owner of five percent or
more of the capital stock of the Company, or (iii) affiliate of any such
officer, director or record or beneficial owner of the Company (each, an
"Affiliate Agreement"), except any transaction on arm's length terms and in the
ordinary course of business consistent with past practice with respect to the
officers and directors of the Company and its Subsidiaries, including the
payment of
13
customary directors fees and expenses. Except as described in Section 3.07 of
the Company Disclosure Schedule, neither the Company nor any Subsidiary has any
loans receivable from any affiliate of the Company or from any director, officer
or employee of the Company or any Subsidiary.
SECTION 3.08. Subsidiaries.
(a) Except as set forth in the SEC Reports filed prior to the date hereof
or Section 3.08 of the Company Disclosure Schedule, the Company does not own,
directly or indirectly, any shares of capital stock or any other equity interest
in any person, domestic or foreign.
(b) All of the outstanding shares of capital stock or equity interests of
each of its Subsidiaries that are owned by the Company or any other Subsidiary
of the Company (collectively, the "Subsidiary Shares") have been duly authorized
and are validly issued, fully paid and non-assessable and were not issued in
violation of any preemptive rights or comparable rights. There are no
irrevocable proxies or similar obligations with respect to any of the Subsidiary
Shares. There are no securities convertible into, exchangeable for, or carrying
the right to acquire, equity securities (or securities convertible into or
exchangeable for equity securities) of any of its Subsidiaries, or
subscriptions, warrants, options, calls, convertible securities, registration or
other rights or other arrangements or commitments obligating any Subsidiary to
issue, transfer or dispose of any of its equity securities or any ownership
interest therein.
(c) Except as disclosed in Section 3.08 of the Company Disclosure Schedule,
the Company owns the Subsidiary Shares free and clear of any Liens. Except as
disclosed in Section 3.08 of the Company Disclosure Schedule, the Company owns
and has full voting power over all of the equity interests of each of its
Subsidiaries. No stock appreciation rights, phantom stock, profit participation
or other similar rights with respect to any Subsidiary or any capital stock of
any Subsidiary are authorized or outstanding.
SECTION 3.09. No Brokers. Except as set forth in Section 3.09 of the
Company Disclosure Schedule, neither the Company nor any of its officers or
directors has employed any investment banker, business consultant, financial
advisor, broker or finder in connection with the transactions contemplated by
this Agreement, or obligated the Company or any of the Subsidiaries to pay any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the transactions contemplated
hereby. The amount of such fees payable pursuant to the items listed in Section
3.09 of the Company Disclosure Schedule and the terms related thereto have been
previously and accurately disclosed in writing to Parent.
SECTION 3.10. SEC Reports; Financial Statements.
(a) The Company and its Subsidiaries have filed with the U.S. Securities
and Exchange Commission (the "SEC") all periodic reports required to be filed by
the Company or any Subsidiary with the SEC from and after January 1, 2001
14
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "SEC Reports"). As of its date
of filing, each SEC Report complied in all material respects with applicable
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, and none of such SEC Reports contained any untrue statement of a
material fact or omitted to state a material fact required or necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including the notes
thereto) included in the SEC Reports filed prior to the date hereof (the
"Financial Statements"): (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) were prepared in accordance with GAAP on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto); and (iii) present fairly in all material respects, as of its
respective date and for the period set forth therein, the consolidated financial
position, results of operations or cash flows, as the case may be, of the
Company and its Subsidiaries (subject, in the case of unaudited interim
financial statements, to exceptions permitted by Form 10-Q under the Exchange
Act).
SECTION 3.11. Undisclosed Liabilities. Except for the liabilities (i) set
forth on, reflected in, reserved against or otherwise described in the most
recent Financial Statements (ii) set forth in Section 3.11 of the Company
Disclosure Schedule or (iii) liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 2003 or as
contemplated by this Agreement, neither the Company nor any Subsidiary has any
material indebtedness, obligation or liability of any kind, whether absolute,
accrued, contingent or otherwise and whether due or to become due, that would be
required to be reflected on a balance sheet prepared in accordance with GAAP
consistently applied in order for such balance sheet to present fairly in all
material respects the consolidated financial position of the Company and its
Subsidiaries.
SECTION 3.12. Intellectual Property. Except as set forth in Section 3.12 of
the Company Disclosure Schedule, the Company or one of its Subsidiaries owns or
possess adequate rights to use all material patents, trademarks, trade names,
inventions, processes, designs, formulas, know-how and other intellectual
property rights (collectively "Intellectual Property") necessary for the conduct
of the business of the Company and its Subsidiaries as presently conducted.
Except as set forth in Section 3.12 of the Company Disclosure Schedule, neither
the Company nor any of its Subsidiaries has received any written notice, nor, to
the Knowledge of the Company, has the Company or any of its Subsidiaries
received since January 1, 2003 any written claim that any Intellectual Property
owned or used by the Company or any of its Subsidiaries infringes in any
material respect on similar rights owned or alleged to be owned by others. To
the Knowledge of the Company, neither the execution and delivery of this
Agreement, nor the transactions contemplated hereby, nor the conduct of the
business as currently conducted, will materially conflict with or result in a
material breach of the terms, conditions or provisions of, or constitute a
material default under, any contract relating to the Intellectual Property that
is material to the Company and its Subsidiaries,
15
taken as a whole, under which the Company or any of its Subsidiaries or any
employees or officers of the Company or any of its Subsidiaries are now
obligated.
SECTION 3.13. Contracts and Commitments. Section 3.13 of the Company
Disclosure Schedule lists, as of the date hereof: (i) all Contracts to which the
Company or any of its Subsidiaries is currently a party or by which it or any
such Subsidiary is currently bound which require payments to be made in excess
of $500,000 per fiscal year and are not terminable by the Company or any of its
Subsidiaries on less than sixty (60) days' notice, (ii) all Contracts to which
the Company or any of its Subsidiaries is a party and which (x) in the year
ended December 31, 2003 generated, or (y) are expected to generate in any fiscal
year thereafter, revenues in excess of $500,000; (iii) all agreements which,
individually or in the aggregate, provide for, or relate to, the incurrence by
the Company or any Subsidiary of indebtedness for borrowed money in an aggregate
amount greater than $250,000; (iv) all guaranties of any indebtedness of persons
other than the Company or any Subsidiary which individually or in the aggregate
exceed $250,000; (v) all agreements that limit (or would limit after the date
hereof) the ability of the Company or any of its Subsidiaries to compete in any
material manner in any line of business or in a geographic area; (vi) all
material partnership, limited liability company, joint venture or other similar
agreements; (vii) all Affiliate Agreements and (viii) all employment agreements
with employees of the Company or any Subsidiary which provide for annual
compensation (salary and bonus) in excess of $100,000 or which are not
terminable by the Company or a Subsidiary within six (6) months without penalty
or premium.
SECTION 3.14. Employee Benefits.
(a) Each of the Company and its Subsidiaries has complied since January 1,
2001, and currently is in compliance with, the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code,
and all other applicable laws with respect to each compensation or benefit plan,
agreement, policy, practice, program, or arrangement (whether or not subject to
ERISA) maintained by the Company or any of its Subsidiaries for the benefit of
any employee, former employee, independent contractor or director of the Company
or any of its Subsidiaries (including any employment agreements or any pension,
savings, profit-sharing, bonus, medical, insurance, disability, severance,
executive compensation, fringe benefit, incentive, stock option, performance
pay, loan or loan guarantee, plant closing, change of control, stock option or
other equity based or deferred compensation plans) (collectively, the "Plans"),
except where such noncompliance has not given and would not reasonably be
expected to give rise to a material liability.
(b) The Company has provided or made available to Parent and Merger Sub a
current, accurate and complete copy of each Plan and, to the extent applicable,
summary plan descriptions, Forms 5500 for the last three years and actuarial
reports. Section 3.14(b) of the Company Disclosure Schedule is a correct and
complete list of all of the Plans.
16
(c) Each Plan intended to qualify under Section 401 of the Code is so
qualified and each trust maintained pursuant thereto is exempt from federal
income taxation under Section 501 of the Code, and nothing has occurred with
respect to the operation of such Plans which would cause the loss of such
qualification or exemption or the imposition of any liability, penalty or tax
under ERISA or the Code, and, with respect to any such Plan for which an
application for a determination letter is pending, to the Knowledge of the
Company, there are no facts that would reasonably be expected to result in the
non-issuance of such determination letter.
(d) Except as set forth in Section 3.14(d) of the Company Disclosure
Schedule, neither the Company, any of its Subsidiaries nor any ERISA Affiliate
has since January 1, 2001 maintained, adopted or established, contributed or
been required to contribute to, or otherwise participated in or been required to
participate in, any employee benefit plan or other program or arrangement
subject to Title IV of ERISA (including any employee pension or welfare benefit
plan to which more than one unaffiliated employer contributes and which is
maintained pursuant to one or more collective bargaining agreements (a
"Multi-Employer Plan")) or any plan otherwise subject to the minimum funding
standards of Section 302 of ERISA or Section 412 of the Code (a "Title IV
Plan"). The Company has no liability (contingent or otherwise) under Section
4069 of ERISA by reason of a transfer of an underfunded Title IV Plan.
(e) Except as set forth in Section 3.14(e) of the Company Disclosure
Schedule, no Plan provides any health or medical benefits (whether or not
insured) with respect to current or former employees of the Company beyond their
retirement or other termination of service with the Company (other than coverage
mandated by Section 4980B of the Code or applicable law).
(f) Except as set forth in Section 3.14(f) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has incurred any
withdrawal liability with respect to any Title IV Plan that is a Multi-Employer
Plan. The Company and itsz subsidiaries have not during the preceding six years
had any obligation or liability (contingent or otherwise) with respect to a Plan
which is described in Section 4(b)(4), 4063 or 4064 of ERISA.
(g) No audit or investigation by any governmental authority is pending or,
to the Knowledge of the Company, threatened, nor has any reportable event
(within the meaning of Section 4043 of ERISA) (other than an event for which the
30-day notice period is waived), prohibited transaction (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) or breach of fiduciary duty
occurred with respect to any Plan has given or would reasonably be expected to
give rise to a material liability.
(h) All benefits due under each Plan have been timely paid and there is no
lawsuit or claim, other than routine uncontested claims for benefits, pending
or, to the Knowledge of the Company, threatened against any Plan or the
fiduciaries of any such plan or otherwise involving or pertaining to any such
Plan that has given or would be reasonably expected to give rise to a material
liability.
17
(i) Except as set forth in Section 3.14(i) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee (current, former or retired) of the
Company, (ii) increase any benefits otherwise payable under any Plan, (iii)
result in the acceleration of the time of payment or vesting of any such
benefits under any Plan or (iv) constitute a "change in control" as defined in
any Plan.
(j) No civil or criminal action brought pursuant to the provisions of Title
I, Subtitle B, Part 5 of ERISA is pending or, to the Knowledge of the Company,
threatened against any fiduciary of any Plan, and, to the Knowledge of the
Company, none of the Plans nor any fiduciary thereof has been the direct or
indirect subject of an audit investigation or examination by any governmental or
quasi-governmental agency that has given or would be reasonably expected to give
rise to a material liability.
(k) Except as set forth in Section 3.14(k) of the Company Disclosure
Schedule, no agreement, commitment or obligation on the part of the Company or
any of its Subsidiaries exists to increase materially any benefit under any Plan
or to adopt any new Plan.
(l) No Plan has any material unfunded accrued benefits that are not
reflected in the SEC Reports filed prior to the date hereof. No "accumulated
funding deficiency" as defined in Section 412 of the Code, has been incurred
with respect to any Title IV Plan subject to Section 412 of the Code, whether or
not waived, and remains outstanding. The Company has not incurred, and does not
reasonably expect to incur (A) any liability under Title IV of ERISA arising in
connection with the termination of, or a complete or partial withdrawal from,
any Title IV Plan or (B) any liability under Section 4971 of the Code that in
either case could become a liability of the Company after the Closing Date.
(m) The Company has provided to Parent and Merger Sub with respect to each
Plan described in Section 3(2) of ERISA (other than a Multi-Employer Plan), each
other Plan that provides for the deferral of compensation, and each Plan
disclosed on Section 3.14(e) of the Company Disclosure Schedule, true, accurate,
and complete copies of each such Plan's most recent financial statements and all
other financial information requested by Parent and Merger Sub with respect to
such Plans. Since the date to which such financial information relates, there
has been no material amendment or modification to any such Plan or any of the
financial statements so provided.
SECTION 3.15. Absence of Certain Changes.
(a) Except as set forth in the SEC Reports filed prior to the date hereof
or to the extent set forth in Section 3.15 of the Company Disclosure Schedule,
since December 31, 2003, except in connection with this Agreement, the Company
and its Subsidiaries have conducted their business in the ordinary course
consistent with past practice and there has not been:
18
(i) any change, condition, event or occurrence that has had or would
reasonably be expected to have a Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend or
other distribution in respect of any shares of capital stock of the Company
or any repurchase, redemption or other acquisition by the Company or any
Subsidiary of any outstanding shares of capital stock or other securities
of, or other ownership interest in, the Company or any Subsidiary;
(iii) any split, combination or reclassification of any of the
Company's or any Subsidiary's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock;
(iv) (A) any granting by the Company or any of its Subsidiaries to any
executive officer or other key employee of the Company or any of its
Subsidiaries of any increase in compensation, except for normal increases
in the ordinary course of business consistent with past practice or as
required under employment agreements in effect as of the date hereof which
have previously been provided or made available to Parent and Merger Sub,
(B) any granting by the Company or any of its Subsidiaries to any such
executive officer of any increase in severance or termination pay, except
as was required under any employment, severance or termination agreements
in effect as of the date hereof which have previously been provided or made
available to Parent and Merger Sub or (C) any entry by the Company or any
of its Subsidiaries into any employment, severance or termination agreement
with any such executive officer except in the ordinary course of business
consistent with past practice;
(v) any material damage, destruction or loss to any material property,
whether or not covered by insurance;
(vi) except insofar as may have been disclosed in the SEC Reports
filed prior to the date hereof or required by a change in GAAP, any
significant change in accounting methods, principles or practices (for
financial accounting or tax purposes);
(vii) any making or revocation of any Tax elections or any settlement
or compromises of any federal, state, foreign or local Tax liability or any
waivers or extensions of the statute of limitations in respect of such
Taxes where the amount of such Taxes subject to settlement, compromise or
waiver or extension of the statute of limitations is greater than $125,000
individually or $250,000 in the aggregate;
(viii) any entry by the Company or any of its Subsidiaries into any
material transaction or Contract;
19
(ix) any failure to pay and discharge current liabilities in the
ordinary course of business consistent with past practice except where a
liability is disputed in good faith by appropriate proceedings or any
significant change that is adverse to the Company in policies or practices
with respect to the collection of accounts receivable or the payment of
sales representative draws;
(x) any making of loans, advances or capital contributions to, or
investments in, any person (other than by the Company in any wholly owned
Subsidiary of the Company or by any Subsidiary of the Company in a wholly
owned Subsidiary of the Company or other than advances by the Company and
its Subsidiaries made to sales representatives in the ordinary course of
business) in excess of $250,000 in the aggregate or payment of any fees or
expenses to any of the Company's stockholders or any Affiliate of any of
such stockholders, except as required under any management agreement in
effect as of the date hereof which has previously been provided or made
available to Parent and Merger Sub;
(xi) the incurrence of a Lien on any of its assets with a value in
excess of $125,000, except for any Lien that is a Permitted Exception, or
acquisition of any assets or sale, assignment, transfer, conveyance, lease
or other disposition of any assets of the Company or any Subsidiary, except
for assets acquired or sold, assigned, transferred conveyed, leased or
otherwise disposed of (A) in the ordinary course of business consistent
with past practice and (B) other indebtedness for borrowed money in an
amount not in excess of $250,000 in the aggregate;
(xii) any incurrence of any indebtedness for borrowed money in an
amount in excess of $250,000 in the aggregate;
(xiii) any cancellation or compromise of any debt or claim or
amendment, cancellation, termination, relinquishment, waiver or release of
any Contract or right except in the ordinary course of business and which,
in the aggregate, would not be material to the Company and its Subsidiaries
taken as a whole;
(xiv) any material delay in making any capital expenditure for an
approved capital project as set forth in the Company's draft fiscal 2005
budget provided to Parent or the making or commitment to make any capital
expenditures or capital additions or betterments materially in excess of
amounts for such purposes set forth in the Company's draft fiscal 2005
budget provided to Parent;
(xv) any grant of any material license or sublicense of any rights
under or with respect to any Intellectual Property;
20
(xvi) any institution or settlement of any material legal proceeding;
(xvii) any acceleration of any options or other equity-based
compensation granted to any director, officer, employee or other person;
(xviii) other than in connection with the transactions contemplated by
this Agreement, any adopted or proposed material change in the
organizational documents of the Company or any of its Subsidiaries; or
(xix) any agreement to do anything set forth in this Section 3.15.
SECTION 3.16. Taxes. "Tax" or "Taxes" shall mean (i) all federal, state,
local or foreign taxes, duties, fees, premiums, assessments, imposts, levies and
governmental impositions of any kind, including, but not limited to, those on or
measured by or referred to as income, franchise, profits, gross receipts, goods
and services, capital, ad valorem, advance, corporation, custom duties,
alternative or add-on minimum taxes, estimated, environmental, disability,
registration, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, employment, social security,
workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, and (ii) any interest, penalties and additions to tax imposed with
respect thereto; and "Tax Returns" shall mean returns, reports and information
statements, including any schedule or attachment thereto, with respect to Taxes
required to be filed with the Internal Revenue Service or any other governmental
or taxing authority or agency, domestic, state, local or foreign, including
consolidated, combined and unitary Tax returns. Except as set forth in Section
3.16 of the Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries and any consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any of its Subsidiaries is or has been a member has timely filed or caused to be
filed (or will file or cause to be filed) with the appropriate taxing
authorities in all jurisdictions in which such Tax returns are required to be
filed all income Tax Returns, and all other Tax Returns which, if properly
prepared and filed, would involve more than an immaterial amount of Taxes,
required to be filed by it (taking into account applicable extension periods)
for all taxable or reporting periods ending on or before the Closing Date and
has paid all Taxes required to be paid and has made adequate provision on its
financial statements in accordance with GAAP for all Taxes which are not yet due
and payable. All such Tax Returns are true, correct and complete in all material
respects, and there are no liens on any of the assets of the Company or any of
its Subsidiaries that arose in connection with any failure (or alleged failure)
to pay any Tax. The Company and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and have duly and timely withheld and collected from
employee salaries, wages and other compensation and from all other amounts and
have paid over to the appropriate taxing authorities all amounts required to be
so withheld and paid over for all periods under all applicable laws.
21
(b) Neither the Company nor any of its Subsidiaries has (i) been notified
in writing that any Tax Return is currently under audit by the United States
Internal Revenue Service ("IRS")or any state or local taxing authority or that
it intends to conduct such an audit and no action, suit, investigation, claim or
assessment is pending or, to the Knowledge of the Company, proposed with respect
to any Taxes; (ii) made any agreement for the extension of time or the waiver of
the statute of limitations for the assessment, collection or payment of any
Taxes; (iii) been notified in writing that any material claim for unpaid Taxes
has become a lien or encumbrance of any kind against the property of the Company
or any of its Subsidiaries or is being asserted against the Company or any of
its Subsidiaries; or (iv) executed any power of attorney with respect to any Tax
matter that is currently in force.
(c) Neither the Company nor any of its Subsidiaries has incurred any
liability for Taxes as a result of Section 1.1502-6 of the Treasury Regulations
or any comparable provision of state, local or foreign law (other than as a
result of being in a group of which the Company is the common parent). The
Company is not a USRPHC and was not a USRPHC on any "determination date" (as
defined in Section 1.897-2(c) of the Treasury Regulations) that occurred in the
five-year period preceding the Closing Date.
(d) No claim has been made by a taxing authority in a jurisdiction where
the Company or any of its Subsidiaries does not file Tax Returns to the effect
that such entity is or may be subject to taxation by that jurisdiction.
(e) Parent and Merger Sub have been provided or given access to (i) all
income Tax Returns of the Company and its Subsidiaries for all taxable periods
ending on or after December 31, 1999 and (ii) all United States and Canadian
federal revenue agents' reports and other similar reports relating to the audit
or examination of the Tax Returns of the Company and its Subsidiaries for all
taxable periods ending on or after December 31, 1999. No issue has been raised
by a domestic or federal, state, local or foreign taxing authority in any
current or prior examination, which, by application of the same or similar
principles, could reasonably be expected to result in a proposed deficiency for
any subsequent taxable period.
(f) Neither the Company nor any other person (including any of its
Subsidiaries) on behalf of the Company or any of its Subsidiaries has (i) agreed
to or are required to make any adjustments pursuant to Section 481(a) of the
Code or any similar provision of state, local or foreign law by reason of a
change in accounting method or has any Knowledge that the IRS has proposed any
such adjustment or change in accounting method, or has any application pending
with any taxing authority requesting permission for any changes in accounting
methods that relate to the business or operations of the Company or any of its
Subsidiaries, or (ii) filed a consent pursuant to Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to the disposition of a
subsection (f) asset (as such term is defined in Section 341(f) of the Code)
owned by the Company or any of its Subsidiaries.
22
(g) No property owned by the Company or any of its Subsidiaries (i) is
property required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986,
(ii) constitutes "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code or (iii) is "tax-exempt bond financed property" within the
meaning of Section 168(g) of the Code.
(h) Neither the Company nor any of its Subsidiaries is a party to (i) any
tax sharing, or similar agreement or arrangement (whether or not written)
pursuant to which they will have any obligation to make any payment after the
Closing, (ii) any agreement that could obligate it to make any payment in
connection with the transactions contemplated by this Agreement that will not be
deductible by the Company or any of its Subsidiaries by reason of Section 280G
of the Code, (iii) a closing agreement pursuant to Section 7121 of the Code or
any predecessor provision thereof or any similar provision of state, local or
foreign law with respect to the Company or any of its Subsidiaries involving
more than $50,000 of Taxes or (iv) otherwise bound by any private letter ruling
of the IRS or comparable rulings or guidance issued by any other taxing
authority. The Company has provided to Parent and Merger Sub all information
that is necessary in order to accurately determine the applicability of Section
280G of the Code to the contractual arrangements between the Company or its
Subsidiaries and their respective employees.
(i) Neither the Company nor any of its Subsidiaries (i) 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 (x) in the two
years prior to the date of this Agreement or (y) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated by this Agreement or (ii) is or was a member of any
consolidated, combined, unitary or affiliated group of corporations that filed
or was required to file a consolidated, combined or unitary Tax Return, other
than the group of which it is now a member.
SECTION 3.17. Insurance. All insurance policies to which the Company or any
Subsidiary is a party or that provide coverage to the Company, any Subsidiary or
any director or officer of the foregoing: (i) are valid, outstanding, and
enforceable; (ii) are issued by an insurer that is financially sound and
reputable; and (iii) taken together, provide adequate insurance coverage for the
assets and the operations of the Company and its Subsidiaries for all risks
normally insured against by a person carrying on the same business or businesses
as the Company and its Subsidiaries. Except as set forth in Section 3.17 of the
Company Disclosure Schedule, neither the Company nor any Subsidiary has received
any notice of premature cancellation or termination with respect to any existing
material insurance policy of the Company or any Subsidiary.
23
SECTION 3.18. Environmental Matters.
(a) Except for such matters that are disclosed in the SEC Reports filed
prior to the date hereof or Section 3.18 of the Company Disclosure Schedule, and
for such matters as have not resulted and would not reasonably be expected to
result in the Company or the Subsidiaries incurring material Environmental
Liabilities: (i) the assets, Company Real Property, Former Company Real
Property, businesses and operations of the Company and its Subsidiaries are and
have been in compliance with applicable Environmental Laws; (ii) the Company and
its Subsidiaries have obtained and, as currently operating, are and have been in
compliance with all Permits necessary under any Environmental Law for the
conduct of the business and operations of the Company and its Subsidiaries in
the manner now conducted; (iii) all Hazardous Substances generated at the
Company Real Property or Former Company Real Property or in connection with any
operations of the Company have been transported and otherwise handled, treated
and disposed of in compliance with all applicable Environmental Laws and in a
manner that does not result in liability under Environmental Laws; (iv) no
Hazardous Substances have been disposed of or otherwise released, handled or
stored by the Company on the Company Real Property or Former Company Real
Property on which the Company's business is or has been conducted or elsewhere
in violation of applicable Environmental Laws or in a manner that would
reasonably be expected to result in the Company incurring Environmental
Liabilities and (v) neither the Company nor any Subsidiary nor any of their
respective assets, Company Real Property, Former Company Real Property,
businesses or operations has received or is subject to any outstanding order,
decree, judgment, complaint, agreement, claim, citation, notice, investigation,
inquiry or proceeding indicating that the Company or any of its Subsidiaries is
or may be (a) liable for a violation of any Environmental Law or (b) liable for
any Environmental Liabilities (including, without limitation, any such
Environmental Liabilities incurred in connection with being designated as a
"potentially responsible party" pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act or any analogous state law)
(collectively, "Environmental Claims"), and, to the Knowledge of the Company, no
such Environmental Claims are threatened).
(b) Copies of all "Phase I" or "Phase II" environmental site assessments
reports, asbestos reports, compliance audits, reports to senior management or
similar reports in the possession or control of the Company or any of the
Subsidiaries containing material information concerning environmental issues
that could affect the Company or any of the Subsidiaries at any property
currently or formerly owned or leased by the Company or any of the Subsidiaries,
or at any other location for which the Company or any of the Subsidiaries may be
liable, have been made available to Purchaser.
(c) The transactions contemplated by this Agreement do not involve any
property in Connecticut or New Jersey that would require notification to any
Governmental Authority with jurisdiction over the environment and the possible
obligation to investigate or remediate such property under either the
Connecticut Transfer Act or the New Jersey Industrial Site Recovery Act.
24
(d) Definitions. For purposes of this Agreement, the terms below shall have
the following respective meanings:
(i) "Environmental Laws" shall mean any law (including, without
limitation, common law), regulation, ordinance, guideline, code, decree,
judgment, order, permit or authorization or other legally enforceable
requirement of any Governmental Authority relating to toxic torts, worker
or public safety or health and the indoor and outdoor environment,
including, without limitation, pollution, contamination, Hazardous
Substances, cleanup, regulation and protection of the air, water or soils
in the indoor or outdoor environment.
(ii) "Environmental Liabilities" shall mean all liabilities,
responsibilities, damages, penalties, obligations or clean-up costs,
response, remedial and removal costs, investigation and feasibility study
costs, capital costs, operation and maintenance costs, losses, punitive
damages, property damages, natural resource damages, consequential damages,
treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants), fines,
sanctions and interest incurred as a result of or related to any claim,
suit, action, investigation, proceeding or demand by any person, assessed
or levied pursuant to any Environmental Law or in connection with any
release of a Hazardous Substance whether on, at, in, under, from or about
or in the vicinity of any real or personal property.
(iii) "Former Company Real Property" shall mean any real property in
which the Company or the Subsidiaries previously held, but no
longer holds, any legal, beneficial, equitable or leasehold
interest.
(iv) "Hazardous Substances" shall mean any material, substance or
waste classified, characterized or regulated as hazardous, toxic, pollutant
or contaminant under any Environmental Law, including, but not limited to,
petroleum products, asbestos, radioactive material, or hazardous or toxic
substances or wastes that pose a hazard to the health or safety of persons.
(e) Notwithstanding anything to the contrary, any representation or
warranty contained in this Section 3.18 that relates to Former Company Real
Property shall only apply to Former Company Real Property during the periods
such real property was owned or operated by the Company or by any of its
Subsidiaries.
SECTION 3.19. Real Property.
(a) Section 3.19(a) of the Company Disclosure Schedule sets forth (i) a
complete list of all real property owned (the "Owned Real Property") by the
Company or any of its Subsidiaries and (ii) a complete list of all real property
leased (the "Leased Real Property" and, together with the Owned Real Property,
the "Company Real
25
Property") by the Company or any of its Subsidiaries. A true and complete copy
of each material lease with all amendments and modifications (the "Real Property
Leases") has been delivered or made available to Parent.
(b) Except as set forth in Section 3.19(b) of the Company Disclosure
Schedule, the Company, or one or more of its Subsidiaries, has (i) good and
marketable fee simple title to each of the Owned Real Properties, free and clear
of all Liens except for the Permitted Exceptions, and (ii) has a valid leasehold
interest in the Leased Real Property, free and clear of all Liens except for the
Permitted Exceptions.
(c) With respect to the Real Property Leases, (i) neither the Company nor
any of its Subsidiaries has sent or received a written notice that, and is not
aware that, any party to a Real Property Lease has materially breached or is in
material default of any of its obligations thereunder, which breach or default
remains uncured and no event has occurred that, with the giving of notice or the
passage of time or both, would constitute such a breach or default thereunder
and (ii) all material covenants to be performed by the Company or any of its
Subsidiaries or, to the Knowledge of the Company, any landlord under any Real
Property Lease have been performed in all material respects.
(d) Each of the Company and its Subsidiaries has the right to use the Real
Property, subject to the Permitted Exceptions and such other exceptions as would
not materially effect the use thereof, in the manner and for the purposes as
each is currently being used.
(e) "Permitted Exceptions" means (i) all defects, exceptions, restrictions,
easements, covenants, reservations, encroachments, utility agreements, rights of
way and encumbrances disclosed in policies of title insurance which have been
made available to Parent and which have not had, nor would be reasonably
expected to have, with respect to any material property of the Company and its
Subsidiaries, taken as a whole, a material adverse effect on the use of such
affected property; (ii) Liens for current taxes, assessments or other
governmental charges not yet delinquent or the amount or validity of which is
being contested in good faith by appropriate proceedings (provided an
appropriate reserve is established therefor on the most recent balance sheet
included in the SEC Reports filed prior to the date hereof in accordance with
GAAP); (iii) landlord's, warehouseman's, mechanics', carriers', workers',
repairers' and similar Liens arising or incurred in the ordinary course of
business in respect of obligations which are not yet due or which are bonded or
which are being contested in good faith and by appropriate proceedings (provided
any required reserves with respect thereto are maintained on the books of the
Company or such Subsidiary, as the case may be, in accordance with GAAP); (iv)
zoning, entitlement and other land use and environmental regulations by any
Governmental Authority, the violation of which has not had, nor would be
reasonably expected to have with respect to any material property of the Company
and its Subsidiaries, taken as a whole, a material adverse effect on such
property; (v) such other imperfections in title, charges, easements,
restrictions, covenants, reservations, encroachments, utility agreements and
encumbrances which do not materially detract from the value of or materially
interfere with the present use of any
26
property subject thereto or affected thereby; and (vi) Liens securing any
financings disclosed in the Financial Statements.
SECTION 3.20. Labor Relations. Except as set forth in Section 3.20 of the
Company Disclosure Schedule: (i) neither the Company nor any Subsidiary is a
party to any collective bargaining or other labor contract; (ii) since December
31, 2003, there has not been, and there presently is no unfair labor practice
charge or complaint pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary which, if adversely determined, would be
reasonably likely to give rise to a Material Adverse Effect; and (iii) since
December 31, 2003, there has not been, and there presently is no labor strike,
slowdown, work stoppage, lockout or other labor controversy in effect or, to the
knowledge of the Company, threatened against the Company or any Subsidiary which
would be reasonably likely to have a Material Adverse Effect.
SECTION 3.21. Inventories; Receivables; Payables.
(a) The inventories of the Company and its Subsidiaries are in good and
marketable condition in all material respects, and are saleable in all material
respects in the ordinary course of business consistent with past practice,
except for shorts, obsolete or otherwise unusable inventory, for which adequate
reserves have been reflected in the Financial Statements, in accordance with
GAAP consistently applied.
(b) All accounts receivable, including salespersons overdrafts representing
receivables for sales representative draws paid in excess of earned commissions,
of the Company and its Subsidiaries reflected in the Financial Statements are
good and collectible in all material respects at the aggregate recorded amounts
thereof, net of any applicable reserve for returns, doubtful accounts or
uncollectible amounts reflected thereon, which reserves are adequate and were
calculated in a manner consistent with past practice and in accordance with GAAP
consistently applied. All accounts receivable arising after December 31, 2003
are good and collectible in all material respects at the aggregate recorded
amounts thereof, net of any applicable reserve for returns, doubtful accounts or
uncollectible amounts reflected thereon, which reserves are adequate and were
calculated in a manner consistent with past practice and in accordance with GAAP
consistently applied and, since December 31, 2003, neither the Company nor any
of its Subsidiaries has made any significant change in its policies or practices
regarding collection of its accounts receivable.
(c) All accounts, commission and other trade payables of the Company and
its Subsidiaries reflected in the Financial Statements or arising after December
31, 2003 are the result of bona fide transactions in the ordinary course of
business consistent with past practice in all material respects and were
calculated in a manner consistent with past practice and in accordance with GAAP
consistently applied and neither the Company nor any of its Subsidiaries has
adversely changed its policies or practices regarding the payment of its
accounts, commission and other trade payables since December 31, 2003.
27
SECTION 3.22. Customers, Suppliers and Sales Representatives. Section 3.22
of the Company Disclosure Schedule sets forth a list (for the Company and its
Subsidiaries taken as a whole) of: (i) the thirty (30) largest customers who
represented the largest sources of revenue to the Company and its Subsidiaries
based upon the Company's consolidated revenues during the fiscal year ended June
30, 2004; (ii) each supplier from whom the Company purchased greater than
$1,250,000 of goods during the fiscal year ended June 30, 2004; and (iii) each
independent sales representative for whom net commissions were greater than
$125,000 during the fiscal year ended June 30, 2004. Except as set forth in
Section 3.22 of the Company Disclosure Schedule, since June 30, 2004, to the
Knowledge of the Company, there has not been any material adverse change in the
business relationship of the Company and its Subsidiaries with any customer,
supplier or sales representative listed on Section 3.22 of the Company
Disclosure Schedule.
SECTION 3.23. No Other Representations or Warranties. Except for the
representations and warranties contained in this ARTICLE III (as modified by the
Company Disclosure Schedule), the Company and its Subsidiaries are making no
representation or warranty whatsoever, express or implied, including, but not
limited to, any implied warranty or representation as to condition,
merchantability or suitability as to any of the properties or assets of the
Company or any of its Subsidiaries and that except for the representations and
warranties contained herein, Parent takes the Company and its Subsidiaries "as
is" and "where is." It is understood that any projections provided or addressed
to Parent are not and shall not be deemed to be or to include representations or
warranties of the Company or its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.01. Organization, Standing and Corporate Power. Each of Parent
and Merger Sub is duly organized, validly existing and in good standing under
the Laws of the jurisdiction in which it is formed or incorporated and has all
requisite corporate power and authority to enter into and perform its
obligations under this Agreement.
SECTION 4.02. Authority; Noncontravention.
(a) Each of Parent and Merger Sub has all requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly authorized by all necessary action on the part of Parent and Merger Sub and
no other proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub
and, assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Parent and Merger Sub
enforceable against Parent and Merger Sub
28
in accordance with its terms (subject to applicable bankruptcy, insolvency,
moratorium, or other similar Laws affecting creditors' rights generally and
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law)).
(b) The execution, performance and delivery of this Agreement do not, and
the consummation of the Merger and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not, require
any consent, approval or notice under, conflict with, or result in any
violation, termination, suspension or breach of, or default (with or without
notice or lapse of time or both) under, or give rise to a right of termination,
suspension, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien upon any of the properties
or other assets of Parent or Merger Sub under (i) the organizational documents
of each of Parent and Merger Sub, (ii) any material Contract to which Parent or
Merger Sub is a party or any of their respective properties or other assets is
subject or (iii) subject to the governmental filings and other matters referred
to in Section 4.03, any Law applicable to Parent or Merger Sub or their
respective properties or other assets, other than, in the case of clauses (ii)
and (iii), with respect to matters that are not reasonably likely to impair the
ability of each of Parent and Merger Sub to perform its obligations under this
Agreement in any material respect or delay in any material respect or prevent
the consummation of any of the transactions contemplated by this Agreement.
(c) Parent, as the sole stockholder of Merger Sub, has adopted this
Agreement, and such adoption is the only action of the members of Parent and of
any class or series of the capital stock of Merger Sub or any of their
respective Affiliates necessary to adopt this Agreement and approve the
transactions contemplated hereby.
SECTION 4.03. Governmental Approvals. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Governmental Authority is required by or with respect to Parent
or Merger Sub in connection with the execution and delivery of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the Merger
or the other transactions contemplated by this Agreement, except for (a) the
filing of a premerger notification and report form by Parent, and the expiration
or termination of all waiting periods, under the HSR Act, (b) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, (c)
such filings as may be required by applicable state securities or "blue sky"
laws or state takeover laws and (d) any consents, approvals, authorizations,
declarations or filings that, if not obtained or made, are not reasonably likely
to impair the ability of each of Parent and Merger Sub to perform its
obligations under this Agreement in any material respect or delay in any
material respect or prevent the consummation of the Merger or the other
transactions contemplated by this Agreement.
SECTION 4.04. Litigation. There is no claim, suit, action, audit,
arbitration, investigation or proceeding pending or, to the Knowledge of Parent,
threatened against Parent or any of its Affiliates which if adversely determined
would, individually or in the aggregate, materially and adversely affect the
ability of each of
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Parent and Merger Sub to perform its obligations hereunder or which seeks to
enjoin the consummation of the transactions contemplated hereby, nor is there
any judgment, decree, award, injunction, rule or order of any Governmental
Authority or arbitrator outstanding against Parent or any of its Affiliates that
would reasonably be expected to materially and adversely affect the ability of
each of Parent and Merger Sub to perform its obligations hereunder.
SECTION 4.05. Brokers and Other Advisors. Neither Parent nor Merger Sub has
incurred any obligation or liability, contingent or otherwise, for brokers' or
finders' fees or commissions.
SECTION 4.06. Interim Operations of Merger Sub. Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business. Except as set forth in Section 5.01 of
the Company Disclosure Schedule or expressly contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Company shall, and shall cause each of its Subsidiaries to: (A) carry on its
business in the ordinary course consistent with past practice in all material
respects; (B) use reasonable best efforts, consistent with prudent business
judgment, to preserve intact its business organization and keep available the
services of its executive officers and key employees; (C) use reasonable best
efforts, consistent with prudent business judgment, to maintain their
relationships with their material licensors, suppliers, contractors,
distributors, customers and others having material business relationships with
it; (D) make capital expenditures in the ordinary course of business consistent
with past practice in all material respects (except to the extent that the
consent of the Investor has been requested with respect to such capital
expenditures and such consent is withheld) and (E) make all income tax payments
in cash in the ordinary course of business consistent with past practice in all
material respects and without regard to the impact or anticipated impact of the
transactions contemplated hereby. Without limiting the foregoing, except as
expressly contemplated by this Agreement and except as set forth in Section 5.01
of the Company Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time, the Company shall not, and shall not permit any
of its Subsidiaries to, without Parent's prior written consent:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
capital stock, other than dividends or distributions by a direct or indirect
wholly owned Subsidiary of the Company to its parent or to another wholly-owned
Subsidiary of the Company; or (ii) split, combine, reclassify or redeem any of
its capital stock;
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(b) authorize for issuance, issue, sell, pledge, encumber or deliver or
agree or commit to issue, sell, pledge, encumber or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of its capital stock, or issue any securities
convertible into, exchangeable for or representing a right to purchase or
receive, or enter into any Contract with respect to the issuance of, shares of
its capital stock, other than in the ordinary course of business under current
employee benefit plans and other shares of Company Common Stock issuable upon
exercise of Company Stock Options and Warrants in accordance with the terms
thereof;
(c) amend the Company Certificate or Company Bylaws or amend the
certificate of incorporation or bylaws or equivalent organizational documents of
any Subsidiary of the Company;
(d) except as set forth on Section 5.01(d) of the Company Disclosure
Schedule, (i) incur or assume any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities of the Company or any of its Subsidiaries or
guarantee (or become liable for) any indebtedness for borrowed money of others,
enter into any "keep well" or other agreement to maintain any financial
statement condition to another person or enter into any arrangement having the
economic effect of any of the foregoing, except for borrowings under the Credit
Facility for any purpose permitted thereunder and other borrowings not exceeding
$250,000 in the aggregate, (ii) make any loans, advances or capital
contributions to, or investments in, any other person other than to or in the
Company or any direct or indirect wholly-owned Subsidiary of the Company;
(e) except as set forth in Section 5.01(e) of the Company Disclosure
Schedule, acquire or sell (whether by merger, consolidation or otherwise), or
lease, transfer, encumber or otherwise dispose of any of its assets for
aggregate consideration in excess of $250,000, except in the ordinary course of
business consistent with past practice;
(f) (i) make or change any Tax election, (ii) settle or compromise any
federal, state, local or foreign Tax liability, (iii) waive or extend the state
of limitations in respect of any such Taxes, in the case of (ii) or (iii) where
the amount of Taxes at issue is greater than $100,000 or (iv) prepare or file
any Tax return (including any amendment thereof) in respect of income or similar
taxes (other than Tax returns with respect to quarterly deposits, deposits of
employee payroll withholding or similar Tax returns), with respect to the filing
thereof, without having provided Parent with a copy (together with the
supporting work papers) at least 5 days before the due date thereof for Parent's
review and comment;
(g) materially modify, amend or terminate or waive compliance with the
terms of or breaches under, or release or assign any material rights or claims
under, any material Contract except in the ordinary course of business
consistent with the past practices of the Company and its Subsidiaries;
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(h) except as may otherwise be required by applicable law or regulation or
generally accepted accounting principle, change any of the material accounting
principles or practices used by it (for financial accounting or Tax purposes);
(i) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization;
(j) settle any litigation or other legal proceeding or claim of liability
against the Company, which is reasonably likely to materially negatively impact
the Company's position with respect to similar pending or threatened material
claim or suit;
(k) pay or agree to pay in settlement or compromise of any litigation or
other legal proceedings or claims of liability against the Company, net of
insurance recoveries, more than $150,000 for any such suit or claim or more than
an aggregate of $375,000 for all such suits and claims;
(l) change in any material respect its credit policy as to sales of
inventories or its policies or practices with respect to the payment of current
liabilities, the collection of accounts receivable or the payment of sales
representative;
(m) enter into any commitment for capital expenditures of the Company and
its Subsidiaries in excess of $50,000 for any individual commitment and $125,000
for all commitments in the aggregate other than for capital expenditures
contemplated by the draft capital budget for the fiscal year 2005, a copy of
which has been provided to Parent;
(n) enter into, materially modify or terminate any labor or collective
bargaining agreement of the Company or any of its Subsidiaries or, through
negotiation or otherwise, make any commitment or incur any liability to any
labor organization with respect to the Company or any of its Subsidiaries;
(o) enter into any transaction, contract, commitment, arrangement or
understanding that limits, restrains, impedes or otherwise restricts the ability
of the Company or any of its Subsidiaries from competing with or engaging in any
business in any geographic location;
(p) take any action to accelerate any option or other equity-based
compensation granted to any director, officer, employee or other person;
(q) prepay or otherwise make any payments, other than scheduled payments,
with respect to the Senior Notes or the PIK Notes; or
(r) commit, propose or agree to take any of, the foregoing actions or
intentionally and knowingly take any action that would make any representation
or warranty of the Company contained in this Agreement untrue or incorrect in
any material respect as of the date when made or as if made as of the Effective
Time.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Section 262 Notice and Information Statement; Section 228(e)
Notice.
(a) In accordance with the requirements of Section 262, the Company shall
notify each holder of Company Common Stock and Company Preferred Stock who is
entitled to appraisal rights of the approval of the Merger and that appraisal
rights are available for shares of Company Common Stock and Company Preferred
Stock, and the Company shall prepare and deliver an information statement with
respect to the Merger to such holders. The Company and the Surviving Corporation
shall otherwise comply with Section 262.
(b) In accordance with the requirements of Section 228(e) of the DGCL, the
Company shall notify each holder of Company Common Stock and Company Preferred
Stock who did not execute the written consent approving and adopting this
Agreement referenced in the recitals hereto of the corporate action taken
thereby.
SECTION 6.02. Access to Information; Confidentiality.
(a) Subject to applicable Laws relating to the exchange of information, the
Company shall afford, upon reasonable advance notice, to Parent and JHC, and to
Parent's and JHC's respective officers, directors, members, employees,
accountants, counsel, environmental consultants, financial advisors and other
representatives, including Marc Reisch, reasonable access during normal business
hours during the period prior to the Effective Time or the termination of this
Agreement to all its and its Subsidiaries' properties (including for the
purposes of environmental site visits), books, contracts, commitments, personnel
and records.
(b) Parent and Merger Sub shall not, and shall cause their Affiliates not
to, directly or indirectly, disclose, reveal, divulge or communicate to any
person other than their officers, directors, employees, accountants, counsel,
financial advisors and other representatives any Confidential Information (as
defined below). Parent and Merger Sub shall not have any obligation to keep
confidential (or cause their Affiliates to keep confidential) any Confidential
Information if and to the extent disclosure thereof is specifically required by
law; provided, however, that in the event disclosure is required by applicable
Law, Parent and Merger Sub shall, to the extent reasonably possible, provide the
Company with prompt notice of such requirement prior to making any disclosure so
that the Company may seek an appropriate protective order. "Confidential
Information" shall mean any confidential information with respect to the Company
or any of its Subsidiaries, including, methods of operation, customers, customer
lists, Products, prices, fees, costs, Technology, inventions, Trade Secrets,
know-how, Software, marketing methods, plans, personnel, suppliers, competitors,
markets or other specialized information or proprietary matters. "Confidential
Information" does not include, and there shall be no obligation hereunder with
respect to, information that (i) is generally
33
available to the public on the date of this Agreement or (ii) becomes generally
available to the public other than as a result of a disclosure not otherwise
permissible thereunder.
(c) For each fiscal month, quarter and year ending between the date of this
Agreement and the Effective Time, the Company will deliver to Parent and JHC
promptly after made available by management of the Company:
(i) unaudited monthly consolidated financial statements;
(ii) unaudited quarterly consolidated financial statements; and
(iii) audited annual consolidated financial statements.
SECTION 6.03. Efforts. Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use, except as otherwise
provided below, its commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including
using commercially reasonable efforts to accomplish the following: (i) the
taking of all acts necessary to cause the conditions to Closing to be satisfied
as promptly as practicable, (ii) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from all relevant Governmental
Authorities and the making of all necessary registrations and filings with all
relevant Governmental Authorities and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by any Governmental Authority and (iii) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement.
SECTION 6.04. Indemnification, Exculpation and Insurance.
(a) Parent and Merger Sub agree that (i) the certificate of incorporation
or the bylaws of the Surviving Corporation and its Subsidiaries immediately
after the Effective Time shall contain provisions with respect to
indemnification and exculpation from liability that are at least as favorable to
the beneficiaries of such provisions as those provisions that are set forth in
the Company Certificate and Company Bylaws and similar organizational documents
of its Subsidiaries, on the date of this Agreement, which provisions shall not
be amended, repealed or otherwise modified for a period of six years following
the Effective Time in any manner that would adversely affect the rights
thereunder of persons who at or prior to the Effective Time were directors,
officers, employees or agents of the Company or any of its Subsidiaries, unless
such modification is required by law and (ii) all rights to indemnification as
provided in any indemnification agreements with any current or former directors,
officers and employees of the Company or any of its Subsidiaries as in effect as
of the date hereof with respect to matters occurring at or prior to the
Effective Time shall survive the Merger.
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(b) For a period of six years after the Effective Time, the Surviving
Corporation shall maintain or cause to be maintained officers' and directors'
liability insurance and fiduciary liability insurance covering the persons
described in paragraph (a) of this Section 6.04 (whether or not they are
entitled to indemnification thereunder) who are currently covered by the
Company's existing officers' and directors' or fiduciary liability insurance
policies set forth on Section 6.04(b) of the Disclosure Schedules on terms no
less advantageous to such indemnified parties than such existing insurance;
provided that the Surviving Corporation shall not be obligated to pay annual
premiums for such insurance in excess of 200% of the last annual premium paid
prior to the date of this Agreement (which premium is set forth on Section
6.04(b) of the Disclosure Schedules).
(c) The Surviving Corporation shall indemnify and hold harmless (and shall
advance expenses to), to the fullest extent permitted under applicable law, each
director, officer and employee of the Company or any Subsidiary of the Company,
including, without limitation, officers and directors, serving as such on the
date hereof, against any reasonable expenses (including reasonable attorneys'
fees and disbursements), judgments, penalties, fines and settlements in
connection with any threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding relating to any of the
transactions contemplated hereby, and in the event of any such proceeding
(whether arising before or after the Effective Time), the parties hereto will
cooperate in the defense of any such matter; provided, however, that the
Surviving Corporation shall not be liable for any settlement effected without
its prior written consent, which consent shall not unreasonably be withheld or
delayed.
(d) The Surviving Corporation shall pay all reasonable expenses, including
attorneys' fees that may be incurred by any indemnified parties in enforcing the
indemnity and other obligations provided for in this Section 6.04 to the fullest
extent permitted by applicable law.
(e) In the event the Surviving Corporation or any of its respective
successors or assigns (i) consolidates with or merges into any other person and
is not 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, proper provisions shall be made so that the successors and
assigns of the Surviving Corporation assume the obligations set forth in this
Section 6.04.
(f) This Section 6.04, which shall survive the consummation of the Merger
at the Effective Time and shall continue for the periods specified herein, is
intended to benefit the Company, the Surviving Corporation, and any person or
entity referenced in this Section 6.04 or indemnified hereunder, each of whom
may enforce the provisions of this Section 6.04 (whether or not parties to this
Agreement).
SECTION 6.05. Cooperation. The Company shall, to the extent Parent or JHC
may reasonably request in connection with any third-party financing Parent,
Merger Sub and JHC may seek to obtain in connection with the Transactions and to
refinance the existing indebtedness of the Company, use its best efforts, to:
(i) cooperate
35
in the preparation of any offering memorandum or similar document, (ii)
cooperate in providing all information necessary to prepare the Deal Financial
Statements (as that term is defined in the Contribution Agreement), (iii) make
senior management of the Company reasonably available for customary "roadshow"
presentations, (iv) cooperate with prospective lenders, placement agents,
initial purchasers and their respective advisors in performing their due
diligence, including, without limitation, any environmental assessments, (v)
enter into customary agreements with underwriters, initial purchasers or
placement agents and (vi) enter into or help procure pledge and security
documents, other definitive financing documents or other requested certificates
or documents, including a customary certificate of the chief financial officer
of the Company with respect to solvency matters, comfort letters of accountants,
legal opinions and real estate title documentation. The Company shall, at the
request of Parent, Merger Sub or JHC, repay at Closing all amounts outstanding
under the PIK Notes and the Credit Facility, and to provide such other
commercially reasonable cooperation as Parent, Merger Sub or JHC reasonably
requests with respect thereto, including, without limitation, obtaining pay-off
letters and terminating security interests under the Credit Facility. With
respect to the Senior Notes, each of the Company and Parent shall use its
reasonable best efforts to assist connection with any repurchase, redemption
and/or satisfaction and discharge of Senior Notes and any debt tender offer and
consent solicitation (the "Debt Tender Offer"), which Debt Tender Offer shall be
conditioned upon the consummation of the Merger, including, without limitation,
to cooperate in the preparation of all redemption notices and tender offer and
consent solicitation documents. The Debt Tender Offer shall be made by means of
an offer to purchase and consent solicitation on terms to be determined by JHC
(subject to the approval of the Company, which shall not be unreasonably
withheld). In the case of Senior Notes which are to be redeemed on the Closing
Date or acquired in the Debt Tender Offer on the Closing Date, the Company or
any applicable Subsidiary shall cooperate with Parent in preparing and
delivering any required notices of redemption, officers' certificates, legal
opinions or other documentation which may be required in connection with the
redemption or acquisition of such Senior Notes.
SECTION 6.06. Fees and Expenses. All fees and expenses incurred by the
parties hereto in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses; provided, that if the Merger is consummated, the
Surviving Corporation shall bear and pay all Transaction Expenses unpaid at
Closing. "Transaction Expenses" means the aggregate amount of fees and expenses
and other payment obligations incurred by the Company or any of its
Subsidiaries, or by DLJ Merchant Banking II, Inc. on behalf of the Company, in
connection with this Agreement or any of the transactions contemplated hereby,
including, without limitation, fees and expenses incurred in connection with
obtaining a fairness opinion with respect to the Merger, but excluding, (i) any
amount payable to Renaissance Brands LLC as set forth in Section 3.07(iii) of
the Company Disclosure Schedule and (ii) costs and expenses arising from or
relating to the repayment, redemption or repurchase of Company Indebtedness and
fees and expenses of counsel, advisors, consultants, investment bankers, dealer
managers, actuaries, auditors and accountants in connection with such
repayments, redemptions or repurchases of Company Indebtedness, including
related tender offers and consent solicitations.
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SECTION 6.07. Public Announcements. Each of Parent, Merger Sub and the
Company agree that it shall not make any public announcement or issue any press
release in connection with the transactions consummated hereby, except as
provided in this Section 6.07 and except if either Parent, Merger Sub or the
Company (i) is ordered to make such disclosure by a court of competent
jurisdiction or (ii) is advised by legal counsel that such disclosure is
required under applicable laws, in which case the party making the required
disclosure shall inform the other party as to the timing and contents of such
disclosure prior to making such disclosure. Parent and the Company shall jointly
agree upon and approve one or more press releases (which need not be joint press
releases) to be issued on or about the date hereof and on or about the Closing
Date, as mutually determined by the parties hereto. Any subsequent press release
or public announcement made by either party hereto after approval of any such
press release shall be consistent with (including in scope) the mutually agreed
upon press release or releases. This Section 6.07 shall survive the Closing.
SECTION 6.08. Stock Option Plan. The Company shall take all actions
necessary and appropriate so that all options granted under the Company Stock
Plan shall become accelerated, fully vested and exercisable and shall terminate,
and the Company Stock Plan shall be terminated, as of the Effective Time.
SECTION 6.09. Further Assurances. From time to time after the Closing, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof
SECTION 6.10. Termination of Affiliate Arrangements. All agreements set
forth on Schedule 3.07 shall be terminated as of the Closing Date, and all
obligations and liabilities thereunder shall be canceled without payment or any
further liability on the part of the Company or any of its Subsidiaries other
than obligations or liabilities incurred or accrued as of the Closing Date.
SECTION 6.11. Equity Commitment. At the Closing, Parent will contribute to
the Surviving Corporation an amount in cash equal to the Merger Consideration
determined based on the Estimated Working Capital Statement.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Regulatory Matters. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act, European Union, Switzerland and
Canada and similar foreign antitrust Laws shall have been terminated or shall
have
37
expired, other than any expiration or termination under foreign antitrust Laws,
the failure of which to occur or obtain individually or in the aggregate would
not reasonably be expected to materially impair the ability of the parties to
consummate the transactions contemplated hereby.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other judgment or order issued by any
court of competent jurisdiction or other statute, law, rule, legal restraint or
prohibition (collectively, "Restraints") shall be in effect preventing the
consummation of the Merger.
(c) Concurrent Transactions. All conditions precedent to the consummation
of the VHH Merger as set forth in the VHH Merger Agreement and all conditions
precedent to the consummation of the transactions contemplated by the
Contribution Agreement other than the consummation of the Merger and the VHH
Merger shall have been satisfied or waived, and the VHH Merger shall be
consummated concurrently with the Closing.
SECTION 7.02. Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are further subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement that are qualified as to materiality or
Material Adverse Effect shall be true and correct, and the representations and
warranties of the Company contained in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date, in which
case as of such earlier date, and except further to the extent that the facts or
matters as to which such representations and warranties are not so true and
correct as of such dates (without giving effect to any qualifications or
limitations as to materiality or Material Adverse Effect set forth therein),
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) Material Adverse Effect. Since the date of this Agreement, there shall
have been no event, condition or occurrence that has had a Material Adverse
Effect or would be reasonably expected to have, a Material Adverse Effect.
(d) Amendment to Certificate of Designations. The Company shall have filed
the Certificate of Designations Amendment with the Secretary of State of the
State of Delaware.
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SECTION 7.03. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
Parent and Merger Sub contained in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date, in which
case as of such earlier date.
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger
Sub shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date.
SECTION 7.04. Frustration of Closing Conditions. None of the Company,
Parent or Merger Sub may rely on the failure of any condition set forth in
Section 7.01, 7.02 or 7.03, as the case may be, to be satisfied if such failure
was caused by such party's failure to use its commercially reasonable efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to Section 6.03.
SECTION 7.05. Documents to be Delivered by the Company. At the Closing, the
Company shall deliver to Parent the following:
(a) a copy of resolutions or other action adopted by the Company
authorizing the execution, delivery and performance of this Agreement as
appropriate, and a certificate of the Company, dated the Closing Date, stating
that such resolutions or other action were duly adopted and are in full force
and effect at such date, and setting forth the incumbency of each person
executing this Agreement or any document required by this Agreement on behalf of
the Company;
(b) a certificate executed by an officer of the Company setting forth the
truth and accuracy of the matters set forth in Sections 7.02(a) and (b) hereof;
and
(c) a certificate or certificates in form and substance reasonably
satisfactory to Parent certifying that the payment of Merger Consideration under
this Agreement is exempt from withholding under Section 1445 of the Code.
SECTION 7.06. Documents to be Delivered by Parent and Merger Sub. At the
Closing, Parent and Merger Sub shall deliver to the Company the following:
(a) a copy of resolutions adopted by the Boards of Directors of Parent and
Merger Sub authorizing the execution, delivery and performance of this Agreement
as appropriate, and a certificate of the secretary or assistant secretary or
other appropriate officer of Parent and Merger Sub, dated the Closing Date,
stating that such resolutions were duly adopted and are in full force and effect
at such date, and setting forth the
39
incumbency of each person executing this Agreement, or any document required by
this Agreement on behalf of Parent and Merger Sub; and
(b) a certificate executed by an officer of Parent and Merger Sub setting
forth the truth and accuracy of the matters set forth in Section 7.03(a) and (b)
hereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated on or before
October 31, 2004, upon delivery of written notice to the other party;
provided, however, that the right to terminate this Agreement under
this Section 8.01(b)(i) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in
the failure of the Merger to be consummated on or before such date; or
(ii) if any Restraint having the effect set forth in Section
7.01(b) shall be in effect and shall have become final and
nonappealable.
SECTION 8.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no further force or effect,
without any liability or obligation on the part of Parent, Merger Sub or the
Company, other than this Section 8.02 and Article IX, which provisions shall
survive such termination, and except to the extent that such termination results
from the willful breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 8.04. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Any such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent inaccuracy or noncompliance.
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The failure or delay of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Nonsurvival. None of the representations, warranties,
covenants or agreements in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time, except for those
covenants and agreements contained herein that by their respective terms are
required to be performed in whole or in part after the Closing.
SECTION 9.02. Remedies; Specific Enforcement. The parties agree that
Parent's and Merger Sub's sole and exclusive remedy in the event of any breach
of any representation, warranty, covenant or agreement of the Company shall be
to not close, assuming conditions set forth in Sections 7.02(a) and 7.02(b) are
not satisfied. No party to this agreement shall be liable for any money damages
in connection with such party's breach of a representation, warranty, covenant
or agreement of this Agreement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement, without the posting of a bond
or similar instrument, and to enforce specifically the terms and provisions of
this Agreement in any Federal court located in the State of New York or in any
state court in the State of New York, this being in addition to any other remedy
to which they are entitled at law or in equity.
SECTION 9.03. Notices. Except for notices that are specifically required by
the terms of this Agreement to be delivered orally, all notices, requests,
claims, demands and other communications hereunder shall be in writing and shall
be deemed given if delivered personally, facsimiled (which is confirmed) or sent
by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
if to Parent, Merger Sub or the Surviving Corporation
Representative, to:
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
Attn: Alexander Navab
Facsimile: (212) 750-0003
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with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attn: Gary Horowitz
Facsimile: (212) 455-2502
if to the Company or the Surviving Corporation, to:
AHC I Acquisition Corp.
1815 East Main Street
Chattanooga, Tennessee 37404
Facsimile No.: (423) 697-7126
Attention: Ken Budde
with a copy to:
Weil Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Douglas P. Warner
Facsimile: (212) 310-8007
and after the Merger with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attn: Gary Horowitz
Facsimile: (212) 455-2502
if to the Stockholder Representative, to:
DLJ Merchant Banking II, Inc.
Eleven Madison Avenue, 16th Floor
New York, New York 10010
Attention: David Burgstahler
Facsimile: (212) 538-0415 and (212) 325-5553
with a copy to:
Weil Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attn: Douglas P. Warner
Facsimile: (212) 310-8007
42
SECTION 9.04. Definitions. The following terms shall have the following
meanings for purposes of this Agreement:
(a) "Affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common control with
such person; provided that no securityholder of the Company shall be deemed an
Affiliate of any other securityholder solely by reason of an investment in the
Company. For the purpose of this definition, the term "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as used with respect to any person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities, by contract or otherwise.
(b) "Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
(c) "Contract" means any loan or credit agreement, bond, debenture, note,
mortgage, indenture, lease, insurance policy or other written contract,
subcontract, option, warranty, agreement, instrument, or other legally binding
obligation commitment, arrangement or understanding.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
(e) "Governmental Authority" means any Federal, state, regional, local or
foreign government, court, administrative, regulatory or other governmental
agency, commission, board agency, public body or authority, or any
non-governmental self-regulatory agency, commission or authority.
(f) "Knowledge" of any person that is not an individual means, with respect
to any matter in question, the actual knowledge, after reasonable inquiry, of
such person's executive officers and other officers having primary
responsibility for such matter.
(g) "Liens" means all pledges, claims, liens, charges, encumbrances or
security interests of any kind or nature whatsoever.
(h) "Material Adverse Effect" shall mean any change or effect that is
materially adverse to the business, properties, assets, financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole,
except for any change or effect that arises out of, results from or is
attributable to (a) any change in general business or economic conditions, (b)
the execution, announcement or consummation of this Agreement and the
transactions contemplated hereby, including any impact thereof on relationships,
contractual or otherwise, with customers, suppliers, distributors, partners or
employees, or (c) any act of terrorism or war (whether or not threatened,
pending or declared), in each case that does not have a disproportionate effect
on the Company and its Subsidiaries taken as a whole.
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(i) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(j) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
(k) "Subsidiary" of any person means another person, an amount of the
voting securities, other voting rights or voting partnership interests of which
is sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
SECTION 9.05. Interpretation.
(a) When a reference is made in this Agreement to an Article, a Section,
Exhibit or Schedule, such reference shall be to an Article of, a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
(b) Any matter disclosed in any section of the Company Disclosure Schedule
shall be deemed disclosed for all purposes and all sections of the Company
Disclosure Schedule to the extent that it is readily apparent on the face of the
Company Disclosure Schedule that such matter is relevant to another section of
the Company Disclosure Schedule.
SECTION 9.06. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
44
SECTION 9.07. Entire Agreement; Third-Party Beneficiaries. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and, except for the provisions of ARTICLE II
and Sections 6.02, 6.04 and 6.05 as contemplated therein, is not intended to
confer upon any person other than the parties any rights or remedies.
SECTION 9.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of New York as applied to
contracts made and performed entirely within such state.
SECTION 9.09. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
SECTION 9.10. Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of New York or of any state court located in the State of
New York in the event any dispute arises out of this Agreement or the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a Federal court located in the State of New York or a state
court located in the State of New York.
SECTION 9.11. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 9.12. No Recourse. No past, present or future director, officer,
employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney
or representative of the Company or Parent or any of their respective Affiliates
shall have any liability for any obligations or liabilities of the Company or
Parent under this Agreement of or for any claim based on, in respect of, or by
reason of, the transactions contemplated hereby and thereby.
SECTION 9.13. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as
45
possible to the fullest extent permitted by applicable Law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
46
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
FUSION ACQUISITION LLC
By: /S/ Alexander Navab
--------------------
Name: Alexander Navab
Title: President
AHC MERGER, INC.
By: /S/ Alexander Navab
-------------------
Name: Alexander Navab
Title: President
AHC I ACQUISITION CORP.
By: /S/ Kenneth A. Budde
--------------------
Name: Kenneth A. Budde
Title: CFO
47
EXHIBIT B
CERTIFICATE OF DESIGNATIONS AMENDMENT
A new Article 9 shall be added to the Certificate of Designations, Rights
and Preferences of 15% Senior Preferred Stock of AHC I Acquisition Corp. to read
in its entirety as follows:
"9. Certain Merger. Notwithstanding any other provision of this
Certificate of Designations, Rights and Preferences to the contrary, in
connection with the proposed merger of AHC Merger, Inc. with and into the
Corporation (the "Proposed Merger") as contemplated in that certain
Agreement and Plan of Merger, dated as of July 21, 2004, by and among
Fusion Acquisition LLC, AHC Merger, Inc. and the Corporation (as it may be
amended from time to time, the "AHC Merger Agreement"), the holders of
shares of Senior Preferred Stock shall, upon the consummation of the
Proposed Merger, only be entitled to receive, for each share of Senior
Preferred Stock, the Per Share Merger Consideration (as defined in the AHC
Merger Agreement), and, thereupon, shall have no further rights with
respect to the Senior Preferred Stock except the right to receive the Per
Share Merger Consideration, unless and to the extent that they perfect
appraisal rights pursuant to the terms of the AHC Merger Agreement and
applicable law. This Section 9 shall terminate and be of no further force
and effect immediately upon the termination of the AHC Merger Agreement in
accordance with its terms."
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