Agreement and Plan of Merger - Fagerdala Holding BV, Fagerdala Industri AB, Chesterfield Properties Ltd., Viking Investments Sarl, Robert B. Trussell Jr., David Fogg, Jeffrey P. Heath, Thomas Bryant, TWI Holdings Inc., TWI Acquisition Corp. and Tempur World Inc.
AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October
4, 2002, is by and among (i) Fagerdala Holding B.V., a Netherlands corporation;
Fagerdala Industri A.B., a Swedish corporation; Chesterfield Properties Limited,
a Nevis corporation; Viking Investments S.a.r.l., a Luxembourg corporation;
Robert B. Trussell, Jr.; David Fogg; Jeffrey P. Heath; and Thomas Bryant (each,
a "Management Shareholder" and, collectively, the "Management Shareholders");
(ii) TWI Holdings, Inc., a Delaware corporation (the "Parent"); (iii) TWI
Acquisition Corp., a Delaware corporation and wholly owned Subsidiary of the
Parent (the "Purchaser"); and (iv) Tempur World, Inc., a Delaware corporation
(the "Company").
WHEREAS, the parties hereto desire that the Purchaser be merged into the
Company; and
WHEREAS, the respective Boards of Directors of the Parent, the Purchaser
and the Company have approved the merger of the Purchaser with and into the
Company, as set forth below (the "Merger"), in accordance with the General
Corporation Law of the State of Delaware (the "GCL") and upon the terms and
subject to the conditions set forth in this Agreement, whereby (i) each issued
and outstanding share of Common Stock, par value $0.01 per share, of the Company
(each, a "Common Share" and collectively the "Common Shares") not owned directly
or indirectly by the Parent, the Purchaser or the Company, except Common Shares
held by Dissenting Shareholders (as defined below), will be converted into the
right to receive the Common Share Merger Consideration (as defined below) and
(ii) each issued and outstanding share of Series A Convertible Preferred Stock,
par value $1.00 per share, of the Company (each, a "Preferred Share,"
collectively the "Preferred Shares" and together with the Common Shares, the
"Shares") not owned directly or indirectly by the Parent, the Purchaser or the
Company except Preferred Shares held by Dissenting Shareholders, will be
converted into the right to receive the Preferred Share Merger Consideration (as
defined below);
WHEREAS, the Parent, the Purchaser, the Company and the Management
Shareholders desire to make certain representations, warranties, covenants and
agreements in connection with the merger of the Purchaser with and into the
Company pursuant to the Merger and also to prescribe various conditions to the
Merger; and
WHEREAS, Fagerdala Holding B.V., Fagerdala Industri A.B., Chesterfield
Properties Limited, Viking Investments S.a.r.l., GE Capital Equity Investment,
Inc., MONY Life Insurance Company and Palmetto Partners, Ltd. (collectively, the
"Consenting Shareholders") have executed the Support Agreements attached hereto
as Annex A (the "Support Agreements"), pursuant to which the Consenting
Shareholders have agreed, in accordance with the terms thereof, to approve and
adopt this Agreement and the Merger and the written consents attached hereto as
Annex B (the "Written Consents"), pursuant to which the Consenting Shareholders
have approved and adopted this Agreement and Plan of Merger on the terms and
conditions set forth in such Written Consent.
WHEREAS, the Company, the Purchaser and certain Management Shareholders
have entered into employment agreements effective as of the Closing Date; and
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WHEREAS, certain capitalized terms used in this Agreement have the meaning
as set forth or referred to in Article I hereof,
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
Purchaser, the Parent, the Company and the Management Shareholders agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Definitions. As used in this Agreement:
"Additional Payment" means (a) if Company EBITDA is less than $70,000,000
or Company Consolidated Net Revenues are less than $336,700,000, Zero Dollars
($0.00); and (b) if Company EBITDA is $70,000,000 or more and Company
Consolidated Net Revenues are at least $336,700,000, the following formula:
($10,000,000 + (3x(A-$70,000,000)))/Adjusted Diluted Shares, where:
"A" is Company EBITDA, provided that "A" shall in no event exceed
$80,000,000.
"Additional Payment Date" means the date which is 15 days after final
determination of the Additional Payment is made under Section 3.06(b).
"Additional Payment Restriction Period" means the period beginning on the
Closing Date and ending on the earlier to occur of (a) in the event of a final
determination, pursuant to Section 3.06, that no Additional Payments are payable
by the Surviving Corporation, the date on which such determination is made, and
(b) in the event of a final determination, pursuant to Section 3.06, that
Additional Payments are payable by the Surviving Corporation, the date on which
such Additional Payments, and all interest accrued and payable on any Deferred
Additional Payments pursuant to Section 3.06(c), shall have been paid in full in
cash.
"Adjusted Diluted Shares" means (i) the number of As-Converted Common
Shares outstanding immediately prior to the Effective Time plus (ii) the number
of Common Shares subject to being issued pursuant to the Management Options that
are outstanding immediately prior to the Effective Time (without giving effect
to the termination of such Management Options pursuant to Section 2.07).
"Adjusted Spread" has the meaning given thereto in Section 3.06(c) hereof.
"Affiliate", as applied to any Person, shall mean any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.
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"Aggregate Merger Consideration" means the sum of (a) the product of (i)
the Common Share Merger Consideration and (ii) the number of Common Shares
outstanding and not owned by the Parent, the Purchaser or the Company
immediately prior to the Effective Time and (b) the product of (i) the Preferred
Share Merger Consideration and (ii) the number of Preferred Shares outstanding
and not owned by the Parent, the Purchaser or the Company immediately prior to
the Effective Time.
"Agreement" has the meaning given thereto in the preamble hereof.
"Antitrust Laws" means any and all antitrust, competition, merger or trade
regulatory laws, rules or regulations of any Governmental Entity.
"Applicable Rate" has the meaning given thereto in Section 3.06(c).
"Arbitrator" has the meaning given thereto in Section 3.05(d)(iii) hereof.
"As-Converted Common Shares" means, as of any time, the Common Shares
outstanding at such time (including the Rollover Shares and the Common Shares
issued in exchange for cancellation of the Exchange Options) plus the Common
Shares issuable upon conversion of the Preferred Shares outstanding at such
time. For purposes of this Agreement, whenever reference is made to
"As-Converted Common Shares" as of any time, each holder of a Preferred Share
will be deemed to hold the number of Common Shares then issuable upon conversion
of such holder's Preferred Shares.
"Audited Balance Sheet" has the meaning given thereto in Section 4.06(a)
hereof.
"Audited Financial Statements" has the meaning given thereto in Section
4.06(a) hereof.
"Avalon Agreement" means the letter agreement dated March 20, 2002 among
Avalon Group, Ltd., Avalon Securities, Ltd. and the Company.
"Avalon Fee" means all costs, fees, expenses, commissions or other amounts
payable by the Company or any of its Subsidiaries to Avalon Group, Ltd. and/or
Avalon Securities, Ltd. pursuant to the Avalon Agreement.
"Board" means the Board of Directors of the Company.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which banks are required or permitted to be closed in the Commonwealth of
Kentucky.
"CADE" has the meaning given thereto in Section 6.04(c) hereof.
"Calculation Date" has the meaning given thereto in Section 3.05(a) hereof.
"Calculation Date Net Working Capital" has the meaning given thereto in
Section 3.05(a) hereof.
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"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within one year from the date of acquisition thereof; (b) commercial
paper maturing no more than one year from the date of acquisition thereof and
currently having the highest rating obtainable from either Standard & Poor's
Rating Group or Moody's Investors Service, Inc.; (c) certificates of deposit
maturing no more than one year from the date of acquisition thereof issued by
commercial banks incorporated under the laws of the United States of America,
each having combined capital, surplus and undivided profits of not less than
$300,000,000 and having a senior unsecured rating of 'A' or better by a
nationally recognized rating agency (an "A-Rated Bank"); (d) time deposits
maturing no more than 30 days from the date of creation thereof with A-Rated
Banks; and (e) mutual funds that invest solely in one or more of the investments
described in clauses (a) through (d) above.
"CERCLA" has the meaning given thereto in Section 4.19(a)(i) hereof.
"Certificate of Net Debt" has the meaning given thereto in Section 7.03(l)
hereof.
"Certificates" has the meaning given thereto in Section 3.02(a) hereof.
"Claim" has the meaning given thereto in Section 9.03(a) hereof
"Closing" has the meaning given thereto in Section 2.02 hereof.
"Closing Date" has the meaning given thereto in Section 2.02 hereof.
"Closing Date Transfer Taxes" has the meaning given thereto in Section
9.02(a) hereof.
"Closing Payment Amount" means ($350,000,000 - A - B + C)/Adjusted Diluted
Shares, where:
"A" is Net Debt;
"B" is $2,800,000;
"C" is the aggregate exercise price paid, payable or required to be
paid by holders of the Management Options upon the exercise of the Management
Options outstanding immediately prior to the Effective Time without giving
effect to the termination of Management Options pursuant to Section 2.07,
whether or not such exercise price is actually paid pursuant to this Agreement.
"Code" means the Internal Revenue Code of 1986, any successor statute of
similar import, and the rules and regulations thereunder, collectively and as
from time to time amended and in effect.
"Commitment Letters" has the meaning given thereto in Section 5.07 hereof.
"Common Payee" and "Common Payees" have the meaning given thereto in
Section 3.03(f) hereof.
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"Common Share" and "Common Shares" have the meaning given thereto in the
recitals hereof.
"Common Share Merger Consideration" means the sum of (i) the Initial Common
Share Closing Payment, payable in cash at the Closing, (ii) the Initial Escrow
Payment and the Company Adjustment Payment, payable in cash on the Initial
Escrow Payment Date, (iii) the Subsequent Escrow Payments, payable in cash on
the Subsequent Escrow Payment Dates, and (iv) the Additional Payment, payable in
the manner, and subject to the restrictions, specified in Section 3.06(c) on the
Additional Payment Date.
"Common Share Percentage" means a fraction, the numerator of which is the
number of As-Converted Common Shares outstanding immediately prior to the
Effective Time minus the Rollover Shares and the denominator of which is the
number of Adjusted Diluted Shares.
"Common Shareholders" means the holders of Common Shares that are
outstanding and not owned by the Company, the Parent or the Purchaser
immediately prior to the Effective Time, including Common Shares issued for
Exchange Options.
"Company" has the meaning given thereto in the preamble hereof.
"Company Adjustment Amount" has the meaning given thereto in Section
3.05(e).
"Company Adjustment Payment" means (a) the Company Adjustment Amount
divided by (b) the number of As-Converted Common Shares outstanding and not
owned by the Parent, the Purchaser, or the Company immediately prior to the
Effective Time.
"Company Consolidated Net Revenues" means the Consolidated Net Revenues of
the Surviving Corporation for calendar year 2003.
"Company EBITDA" means the EBITDA of the Surviving Corporation for calendar
year 2003.
"Company Representatives" has the meaning given thereto in Section 6.02
hereof.
"Company Transaction Expenses" means all costs, fees, expenses or
commissions incurred by the Company or any of its Subsidiaries prior to the
Closing in connection with the Merger and the transactions contemplated hereby
and by the Transaction Documents, including without limitation, broker's,
finder's or placement fees or commissions, attorneys' fees, accountants' fees,
fees of other professionals and the Avalon Fee.
"Competing Transaction" has the meaning given thereto in Section 6.08
hereof.
"Confidentiality Agreement" has the meaning given thereto in Section
10.01(a) hereof.
"Consent" has the meaning given thereto in Section 4.05(b) hereof.
"Consenting Shareholders" has the meaning given thereto in the recitals
hereof.
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"Consolidated Net Revenues" means, with respect to any Person for any
fiscal period, the consolidated revenues of such Person, net of any returns,
allowances and discounts, for such period determined in accordance with GAAP.
"Contribution Agreement" means the Contribution Agreement, dated October 4,
2002, among the Parent, TA IX L.P., TA/Atlantic and Pacific IV L.P., TA/Advent
VIII L.P., TA Strategic Partners Fund A L.P., TA Strategic Partners Fund B L.P.,
TA Investors LLC, Friedman Fleischer & Lowe Capital Partners, LP, FFL Executive
Partners, LP and certain managers and shareholders of the Company.
"Danish Environmental Claims" has the meaning given thereto in Section
9.02(a).
"Deductible" has the meaning given thereto in Section 9.02(e) hereof.
"Deferred Additional Payment" has the meaning given thereto in Section
3.06(c).
"Dent-A-Med Inc. Facility" means the factoring facility in place as of the
date hereof among the Company and certain of its Subsidiaries and Dent-A-Med
Inc.
"Disposition Event" has the meaning set forth in the Certificate of
Incorporation of the Parent as of the Closing Date.
"Dissenting Shares" has the meaning given thereto in Section 3.01(b)
hereof.
"DOJ" has the meaning given thereto in Section 6.04(a) hereof.
"EBITDA" means, with respect to any Person for any fiscal period, without
duplication, an amount equal to (a) consolidated net income of such Person for
such period determined in accordance with GAAP, minus (b) the sum of (i)
interest income, and (ii) gain from extraordinary items for such period, in each
case to the extent included in the calculation of consolidated net income of
such Person for such period in accordance with GAAP, but without duplication,
plus (c) the sum of (i) any provision for income taxes net of any income tax
credits, (ii) interest expense (cash or non-cash and including capitalized
interest), (iii) any aggregate net loss net of any aggregate net gain during
such period arising from the sale, exchange or other disposition of capital
assets by such Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), (iv) loss from extraordinary items for such period
(provided, that any Kruse Restructuring Costs for such period shall be included
in this clause (iv) only to the extent of the excess, if any, of (A) the sum of
the Kruse Restructuring Costs plus the consolidated net losses of the Kruse
Companies (exclusive of the Kruse Restructuring Costs) for such fiscal period
over (B) the consolidated net losses of the Kruse Companies (exclusive of any
Kruse Restructuring Costs) for the last twelve full calendar months ended prior
to the date on which the operations of the Kruse Companies are discontinued or
the Kruse Companies are sold), (v) the amount of non-cash charges (including
depreciation and amortization and non-cash losses relating to foreign currency)
for such period net of any other non-cash gains (including non-cash gains
relating to foreign currency) that have been added in determining consolidated
net income, (vi) amortized debt discount for such period, (vii) the amount of
any deduction to consolidated net income as the result of any grant to any
members of the management of such Person of any capital stock or other equity
interests, or warrants, options or similar rights to acquire capital stock or
other
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equity interests, (viii) the amount of any deduction, loss or charge relating to
any costs, expenses or charges of such Person incurred or arising (whether or
not capitalized) in connection with (A) the transactions contemplated by this
Agreement (including, without limitation, the costs and expenses of implementing
the restructuring of the Company's European Subsidiaries as described in
Schedule 7.03(o) prior to the Closing) and all costs incurred pursuant to
Section 3.05(c), or (B) any amendment, termination, refinancing or replacement
of, or waiver or other modification of, the TWI Credit Agreement, the Redemption
Agreements or the Securities Purchase Agreements, and (ix) any payments to TA
Associates, Inc. or Friedman Fleischer & Lowe, LLC or their respective
Affiliates or costs, expenses or charges incurred or arising in connection with
any such payments (other than reimbursement of out-of-pocket expenses associated
with attendance at board meetings and service as a director), in each case to
the extent included in the calculation of consolidated net income of such Person
for such period in accordance with GAAP, but without duplication. For purposes
of this definition, the following items shall be excluded in determining
consolidated net income of a Person: (1) the income or deficit of any other
Person accrued prior to the date it became a Subsidiary of, or was merged or
consolidated into, such Person or any of such Person's Subsidiaries, (2) the
income (or deficit) of any other Person (other than a Subsidiary) in which such
Person has an ownership interest, except to the extent any such income has
actually been received by such Person in the form of cash dividends or
distributions, (3) any restoration to income of any contingency reserve, except
to the extent that provision for such reserve was made out of income accrued
during such period, (4) any write-up of any assets, (5) any net gain from the
collection of the proceeds of life insurance policies, (6) any net gain arising
from the acquisition of any securities, or the extinguishment, under GAAP, of
any Indebtedness, of such Person or any of its Subsidiaries, (7) in the case of
a successor to such Person by consolidation or merger or as a transferee of its
assets, any earnings of such successor prior to such consolidation, merger or
transfer of assets, and (8) any deferred credit representing the excess of
equity in any Subsidiary of such Person at the date of acquisition of such
Subsidiary over the cost to such Person of the investment in such Subsidiary.
"EBITDA Statement" has the meaning given thereto in Section 3.06(a) hereof.
"Effective Time" has the meaning given thereto in Section 2.02 hereof.
"Environmental Laws" has the meaning given thereto in Section 4.19(a)(i)
hereof.
"ERISA" has the meaning given thereto in Section 4.16(c) hereof.
"Escrow Adjustment Amount" means $1,200,000.
"Escrow Adjustment Funding Payment" means (a) the Escrow Adjustment Amount
divided by (b) the number of As-Converted Common Shares outstanding and not
owned by the Parent, the Purchaser or the Company immediately prior to the
Effective Time.
"Escrow Agent" has the meaning given thereto in Section 3.04(a) hereof.
"Escrow Agreement" means the Escrow Agreement among the Parent, the
Company, the Payee Representatives and the Escrow Agent substantially in the
form of Annex C hereto.
"Escrow Amount" means the sum of the Escrow Indemnification Amount and the
Escrow Specified Amount.
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"Escrow Indemnity Funding Payment" means (i) the Escrow Amount divided by
(ii) the number of Common Shares outstanding and not owned by the Parent, the
Purchaser or the Company immediately prior to the Effective Time.
"Escrow Indemnification Amount" means $12,800,000.
"Escrow Indemnification Funds" has the meaning given thereto in Section
9.02(d).
"Escrow Specified Amount" means $16,100,000.
"Escrow Specified Release Date" has the meaning given thereto in Section
9.07(b).
"Exchange Fund" has the meaning given thereto in Section 3.02(a).
"Exchange Options" has the meaning given thereto in Section 2.07.
"Final Closing Statement" has the meaning given thereto in Section 3.05(c)
hereof.
"Final Net Working Capital Adjustment" has the meaning given thereto in
Section 3.05(e) hereof.
"Final Resolution" has the meaning given thereto in Section 9.02(c).
"Financing Documents" means the credit agreements, loan agreements, notes,
security agreements, pledge agreements, guarantees, mortgages, escrow
agreements, warrants, and all other agreements, instruments, certificates,
consents, assignments and other documents executed and/or delivered in
connection with the Senior Credit Facility or the Mezzanine Credit Facility.
"FCA" has the meaning given thereto in Section 6.04(b) hereof.
"FTC" has the meaning given thereto in Section 6.04(a) hereof.
"GAAP" means generally accepted accounting principles in the United States
of America, as of the date hereof, applied in a manner consistent with the
application of such principles by the Company in the preparation of the Audited
Financial Statements.
"GCL" has the same meaning given thereto in the recitals hereof.
"Governmental Entity" has the meaning given thereto in Section 4.05(b)
hereof.
"Hazardous Substances" has the meaning given thereto in Section 4.19(a)(ii)
hereof.
"HSR Act" has the meaning given thereto in Section 4.05(b) hereof.
"Indebtedness" means, as applied to any Person, all indebtedness of such
Person for borrowed money (excluding, in case of the Company, the Additional
Payments), whether current or funded, or secured or unsecured (excluding, in
case of the Company or any of its Subsidiaries, any indebtedness with respect to
the Dent-A-Med Inc. Facility (in an amount not to exceed $1,750,000)),
including, without limitation, (a) all indebtedness of such Person for the
deferred purchase price of
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property or services represented by a note or other security, including, without
limitation, any related party notes payable, (b) all indebtedness of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (c) all indebtedness of
such Person secured by a purchase money mortgage or other lien to secure all or
part of the purchase price of property subject to such mortgage or lien, (d) all
obligations under leases which shall have been or must be, in accordance with
generally accepted accounting principles, recorded as capital leases in respect
of which such Person is liable as lessee, (e) any liability of such Person in
respect of banker's acceptances or letters of credit, to the extent of amounts
drawn thereunder, (f) any liability of such Person for deferred compensation
payable to any current or former officer, director, employee or consultant, (g)
any amounts owed with respect to overdrafts, (h) any liability in respect of
interest, fees or other charges in respect of any indebtedness referred to above
and (i) all indebtedness referred to above which is directly or indirectly
guaranteed by such Person or which such Person has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss.
"Indemnified Party" has the meaning given thereto in Section 9.03(a)
hereof.
"Indemnifying Party" has the meaning given thereto in Section 9.03(a)
hereof.
"Initial Adjustment Deduction" means (a) the Initial Net Working Capital
Adjustment divided by (b) the Adjusted Diluted Shares.
"Initial Common Share Closing Payment" means (a) the Closing Payment Amount
minus (b) the sum of (i) the Initial Adjustment Deduction, (ii) the Escrow
Indemnity Funding Payment, and (iii) the Escrow Adjustment Funding Payment.
"Initial Closing Statement" has the meaning given thereto in Section
3.05(a) hereof.
"Initial Company Escrow Release" has the meaning given thereto in Section
3.05(e) hereof.
"Initial Escrow Payment" means (a) the Initial Shareholder Escrow Release
divided by (b) the number of As-Converted Common Shares outstanding and not
owned by the Parent, the Purchaser or the Company immediately prior to the
Effective Time.
"Initial Escrow Payment Date" means the date provided in Section 3.05(e)
for the payment of the Initial Escrow Payments and the Company Adjustment
Payments.
"Initial Net Working Capital Adjustment" has the meaning given thereto in
Section 3.05(b) hereof.
"Initial Preferred Share Closing Payment" means (a) the sum of (i) the
Closing Payment Amount minus (ii) the sum of (A) the Initial Adjustment
Deduction and (B) the Escrow Adjustment Funding Payment multiplied by (b) the
number of Common Shares into which each Preferred Share is convertible
immediately prior to the Effective Time.
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"Initial Shareholder Escrow Release" has the meaning given thereto in
Section 3.05(e) hereof.
"Initial Spread" has the meaning given thereto in Section 3.06(c).
"Interim Balance Sheet" has the meaning given thereto in Section 4.06(a)
hereof.
"Interim Financial Statements" has the meaning given thereto in Section
4.06(a) hereof.
"Interest Rate Cap Criteria" has the meaning given thereto in Section
3.06(c).
"Knowledge" means actual knowledge, after a commercially reasonable
internal investigation made to the appropriate employees of the Company, Tempur
World Holdings, Inc., Tempur Production USA, Inc. Tempur-Pedic, Inc. or any
Subsidiary, division or business unit of the Company, as the case may be, of a
particular fact being known by, with respect to the Company, Tempur World
Holdings, Inc., Tempur Production USA, Inc. or Tempur-Pedic, Inc., any of (a)
the directors of the Company serving on the date hereof, (b) the following
officers of the Company: Robert B. Trussell, Jr., Jeffrey P. Heath, Thomas
Bryant, and David Fogg, (c) with respect to information concerning any
Subsidiary, division or business unit of the Company, the president or most
senior executive of such Subsidiary, division or business unit, and (d) any
person succeeding, prior to the Closing, to the position on the date hereof of
any of the persons indicated in clauses (b) and (c) above.
"Kruse Companies" means Kruse Polstermoebel System GmbH and its
Subsidiaries.
"Kruse Restructuring Costs" means, with respect to any period in which the
operations of the Kruse Companies are discontinued or the Kruse Companies are
sold, the aggregate amount of all losses, costs and expenses incurred in
connection with such discontinuance or sale.
"Liens" means liens, security interests, options, rights of first refusal,
easements, mortgages, charges, pledges, deeds of trust, rights-of-way,
restrictions, encroachments, licenses, leases, permits, security agreements, or
any other encumbrances, restrictions or limitations on the use of real or
personal property, whether or not they constitute specific or floating charges.
"Loss" and "Losses" have the meaning given thereto in Section 9.02(a)
hereof.
"Management Options" has the meaning given thereto in Section 2.07 hereof.
"Management Shareholder" and "Management Shareholders" have the meanings
given thereto in the preamble hereof.
"Management Shareholder Permitted Liens" means restrictions on transfer
under the Securities Act.
"Material Adverse Effect" means, with respect to a specific Person, any
development, condition or circumstance having an effect on the business, assets,
financial condition or results of operations of such Person or any of its
Subsidiaries, that is materially adverse to such Person and its Subsidiaries
taken as a whole.
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"Material Contract" has the meaning given thereto in Section 4.11(a)
hereof.
"Merger" has the meaning given thereto in the recitals hereof.
"Merger Consideration" means, with respect to each Common Share, the Common
Share Merger Consideration, and with respect to each Preferred Share, the
Preferred Share Merger Consideration.
"Mezzanine Credit Facility" means the aggregate $50,000,000 credit facility
to be available to the Surviving Corporation and its Subsidiaries on
substantially the terms set forth in the commitment letter dated September 19,
2002 issued by Gleacher Mezzanine LLC (as general partner of Gleacher Mezzanine
Fund I, L.P., and Gleacher Mezzanine Fund P, L.P.) to TA Associates, Inc. and
Friedman Fleischer & Lowe LLC and the commitment letter dated September 19, 2002
issued by TA Associates, Inc. (as general partner of certain funds) to TA
Associates, Inc. and Friedman Fleischer & Lowe, LLC.
"Net Debt" means (a) the sum of (i) the Indebtedness of the Company and its
Subsidiaries, (ii) to the extent not included in clause (i), the amounts owed by
the Company and its Subsidiaries to the states of California and Florida for
sales and use tax for periods prior to the Closing Date as agreed to in writing
by the Company or any of its Subsidiaries and each such state prior to the date
hereof pursuant to the tax settlement agreements described on Schedule B and as
otherwise agreed to in writing by the Company or any of Subsidiaries and any
such state after the date hereof and prior to the Closing Date (a copy of which
shall be provided to the Parent and the Purchaser prior to the Closing Date),
and (iii) to the extent not included in clause (i), the Company Transaction
Expenses minus (b) the sum of the cash (less outstanding checks or wire payments
of the Company and its Subsidiaries) and Cash Equivalents of the Company and its
Subsidiaries, in each case on a consolidated basis as of the Closing Date
immediately prior to giving effect to the Closing.
"Net Working Capital" means, as at any date, (a) accounts receivable,
inventory, current prepaid expenses and other current assets (excluding cash and
Cash Equivalents) of the Company and its Subsidiaries on a consolidated basis as
of such date minus (b) accounts payable, current accrued expenses (excluding any
accrued expenses relating to the items described on Schedule A) and current
accrued Tax liabilities (excluding accrued income Tax liabilities and accrued
Tax liabilities relating to items described on Schedule A), other than
Indebtedness, of the Company and its Subsidiaries on a consolidated basis as of
such date, all calculated in accordance with GAAP.
"Net Working Capital Target" has the meaning given thereto in Section
3.05(b) hereof.
"Non-Specified Item" shall have the meaning given thereto in Section
9.07(b) hereof.
"Notice of Offering" means that notice of offering to be distributed by
Parent promptly following the execution of this Agreement pursuant to which
Common Shareholders who are accredited investors (as such term is defined under
Regulation D under the Securities Act) will be offered the opportunity to
exchange their Common Shares for Parent Class A Common Stock in accordance with
the Contribution Agreement.
"Notices" shall have the meaning given thereto in Section 10.03 hereof.
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"Option" means an option to purchase Common Shares granted pursuant to the
Option Plan.
"Option Plan" means the Company's Stock Option Plan, as amended from time
to time.
"Parent" has the meaning given thereto in the preamble hereof.
"Parent Class A Common Stock" has the meaning given thereto in Section 5.06
hereof.
"Parent Class B-1 Common Stock" has the meaning given thereto in Section
5.06 hereof.
"Parent Preferred Stock" has the meaning given thereto in Section 5.06
hereof.
"Payee" and "Payees" have the meaning given thereto in Section 3.03(f)
hereof.
"Payee Representatives" has the meaning given thereto in Section 10.12
hereof.
"Paying Agent" has the meaning given thereto in Section 3.02(a) hereof.
"Permits" has the meaning given thereto in Section 4.13.
"Permitted Liens" means (a) Liens for Taxes or assessments or other
governmental charges not yet due and payable; (b) pledges or deposit of money
securing statutory obligations under workmen's compensation, unemployment
insurance, social security or public liability laws or similar legislation
(excluding Liens under ERISA); (c) pledges or deposits of money securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which the Company or any of its Subsidiaries is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers', mechanics'
or similar Liens arising in the ordinary course of business, so long as such
Liens attach only to equipment, fixtures or real property of the Company or any
of its Subsidiaries; (e) carriers', warehousemen's, suppliers' or other similar
possessory liens arising in the ordinary course of business and securing
liabilities in an outstanding aggregate amount not in excess of $50,000 at any
time, so long as such Liens attach only to inventory of the Company or any of
its Subsidiaries; (f) deposits securing, or in lieu of, surety, appeal or
customs bonds in proceedings to which the Company or any of its Subsidiaries is
a party; (g) zoning restrictions or recorded easements affecting the use of any
Real Property or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not impair the use, value, or marketability of
such Real Property; (h) Liens presently existing or hereafter created pursuant
to the TWI Credit Agreement; (i) any leases or subleases entered into in the
ordinary course of business by the Company or any of its Subsidiaries as lessor
with respect to excess or unused owned or leased real property; and (j) Liens
identified on Schedule 4.09 as "Permitted Liens" which will be released as of
the Closing.
"Person" or "person" means individuals, corporations, limited liability
companies, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended).
"Preferred Payee" and "Preferred Payees" have the meaning given thereto in
Section 3.03(f) hereof.
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"Preferred Share" and "Preferred Shares" have the meaning given thereto in
the recitals hereof.
"Preferred Share Merger Consideration" means the sum of (i) the Initial
Preferred Share Closing Payment, payable in cash at the Closing, (ii) the sum of
(A) the Initial Escrow Payment and (B) the Company Adjustment Payment multiplied
by the number of Common Shares into which each Preferred Share is convertible
immediately prior to the Effective Time, payable in cash on the Initial Escrow
Payment Date, and (iii) the Additional Payment multiplied by the number of
Common Shares into which each Preferred Share is convertible immediately prior
to the Effective Time, payable in the manner, and subject to the restrictions,
specified in Section 3.06(c) on the Additional Payment Date.
"Pro Rata Portion" has the meaning given thereto in Section 9.02(d) hereof.
"Purchaser" has the meaning given thereto in the preamble hereof.
"Purchaser Indemnified Parties" has the meaning given thereto in Section
9.02(a) hereof.
"Purchaser Representatives" has the meaning given thereto in Section 6.02
hereof.
"Real Property" has the meaning given thereto in Section 4.09 hereof.
"Redemption Agreement" means the Stock Redemption Agreement, dated
September 25, 2001 among the Company, MONY Life Insurance Company, GE Capital
Equity Investment, Inc., Palmetto Partners, Ltd., Fagerdala Holding B.V., Robert
B. Trussell, Jr. and certain of the Company's other stockholders.
"Refinancing Credit Facility" means any credit agreement or facility which
refinances any of the Indebtedness represented by the Senior Credit Facility or
the Mezzanine Credit Facility.
"Reiners Claims" has the meaning given thereto in Section 9.02(a).
"Reset Date" has the meaning given thereto in Section 3.06(c).
"Rollover Shares" means the aggregate number of Common Shares contributed
to the Parent by the holders thereof pursuant to the Contribution Agreement.
"RCRA" has the meaning given thereto in Section 4.19(a)(i).
"SARA" has the meaning given thereto in Section 4.19(a)(i).
"Securities Act" has the meaning given thereto in Section 4.05(b) hereof.
"Securities Purchase Agreements" means the Securities Purchase Agreement,
dated September 25, 2001, among the Company, MONY Life Insurance Company, GE
Capital Equity Investment, Inc. and Palmetto Partners, Ltd. and the Securities
Purchase Agreement, dated March 25, 2002, between the Company and GE Capital
Equity Investment, Inc.
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"Senior Credit Facility" means the senior credit agreement among certain
Subsidiaries of the Company and their senior lenders to be entered into on the
Closing Date, the proceeds of which will be used in part to finance a portion of
the Aggregate Merger Consideration, including any amendment and restatement of
the TWI Credit Agreement made as of the Closing Date.
"Shares" has the meaning given thereto in the recitals hereof.
"Shareholders" means, collectively, the holders of the Shares issued and
outstanding immediately prior to the Effective Time, other than Shares held by
the Company, the Parent, the Purchaser and their respective Subsidiaries.
"Specified Claims" has the meaning given thereto in Section 9.02(a).
"Specified Item" has the meaning given thereto in Section 9.07(b).
"Subsequent Escrow Payments" means the payment(s) of (i) the portion(s), if
any, of the Escrow Indemnification Amount and the Escrow Specified Amount
payable to the Common Payees under the Escrow Agreement divided by (ii) the
number of Common Shares outstanding and not owned by the Parent, the Purchaser
or the Company immediately prior to the Effective Time.
"Subsequent Escrow Payment Date" means each date on which a Subsequent
Escrow Payment is to be made pursuant to the terms of the Escrow Agreement.
"Subsidiary" or "Subsidiaries" means, with respect to a specific Person,
every corporation, limited liability company, partnership, or other business
organization or entity of which such Person owns, directly or through its
Subsidiaries, (a) more than 50% of (i) the total combined voting power of all
classes of voting securities of such entity, (ii) the total combined equity
interest therein, or (iii) the capital or profits interests therein, in the case
of a partnership or limited liability company; or (b) otherwise has the power to
vote or direct the voting of sufficient securities to elect the majority of the
board of directors or similar governing body of such entity.
"Substantial Loss" has the meaning given thereto in Section 9.02(e) hereof.
"Support Agreements" has the meaning given thereto in the recitals hereof.
"Surviving Corporation" has the meaning given thereto in Section 2.01
hereof.
"Surviving Corporation's Proposed Calculation" has the meaning given
thereto in Section 3.05(c) hereof.
"Taxes" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, worker's compensation, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
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"Tax Returns" means any return, declaration, report, estimate, claim for
refund, or information return, statement or document filed or required to be
filed in connection with the determination, assessment or collection of any
Taxes or the administration of any law, regulation or administrative
requirements relating to any Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"Third-Party Claim" has the meaning given thereto in Section 9.03(b)
hereof.
"Transaction Documents" means, collectively, this Agreement, the
Contribution Agreement, the Support Agreements, the Written Consents and the
Escrow Agreement.
"Treasury Rate" has the meaning given thereto in Section 3.06(c).
"TWI Credit Agreement" means the Credit Agreement, dated September 25,
2001, as amended March 29, 2002, by and among the Company, the Borrowers
referred to therein, the Other Credit Parties referred to therein, the Lenders
referred to therein, Nordea Unibank A/S, as European Loan Agent, and General
Electric Capital Corporation, as U.S. Revolver Agent and Administrative Agent.
"U.S. Plan" has the meaning given thereto in Section 4.16(c) hereof.
"Violation" has the meaning given thereto in Section 4.05(a) hereof.
"Written Consents" has the meaning given thereto in the recitals hereof.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions of this Agreement, and in accordance
with the applicable provisions of this Agreement and the GCL, at the Effective
Time the Purchaser shall be merged with and into the Company. Following the
Merger, the separate corporate existence of the Purchaser shall cease and the
Company shall continue as the surviving corporation and shall succeed to and
assume all the rights and obligations of the Purchaser in accordance with the
GCL. In its capacity as the surviving corporation of the Merger, the Company is
sometimes referred to herein as the "Surviving Corporation."
SECTION 2.02 Closing Effective Time. The closing of the Merger (the
"Closing") will take place as promptly as practicable following the satisfaction
or waiver of the conditions set forth in Sections 7.01, 7.02 and 7.03 of this
Agreement (other than the delivery of customary closing documents) (the "Closing
Date"), at a place, date and time to be mutually agreed upon by the parties
hereto as soon as practicable after all of the conditions to the consummation of
the Merger set forth in Article VII have been satisfied or waived; provided,
however that the Closing shall occur on a date which is not more than five (5)
days before or after the last Business Day of a month. Immediately following the
Closing, the parties hereto shall cause the Merger to become effective by filing
a Certificate of Merger with the Secretary of State of the State of Delaware, in
accordance with
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the relevant provisions of the GCL (the effective time of the Merger as
specified in the Certificate of Merger being the "Effective Time") and shall
make all other filings or recordings required under the GCL.
SECTION 2.03 Effects of the Merger.
(a) The Merger shall have the effects set forth in this Agreement and
the GCL.
(b) The Certificate of Incorporation of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation, until thereafter amended in
accordance with the provisions thereof and hereof and applicable law; provided
that Article First of the Certificate of Incorporation shall be amended to read
as follows: "The name of the Corporation is Tempur World, Inc."
(c) Subject to the provisions of Section 6.06 of this Agreement, the
By-Laws of the Purchaser in effect at the Effective Time shall be the By-Laws of
the Surviving Corporation until amended in accordance with the provisions
thereof and applicable law.
(d) Subject to applicable law, the directors of the Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation and shall hold office until their respective successors
are duly elected and qualified, or their earlier death, resignation or removal.
(e) The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation and shall hold
office until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal.
SECTION 2.04 Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
deeds, bills of sale, assignments or assurances in law or any other acts are
necessary or desirable to (a) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its rights, title or interest in, to or under any
of the rights, properties or assets of the Company or its Subsidiaries, or (b)
otherwise carry out the provisions of this Agreement, the Company and its
officers and directors shall be deemed to have granted the Surviving Corporation
an irrevocable power of attorney, coupled with an interest, to execute and
deliver all such deeds, bills of sale, assignments or assurances in law and to
take all acts necessary, proper or desirable to vest, perfect or confirm title
to and possession of such rights, properties or assets in the Surviving
Corporation and otherwise to carry out the provisions of this Agreement, and the
officers and directors of the Surviving Corporation are authorized in the name
of the Company or otherwise to take any and all such action.
SECTION 2.05 Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof, (a) each
Common Share issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares and Common Shares held by the Company, the Parent
(including the Rollover Shares), the Purchaser and their respective
Subsidiaries) shall be converted into the right to receive the Common Share
Merger Consideration, (b) each Preferred Share issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares and
Preferred Shares held by the Company, the Parent, the
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Purchaser and their respective Subsidiaries) shall be converted into the right
to receive the Preferred Share Merger Consideration, and (c) each Common Share
or Preferred Share owned by the Company, the Parent or one of their respective
Subsidiaries shall be canceled without payment and without surrender of the
certificate formerly representing such Common Shares or Preferred Shares. All
such Common Shares and Preferred Shares, when so converted, shall no longer be
outstanding and shall be deemed to have been automatically cancelled and each
holder of a certificate or certificates which immediately prior to the Effective
Time represented any such Common Shares or Preferred Shares shall cease to have
any rights with respect thereto, except the right to receive the applicable
Merger Consideration, without interest.
SECTION 2.06 Conversion of Purchaser Stock. At the Effective Time,
each share of common stock, par value $0.01 per share, of the Purchaser issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and non-assessable share of
common stock, par value $0.01 per share, of the Surviving Corporation.
SECTION 2.07 Company Stock Options. As soon as practicable following
the date of this Agreement, the Company shall take such actions as are
reasonably required to provide that immediately prior to the Effective Time,
each then outstanding Option, whether or not then exercisable, other than
Options held by the individuals listed on Schedule 2.07 shall (a) accelerate and
fully and immediately vest, and (b) be simultaneously canceled in exchange for
Common Shares pursuant to the terms of the Option Plan. The outstanding Options
to be canceled in exchange for Common Shares pursuant to the immediately
preceding sentence are referred to as the "Exchange Options" and shall not be
deemed to be Options issued and outstanding immediately prior to the Effective
Time; provided, however, that the Common Shares issued in connection with the
cancellation of the Exchange Options shall be deemed to be outstanding
immediately prior to the Effective Time and shall be subject to the provisions
of Section 2.05 and the other relevant provisions of this Agreement. Prior to
taking the actions described above in this Section 2.07, the Company shall have
entered into agreements with the holders of the Options listed on Schedule 2.07
(the "Management Options") terminating the Management Options effective upon the
Effective Time. For purposes of this Agreement, the Management Options shall be
deemed to be Options outstanding immediately prior to the Effective Time.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES;
ADJUSTMENTS TO PAYMENT FOR SHARES
SECTION 3.01 Appraisal Rights; Dissenting Shares.
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(a) As soon as practicable after the date hereof, the Parent shall
prepare a notice of appraisal rights containing the information required by
Section 262 of the GCL and deliver such notice to the Company. Within three (3)
business days after the date of delivery of such notice, the Company shall mail
to each record holder of Certificates as of a record date fixed in accordance
with Section 262 of the GCL a copy of such notice. Within ten (10) days after
the Effective Time, the Surviving Corporation shall cause the Paying Agent to
mail to each holder of Certificates that immediately prior to the Effective Time
represented Dissenting Shares a notice of appraisal rights containing the
information required by Section 262 of the GCL.
(b) Notwithstanding anything in this Agreement to the contrary,
Shares outstanding immediately prior to the Effective Time and held by a holder
who has demanded appraisal for such Shares or is otherwise entitled to appraisal
rights in accordance with Section 262 of the GCL, if such Section 262 provides
for appraisal rights for such shares in the Merger ("Dissenting Shares"), shall
not be converted into the right to receive the Merger Consideration as provided
in Section 2.05, unless and until such holder fails to perfect or withdraws or
otherwise loses his right to appraisal and payment under the GCL. If, after the
Effective Time, any such holder fails to perfect or withdraws or loses his right
to appraisal, such Dissenting Shares shall thereupon be treated as if they had
been converted as of the Effective Time into the right to receive the Merger
Consideration, if any, to which such holder is entitled, without interest or
dividends thereon. The Company shall give the Purchaser prompt notice of any
demands received by the Company for appraisal of Shares and the Purchaser 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, except with
the prior written consent of the Purchaser, make any payment with respect to, or
settle or offer to settle, any such demands.
SECTION 3.02 Payment of Initial Common Share Closing Payment and
Initial Preferred Share Closing Payment.
(a) From and after the Effective Time, Fifth Third Bank, or such
other bank or trust company as shall be mutually acceptable to the Purchaser and
the Company, shall act as paying agent (the "Paying Agent") in effecting the
payment of the Initial Common Share Closing Payments and the Initial Preferred
Share Closing Payments in respect of certificates (the "Certificates") that,
prior to the Effective Time, represented Common Shares or Preferred Shares
entitled to payment of the applicable Merger Consideration pursuant to Section
2.05. At the Effective Time, the Purchaser shall deposit, or cause to be
deposited, in trust with the Paying Agent the aggregate Initial Common Share
Closing Payments and the aggregate Initial Preferred Share Closing Payments to
which holders of Common Shares and Preferred Shares shall be entitled at the
Effective Time pursuant to Section 2.05 (such cash being hereinafter referred to
as the "Exchange Fund"). The Exchange Fund shall be invested by the Paying Agent
as directed by the Parent, provided that such investments shall be (i)
securities issued directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (ii) certificates of deposit,
eurodollar time deposits and bankers' acceptances with maturities not exceeding
six months and overnight bank deposits with any commercial bank, depository
institution or trust company incorporated or doing business under the laws of
the United States of America, any state thereof or the District of Columbia,
provided that such commercial bank, depository institution or trust company has,
at the time of investment, (A) capital and surplus exceeding $250 million and
(B) outstanding short-term debt securities which are rated at least A-1
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by Standard & Poor's Rating Group Division of The McGraw-Hill Companies, Inc. or
at least P-1 by Moody's Investors Service, Inc. and (iii) money market mutual or
similar funds having assets in excess of $1 billion. Any net profit resulting
from, or interest or income produced by, such investments will be payable to the
Parent upon the Parent's request.
(b) Promptly after the Effective Time, the Paying Agent shall mail to
each record holder of Certificates (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 proper delivery of the Certificates and a
properly completed letter of transmittal to the Paying Agent and which shall
contain a representation and warranty of the holder as to title to, and the
absence of any Liens on, the Common Shares or Preferred Shares represented by
the Certificates and authority of the holder to execute and deliver the letter
of transmittal and deliver the Certificates), and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Initial Common
Share Closing Payments or the Initial Preferred Share Closing Payments, as
applicable. Such letter of transmittal and instructions shall be in
substantially the form of Annex 3.02(a) (as to Common Shares) and Annex 3.02(b)
(as to Preferred Shares). The Parent shall instruct the Paying Agent to make
such letters of transmittal available at the location of the Closing, and shall
cause the Paying Agent to be available at such location to receive, from record
holders of Certificates wishing to surrender them, such letters of transmittal
along with the related Certificates, and shall instruct the Paying Agent to pay
on the Closing Date the Initial Common Share Closing Payments or the Initial
Preferred Share Closing Payments, as applicable, to all holders of Certificates
that have provided to the Paying Agent all documents required under this Section
3.02(b) at least 3 Business Days in advance of the Closing Date. Upon the
surrender of each such Certificate and a properly completed letter of
transmittal, the Paying Agent shall, in consideration for the shares represented
by such Certificates, (A) pay the holder of each such Certificate for Preferred
Shares the Initial Preferred Share Closing Payment multiplied by the number of
Preferred Shares formerly represented by such Certificate, in consideration
therefor, and such Certificate shall forthwith be canceled and (B) pay the
holder of each such Certificate for Common Shares the Initial Common Share
Closing Payment multiplied by the number of Common Shares formerly represented
by such Certificate, in consideration therefor, and such Certificate shall
forthwith be canceled. Until so surrendered, each such Certificate (other than
Certificates representing Dissenting Shares and Certificates representing Shares
held by the Parent (including Rollover Shares), the Purchaser, the Company or
their respective Subsidiaries) shall represent solely the right to receive the
aggregate Merger Consideration relating thereto. No interest or dividends shall
be paid or accrued on the Merger Consideration. If the Initial Common Share
Closing Payments or Initial Preferred Share Closing Payments (or any portion
thereof) are to be delivered to any person other than the person in whose name
the Certificate formerly representing Shares surrendered therefor is registered,
it shall be a condition to such right to receive such Initial Common Share
Closing Payments or Initial Preferred Share Closing Payments that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person surrendering such Shares shall pay to the
Paying Agent any transfer or other taxes required by reason of the payment of
the Initial Common Share Closing Payments or Initial Preferred Share Closing
Payments to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable.
SECTION 3.03 General Provisions Regarding Payment for Shares.
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(a) Promptly following the date which is 180 days after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, holders of Shares shall look only to the Surviving Corporation for
payment of the Merger Consideration in respect thereof (subject to applicable
abandoned property, escheat and similar laws), in each case, without interest or
dividends thereon, provided that the Initial Escrow Payment and Subsequent
Escrow Payments shall be made by the Escrow Agent from the Escrow Adjustment
Amount and the Escrow Amount in accordance with the terms of the Escrow
Agreement.
(b) None of the Purchaser, the Surviving Corporation or the Paying
Agent shall be liable to any person in respect of any Shares (or dividends or
distributions with respect thereto) or cash deposited by the Purchaser with the
Paying Agent that is delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time (or immediately
prior to such earlier date on which any cash would otherwise escheat to or
become the property of any Governmental Entity), any such cash in respect of
such Certificate shall, to the extent permitted by applicable law, become the
property of the Purchaser, free and clear of all claims or interest of any
person previously entitled thereto.
(c) The Purchaser and the Paying Agent shall be entitled to deduct
and withhold from the consideration otherwise payable or issuable pursuant to
this Agreement to any holder of Shares such amounts as the Purchaser or the
Paying Agent is required to deduct and withhold with respect to such payment or
issuance under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holders of Shares
in respect of which such deduction and withholding was made.
(d) All cash paid upon surrender of Certificates in accordance with
the terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Common Shares and Preferred Shares formerly represented
thereby, other than the right to receive (i) with respect to each Common Share,
the Common Share Merger Consideration in excess of the Initial Common Share
Closing Payment, and (ii) with respect to each Preferred Share, the Preferred
Share Merger Consideration in excess of the Initial Preferred Share Closing
Payment. After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Common Shares or Preferred
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates formerly representing Common Shares or
Preferred Shares are presented to the Surviving Corporation or the Paying Agent,
they shall be surrendered and canceled in return for the payment of (x) with
respect to each Common Share relating thereto, the Initial Common Share Closing
Payment (and (i) if the Initial Escrow Payment Date has occurred, the payment by
the Escrow Agent of the Initial Escrow Payment and the payment by the Surviving
Corporation of the Company Adjustment Payment, (ii) if any Subsequent Escrow
Payment Dates have occurred, the payment by the Escrow Agent of the Subsequent
Escrow Payments payable with respect to such dates, and (iii) if the Additional
Payment Date has occurred, the payment by the Surviving Corporation of the
Additional Payment) deliverable in respect thereof as determined in accordance
herewith, and (y) with respect to each Preferred Share relating thereto, the
Initial Preferred Share Closing Payment (and (i) if the Initial Escrow Payment
Date has occurred, the
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payment by the Escrow Agent of the Initial Escrow Payment and the payment by the
Surviving Corporation of the Company Adjustment Payment and (ii) if the
Additional Payment Date has occurred, the payment by the Surviving Corporation
of the Additional Payment) deliverable in respect thereof as determined in
accordance herewith, subject in each case to applicable law in the case of
Dissenting Shares.
(e) In the event 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 subject to such other
conditions as the Board of Directors of the Surviving Corporation may impose,
the Surviving Corporation or the Paying Agent shall pay, (x) in exchange for
each Common Share represented by such lost, stolen or destroyed Certificate, the
Initial Common Share Closing Payment (and (i) if the Initial Escrow Payment Date
has occurred, the Escrow Agent shall pay the Initial Escrow Payment and the
Surviving Corporation shall pay the Company Adjustment Payment, (ii) if any
Subsequent Escrow Payment Dates have occurred, the Escrow Agent shall pay the
Subsequent Escrow Payments payable with respect to such dates, and (iii) if the
Additional Payment Date has occurred, the Surviving Corporation shall pay the
Additional Payment) deliverable in respect thereof as determined in accordance
herewith, and (y) in exchange for each Preferred Share represented by such lost,
stolen or destroyed Certificate, the Initial Preferred Share Closing Payment
(and (i) if the Initial Escrow Payment Date has occurred, the payment by the
Escrow Agent of the Initial Escrow Payment and the payment by the Surviving
Corporation of the Company Adjustment Payment and (ii) if the Additional Payment
Date has occurred, the payment by the Surviving Corporation of the Additional
Payment) deliverable in respect thereof as determined in accordance herewith.
When authorizing such payment of the Merger Consideration or portion thereof in
exchange therefor, the Board of Directors of the Surviving Corporation (or any
authorized officer thereof) may, in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to give the Surviving Corporation a bond in such sum as the Board of
Directors may direct as indemnity against any claim that may be made against the
Surviving Corporation with respect to the Certificate alleged to have been lost,
stolen or destroyed.
(f) The Initial Escrow Payments shall be paid by the Escrow Agent
only to the Persons to whom the Initial Common Share Closing Payments were paid
or such Persons' written designees (each, a "Common Payee" and, collectively,
the "Common Payees") and the Persons to whom the Initial Preferred Share Closing
Payments were paid or such Persons' written designees (each, a "Preferred Payee"
and, collectively, the "Preferred Payees" and collectively with the Common
Payees, the "Payees"), as applicable, the Subsequent Escrow Payments shall be
paid by the Escrow Agent only to the Common Payees and the Company Adjustment
Payments and the Additional Payments shall be paid by the Surviving Corporation
or its Affiliate only to the Common Payees and the Preferred Payees, provided
that in each case where any such Payee is a written designee in accordance with
this Section 3.03(f), the Surviving Corporation shall have received evidence
reasonably satisfactory to it that such designee is rightfully entitled to the
Initial Escrow Payments, the Company Adjustment Payments, the Subsequent Escrow
Payments and the Additional Payments, as applicable.
SECTION 3.04 Escrowed Funds.
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(a) From and after the Effective Time, Fifth Third Bank, or such
other bank or trust company as shall be mutually acceptable to the Purchaser and
the Company, shall act as escrow agent (the "Escrow Agent") in effecting any
payments of the Initial Escrow Payments, the Initial Company Escrow Release, the
Subsequent Escrow Payments and any disbursements to the Purchaser Indemnified
Parties in connection with indemnification claims under Article IX hereof. At
the Effective Time, the Purchaser shall deposit, or cause to be deposited, in
trust with the Escrow Agent the Escrow Adjustment Amount and the Escrow Amount,
pursuant to the terms of the Escrow Agreement.
(b) The Initial Escrow Payments and the Initial Company Escrow
Release shall be calculated and paid in the amounts and at the times determined
in accordance with Section 3.05 below.
(c) All Subsequent Escrow Payments shall be paid at the times
determined in accordance with the Escrow Agreement.
(d) Notwithstanding any provision of this Agreement to the contrary,
the Escrow Agreement shall govern the allocation and payment of interest earned
on the Escrow Amount and the Escrow Adjustment Amount.
SECTION 3.05 Initial Adjustment; Subsequent Adjustment.
(a) At the Closing, the Company shall have prepared and delivered to
the Purchaser (i) an unaudited consolidated balance sheet of the Company as of
the close of business on the last day of the month immediately preceding the
month in which the Closing Date occurs or, in the event the Closing Date occurs
prior to the 21st day of the month, the last day of the month that is two months
prior to the month in which the Closing Date occurs (the "Calculation Date"),
prepared in accordance with GAAP, except for normal recurring year-end
adjustments and the absence of footnotes (the "Initial Closing Statement"), and
(ii) a certificate of the Chief Executive Officer and Chief Financial Officer of
the Company, (A) certifying that the Initial Closing Statement was prepared on
the basis described in clause (i) above and (B) containing the Company's
calculation based on the Initial Closing Statement of the Net Working Capital as
of the Calculation Date (the "Calculation Date Net Working Capital").
(b) If the Calculation Date Net Working Capital is less than
$42,000,000 (the "Net Working Capital Target"), then the amount of such
shortfall shall be the "Initial Net Working Capital Adjustment." If the
Calculation Date Net Working Capital is equal to or greater than the Net Working
Capital Target, the Initial Net Working Capital Adjustment shall be zero. The
amount of the Initial Net Working Capital Adjustment determined pursuant to this
paragraph (b) shall be used to calculate the Initial Adjustment Deduction at
Closing, which in turn shall be used to calculate the Initial Common Share
Closing Payment and the Initial Preferred Share Closing Payment at Closing.
(c) Within one hundred twenty (120) days after the Closing Date, the
Surviving Corporation shall cause to be prepared and delivered to the Parent an
audited consolidated balance sheet (audited by the Louisville, Kentucky office
and/or Cincinnati, Ohio office of Ernst & Young, LLP) as of the Closing Date,
immediately prior to giving effect to the Closing, prepared in accordance with
GAAP, except for normal recurring year-end adjustments and the absence of
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footnotes (the "Final Closing Statement"), provided that in the event that
Closing does not occur on the last Business Day of the month but occurs on a
date which is no more than five (5) days before or after such last Business Day
of a month, then for purposes of this Section 3.05, the Closing Date shall be
deemed to be such last Business Day of the month. The Surviving Corporation
shall bear the cost of the preparation of the Final Closing Statement. The
Surviving Corporation shall permit the accountants for the Parent and the Payee
Representatives at the earliest practicable date to review and make copies of
all work papers, schedules and calculations used in the preparation of the Final
Closing Statement, subject to the execution by the Parent and the Payee
Representatives of any customary release or indemnification agreement required
by and for the benefit of the Louisville, Kentucky office and/or Cincinnati,
Ohio office of Ernst & Young, LLP. Inventories included in the Final Closing
Statement shall be valued on the basis of a physical inventory conducted by the
Company and the Parent on or about the Closing Date. When the Surviving
Corporation delivers the Final Closing Statement, the Surviving Corporation
shall also deliver a certificate (i) certifying that the Final Closing Statement
was prepared in accordance with GAAP in accordance with the procedures set forth
in paragraph (a) above and (ii) containing the Surviving Corporation's
calculations, based on the Final Closing Statement (the "Surviving Corporation's
Proposed Calculation") of the Net Working Capital as of the Closing Date. A copy
of the Final Closing Statement shall be provided to the Preferred Payees
promptly upon its completion.
(d) In the event that neither Parent nor any Payee Representative has
disputed, within thirty (30) days after receipt of the Final Closing Statement,
the Surviving Corporation's Proposed Calculation of the Net Working Capital as
of the Closing Date, such Surviving Corporation's Proposed Calculation shall be
final and binding on the Payee Representatives, the Payees, the Parent and the
Surviving Corporation. In the event that the Parent or either Payee
Representative disputes the Surviving Corporation's Proposed Calculation of the
Net Working Capital as of the Closing Date, the Surviving Corporation agrees to
make available to the Parent, upon request, all books, records, financial
statements, work papers, schedules and calculations related thereto. Any dispute
regarding the calculation of the Net Working Capital as of the Closing Date
arising under this Section 3.05(d) is to be resolved in the following manner:
(i) The Parent or the Payee Representatives, as applicable, or
either Payee Representative shall, within thirty (30) days after receipt of the
Final Closing Statement, notify the Surviving Corporation in writing of any such
dispute, which notice shall specify in reasonable detail the nature of the
dispute;
(ii) During the 30-day period following the Surviving
Corporation's receipt of such notice, the Payee Representatives, the Parent and
the Surviving Corporation shall attempt to resolve such dispute and to determine
the appropriate calculations of the Net Working Capital as of the Closing Date;
and
(iii) If at the end of the 30-day period specified in subsection
(ii) above, the Payee Representatives, the Parent and the Surviving Corporation
shall have failed to reach a written agreement with respect to such dispute or
the Parent and/or the Payee Representatives, as applicable, have not withdrawn
all objections, the matter shall be referred to Deloitte & Touche, or other
reputable accounting firm acceptable to the Parent and the Payee Representatives
that does not have a relationship with the Parent, the Purchaser, the Surviving
Corporation, any of the Payee
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Representatives or their respective Affiliates (the "Arbitrator"), which shall
act as an arbitrator and shall issue its report resolving all disputes as to the
calculation of the Net Working Capital as of the Closing Date within sixty (60)
days after such dispute is referred to it. The Net Working Capital as of the
Closing Date, as agreed to by the Parent, the Surviving Corporation and the
Payee Representatives or determined by the Arbitrator, shall be final and
binding on the Parent, Surviving Corporation, the Payee Representatives and the
Payees. Each of the parties to any dispute shall bear all of its costs and
expenses related to such dispute, except that the fees and expenses of the
Arbitrator hereunder with respect to such dispute shall be borne by either the
Surviving Corporation or the Payee Representatives, whichever party's estimate
of the Net Working Capital as of the Closing Date was farthest from that
determined by agreement of such parties or by the Arbitrator. This provision for
arbitration shall be specifically enforceable by the Surviving Corporation and
the Payee Representatives, and the decision of the Arbitrator in accordance with
the provisions hereof shall be final and binding and there shall be no right of
appeal therefrom.
(e) Upon the determination, pursuant to paragraph (d) of this Section
3.05, of the Final Closing Statement and the Net Working Capital as of the
Closing Date, the Final Net Working Capital Adjustment, the Initial Escrow
Payment, the Initial Company Escrow Release and the Company Adjustment Amount
shall be calculated pursuant to this paragraph (e). If the Net Working Capital
as of the Closing Date is less than the Net Working Capital Target, then the
amount of such shortfall shall be the "Final Net Working Capital Adjustment." If
the Net Working Capital as of the Closing Date is equal to or greater than the
Net Working Capital Target, the Final Net Working Capital Adjustment shall be
zero. The "Initial Company Escrow Release" shall equal (A) if (i) the Common
Share Percentage multiplied by (ii) the Final Net Working Capital Adjustment
exceeds (x) the Common Share Percentage multiplied by (y) the Initial Net
Working Capital Adjustment, the amount of such excess, and (B) if the Final Net
Working Capital Adjustment equals or is less than the Initial Net Working
Capital Adjustment, zero. The "Initial Shareholder Escrow Release" shall equal
(A) if the Final Net Working Capital Adjustment is less than or equal to the
Initial Net Working Capital Adjustment, the Escrow Adjustment Amount, (B) if (i)
the Common Share Percentage multiplied by (ii) the Final Net Working Capital
Adjustment exceeds (x) the Common Share Percentage multiplied by (y) the Initial
Net Working Capital Adjustment by an amount equal to or in excess of the Escrow
Adjustment Amount, zero, and (C) if (i) the Common Share Percentage multiplied
by (ii) the Final Net Working Capital Adjustment exceeds (x) the Common Share
Percentage multiplied by (y) the Initial Net Working Capital Adjustment by an
amount less than the Escrow Adjustment Amount, the difference between such
excess and the Escrow Adjustment Amount. The "Company Adjustment Amount" shall
equal (A) if (i) the Common Share Percentage multiplied by (ii) the Final Net
Working Capital Adjustment is less than (x) the Common Share Percentage
multiplied by (y) the Initial Net Working Capital Adjustment, the amount of such
shortfall, and (B) if the Final Net Working Capital Adjustment exceeds or equals
the Initial Net Working Capital Adjustment, zero. The Initial Shareholder Escrow
Release as determined pursuant to this paragraph (e) shall be used to calculate
the Initial Escrow Payment. The Company Adjustment Amount as determined pursuant
to this paragraph (e) shall be used to calculate the Company Adjustment Payment.
Promptly upon the final determination of the Net Working Capital as of the
Closing Date in accordance with paragraph (d) above, (i) the Parent, the
Surviving Corporation and the Payee Representatives agree to execute and deliver
to the Escrow Agent written disbursement instructions authorizing the Escrow
Agent to make promptly (x) the Initial Escrow Payments, if any, to the Payees
and (y) the Initial Company Escrow Release, if any, to the Surviving
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Corporation, in accordance with the terms of the Escrow Agreement and (ii) the
Surviving Corporation shall promptly pay the Company Adjustment Payments (if
any) to the Payees. The Initial Company Escrow Release, if any, shall be paid by
the Escrow Agent from the Escrow Adjustment Amount and, to the extent that the
Escrow Adjustment Amount is not sufficient to pay the Initial Company Escrow
Release, from the Escrow Indemnification Amount.
SECTION 3.06 Payment of Additional Payments.
(a) As soon as practicable following the completion of the Surviving
Corporation's financial statement audit for calendar year 2003, but in any event
by no later than March 31, 2004, Parent shall, and shall cause the Surviving
Corporation to promptly deliver to the Payee Representatives and each of the
Preferred Payees a balance sheet and related statements of operations, retained
earnings and cash flows for calendar year 2003, prepared in accordance with GAAP
and audited by Ernst & Young LLP. Such financial statements shall also be
accompanied by a detailed schedule in the form of the attached Annex 3.06(a)
setting forth Company EBITDA and Company Consolidated Net Revenues (the "EBITDA
Statement"), which shall have been audited by Ernst & Young LLP. Parent shall,
and shall cause the Surviving Corporation to, deliver a copy of the EBITDA
Statement to each of the Preferred Payees.
(b) In the event neither of the Payee Representatives has disputed,
within forty (40) days after receipt of the EBITDA Statement, the calculation of
Company EBITDA or Company Consolidated Net Revenues, such calculation shall be
final and binding on all Payees, the Surviving Corporation and the Parent, and
the Surviving Corporation shall, and the Parent shall cause the Surviving
Corporation to, pay the Additional Payments to the Payees, in the manner
specified in Section 3.06(c), promptly after the earlier of the receipt by the
Surviving Corporation of written statements from all of the Payee
Representatives confirming that they do not dispute such calculations and the
expiration of such 40-day period. In the event either of the Payee
Representatives disputes the calculation of Company EBITDA or Company
Consolidated Net Revenues, the Parent shall cause the Surviving Corporation to
make available to the Payee Representatives, upon request, all books, records,
financial statements, work papers, schedules and calculations related thereto.
Any dispute regarding the calculation of Company EBITDA or Company Consolidated
Net Revenues arising under this Section 3.06(b) is to be resolved in the
following manner:
(i) Either of the Payee Representatives shall, within thirty
(30) days after receipt of the EBITDA Statement, notify the Surviving
Corporation in writing of any such dispute, which notice shall specify in
reasonable detail the nature of the dispute;
(ii) During the 10-day period following the Surviving
Corporation's receipt of such notice, the Payee Representatives, the Parent and
the Surviving Corporation shall attempt to resolve such dispute and to determine
the appropriate calculation of Company EBITDA and/or Company Consolidated Net
Revenues, as applicable; and
(iii) If at the end of the 10-day period specified in subsection
(ii) above, the Payee Representatives, Parent and the Surviving Corporation
shall have failed to reach a written agreement with respect to such dispute or
the Payee Representatives have not withdrawn their objection, the matter shall
be referred to the Arbitrator which shall act as an arbitrator and shall issue
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its report resolving all disputes as to the calculation of Company EBITDA and/or
Company Consolidated Net Revenues, as applicable, within thirty-five (35) days
after such dispute is referred to it. Company EBITDA and/or Company Consolidated
Net Revenues, as applicable, as agreed to by the Parent, the Surviving
Corporation and the Payee Representatives or determined by the Arbitrator, shall
be final and binding on the Surviving Corporation, the Parent, the Payee
Representatives and the Payees. Each of the parties to any dispute shall bear
its costs and expenses incurred in connection with any arbitration related to
such dispute, except that the fees and expenses of the Arbitrator hereunder with
respect to such dispute shall be borne by either the Surviving Corporation or
the Payee Representatives, whichever party's estimate of Company EBITDA and/or
Company Consolidated Net Revenues, as applicable, was farthest from that
determined by agreement of such parties or by the Arbitrator. This provision for
arbitration shall be specifically enforceable by the Surviving Corporation and
the Payee Representatives, and the decision of the Arbitrator in accordance with
the provisions hereof shall be final and binding and there shall be no right of
appeal therefrom. Within fifteen (15) days after the final determination of
Company EBITDA and/or Company Consolidated Net Revenues, as applicable, the
Surviving Corporation shall, and Parent shall cause the Surviving Corporation
to, pay the Additional Payments to each of the Payees, in the manner, and
subject to the restrictions, specified in Section 3.06(c).
(c) The Surviving Corporation shall pay the Additional Payments, if
any, and the Parent shall cause the Additional Payments, if any, to be made to
the Payees by check or wire transfer; provided, that in the event that any cash
payment by the Surviving Corporation of any portion of the aggregate Additional
Payments (or the distribution to the Surviving Corporation by any of its
Subsidiaries of funds to make any portion of such cash payment) is, at the time
such payment would otherwise be due hereunder, prohibited by the terms of the
Senior Credit Facility, the Mezzanine Credit Facility or any Refinancing Credit
Facility (each as amended and in effect from time to time), the Surviving
Corporation shall be entitled to pay the aggregate Additional Payments payable
to each Payee by delivering to each Payee a check or wire transfer in an amount
equal to that portion of the aggregate Additional Payments payable to such Payee
which are not so prohibited, and the balance of the aggregate Additional
Payments payable to such Payee shall be deferred in accordance with this Section
3.06(c). The proportion of the cash portion (if any) to the deferred portion of
the aggregate Additional Payments payable to each Payee shall be identical for
each Payee. Such deferred portion of the aggregate Additional Payments (the
"Deferred Additional Payments") shall bear interest from the Additional Payment
Date at an initial rate equal to the Treasury Rate as of the Additional Payment
Date plus the Initial Spread, and such interest rate shall be reset as of the
last day of each six-month interval after such date (each, a "Reset Date") at
the Applicable Rate (as hereinafter defined) in effect at such Reset Date until
paid in full. As used herein, the "Applicable Rate" shall mean, as of any Reset
Date, the sum of (i) the Treasury Rate on such Reset Date plus (ii) the Adjusted
Spread (as hereinafter defined) for such Reset Date; provided, that during such
periods as the Senior Credit Facility, the Mezzanine Credit Facility and any
Refinancing Credit Facility meet the Interest Rate Cap Criteria, the Applicable
Rate shall not exceed 15-1/2% or be less than 12-1/2%. The "Treasury Rate" shall
mean, with respect to any date, the yield to maturity on a 1-year U.S. Treasury
Note issued on such date, or if no 1-year U.S. Treasury Notes were issued on
such date, on the date on which 1-year U.S. Treasury Notes were most recently
issued. The "Adjusted Spread" shall mean, as of any Reset Date, the sum of (i)
the Initial Spread plus (ii) the lesser of (A) 3% or (B) the product (calculated
as a percentage) of 0.75 multiplied by the number of Reset Dates that have
occurred on or prior to such Reset Date. The "Initial Spread" shall mean the
difference between (i) 12-1/2% and (ii) the Treasury Rate as of the Closing
Date. The
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"Interest Rate Cap Criteria" shall mean that the financing agreements under the
Senior Credit Facility, the Mezzanine Credit Facility and any Refinancing Credit
Facility provide for all of the following terms: absent an event of default, (x)
no excess cash flow of the Surviving Corporation and its Subsidiaries for the
calendar year 2003 will be required to be applied as a mandatory prepayment of
the indebtedness owed under such financing agreements unless the Deferred
Additional Payments have been paid in full in cash, (y) the percentages of
excess cash flow of the Surviving Corporation and its Subsidiaries required to
be applied to mandatory prepayments under such financing agreements will be the
same as those set forth in the Commitment Letters and (z) any excess cash flow
of the Surviving Corporation and its Subsidiaries for any period after the
calendar year 2003 required to be applied as a mandatory prepayment of the
indebtedness under such financing agreements will be calculated after deduction
of, or reduced by the amount of, the interest on the Deferred Additional
Payments accrued during such period. The Deferred Additional Payments (plus
accrued interest thereon) shall (i) be payable in such installments and at such
times as are permitted under the terms of the Senior Credit Facility, the
Mezzanine Credit Facility and any Refinancing Credit Facility (as amended and in
effect from time to time) and (ii) be subordinated to the indebtedness of the
Surviving Corporation and its Subsidiaries under the Senior Credit Facility, the
Mezzanine Credit Facility and any Refinancing Credit Facility (each as amended
and in effect from time to time) on terms satisfactory to the holders of
indebtedness under such facilities. The Payee Representatives will execute such
subordination agreements as are required from time to time by the holders of
indebtedness under the Senior Credit Facility, the Mezzanine Credit Facility and
any Refinancing Credit Facility to evidence the terms of such subordination. The
right to receive any Deferred Additional Payments shall not be assignable except
by operation of law without the prior written consent of the Surviving
Corporation, which may be withheld in its absolute discretion. The Surviving
Corporation shall not have any right of offset against any Additional Payment
payable to a Payee if such Payee does not owe any amount to the Surviving
Corporation.
(d) The parties hereto acknowledge and agree that (i) the provisions
of the Additional Payment definition are based on GAAP and (ii) Company EBITDA
and Company Consolidated Net Revenues shall be calculated without regard to any
changes to the accounting practice and procedures of the Company that are
implemented by the Parent or the Surviving Corporation after the Closing Date.
In the event that the Parent or the Surviving Corporation sells or disposes of
any subsidiary or division between the Closing Date and December 31, 2003, the
Surviving Corporation and the Purchaser Representatives shall agree on
adjustments to Company EBITDA and Company Consolidated Net Revenues to reflect
the changes to Company EBITDA and Company Consolidated Net Revenues that result
from such sale or disposition. The Parent and the Purchaser further covenant and
agree that during the Additional Payment Restriction Period, (A) no loans,
distributions or other payments shall be made by the Parent or any of its
Subsidiaries to any Investor (as defined in the Contribution Agreement) or their
respective Affiliates (other than transaction fees and costs paid at the Closing
and other than reimbursement of reasonable out-of-pocket expenses incurred by
them from time to time after the Closing), (B) neither the Parent nor the
Surviving Corporation will close any Disposition Event (other than pursuant to a
foreclosure or the exercise of other remedies after default by the holders of
indebtedness under the Senior Credit Facility, the Mezzanine Credit Facility and
any Refinancing Facility and other than any Disposition Event in connection with
the closing of which all of the Additional Payments, together with any interest
accrued with respect thereto, are paid in full in cash), (C) the Parent shall
not pay any dividends on any of its capital stock and (D) neither the Parent nor
any of its Subsidiaries shall
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repurchase, redeem or otherwise acquire any equity interest of the Parent or any
of its Subsidiaries; provided, however, that the Parent or any of its
Subsidiaries may purchase any equity interests held by an employee in connection
with termination of such employee's employment with the Parent or any of its
Subsidiaries. From and after the date on which any interest begins to accrue on
the Deferred Additional Payments, until the date on which all payments of the
Deferred Additional Payments (including all interest due and payable thereon)
have been made in cash, the Surviving Corporation shall deliver to the Payee
Representatives and each of the Preferred Payees copies of the audited annual
financial statements and unaudited quarterly financial statement of the
Surviving Corporation promptly after such financial statements become available,
subject to receipt by the Surviving Corporation of a confidentiality agreement
in the form of Annex 3.06(d) hereto, signed by the Payee Representatives and
each of the Preferred Payees.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that, except as set
forth in the Schedules hereto, as of the date hereof (or such other later date
as is specified) and as of the Closing Date:
SECTION 4.01 Organization and Qualification; Subsidiaries. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Set forth on Schedule 4.01 is a list of
all of the Company's Subsidiaries specifying the jurisdiction of its
incorporation. Each of the Subsidiaries listed on Schedule 4.01 is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company and each of its Subsidiaries has
the requisite corporate power to own, operate or lease its properties and to
carry on its business as it is now being conducted, and is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction in which
the nature of its business or the properties owned, operated or leased by it
makes such qualification, licensing or good standing necessary.
SECTION 4.02 Charter and By-Laws. The Company has heretofore made
available to the Purchaser a complete and correct copy of the charter and the
by-laws or comparable organizational documents, each as amended to the date
hereof, of the Company and each of its Subsidiaries.
SECTION 4.03 Capitalization; Subsidiaries.
(a) The authorized capital stock of the Company consists of (i)
1,100,000 Preferred Shares, (ii) 2,200,000 shares of Series B Preferred Stock,
par value $1.00 per Share, (iii) 500,000 shares of Series C Preferred Stock, par
value $1.00 per Share, and (iv) 11,000,000 Common Shares. As of the date hereof,
7,383,079.5 Common Shares are issued and outstanding and owned of record as set
forth on Schedule 4.03(a)(i), and 1,616,952.5 Common Shares are in the Company's
treasury, and 734,214 Preferred Shares are issued and outstanding and owned of
record as set forth on Schedule 4.03(a)(i). Each Preferred Share is convertible
into one Common Share. The Company has 1,000,000 Common Shares reserved for
issuance pursuant to the Option Plan. Schedule 4.03(a)(ii) sets forth the name
of each holder of an outstanding Option under the Option
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Plan, and with respect to each Option held by any such holder, the grant date,
exercise price and number of Common Shares for which such Option is exercisable.
As of the date hereof, except as set forth on Schedule 4.03(a)(iii), the Company
has no outstanding options that would allow other Persons to purchase shares of
its capital stock other than those granted and outstanding under the Option
Plan. All of the outstanding Common Shares and Preferred Shares are, and all
Common Shares which may be issued pursuant to the exercise of outstanding
Options will be, when issued in accordance with the respective terms thereof,
duly authorized, validly issued, fully paid and nonassessable. There are no
bonds, debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) of the Company or any of its
Subsidiaries issued and outstanding. Except as set forth on Schedule 4.03(a)(ii)
and except as contemplated by this Agreement, or between the Company and one or
more of its direct or indirect wholly owned Subsidiaries, there are no existing
options, warrants, calls, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the issued or unissued
capital stock of the Company or any of its Subsidiaries, obligating the Company
or any of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock of, or other equity interest in
or voting security of, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or voting
securities and neither the Company nor any of its Subsidiaries is obligated to
grant or enter into any such option, warrant, call, subscription or other right,
agreement, arrangement or commitment.
(b) Except as set forth on Schedule 4.03(b), the Company has no
Subsidiaries, owns or holds of record and/or beneficially no shares or other
securities of any class in the capital of any corporations, and owns no legal
and/or beneficial interests in any partnerships, limited liability companies,
business trusts or joint ventures or in any other unincorporated trade or
business enterprises.
(c) Each of the outstanding shares of capital stock of each of the
Company's Subsidiaries is owned of record and beneficially as set forth on
Schedule 4.03(b) and is duly authorized, validly issued, fully paid and
nonassessable, and such shares of the Company's Subsidiaries as are owned by the
Company or by a Subsidiary of the Company are owned in each case free and clear
of any Lien except Permitted Liens.
SECTION 4.04 Authority Relative to this Agreement. The Company
represents and warrants to the Purchaser, as of the date hereof, that: (i) it
has all necessary corporate power and authority to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby; (ii) its execution
and delivery of this Agreement and each of the Transaction Documents to which it
is a party and its consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized and approved by all necessary
corporate proceedings on the part of the Company (including, without limitation,
unanimous approval by the Board of Directors of the Company and approval and
adoption of this Agreement and the Merger by the Consenting Stockholders
pursuant to the Written Consents); (iii) this Agreement and the other
Transaction Documents to which it is a party have been (or upon execution and
delivery thereof will be) duly and validly executed and delivered by the Company
and, assuming the due and valid authorization, execution and delivery of this
Agreement and the other Transaction Documents to which it is a party by each
other Person party thereto (other than the Company), this Agreement and such
other Transaction Documents constitute (or upon such execution and delivery will
constitute) a valid and binding obligation of the
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Company, enforceable against it in accordance with their terms, except that such
enforceability (A) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (B) is subject to general principles of equity.
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement or the other
Transaction Documents to which it is a party by the Company, the consummation by
the Company of the Merger or any other transactions contemplated hereby and
thereby, or compliance by the Company with any of the provisions hereof will (i)
conflict with or violate the Certificate of Incorporation or Bylaws of the
Company or the comparable organizational documents of any of its Subsidiaries,
(ii) conflict with or violate any statute, ordinance, rule, regulation, order,
judgment or decree applicable to the Company or its Subsidiaries, or by which
any of them or any of their respective properties or assets may be bound, or
(iii) except as set forth on Schedule 4.05(a), result in a violation or breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in any loss of any
material benefit, or the creation of any Lien on any of the property or assets
of the Company or any of its Subsidiaries (any of the foregoing referred to in
clause (ii) or this clause (iii) being a "Violation") pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective properties may be bound or affected.
(b) None of the execution and delivery of this Agreement or the other
Transaction Documents to which it is a party by the Company, the consummation by
the Company of the Merger or any other transaction contemplated hereby or
thereby or compliance by the Company and its Subsidiaries with any of the
provisions hereof will require the Company or any of its Subsidiaries to make or
obtain any consent, waiver, approval, authorization or permit of, or
registration or filing with or notification to (any of the foregoing being a
"Consent") any government or subdivision thereof, domestic, foreign or
supranational or any administrative, governmental or regulatory authority,
agency, commission, tribunal or body, domestic, foreign or supranational (a
"Governmental Entity") or any third party, except for (i) compliance with any
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), (ii) the filing of a certificate of merger pursuant to the
GCL, (iii) compliance with the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and any requirements of any foreign or
supranational Antitrust Laws, and (iv) other Consents identified in Schedule
4.05(b).
SECTION 4.06 Financial Statements.
Except as set forth on Schedule 4.06:
(a) The Purchaser has heretofore been furnished with complete and
correct copies of (i) the audited consolidated balance sheet of the Company and
its Subsidiaries as at December 31, 2001, (the "Audited Balance Sheet") and the
related audited consolidated statements of income and cash flows of the Company
and its Subsidiaries for the twelve-month period then ended; (ii) the audited
consolidated balance sheet of the Company and its
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Subsidiaries as at December 31, 2000, and the audited consolidated statements of
income and cash flows of the Company and its Subsidiaries for the twelve-month
period ended December 31, 2000 (such financial statements together with the
financial statements referenced in clause (i) of this Section 4.06(a),
collectively are referred to as the "Audited Financial Statements"); (iii) the
unaudited consolidated and consolidating balance sheet of the Company and its
Subsidiaries as at July 31, 2002 (the "Interim Balance Sheet") and the related
unaudited consolidated and consolidating statements of income and cash flows of
the Company and its Subsidiaries for the seven-month period then ended (the
"Interim Financial Statements"), each of such balance sheets and related
statements being attached hereto as Schedule 4.06(a);
(b) Each of the financial statements delivered under Section 4.06(a)
hereof was prepared in accordance with U.S. generally accepted accounting
principles applied on a basis consistent with prior periods except as otherwise
stated therein. Each of the balance sheets of the Company included in such
financial statements truly and accurately presents the financial condition of
the Company and its Subsidiaries as at the close of business on the date thereof
in accordance with U.S. generally accepted accounting principles, subject, in
the case of the Interim Financial Statements, to normal year-end adjustments and
the absence of footnotes. Each of the statements of income and cash flows of the
Company and its Subsidiaries included in such financial statements truly and
accurately presents the results of operations of the Company and its
Subsidiaries for the fiscal periods then ended in accordance with U.S. generally
accepted accounting principles, subject, in the case of the Interim Financial
Statements, to normal year-end adjustments and the absence of footnotes.
SECTION 4.07 Material Adverse Change. Except as set forth in Schedule
4.07, there has been no change in the financial condition or operations of the
Company or its Subsidiaries since December 31, 2001 which has had or is
reasonably likely to have a Material Adverse Effect on the Company.
SECTION 4.08 Absence of Certain Developments. Except as set forth on
Schedule 4.08 and except as expressly contemplated by or disclosed in this
Agreement (including, without limitation, any of the schedules and annexes
hereto), since December 31, 2001, neither the Company nor any of its
Subsidiaries has engaged in any material transaction outside the ordinary course
of business consistent with past practice or:
(a) Incurred any Indebtedness, except borrowings from banks (or other
financial institutions) necessary to meet ordinary course working capital
requirements and to finance capital expenditures in the ordinary course of
business consistent with past practice;
(b) Mortgaged, pledged or subjected to any Lien, other than a
Permitted Lien, any asset or related group of assets having a net book value in
excess of $100,000 individually or $500,000 in the aggregate;
(c) Sold, leased, assigned or transferred any tangible asset or
related group of assets having a net book value in excess of $100,000
individually or $500,000 in the aggregate except for the sale of inventory and
obsolete or used machinery and equipment in the ordinary course of business
consistent with past practice;
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(d) Sold, leased, assigned or transferred any interest in real estate
having a net book value in excess of $100,000 individually or $500,000 in the
aggregate;
(e) Sold, licensed, assigned or transferred any patents, trademarks,
trade names, copyrights, trade secrets, technology, know-how, processes or other
intangible assets having a fair market value in excess of $100,000 individually
or $500,000 in the aggregate;
(f) Waived or relinquished any right or claim or related group of
rights or claims except any such item which the Company believes has a fair
value of less than $100,000 individually or $500,000 in the aggregate;
(g) Except for the issuance of Common Shares upon the exercise of
outstanding Options and the grant of Options pursuant to the Option Plan, (i)
issued or sold any of its Common Shares, Preferred Shares or other equity
securities or any warrants, options or other rights to acquire its Common
Shares, Preferred Shares or other equity securities of the Company, or (ii)
purchased or redeemed or agreed to purchase or redeem any Common Shares,
Preferred Shares or other equity securities;
(h) Made or entered into any binding commitment for any capital
expenditures or related group of capital expenditures in excess of $50,000
individually;
(i) Modified or amended in any material manner or terminated or
entered into any Material Contract, except in the ordinary course of business
consistent with past practice;
(j) Granted any increase in the base compensation of, or made any
other material change in the employment terms for, any of its directors,
officers, and employees other than normal periodic increases or changes
reflecting or based upon changed responsibilities or duties made in the ordinary
course of business consistent with past practice or changes made pursuant to any
collective bargaining agreements or existing contracts;
(k) Adopted, modified, or terminated any bonus, profit-sharing,
incentive, severance or other plan or contract for the benefit of any of its
directors, officers, and employees, other than for changes which are required by
law or a collective bargaining agreement; or
(l) Declared or paid any dividend or other distribution with respect
to the Shares.
SECTION 4.09 Title to Assets; Real Property; Leases. Except as
disclosed on Schedule 4.09 attached hereto, the Company and its Subsidiaries
have (a) good and legal title to (in the case of fee interests in real
property), (b) valid leasehold interests in (in the case of leasehold interests
in real or personal property) or (c) good title to (in the case of all other
personal property) all of the assets reflected in the Interim Balance Sheet,
subject to no Liens other than Permitted Liens. All such properties and assets
are adequate and sufficient to carry on the business of the Company and its
Subsidiaries as presently conducted. Schedule 4.09 sets forth a complete and
correct list of all capital assets of the Company or any of its Subsidiaries
having a book value in excess of $100,000 and all real property owned or leased
by the Company or any of its Subsidiaries (the "Real Property"). As of October
1, 2002, the total amount of capital expenditure commitments of the Company and
its Subsidiaries for the period from October 1, 2002 through December 31, 2002
is $996,619.49. There are no material defects in any such capital assets or Real
Property, as to
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title or condition, not described on Schedule 4.09. Neither the Company nor any
of its Subsidiaries has received any written notice that either the whole or any
portion of the Real Property is to be condemned, requisitioned or otherwise
taken by any public authority. To the Company's Knowledge, there are no public
improvements that may result in special assessments against or otherwise affect
any of the Real Property. The Company and each of its Subsidiaries enjoys
peaceful and undisturbed possession, and is in material compliance with the
terms, (i) of all leases of real property on which facilities operated by it are
situated requiring annual rental payments in excess of $100,000, each of which
is listed on Schedule 4.09 hereto, and (ii) of all leases of personal property
requiring annual lease payments from or to the Company or any of its
Subsidiaries in excess of $100,000, each of which is listed on Schedule 4.11(a)
hereto, and all leases described in clauses (i) and (ii) above are valid and in
full force and effect. Complete and correct copies of all such leases have been
delivered to the Purchaser.
SECTION 4.10 Tax Matters. Except as set forth on Schedule 4.10, the
Company and its Subsidiaries have filed with the appropriate Governmental
Entities all income Tax Returns and other Tax Returns required to be filed by
them on or before the date hereof. All Tax Returns for the Company and its
Subsidiaries in respect of all years not barred by the statute of limitations
have heretofore been made available by the Company to the Purchaser and such
returns are true, correct, and complete in all material respects. Except as set
forth on Schedule 4.10 or Schedule 4.14:
(a) All Taxes upon the Company or any of its Subsidiaries or any of
their properties, assets, revenues and franchises which are owed prior to the
Closing Date by the Company or any of its Subsidiaries with respect to any
period ending on or before the Closing Date have been paid, other than those
currently payable without penalty or interest which will be accurately reflected
on the Final Closing Statement;
(b) The provisions for Taxes on the Interim Balance Sheet are
sufficient in accordance with GAAP for all accrued and unpaid Taxes as of the
date thereof;
(c) The Company and each of its Subsidiaries has withheld and paid,
or properly accrued in accordance with GAAP, all Taxes required to be withheld
or paid in connection with amounts paid or owing to any employee, creditor,
independent contractor or third party;
(d) No Tax Return of the Company or any of its Subsidiaries is
currently under audit by the U.S. Internal Revenue Service or any other
governmental agency or other taxing authority;
(e) Neither the U.S. Internal Revenue Service nor any other
governmental agency or taxing authority is now asserting in writing or, to the
Company's Knowledge, threatening to assert against the Company or any of its
Subsidiaries, any deficiency or claim for additional Taxes or any adjustment
that would have an adverse effect on the Company or any of its Subsidiaries,
except for any such claim or deficiency for which adequate reserves have been
established in accordance with GAAP, which reserves will be reflected on the
Final Closing Statement;
(f) Neither the Company nor any of its Subsidiaries has waived, or
agreed to the extension of, the statute of limitations with respect to any Taxes
or Tax Return, which is currently in effect;
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(g) Neither the Company nor any of its Subsidiaries has any liability
for Taxes for any Person (other than the Company and its Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign income Tax law) or as a transferee or successor by contract or
otherwise;
(h) The reserves for accrued and unpaid state sales and use Taxes
relating to sales by the Company and its Subsidiaries on a drop shipment basis
to be set forth in the Final Closing Statement are sufficient in accordance with
GAAP for the payment of all liabilities of the Company and its Subsidiaries for
such Taxes through the Closing Date;
(i) Neither the Company nor any Subsidiary has made any payments, nor
is the Company or any Subsidiary obligated to make any payments, nor is the
Company or any Subsidiary a party to any agreement, plan or arrangement that
could obligate any of them to make any payments, that will not be deductible
pursuant to Section 280G or Section 162(m) of the Code; and
(j) the Company and its Subsidiaries have maintained their respective
records with respect to Taxes in a commercially reasonable manner.
SECTION 4.11 Contracts and Commitments.
(a) Except as set forth on Schedule 4.08, Schedule 4.09, Schedule
4.11(a) or Schedule 4.16(a), neither the Company nor any of its Subsidiaries is
a party to, nor are any assets or properties of the Company or any of its
Subsidiaries bound or subject to, any: (i) bonus, pension, profit sharing,
retirement or other form of deferred compensation plan which may provide
compensation or benefits of at least $100,000 or which when aggregated with all
such other plans not included on such schedules may provide compensation or
benefits of at least $500,000; (ii) stock purchase, stock option, stock
appreciation or similar plan; (iii) contract for the employment or engagement as
a consultant of any officer, individual employee or other person on a full-time,
part-time or consulting basis involving an annual compensation commitment by the
Company or any of its Subsidiaries in excess of $100,000; (iv) contract,
agreement or indenture relating to Indebtedness in excess of $1,000,000 or to
mortgaging, pledging or otherwise placing a Lien (other than a Permitted Lien)
on any portion of the Company's assets; (v) guaranty of any obligation for
borrowed money in excess of $1,000,000; (vi) lease, contract or agreement under
which it is lessee of, or holds or operates, any personal property owned by any
other party, for which the annual rental exceeds $100,000, (vii) contract or
group of related contracts with the same party for the purchase of inventories,
supplies or services, under which the undelivered balance of such inventories,
supplies or services has a selling price in excess of $100,000, other than
contracts which are terminable by the Company or one of its Subsidiaries upon 30
days' notice or less without the payment of any termination fee or penalty;
(viii) contract or group of related contracts with the same party for the sale
of products or services under which the undelivered balance of such products or
services has a sales price in excess of $100,000, other than contracts which are
terminable by the Company or one of its Subsidiaries upon 30 days' notice or
less without the payment of any termination fee or penalty; (ix) contract which
prohibits or limits the Company or a Subsidiary in any material respect from
freely engaging in business in the United States or anywhere else in the world;
(x) joint venture, partnership or strategic alliance contract or agreement
relating to the assets, properties or business of the Company or any of its
Subsidiaries or by or to which any of them or any of their assets or properties
are bound or subject; (xi) distribution, sales representative and sales agency
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contract or agreement, other than those which are terminable by the Company or
one of its Subsidiaries upon 30 days' notice or less without the payment of any
termination fee or penalty; (xii) contract for the sale of any assets or
properties of the Company or any of its Subsidiaries other than in the ordinary
course of business or for the grant to any Person of any preferential rights to
purchase any of such assets or properties; (xiii) any contract or agreement
pursuant to which the Company or one of its Subsidiaries is indemnified by a
third party; (xiv) any other contract or commitment (A) involving the payment by
or to the Company or any of its Subsidiaries of $500,000 or more (whether in
cash or other assets) in any 12 month period or $2,000,000 or more (whether in
cash or other assets) in the aggregate over the remaining life of the contract
or (B) the termination of which or loss of the benefits thereunder would have a
Material Adverse Effect on the Company. As used in this Section 4.11, "contract"
means and includes every contract, agreement, arrangement, commitment or
understanding of any kind, written or oral, which is legally enforceable by or
against the Company or any of its Subsidiaries. "Material Contract" means any
contract of a type referred to in any of clauses (i) through (xiv) of this
Section 4.11(a).
(b) The Purchaser or the Parent either has been supplied with, or has
been given access to, a true and correct copy of (i) all written contracts which
are referred to on Schedule 4.11(a) and Schedule 4.09, together with all written
amendments, waivers or other changes thereto and (ii) all arbitration decisions
and grievance settlements related to collective bargaining agreements and
contracts with any labor union. Schedule 4.11(a) and Schedule 4.09 set forth a
true, complete and correct description of the material terms of all oral
contracts (other than oral contracts for the delivery of products or services in
an amount of less than $25,000) listed thereon.
(c) Each contract listed on Schedule 4.11(a) or Schedule 4.09 is (i)
a legal, valid and binding obligation of, and enforceable against, and following
consummation of the transactions contemplated hereby will continue to be a
legal, valid and binding obligation of, and enforceable against, the Company or
its Subsidiary, and (ii) to the Company's Knowledge, a legal, valid and binding
obligation of, and enforceable against, and following consummation of the
transactions contemplated hereby will continue to be a legal, valid and binding
obligation of, and enforceable against, the other party. Except for such
defaults as are described on Schedule 4.07, neither the Company nor its
Subsidiaries, nor to the Company's Knowledge any other party, are in default,
breach or violation (or would be in default, breach or violation with notice or
lapse of time, or both) under any contract listed on Schedule 4.11(a) or
Schedule 4.09. The Company and each of its Subsidiaries have in all material
respects performed all obligations required to be performed by any of them to
date under each such contract.
SECTION 4.12 Intellectual Property
(a) Schedule 4.12(a)(i) sets forth a complete and accurate list of
all patents, trademarks, trade names, brand names and copyrights owned by or
registered in the name of the Company or any of its Subsidiaries, all
applications therefor, and all licenses (as licensee or licensor) and other
agreements relating thereto. Schedule 4.12(a)(ii) sets forth a complete and
accurate list of all agreements relating to other patents, trademarks, trade
names, brand names, copyrights, trade secrets, technology, know-how and
processes which the Company or any of its Subsidiaries is licensed or authorized
by others to use or which the Company or any of its Subsidiaries has licensed or
authorized for use by others. Except as otherwise described in Schedule 4.12(b),
the Company or
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one of its Subsidiaries is the sole and exclusive owner of the patents,
trademarks, trade names, brand names and copyrights listed on Schedule
4.12(a)(i), free and clear of any Liens other than Permitted Liens, and has the
right to use, free and clear of any material obligations to pay royalties or any
other similar obligations or restrictions (other than to the Company or another
of its Subsidiaries), and free and clear of all Liens other than Permitted
Liens, all (if any) patents, trade secrets, trademarks, trade names, brand
names, copyrights, trade secrets, technology, know-how and processes listed on
Schedule 4.12(a)(ii), and all other trade secrets, technology, know-how and
processes used in or necessary for the ordinary course of business of the
Company and its Subsidiaries as now conducted or as currently proposed to be
conducted, and the consummation of the transactions contemplated hereby will not
impair any such right. Neither the Company nor any of its Subsidiaries is in
default in any material respect under or in relation to any of the licenses or
agreements referred to in this Section 4.12(a).
(b) Except as set forth on Schedule 4.12(b), neither the Company nor
any of its Subsidiaries, has received any written claim by or demand of any
Person pertaining to, and there is no pending or, to the Company's Knowledge,
threatened action, suit, proceeding or investigation relating to any rights of
the Company or any of its Subsidiaries in respect of any patents, trade secrets,
trademarks, trade names, brand names, copyrights, technology, know-how or
processes used in the business or operations of the Company or any of its
Subsidiaries, or challenging or questioning the validity or effectiveness of any
license or agreement referred to in Section 4.12(a).
(c) Except as set forth on Schedule 4.12(b), no patent, trade secret,
trademark, trade name, brand name, copyright, technology, know-how or processes
owned or used by the Company or any of its Subsidiaries (i) is, to the Company's
Knowledge, being infringed by any Person, or (ii) to the Company's Knowledge,
infringes any patent, trade secret, trademark, trade name, brand name,
copyright, technology, know-how, process or other intellectual property right of
any Person.
(d) Schedule 4.12(d) sets forth a list of all employees, consultants
and agents of the Company or any of its Subsidiaries to whom the Company or any
of its Subsidiaries has provided information regarding, or access to, the
viscoelastic foam formula of the Company and/or its Subsidiaries. Except as
noted in Schedule 4.12(d), each such person is subject to a valid and binding
confidentiality agreement with the Company or one of its Subsidiaries which
requires that such person keep such information confidential.
SECTION 4.13 Permits, Licenses, Etc. The Company and its Subsidiaries
have and maintain, and the permits listed on Schedule 4.13 include, all
franchises, licenses, permits and other authorizations from all governmental or
regulatory authorities (collectively, the "Permits") as are necessary or
desirable for the conduct of the business of the Company and its Subsidiaries as
presently conducted or proposed to be conducted. All of the Permits are in full
force and effect, and the Company and each of its Subsidiaries is in material
compliance with the terms of such Permits. Except as expressly designated on
Schedule 4.13, none of the Permits will be terminated, and none of the Company's
or any of its Subsidiaries' rights with respect to such Permits will be
materially adversely affected, by reason of the transactions hereunder or
contemplated hereby, and true and complete copies of such Permits have
previously been delivered or made available to the Purchaser.
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SECTION 4.14 Litigation. Except as set forth on Schedule 4.14, as of
the date of this Agreement, there are no actions, suits or proceedings pending
or, to the Company's Knowledge, threatened against the Company or any of its
Subsidiaries (or, in each case, in which the Company or its Subsidiaries is a
party or to which any of their assets or properties are subject), at law or in
equity, or before or by any foreign, federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. Except as set forth on Schedule 4.14, neither the Company
nor any of its Subsidiaries is subject to any outstanding judgment, injunction,
order or decree of any court or Governmental Entity to which the Company or its
Subsidiaries is a party.
SECTION 4.15 Notice of Offering. None of the information supplied or
to be supplied by the Company in writing for inclusion or incorporation by
reference in the Notice of Offering will, at the time such information is
provided to the Parent, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4.16 Employee Benefit Plans.
(a) Except for the arrangements set forth on Schedule 4.16(a),
neither the Company nor any of its Subsidiaries now maintains or contributes to,
nor does it have any outstanding liability to or in respect of or obligation
under, any pension, profit-sharing, deferred compensation, bonus, stock option,
share appreciation right, severance, group or individual health, dental,
medical, life insurance, survivor benefit, or similar plan, policy or
arrangement for the benefit of any director, officer, consultant or employee,
whether active or terminated, of the Company or any of its Subsidiaries. Each of
the arrangements set forth on Schedule 4.16(a) is hereafter referred to as an
"Employee Benefit Plan", except that any such arrangement which is a
multi-employer plan shall be treated as an Employee Benefit Plan only for
purposes of Sections 4.16(d)(ii), (vi) and (viii) and 4.16(g) below.
(b) The Company has heretofore delivered to the Purchaser true,
correct and complete copies of each Employee Benefit Plan, and with respect to
each Employee Benefit Plan true, correct and complete copies of (a) any
associated trust, custodial, insurance or service agreements, (b) any annual
report, actuarial report, or disclosure materials (including specifically any
summary plan descriptions) submitted to any governmental agency or distributed
to participants or beneficiaries thereunder in the current or any of the three
(3) preceding calendar years and (c) the most recently received Internal Revenue
Service determination letters and any governmental advisory opinions, rulings,
compliance statements, closing agreements, or similar materials specific to such
Employee Benefit Plan.
(c) Each Employee Benefit Plan is and has heretofore been maintained
and operated in all material respects in compliance with the terms of such
Employee Benefit Plan and with the requirements prescribed (whether as a matter
of substantive law or as necessary to secure favorable tax treatment) by any and
all statutes, governmental or court orders, or governmental rules or regulations
in effect from time to time, including but not limited to, with respect to any
Employee Benefit Plan of the Company or any of its Subsidiaries applicable to
any employees based in the U.S. (a "U.S. Plan"), the Employee Retirement Income
Security Act of 1974, as amended,
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("ERISA") and the Code and applicable to such Employee Benefit Plan. Each U.S.
Plan which is intended to qualify under Section 401(a) of the Code is expressly
identified as such on Schedule 4.16(a) and, to the Knowledge of the Company,
nothing has occurred which would likely adversely affect the qualified status of
such U.S. Plans or could reasonably require action under the compliance
resolution programs of the Internal Revenue Service to preserve such
qualification. No U.S. Plan is, or is associated with, a trust or other entity
intended to qualify as a "voluntary employee benefit association" within the
meaning of Section 501(c)(9) of the Code.
(d) Except as set forth on Schedule 4.16(d):
(i) there is no pending or threatened legal action, proceeding
or investigation, other than routine claims for benefits, concerning any
Employee Benefit Plan or to the Knowledge of the Company any fiduciary or
service provider thereof with respect to such Employee Benefit Plans and, to the
Knowledge of the Company, there is no reasonable basis for any such legal action
or proceeding;
(ii) no liability (contingent or otherwise) to the Pension
Benefit Guaranty Corporation or any multi-employer plan has been incurred by the
Company, any of its Subsidiaries or any affiliate thereof (other than insurance
premiums satisfied in due course);
(iii) no Employee Benefit Plan, or any retirement plan of an
affiliate of the Company, is subject to Title IV of ERISA;
(iv) no U.S. Plan nor, to the Knowledge of Company, any party
in interest with respect thereof, has engaged in a non-exempt prohibited
transaction which could subject the Company or any of its Subsidiaries directly
or indirectly to liability under Section 409 or 502(i) of ERISA or Section 4975
of the Code;
(v) no written communication, report or disclosure has been
made by or on behalf of the Company or any Subsidiary which, at the time made,
did not accurately reflect, in all material respects, the terms and operations
of any Employee Benefit Plan;
(vi) no Employee Benefit Plan provides welfare benefits
subsequent to termination of employment to employees or their beneficiaries
except to the extent required by applicable national or state laws (including,
with respect to any U.S. Plans, Title I, Part 6 of ERISA);
(vii) neither the Company nor any Subsidiary has announced its
intention, or undertaken (whether or not legally bound) to materially modify or
terminate any Employee Benefit Plan or adopt any arrangement or program which,
once established, would come within the definition of an Employee Benefit Plan;
and
(viii) the Company has not undertaken to maintain any Employee
Benefit Plan for any period of time and by its terms each Employee Benefit Plan
is terminable at the sole discretion of the sponsor thereof, subject only to
such constraints as may imposed by applicable law.
(e) With respect to each Employee Benefit Plan for which a separate
fund of assets is or is required to be maintained, full and timely payment has
been made of all amounts required of
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the Company or any of its Subsidiaries, under the terms of each such Employee
Benefit Plan or applicable law, as applied through the Closing Date. No Employee
Benefit Plan is subject to the provisions of Section 302 of ERISA and Section
412 of the Code. The current value of the assets of each Employee Benefit Plan
subject to Section 401(a) of the Code, as of the end of the most recently ended
plan year of that Employee Benefit Plan, equals the current value of all
benefits liabilities under that Employee Benefit Plan.
(f) Except as set forth on Schedule 4.16(f), the execution of this
Agreement and the consummation of the transactions contemplated herein will not,
by itself or in combination in any other event (regardless of whether that other
event has occurred or will occur), result in any payment (whether of severance
pay or otherwise) becoming due from or under any Employee Benefit Plan to any
current or former director, officer, consultant or employee of the Company or
any of its Subsidiaries or result in the acceleration of vesting, acceleration
of payment or increase in the amount of any benefit payable to or in respect of
any such current or former director, officer, consultant or employee.
(g) No Employee Benefit Plan is a multi-employer plan.
(h) For purposes of this Section 4.16, "multi-employer plan", "party
in interest"' "current value", "reportable event" and "benefit liability" have
the same meaning assigned such terms under Sections 3, 4043(c) or 4001(a) of
ERISA, and "affiliate" means any entity which under Section 414 of the Code is
treated as a single employer.
SECTION 4.17 Insurance. Schedule 4.17 lists all insurance policies
maintained by the Company and its Subsidiaries and their respective coverage and
expiration dates. All of such insurance policies (a) are in full force and
effect, (b) are sufficient for compliance by the Company and its Subsidiaries
with all requirements of law and all agreements to which the Company or any of
its Subsidiaries is a party and (c) will not terminate or lapse by reason of the
transactions contemplated by this Agreement. Neither the Company nor any of its
Subsidiaries is in default with respect to its obligations under any of such
insurance policies. No written notice of cancellation or termination or
rejection of any claim or denial of coverage has been received by the Company or
its Subsidiaries with respect to any such policy in the last three years (or
such shorter period as such entity has been in existence or has been a
Subsidiary of the Company). The Company and each of its Subsidiaries has been
covered during the past five years (or such shorter period as such entity has
been in existence or has been a Subsidiary of the Company) by insurance in scope
and amount customary and reasonable for the businesses in which they have
engaged during such period.
SECTION 4.18 Compliance with Laws. Except as set forth on Schedule
4.18, Schedule 4.10, Schedule 4.08, Schedule 4.14 or Schedule 4.19, the Company
and each of its Subsidiaries is in material compliance with every statute, rule,
restriction, law, regulation, order, judgment or decree of any Governmental
Entity applicable to it or by which it is bound. Except as set forth on Schedule
4.18, Schedule 4.10, Schedule 4.08, Schedule 4.14, or Schedule 4.19, neither the
Company nor any Subsidiary has received from any governmental or regulatory
authority any written notice alleging any material violation of law or claiming
any material liability of the Company or any of its Subsidiaries as a result of
any such alleged material violation.
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SECTION 4.19 Environmental Compliance.
(a) The representations and warranties in this Section 4.19 are the
exclusive representations and warranties of the Company relating to compliance
with Environmental Laws or contamination from Hazardous Substances. Except as
set forth on Schedule 4.19:
(i) the Company and each of its Subsidiaries has been issued
and is in material compliance with all permits, certificates, approvals,
licenses and other authorizations issued by a Government Entity relating to
environmental matters and required under applicable Environmental Laws for
the conduct of its business, including the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Water
Pollution Control Act, the Solid Waste Disposal Act, as amended, the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, the Danish Contaminated Soil Act, or any supranational,
national, state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter "Environmental
Laws").
(ii) neither the Company nor any of its Subsidiaries is in
violation or, to the Company's Knowledge, alleged violation of any
judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation those arising under any
applicable Environmental Laws;
(iii) neither the Company nor any of its Subsidiaries has
received notice from any Governmental Entity, (A) that the Company or any
of its Subsidiaries has been identified by such Governmental Entity as
having potential liability under any Environmental Law, including, without
limitation, any such notice from the United States Environmental Protection
Agency that the Company or any of its Subsidiaries has been identified as a
potentially responsible party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (B)
that any hazardous waste regulated by any Environmental Laws (including,
without limitation, as defined by 42 U.S.C. Section6903(5)), any hazardous
substance regulated by any Environmental Laws (including, without
limitation, as defined by 42 U.S.C. Section9601(14)), any pollutant or
contaminant regulated by any Environmental Laws (including, without
limitation, as defined by 42 U.S.C. Section9601(33)) or any toxic
substance, oil or hazardous material or other chemical or substance
(including, without limitation, asbestos in any form, urea formaldehyde or
polychlorinated biphenyls) regulated by any Environmental Laws ("Hazardous
Substances") which the Company or any of its Subsidiaries has generated,
transported or disposed of has been found at any site at which a
Governmental Entity has conducted or has ordered that the Company or any of
its Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (C) that the Company
or any of its Subsidiaries is or shall be a named party to any claim,
action, cause of action, complaint, (contingent or otherwise) legal or
administrative proceeding arising out of any third party's incurrence of
costs, expenses, losses or damages of any kind whatsoever in connection
with the release of Hazardous Substances;
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(iv) all real properties presently owned, leased or operated by
the Company or any of its Subsidiaries are free from contamination of every
kind, including without limitation, groundwater, surface water, soil,
sediment and air contamination, and such properties and the buildings and
equipment thereon do not contain any Hazardous Substances, except in each
case to the extent that the presence of Hazardous Substances on such
properties does not materially violate any applicable Environmental Laws;
(v) there have been no material releases (i.e., any past or
present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping) or threatened
releases of Hazardous Substances, except in accordance with applicable
Environmental Laws, on, upon, into or from any real property presently
owned, leased or operated by the Company or any of its Subsidiaries, or to
the Company's actual knowledge, formerly owned, leased or operated by the
Company or any of its Subsidiaries, for which the Company or any of its
Subsidiaries may be liable; and
(vi) no real property presently owned, leased or operated by the
Company or any of its Subsidiaries and, to the Company's actual knowledge
no real property formerly owned, leased or operated by the Company or any
of its Subsidiaries, is subject to any clean-up obligations or real
property transfer requirements under applicable Environmental Laws by
virtue of the transactions set forth herein and contemplated hereby.
(b) Attached as part of Schedule 4.19 is a list of all documents,
reports, site assessments, data, communications or other materials, in the
possession of the Company or any of its Subsidiaries or to which any of them has
access, which contain any material information with respect to potential
environmental liabilities associated with any real property presently or
formerly owned, leased or operated by the Company or any of its Subsidiaries and
relating to violations of Environmental Laws or potential liability associated
with the environmental condition of such properties. The Company has furnished
to the Purchaser complete and accurate copies of all of the documents, reports,
site assessments, data, communications and other materials listed on Schedule
4.19 hereto.
SECTION 4.20 Affiliated Transactions. Except for the Company's
employee benefit plans or as set forth on Schedule 4.20, Schedule 4.08 or
Schedule 4.11(a), no officer, director, or Management Stockholder of the Company
or, to the Company's Knowledge, any individual in such officer's or director's
immediate family or any Affiliate of any such person is a party to any
agreement, contract, commitment or transaction with the Company or any of its
Subsidiaries or has any interest in any real or personal property used by the
Company or any of its Subsidiaries other than arrangements with employees that
are available to similarly situated employees.
SECTION 4.21 Brokers. Except as set forth on Schedule 4.21, none of
the Company, any of its Subsidiaries, or any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement.
SECTION 4.22 Labor Relations. The Company and its Subsidiaries are in
material compliance with all applicable European Union, national, federal and
state laws respecting employment and employment practices, terms and conditions
of employment, wages and hours, and
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nondiscrimination in employment, and are not engaged in any unfair labor
practice. There is no charge pending or, to the Company's Knowledge, threatened,
against or with respect to the Company or any of its Subsidiaries before any
court or agency alleging unlawful discrimination in employment practices, and
there is no charge of or proceeding with regard to any unfair labor practice
against any of them pending before the National Labor Relations Board or any
equivalent foreign regulatory agency. There is no labor strike, dispute,
slow-down, or work stoppage pending, or to the Company's Knowledge, threatened
against or involving the Company or any of its Subsidiaries. No employees of the
Company or any of its Subsidiaries are party to a collective bargaining
agreement, and no such collective bargaining agreement is currently being
negotiated. No one has petitioned and no one is now petitioning for union
representation of any employees of the Company or any Subsidiary, excluding any
workers council provisions under any applicable laws. Neither the Company nor
any of its Subsidiaries has experienced any work stoppage or other material
labor difficulty within the five years preceding the Closing.
SECTION 4.23 Suppliers and Customers. Schedule 4.23 hereto sets forth
(a) the ten (10) largest suppliers of the Company and its Subsidiaries, taken as
a whole, based on the dollar amount of purchases for the twelve months ending
December 31, 2001, and (b) the ten (10) largest customers of the Company's and
its Subsidiaries' products, taken as a whole, based on the dollar amount of
sales for the twelve months ending December 31, 2001. The relationships of the
Company or any of its Subsidiaries with such suppliers and customers are good
commercial working relationships and, except as set forth on Schedule 4.23, no
such supplier or customer has, during the last twelve (12) months, cancelled or
otherwise terminated, or threatened to cancel or otherwise to terminate, its
relationship with the Company or such Subsidiary or decreased materially, or
threatened to decrease or limit materially, its services, supplies or materials
for use by the Company or such Subsidiary or its usage or purchase of the
services or products of the Company or such Subsidiary, except for normal
cyclical changes related to customers' businesses. To the Company's Knowledge,
no such supplier, or customer intends to cancel or otherwise substantially
modify its relationship with the Company or any of its Subsidiaries or to
decrease materially or limit its services, supplies or materials to the Company
or any of its Subsidiaries, or its usage or purchase of the services or products
of the Company or any of its Subsidiaries.
SECTION 4.24 Solvency. Prior to consummation of the transactions
contemplated hereby, the Company is solvent, has tangible and intangible assets
having a fair value in excess of the amount required to pay its probable
liabilities and its existing debts as they become absolute and matured, and has
access to adequate capital for the conduct of its business and the ability to
pay its debts from time to time incurred in connection therewith as such debts
mature.
SECTION 4.25 Accounts Receivable. All accounts and notes receivable
reflected on the Interim Balance Sheet, and all accounts and notes receivable
arising subsequent to the date of the Interim Balance Sheet, have arisen in the
ordinary course of business, represent valid obligations owing to the Company
and its Subsidiaries and have been collected or are collectible in the aggregate
recorded amounts thereof in accordance with their terms, net of the reserve for
uncollected accounts to be set forth on the Final Closing Statement.
SECTION 4.26 Inventory. The inventory and supplies of the Company and
its Subsidiaries are adequate for present needs, and are in usable and saleable
condition in the ordinary
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course of business, subject only to appropriate reserves for obsolescence to be
reflected on the Final Closing Statement.
SECTION 4.27 No Undisclosed Liabilities. Except to the extent (a)
reflected or reserved against in the Interim Balance Sheet, (b) incurred in the
ordinary course of business after the date of the Interim Balance Sheet and
either discharged at or prior to Closing or reflected on the Final Closing
Statement, or (c) described on any Schedule hereto, the Company and its
Subsidiaries have no liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise (including without limitation as a guarantor
or otherwise with respect to obligations of others), other than performance
obligations with respect to contracts that would not be required to be reflected
or reserved against on a balance sheet prepared in accordance with generally
accepted accounting principles or in the footnotes thereto.
SECTION 4.28 Indebtedness; Company Transaction Expenses. Except for
Indebtedness described on Schedule 4.28 hereto, the Company and its Subsidiaries
have no Indebtedness outstanding at the date hereof. As of the Closing Date, the
Company and its Subsidiaries will have no outstanding Indebtedness or unpaid
Company Transaction Expenses other than as described on the Certificate of Net
Debt.
SECTION 4.29 Bank Accounts, Signing Authority, Powers of Attorney.
Except as set forth on Schedule 4.29 hereto, neither the Company nor any of its
Subsidiaries has an account or safe deposit box in any bank and no Person has
any power, whether singly or jointly, to sign any checks on behalf of the
Company or any of its Subsidiaries, to withdraw any money or other property from
any bank, brokerage or other account of the Company or any of its Subsidiaries
or to act under any power of attorney granted by the Company or any of its
Subsidiaries at any time for any purpose. Schedule 4.29 also sets forth the
names of all persons authorized to borrow money or sign notes on behalf of the
Company or any of its Subsidiaries.
ARTICLE IV(A)
REPRESENTATIONS AND WARRANTIES
OF MANAGEMENT SHAREHOLDERS
Each of the Management Shareholders, severally and not jointly,
represents and warrants to the Purchaser as of the date hereof (or such later
date as is specified) and as of the Closing Date that: (i) except as set forth
on Schedule 4A, such Management Shareholder has (A) sole record and beneficial
ownership of the number and class or series of Shares set forth for such
Shareholder on Schedule 4.03(a)(i), in each case free and clear of any Lien,
other than Management Shareholder Permitted Liens, and (B) the unqualified right
to sell, assign, transfer and deliver such Shares in connection with the
consummation of the Merger; (ii) such Management Shareholder has all necessary
corporate or applicable entity power and authority, if applicable, to execute
and deliver this Agreement and the other Transaction Documents to which such
Person is a party and to consummate the transactions contemplated hereby and
thereby; (iii) the execution and delivery of this Agreement, and each of the
Transaction Documents to which such Person is a party, by such Management
Shareholder and the consummation by such Management Shareholder of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all necessary corporate or applicable entity
proceedings, if applicable, on the part of such Management Shareholder, other
than approval and adoption of this Agreement and the Merger by
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the stockholders of the Company; and (iv) this Agreement and the other
Transaction Documents to which such Person is a party has been (or upon
execution and delivery thereof will be) duly and validly executed and delivered
by such Management Shareholder and, assuming the due and valid authorization,
execution and delivery of this Agreement and the other Transaction Documents to
which such Person is a party by each other Person party thereto (other than such
Management Shareholder), this Agreement and such other Transaction Documents
constitute (or upon such execution and delivery will constitute) a valid and
binding obligation of such Management Shareholder enforceable against it in
accordance with their terms, except that such enforceability (A) may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights generally and (B) is subject to
general principles of equity.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND THE PURCHASER
The Parent and the Purchaser jointly and severally represent and warrant to
the Company that, as of the date hereof (or such other later date as is
specified):
SECTION 5.01 Organization and Qualification. The Parent and the
Purchaser are corporations duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Parent and the Purchaser have the
requisite corporate power and authority to own, operate or lease their
properties and to carry on their businesses as they are now being conducted and
to enter into this Agreement and to perform all of their obligations hereunder.
SECTION 5.02 Authority Relative to this Agreement. Each of the Parent
and the Purchaser has all necessary corporate power and authority to execute
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Parent and the Purchaser and the
consummation by the Parent and the Purchaser of the transactions contemplated
hereby have been duly and validly authorized and approved by all necessary
corporate proceedings on the part of the Parent and the Purchaser. This
Agreement has been duly executed and delivered by the Parent and the Purchaser
and, assuming the due and valid authorization, execution and delivery by the
Company and the Management Shareholders, such agreement constitutes a valid and
binding obligation of the Parent and the Purchaser enforceable against them in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
SECTION 5.03 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement by the
Parent and the Purchaser, the consummation by the Purchaser of the Merger or any
other transactions contemplated hereby or compliance by the Parent and the
Purchaser with any of the provisions hereof will (i) conflict with or violate
the organizational documents of the Parent or the Purchaser, (ii) conflict with
or violate any statute, ordinance, rule, regulation, order, judgment or decree
applicable to the Parent or any of its Subsidiaries, or by which any of them or
any of their respective properties or assets may be bound or affected, or (iii)
result in a Violation pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the
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Parent or any of its Subsidiaries is a party or by which any of their respective
properties or assets may be bound or affected, except for any such actions which
would not have a material adverse effect on the ability of the Parent or the
Purchaser to consummate the transactions contemplated hereby.
(b) None of the execution and delivery of this Agreement by the
Parent and the Purchaser, the consummation by the Purchaser of the Merger or any
other transactions contemplated hereby or compliance by the Parent and the
Purchaser with any of the provisions hereof will require any Consent of any
Governmental Entity or third party, except for (i) compliance with any
applicable requirements of the Securities Act, (ii) the filing of a Certificate
of Merger pursuant to the GCL, (iii) compliance with the HSR Act and any
requirements of any foreign or supranational Antitrust Laws, and (iv) Consents
the failure of which to obtain or make would not have a material adverse effect
on the ability of the Parent or the Purchaser to consummate the transactions
contemplated hereby.
SECTION 5.04 Conduct of Business. The Purchaser and the Parent are
newly formed corporations which have not conducted any business other than in
connection with the transactions contemplated by this Agreement.
SECTION 5.05 Solvency. Assuming the correctness of the
representations and warranties in Article IV hereof, the Surviving Corporation
and its Subsidiaries will immediately after the Closing and immediately after
the Effective Time be solvent and capable of meeting their obligations as they
become due, have assets exceeding their liabilities and have a reasonable amount
of capital for the conduct of their business.
SECTION 5.06 Capitalization. On the Closing Date, the authorized
capital stock of the Parent will consist of 250,000 shares of preferred stock,
$0.01 par value per share, of which 180,000 shares have been designated as
Series A preferred stock (the "Parent Preferred Stock"), 25,000 shares of Class
A common stock, $0.01 par value per share (the "Parent Class A Common Stock"),
300,000 shares of Class B-1 voting common stock, $0.01 par value per share (the
"Parent Class B-1 Common Stock") and 25,000 shares of Class B-2 non-voting
common stock, $0.01 par value per share. On the Closing Date, after giving
effect to the transactions contemplated hereby, the Parent will have no
outstanding capital stock other than the shares of Parent Preferred Stock to be
issued pursuant to Sections 2.1(b) and 2.2(c) of the Contribution Agreement, the
shares of Parent Class A Common Stock to be issued pursuant to Sections 2.1(a),
2.2(a) and 2.2(b) of the Contribution Agreement and the shares of Parent Class
B-1 Common Stock to be issued pursuant to Sections 2.1(c) of the Contribution
Agreement, all of which will be duly authorized, validly issued, fully paid, and
non-assessable. The authorized capital stock of the Purchaser consists of 3,000
shares of common stock, $0.01 par value per share. There are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) of the Parent or any of its
Subsidiaries issued and outstanding. Except for this Agreement, the Contribution
Agreement, the Parent's Stock Option Plan, the Notice of Offering and the
commitment letters relating the Mezzanine Credit Facility, there are no existing
options, warrants, calls, subscriptions or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Parent or any of its Subsidiaries, obligating the Parent or
any of its Subsidiaries to purchase, redeem, issue, transfer or sell, or cause
to be purchased, redeemed, issued, transferred or sold, any shares of capital
stock of, or other equity interest in or
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voting security of, the Parent or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or voting
securities, and neither the Parent nor any of its Subsidiaries is obligated to
grant or to enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment.
SECTION 5.07 Financing. The Parent and its Affiliates have received
the written commitments, true, correct and complete copies of which are attached
hereto as Annex 5.07 (the "Commitment Letters"), to obtain, subject to the terms
and conditions therein, the funds necessary for the consummation of the
transactions contemplated hereby, including payment of the Merger Consideration
with respect to all Shares not owned, directly or indirectly, by the Parent or
the Company prior to the Closing Date and all related costs and expenses. The
Parent or its Affiliates have paid all commitment fees required to be paid and
taken all other actions required to cause such Commitment Letters to be
effective and to constitute the valid commitment of the issuer(s) of such
letters, and each such Commitment Letter is a valid and binding commitment of
the Affiliates of the Parent party thereto and, to the knowledge of the Parent,
the issuer thereof. Neither the Parent nor its Affiliates has any knowledge, as
of the date hereof, of any fact that is in the control of the Parent or the
Purchaser that would cause the commitments provided in the Commitment Letters to
be terminated prior to October 31, 2002.
SECTION 5.08 Interest in Other Entities. Neither the Parent nor the
Purchaser owns, directly or indirectly, beneficially or of record, any stock,
partnership interest, option, warrant or other equity interest in any Person
other than the Purchaser and, following the consummation of the transactions
contemplated by this Agreement, the Company and its Subsidiaries.
SECTION 5.09 Notice of Offering. None of the information supplied or
to be supplied by the Parent or the Purchaser or their respective Affiliates in
writing for inclusion in the Notice of Offering will, at the times provided to
the Parent, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 5.10 Litigation. There is no suit, claim, action, proceeding,
judgment, writ, order, injunction or decree pending or, to the knowledge of the
Parent or the Purchaser, threatened against or affecting the consummation by the
Parent or the Purchaser of the transactions contemplated hereby or by the
Transaction Documents to which either of them is a party, at law or in equity or
before any governmental authority or instrumentality or before any arbitrator of
any kind, except for those that would not have a material adverse effect on the
Parent's or the Purchaser's financial condition or results of operations,
assuming the consummation of the transactions contemplated hereby and by the
other Transaction Documents, or the ability of either the Parent or the
Purchaser to consummate the transactions contemplated hereby, or by the other
Transaction Documents.
SECTION 5.11 Broker's Fees. Neither the Parent nor the Purchaser nor
any Person on the Parent's or the Purchaser's behalf has retained any broker,
finder or agent or agreed to pay any brokerage fee, finder's fee or commission
with respect to the transactions contemplated by this Agreement.
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SECTION 5.12 Ownership of Purchaser. The Parent owns beneficially and
of record all of the shares and interests in the Purchaser, free and clear of
any Liens, proxies, voting trusts or restrictions whatsoever, except
restrictions on transfer under any applicable securities laws. There are no
outstanding options, warrants, conversion or other rights or agreements of any
kind (except as contemplated hereby) for the purchase from, or the sale or
issuance by, the Parent of any interest or stock in the Purchaser. Each of the
outstanding shares of capital stock of the Purchaser is duly authorized, validly
issued, fully paid and non-assessable. The Parent is not a party to any
obligation (contingent or otherwise) to buy or sell the Purchaser, except to the
extent of any pledge of the capital stock of the Purchaser required in
connection with the Senior Credit Facility.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as provided
in Section 6.08 hereof or as otherwise contemplated by this Agreement (including
without limitation, any schedules or annexes hereto) or with the written consent
of the Purchaser, during the period from the date of this Agreement to the
Closing Date, the Company will (and each of the Management Shareholders will
cause the Company to), and will cause each of its Subsidiaries to, conduct its
operations only in the ordinary course of business consistent with past practice
and will (and each of the Management Shareholders will cause the Company to) use
all commercially reasonable efforts, and will cause each of its Subsidiaries to
use all commercially reasonable efforts, to preserve intact the business
organization of the Company and each of its Subsidiaries, to keep available the
services of its and their present officers and key employees and to preserve the
goodwill of those having business relationships with it. Without limiting the
generality of the foregoing, and except as provided in Section 6.08 hereof, as
otherwise contemplated by this Agreement (including without limitation, Schedule
7.03(o) and any other schedules or annexes hereto) or with the written consent
of the Purchaser, the Company will not (and each of the Management Shareholders
will cause the Company to not), and will not permit any of its Subsidiaries to,
prior to the Closing Date:
(a) Adopt any amendment to its charter or by-laws or comparable
organizational documents;
(b) Except for issuances of capital stock of the Subsidiaries to the
Company or a wholly owned subsidiary of the Company, and other than the issuance
of Common Shares pursuant to the exercise of Options outstanding on the date
hereof, issue, reissue, pledge or sell, or authorize the issuance, reissuance,
pledge or sale of (i) additional Shares or other shares of capital stock of any
class, or securities convertible into Shares or other capital stock of any
class, or any rights, warrants or options to acquire any convertible securities
or capital stock, or (ii) any other securities in respect of, in lieu of, or in
substitution for, Shares outstanding on the date hereof;
(c) Declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock other than between any of the
Company and its wholly owned Subsidiaries.
(d) Split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem, purchase or otherwise acquire, any
Shares or any other capital stock;
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(e) Make any loans, advances or capital contributions to, or
investments in, any other Person in excess of $100,000, except for loans,
advances, capital contributions or investments between any Subsidiary of the
Company and the Company or another wholly owned subsidiary of the Company;
(f) Merge with any other Person or permit any other Person to merge
into it, consolidate or combine with any Person, or sell all or substantially
all of its assets;
(g) Sell or otherwise dispose of any capital asset with a market
value in excess of $100,000 individually or $500,000 in the aggregate, or
purchase, sell or otherwise dispose of any capital asset other than in the
ordinary course of business;
(h) Enter into, establish, adopt, amend or renew any employment,
consulting, severance or similar agreements or arrangements with any director,
officer or employee; grant any salary or wage increase (other than in the
ordinary course of business consistent with past practice or as may be required
by law); or establish, adopt, amend, or increase benefits under, any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, welfare benefit contract, plan or arrangement (other
than in the ordinary course of business consistent with past practice or as may
be required by law);
(i) Enter into any labor or collective bargaining agreement,
memorandum of understanding, grievance settlement or any other agreement or
commitment to or relating to any labor union, except in the ordinary course of
business consistent with past practice;
(j) Take any action that would or might be expected to (i) result in
any inaccuracy of any representation or warranty herein that would allow for the
termination of this Agreement, (ii) cause any of the conditions precedent to the
transactions contemplated by this Agreement to fail to be satisfied, (iii) fail
to comply in any material respect with any laws, regulations, ordinances or
governmental actions applicable to it or to the conduct of its business or (iv)
cause any of the insurance policies required to be disclosed on Schedule 4.17 to
cease to be in effect, unless such policies are replaced with replacement
policies containing substantially similar provisions; or
(k) Agree to take any of the foregoing actions prohibited under this
Section.
SECTION 6.02 Access to Information. From the date of this Agreement
until the Closing, upon reasonable notice, the Company will (and each of the
Management Shareholders will cause the Company to), and will cause its
Subsidiaries, and each of their respective Affiliates, officers, directors,
counsel, employees, advisors and representatives (collectively, the "Company
Representatives") to, give the Purchaser and its Affiliates, officers,
directors, employees, counsel, advisors and representatives (collectively, the
"Purchaser Representatives") full access (subject, however, during the term of
this Agreement and following any termination hereof, to the Purchaser keeping
and causing its Subsidiaries and Affiliates to keep such information
confidential in a manner consistent with existing confidentiality and similar
non-disclosure obligations, including those contained in the Confidentiality
Agreement, and the preservation of attorney client and work product privileges),
during normal business hours, to the offices and other facilities and to the
books and records of the Company and its Subsidiaries and will (and each of the
Management Shareholders
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will cause the Company to) cause the Company Representatives to furnish the
Purchaser and the Purchaser Representatives to the extent available with such
financial and operating data and such other information with respect to the
business and operations of the Company and its Subsidiaries as the Purchaser may
from time to time reasonably request; provided that if the Company determines in
good faith that any such data or information is competitively sensitive, then
during the period prior to the Closing Date, the Purchaser will take such steps
as are reasonable and appropriate to limit the dissemination of such information
to only such Purchaser Representatives as are necessary to have access to such
information for purposes of this transaction. Prior to the Closing Date, neither
the Purchaser nor the Purchaser Representatives shall contact or in any manner
communicate with the employees, customers, lessors or suppliers of the Company
and its Subsidiaries with respect to any matter related to the transactions
contemplated hereby, except with the prior written consent of the Company. In
the event of the termination of this Agreement, each party hereto shall return
to the other party upon its written request all confidential information
previously furnished in connection with the transactions contemplated by this
Agreement.
SECTION 6.03 Cooperation. Subject to the terms and conditions herein
provided and to applicable legal requirements, each of the parties hereto agrees
to use commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, and to assist and cooperate with the
other party hereto in doing, as promptly as practicable, all things necessary,
proper or advisable under applicable laws and regulations to ensure that the
conditions set forth in Article VII are satisfied and to consummate and make
effective the transactions contemplated by the Merger and this Agreement on or
before November 5, 2002.
SECTION 6.04 Consents.
(a) Within five (5) Business Days following the date hereof, the
Parent, the Purchaser and the Company shall prepare and file or cause to be
prepared and filed on their respective behalf with the United States Federal
Trade Commission ("FTC") and the United States Department of Justice ("DOJ") all
reports or other documents required to be filed by or on behalf of them under
the HSR Act and the Premerger Notification Rules promulgated thereunder
concerning the transactions contemplated hereby. Each of the Parent, the
Purchaser and the Company shall respond promptly to any request for additional
information that may be issued by either the FTC or the DOJ and shall use
commercially reasonable efforts to assure that the waiting period required by
the HSR Act has expired or been terminated prior to the date that is 30 days
following the date that all reports or other documents required to be filed with
the FTC and the DOJ have been submitted. Each of the Parent, the Purchaser and
the Company shall provide the others with copies of all documents and other
information provided to the FTC and the DOJ, subject to the limitations and
conditions set forth in Section 6.02.
(b) Within five (5) Business Days following the date hereof, the
Parent, the Purchaser and the Company shall prepare and file or cause to be
prepared and filed on their respective behalf with the Finnish Competition
Authority ("FCA") all reports or other documents required to be filed by them
under the Finnish Act on Competition Restrictions and the rules and regulations
promulgated thereunder concerning the transactions contemplated hereby. Each of
the Parent, the Purchaser and the Company shall respond promptly to any request
for additional information that may be issued by the FCA and shall use
commercially reasonable efforts to assure that the waiting period required by
the Finnish Act on Competition Restrictions has expired or been
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terminated prior to the date that is 30 days following the date that all reports
or other documents required to be filed with the FCA have been submitted. Each
of the Parent, the Purchaser and the Company shall provide the others with
copies of all documents and other information provided to the FCA, subject to
the limitations and conditions set forth in Section 6.02.
(c) Within fifteen (15) days following the date hereof, the Parent,
the Purchaser and the Company shall prepare and file or cause to be prepared and
filed on their respective behalf with the Brazilian Administrative Council for
Economic Defence ("CADE") all reports or other documents required to be filed by
them under Brazilian Law No. 8,884 of June 11, 1994 and the rules and
regulations promulgated thereunder concerning the transactions contemplated
hereby. Each of the Parent, the Purchaser and the Company shall respond promptly
to any request for additional information that may be issued by the CADE and
shall use commercially reasonable efforts to assure that the transactions
contemplated hereby are approved or cleared by the CADE; provided, that such
approval or clearance shall not be a required approval or clearance for purposes
of Sections 7.01(b) or 8.01(c)(ii) of this Agreement. Each of the Parent, the
Purchaser and the Company shall provide the others with copies of all documents
and other information provided to the CADE, subject to the limitations and
conditions set forth in Section 6.02.
(d) Each of the Purchaser, the Parent and the Company will use its
commercially reasonable efforts to obtain as promptly as practicable all
Consents of any Governmental Entity or any other person required in connection
with, and waivers of any Violations that may be caused by, the consummation of
the transactions contemplated by this Agreement. Each of the Parent, the
Purchaser and the Company shall provide the others with copies of all documents
and other information provided in connection with such Consents and waivers,
subject to the limitation and conditions set forth in Section 6.02.
(e) Any party hereto shall promptly inform the others of any material
communication from the FTC, the DOJ, the FCA, the CADE or any other Governmental
Entity regarding any of the transactions contemplated by this Agreement. If any
party hereto or any Affiliate thereof receives a request for additional
information or documentary material from any such government or authority with
respect to the transactions contemplated by this Agreement, then such party will
endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other party, an appropriate response
in compliance with such request. The Parent and the Purchaser will advise the
Company promptly in respect of any understandings, undertakings or agreements
(oral or written) which the Parent or the Purchaser proposes to make or enter
into with the FTC, the DOJ, the FCA, the CADE or any other Governmental Entity
in connection with the transactions contemplated by this Agreement.
SECTION 6.05 Public Announcements. Prior to the Effective Time,
except as required by applicable law, no party hereto shall issue any press
release or otherwise make any public statement with respect to this Agreement
and the transactions contemplated hereby without the prior written consent of
the other parties hereto. With respect to any public statement of any party that
does not require the consent of the other parties, the party making such
statement shall, prior to public disclosure thereof, first consult with and
provide the other party a reasonable opportunity to review the contents of such
statement. After the Effective Time, no party hereto shall issue any press
release (or otherwise make any public statement) disclosing the Aggregate Merger
Consideration or the price paid per share for the Common Shares or the Preferred
Shares pursuant to
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the Merger, without the prior written consent of the other parties, such consent
not to be unreasonably withheld, unless such price has already become publicly
available other than through a breach of this provision by the disclosing party.
SECTION 6.06 Indemnification.
(a) The Parent and the Purchaser agree that all rights to
indemnification now existing in favor of any director or officer of the Company
and its Subsidiaries as provided in their respective charters or by-laws or in
any agreement disclosed on Schedule 4.11(a) between any such officer or director
and the Company or one of its Subsidiaries, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time; provided that in the event any claim or claims are asserted
or made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until final disposition of any and all
such claims. The Surviving Corporation shall honor all rights to indemnification
referred to in the preceding sentence. Without limitation of the foregoing, in
the event any current or former officer or director of the Company and its
Subsidiaries is or becomes involved in any capacity in any action, proceeding or
investigation in connection with any matter, including, without limitation, the
transactions contemplated by this Agreement, occurring prior to, and including,
the Effective Time, the Surviving Corporation will cause to be paid in
accordance with the applicable charters, by-laws and agreements, as incurred,
such officer's or director's legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith. The Surviving
Corporation shall pay all reasonable expenses, including attorneys' fees, that
may be incurred by any applicable officer or director in enforcing the indemnity
and other obligations provided for in this Section 6.06, subject to the
limitations of the GCL to the extent applicable.
(b) The Surviving Corporation shall cause to be maintained in effect,
for not less than six years from the Effective Time for the benefit of all
current and former directors and officers of the Company, the current policies
of the directors' and officers' liability insurance maintained by the Company;
provided that the Surviving Corporation may substitute therefor other policies
not less advantageous (other than to a de minimus extent) to the beneficiaries
of the current policies and provided that such substitution shall not result in
any gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time; and provided, further, that the Surviving Corporation shall not
be required to pay an annual premium in excess of the last annual premium paid
by the Company prior to the date hereof and if the Surviving Corporation is
unable to obtain the insurance required by this Section 6.06(b) it shall obtain
as much comparable insurance as possible for an annual premium equal to such
maximum amount.
(c) The provisions of this Section 6.06 are intended for the benefit
of, and shall be enforceable by, all current or former officers and directors of
the Company and of its Subsidiaries, and such directors' or officers' heirs and
personal representatives, and such persons shall be entitled to reimbursement by
the Parent or the Purchaser of all fees and expenses (including reasonable
attorneys' fees) incurred to enforce the terms of this section. In the event the
Purchaser or the Surviving Corporation or any of their respective successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all its properties and assets to
any person, then the obligations of the Purchaser or the Surviving Corporation
set forth in this Section 6.06 shall survive such consolidation, merger or
transfer.
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SECTION 6.07 Notification of Certain Matters. Each of the Parent, the
Purchaser, the Company and the Management Shareholders shall promptly notify the
others of (a) (i) it becoming aware of any fact or event which would be
reasonably likely to demonstrate that any representation or warranty of any
party hereto contained in this Agreement was or is untrue or inaccurate in any
material respect as of the date of this Agreement or (ii) the occurrence or
non-occurrence of any fact or event which would be reasonably likely to cause
any material covenant, condition or agreement of any party hereto under this
Agreement not to be complied with or satisfied in all material respects and (b)
any failure of any party hereto to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder in any
material respect; provided, however, that no such notification shall affect the
representations or warranties of any party hereto or the conditions to the
obligations of any party hereunder.
SECTION 6.08 No Solicitation. The Company agrees that, during the
term of this Agreement it shall not, and shall not authorize, support or
encourage any of its Subsidiaries or any of its or its Subsidiaries' directors,
officers, employees, agents or representatives, directly or indirectly, to
solicit, initiate, encourage, facilitate or furnish or disclose non-public
information in furtherance of, any inquiries or the making of any proposal with
respect to any recapitalization, merger, consolidation or other business
combination involving the Company, or acquisition of any capital stock (other
than upon exercise of the Options which are outstanding as of the date hereof)
or any portion of the assets (except for acquisitions of assets in the ordinary
course of business consistent with past practice) of the Company or any of its
Subsidiaries, or any combination of the foregoing (a "Competing Transaction"),
or negotiate, or otherwise engage in discussions with any person (other than the
Purchaser or its directors, officers, employees, agents and representatives) for
the purpose of facilitating any Competing Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by this
Agreement.
SECTION 6.09 Cooperation for Financing. The Company agrees that,
during the term of this Agreement, it shall provide reasonable cooperation to
the Parent and the Purchaser to facilitate the efforts of the Parent and the
Purchaser to obtain the financing contemplated by the Commitment Letters.
SECTION 6.10 Stock Option Plan. The Parent shall adopt a Stock Option
Plan in substantially the form of the attached Annex 6.10.
SECTION 6.11 Stockholder Approval. To the extent such approval has
not already been obtained, the Company, acting through its Board of Directors,
shall in accordance with applicable law and its certificate of incorporation and
bylaws, use its commercially reasonable efforts to obtain the necessary approval
of the Merger by its Shareholders.
SECTION 6.12 Notice of Offering. Promptly following the date of this
Agreement, the Parent shall distribute the Notice of Offering to those Common
Shareholders who are accredited investors (as such term is defined in Regulation
D under the Securities Act). The parties hereto shall use commercially
reasonably efforts to cooperate with the Parent to timely distribute the Notice
of Offering, and to ensure that the Notice of Offering complies, as to form and
content, with all applicable securities laws.
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SECTION 6.13 Solvency Opinion. In the event the lenders to the Parent
or the Purchaser require a solvency opinion in connection with funding any of
the proceeds required to consummate the transactions contemplated by this
Agreement, the Parent and the Purchaser will ensure that a draft of such
solvency opinion is provided to the Board and counsel to the Company for their
review and comment not less than three days prior to the formal delivery thereof
and will provide that such solvency opinion is addressed to and delivered to the
Board.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions Precedent - Parent, Purchaser and Company.
The respective obligations of the Parent, the Purchaser and the Company to
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction or waiver, at or before the Effective Time, of each of the
following conditions:
(a) No Injunctions or Restraints; Illegality. No (i) order or
preliminary or permanent injunction shall be entered in any action or proceeding
before any court of competent jurisdiction or any statute, rule, regulation,
legislation, or order shall be enacted, entered, enforced, promulgated, amended
or issued by any Governmental Entity (other than the waiting period provisions
of the HSR Act and the Finnish Act on Competition Restrictions) which shall
remain in effect and which shall have the effect of (x) making illegal or
restraining or prohibiting the consummation of the Merger or any of the other
transactions contemplated by this Agreement or any of the Transaction Documents,
or (y) imposing material limitations on the ability of the Surviving Corporation
effectively to acquire, own or operate the assets and businesses owned and
operated by the Company immediately prior to the Effective Time; or (ii)
proceeding brought by any Governmental Entity seeking any of the foregoing shall
be pending.
(b) Regulatory Approvals. The parties hereto shall have received all
approvals and consents required from any Governmental Entity in connection with
the transactions contemplated by this Agreement, all notice periods and waiting
periods with respect to such approvals and consents shall have expired and all
such approvals and consents shall be in effect.
SECTION 7.02 Conditions Precedent - Company. The obligations of the
Company to consummate the Merger and the other transactions contemplated hereby
are subject to the satisfaction or waiver, at or before the Effective Time, of
each of the following additional conditions:
(a) Representations, Warranties and Obligations of the Parent and the
Purchaser. The representations and warranties contained in Article V shall be
true and correct as of the date hereof and as of the Closing Date as though made
on and as of the Closing Date; provided, however, that if any such
representation and warranty is not qualified by a standard of materiality, such
representation and warranty need only be true and correct in all material
respects. The Parent and the Purchaser shall have duly performed and complied in
all material respects with all agreements and covenants contained herein
required to be performed or complied with by them at or prior to the Closing.
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(b) Officer's Certificate. Each of the Parent and the Purchaser shall
have delivered to the Company a Certificate, dated the Closing Date, signed by
its President, Secretary or a Vice-President, as to the fulfillment of the
conditions set forth in Section 7.02(a).
(c) Contribution Agreement. The Investors (as defined in the
Contribution Agreement) shall have contributed to the Parent all of the cash
required to be contributed by them under the Contribution Agreement in exchange
for shares of Parent Preferred Stock as set forth in the Contribution Agreement,
and the Parent shall have issued all capital stock required to have been issued
by it under the Contribution Agreement.
(d) Escrow Agreement. The Parent and the Escrow Agent shall have
executed and delivered to the Payee Representatives the Escrow Agreement, and
the Escrow Agreement shall be in full force and effect.
(e) Opinion of Counsel. Bingham McCutchen LLP, counsel to the Parent
and the Purchaser, shall have delivered to the Company a written opinion,
addressed to the Company and dated the Closing Date, substantially in the form
of Annex 7.02(e).
SECTION 7.03 Conditions Precedent - Parent and Purchaser. The
obligations of the Parent and the Purchaser to consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction or
waiver, at or before the Effective Time, of each of the following additional
conditions:
(a) Representations, Warranties and Obligations of the Company and
the Management Shareholders. The representations and warranties contained in
Articles IV and IV(A) shall be true and correct as of the date hereof, and,
except to the extent such representations and warranties relate solely to an
earlier date, as of the Closing Date, as though made on and as of the Closing
Date with only such exceptions as would not reasonably be expected to have a
Material Adverse Effect on the Company. The Company and the Management
Shareholders shall have duly performed and complied in all material respects
with all agreements and covenants contained herein required to be performed or
complied with by it at or before the Closing.
(b) No Material Adverse Change. Since the date of this Agreement,
there shall have been or have threatened to be no change which has or has had a
Material Adverse Effect on the Company.
(c) Officer's Certificate. The Company shall have delivered to the
Purchaser a certificate, dated the Closing Date and signed by its President,
Secretary or a Vice-President, as to the fulfillment of the conditions set forth
in Sections 7.03(a) and (b).
(d) Third-Party Approvals. The parties hereto shall have received all
approvals and consents required from any third party under the Material
Contracts set forth in Schedule 7.03(d) in connection with the transactions
contemplated by this Agreement and all such approvals and consents shall be in
effect.
(e) Contribution Agreement. The TWI Shareholders (as defined in the
Contribution Agreement) shall have contributed to the Parent all of the shares
of capital stock of the Company required to be so contributed pursuant to the
Contribution Agreement, in exchange for
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shares of Parent Class A Common Stock as set forth in the Contribution
Agreement; and the Class B Shareholders (as defined in the Contribution
Agreement) shall have transferred to the Parent the consideration required to be
so transferred pursuant to the Contribution Agreement, in exchange for shares of
Parent Class B-1 Common Stock as set forth in the Contribution Agreement.
(f) Non-Competition and Non-Disclosure Agreements. The
Non-Competition Agreements, dated as of the date hereof, among the Parent, the
Surviving Corporation and each of Mikael Magnusson and Dag Landvik in the
respective forms of the attached Annexes 7.03(f)(1)(A) and 7.03(f)(1)(B) shall
be in full force and effect. Each of the employees identified on Schedule
4.12(d) as not having executed a confidentiality agreement shall have executed a
Confidentiality Agreement in favor of the Surviving Corporation and/or one or
more of its Subsidiaries in substantially the form of the attached Annex
7.03(f)(2).
(g) Support Agreement; Written Consents. The Consenting Shareholders
shall have complied with, and not be in breach of, the Support Agreements. The
Consenting Shareholders shall not have withdrawn their consent as set forth in
the Written Consents.
(h) Escrow Agreement. The Payee Representatives, the Company and the
Escrow Agent shall have executed and delivered to the Purchaser the Escrow
Agreement, and the Escrow Agreement shall be in full force and effect.
(i) Financing. The Parent and the Purchaser shall have obtained debt
financing in the amounts, on substantially the same terms and from the sources
described in the Commitment Letters.
(j) Cancellation of Options. The Exchange Options shall have been
canceled in exchange for Common Shares, and the Management Options shall have
been terminated, in each case in accordance with Section 2.07.
(k) Opinion of Counsel. Frost Brown Todd LLC, counsel to the Company,
shall have delivered to the Purchaser and the Parent its written opinion,
addressed to the Purchaser and the Parent, and dated the Closing Date,
substantially in the form of Annex 7.03(k)(1). Foreign counsel to certain of the
Management Shareholders shall have delivered to the Purchaser and the Parent
their respective written opinions, addressed to the Purchaser and the Parent,
and dated the Closing Date, collectively containing the opinions set forth on
Annex 7.03(k)(2).
(l) Certificate of Net Debt; Pay-off of Indebtedness; Release of
Avalon Agreement. The Company shall have prepared and delivered to the Purchaser
a certificate (the "Certificate of Net Debt") certifying as to (a) the amount of
cash and Cash Equivalents of the Company and its Subsidiaries on hand as of the
Closing Date less the amount of outstanding checks or wire payments of the
Company and its Subsidiaries as of the Closing Date, (b) the amount of
Indebtedness (excluding Indebtedness relating to the Dent-A-Med Inc. Facility)
of the Company and its Subsidiaries outstanding on the Closing Date, and
specifying the amount owed to each creditor listed thereon, (c) to the extent
not included in clause (b), the amounts owed by the Company and its Subsidiaries
to the states of California and Florida for sales and use tax for periods prior
to the Closing Date as agreed to in writing by the Company or any of its
Subsidiaries and each such state prior to the date hereof pursuant to the tax
settlement agreements described on Schedule B and as
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otherwise agreed to in writing by the Company or any of Subsidiaries and any
such state after the date hereof and prior to the Closing Date (copies of which
shall be provided to the Parent and the Purchaser prior to the Closing Date) and
(d) to the extent not included in clause (b), the Company Transaction Expenses.
The Company shall have caused the creditors of the Company and its Subsidiaries
to deliver pay-off letters, each in form satisfactory to the Purchaser, with
respect to the Indebtedness listed on Schedule 7.03(l). Avalon Group, Ltd. and
Avalon Securities, Ltd. shall have executed and delivered a release and
termination agreement in form and substance satisfactory to the Purchaser
acknowledging receipt of the Avalon Fee as payment in full of all amounts owed
by the Company to them under the Avalon Agreement and releasing the Company, the
Surviving Corporation and their Affiliates from any further obligations under
the Avalon Agreement, except for the Company's indemnification obligations
thereunder.
(m) Ashfield Consulting Agreement. The Consulting and Service Support
Agreement dated as of November 16, 2000 among the Company, Ashfield Consultancy
Ltd and Dan Foam A/S shall have been terminated and replaced by the Consulting
and Service Support Agreement in the form of the attached Annex 7.03(m).
(n) Administrative Services Agreement. Fagerdala Industri AB and its
Subsidiaries shall have entered into a Administrative Services Agreement with
the Company and its Subsidiaries in the form of the attached Annex 7.03(n).
(o) European Restructuring. The portion of the restructuring of the
Company's European Subsidiaries described on the attached Schedule 7.03(o) which
is to be completed prior to the Closing shall have been completed.
(p) Employment Agreement Waivers. Each of the management employees of
the Company and its Subsidiaries listed on Schedule 7.03(p) shall have waived
any change in control provisions in his employment agreement in connection with
the consummation of the transactions contemplated by this Agreement.
(q) Resignations. The directors, officers and managers of the Company
and its Subsidiaries specified in Schedule 7.03(q) shall have resigned their
positions with the Company or any of its Subsidiaries, on or prior to the
Closing Date, and prior thereto shall have executed such appropriate documents
with respect to the transfer or establishment of bank accounts, signing
authority, etc., as the Purchaser shall have reasonably requested.
(r) Waiver of Existing Rights. All holders of Shares issued pursuant
to the Securities Purchase Agreements shall have waived any redemption rights
with respect to the Shares, and all holders of Shares having buy-back rights
under the Redemption Agreement (or pursuant to any redemption contemplated by
any of the Securities Purchase Agreements) shall have waived such buy-back
rights, in each case pursuant to a written instrument executed by each such
holder in form and substance reasonably satisfactory to Purchaser.
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ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the shareholders of the Company:
(a) By the mutual written consent of the Purchaser and the Company;
(b) By the Purchaser or the Company if any court or other
Governmental Entity shall have issued, enacted, entered, promulgated or enforced
any order, judgment, decree, injunction, or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment, decree, injunction, ruling or other action shall have become final and
nonappealable; provided that the party seeking to terminate the Agreement shall
have used its reasonable efforts to remove or lift such order, judgment, decree,
injunction, ruling or other action;
(c) By the Company or the Purchaser if the Effective Time has not
occurred by December 5, 2002, and the party giving the notice is not in material
breach of, and has not materially failed to comply with, any of its
representations, warranties, covenants, agreements or other obligations under
this Agreement; provided, however, that (i) the passage of such period shall be
tolled (but not for longer than an additional 90 days) for any part thereof
during which any party shall be subject to a non-final order, judgment, decree,
injunction, ruling or other action restraining, enjoining or otherwise
prohibiting the Merger and (ii) such period shall be extended for an additional
30 day period to the extent that any required approval or clearance of the DOJ,
FTC or any other Governmental Entity has not been received by such date under
the HSR Act or any other applicable supranational or national Antitrust Law;
(d) By the Company, if either of the Parent or the Purchaser
materially breaches its obligations under this Agreement unless such breach is
cured within 30 days after notice to the Parent or the Purchaser, as applicable,
by the Company; or by the Purchaser, if the Company or any Management
Shareholder materially breaches his or its obligations under this Agreement
unless such breach is cured within 30 days after notice to the Company by the
Purchaser; or
(e) By the Purchaser, if any party materially breaches its
obligations under any of the Support Agreements or if the minimum number of
Shares required to be contributed to the Parent pursuant to the Contribution
Agreement is not contributed.
SECTION 8.02 Effect of Termination; Fees and Expenses. In the event
of the termination of this Agreement pursuant to Section 8.01, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party hereto or its directors, officers or stockholders, other than
the provisions of this Section 8.02, the confidentiality provisions referenced
in the first sentence of Section 6.02 and the expense provisions referenced in
Section 10.09, which shall survive any such termination. Nothing contained in
this Section 8.02 shall relieve any party from liability for any deliberate or
willful breach of this Agreement or the Confidentiality Agreement to the extent
that any such deliberate or willful breach by such party results in the
termination of this Agreement by any other party under Section 8.01(c) hereof.
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SECTION 8.03 Amendment. This Agreement may not be amended except by
an instrument in writing signed on behalf of all the parties hereto.
SECTION 8.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto may (a) extend the time for the performance of any of
the obligations or other acts of any other party hereto, (b) waive any
inaccuracies in the representations and warranties contained herein by any other
party hereto or in any document, certificate or writing delivered pursuant
hereto by any other party hereto or (c) waive compliance with any of the
agreements of any other party hereto or with any conditions to its own
obligations. Any agreement on the part of any party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. No waiver or failure to insist upon strict compliance with
any obligation, covenant, agreement or condition of this Agreement shall operate
as a waiver of, or an estoppel with respect to, any subsequent or other failure.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01 Survival of Representations and Warranties. Each
representation and warranty made by the Company and the Management Shareholders
shall expire on the last day, if any, that Claims for breaches of such
representation or warranty may be made pursuant to Section 9.02(c), except that
any such representation or warranty that has been made the subject of a Claim
prior to such expiration date shall survive with respect to such Claim until the
final resolution of such Claim pursuant to this Article IX.
SECTION 9.02 Indemnification Provisions for Benefit of the Parent and
the Surviving Corporation.
(a) Subject to the limitations set forth in Sections 9.02(c), (d),
(e) and (f) and Section 10.10, after the Closing, each of the Common
Shareholders, severally and not jointly, agrees to indemnify and hold the
Parent, the Surviving Corporation and the Purchaser Representatives
(collectively, the "Purchaser Indemnified Parties") harmless from and in respect
of any and all damages, losses, claims, deficiencies, liabilities, suits,
demands, judgments, diminutions in value and costs and expenses (including costs
of investigations and reasonable attorneys' fees) (each a "Loss" and
collectively "Losses") related to, resulting from, arising out of, or caused by,
directly or indirectly, (i) any breach by the Company of any representation,
warranty, covenant or agreement contained herein, to the extent such breach does
not result in any liability or claim described in the following subclauses of
this Section 9.02(a), (ii) any contractual product warranty claims arising out
of defects in any product sold or manufactured by the Company or any of its
Subsidiaries prior to the Closing Date, to the extent that the Surviving
Corporation's cost of materials and transportation required to satisfy such
claims, less the amount of payments received from customers in connection with
such claims, exceeds the amount accrued or reserved for such claims on the Final
Closing Statement, (iii) any of the items disclosed on Schedule 9.02(a)(iii)(A)
(the "Specified Claims"), or the items disclosed on Schedule 9.02(a)(iii)(B)
(the "Reiners Claims") or the items disclosed on Schedule 9.02(a)(iii)(C) (the
"Danish Environmental Claims"), (iv) any (A) income Taxes owed or which will be
payable by the Company or its Subsidiaries (other than any Closing Date Transfer
Taxes and any Taxes for which the Purchaser Indemnified Parties are indemnified
pursuant to clause (iii) above) relating to any period or portion thereof ending
on or before the Closing Date, to the
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extent such liability (whether or not reserved for by the Company or any of its
Subsidiaries) exceeds $5,000,000, and (B) other Taxes of the Company or its
Subsidiaries (other than any Closing Date Transfer Taxes and any Taxes for which
the Purchaser Indemnified Parties are indemnified pursuant to clause (iii)
above) relating to any period or portion thereof ending on or before the Closing
Date, to the extent such liability was not taken into account in calculating the
Final Net Working Capital Adjustment, (v) any and all Hazardous Substances in
the environment (including without limitation soil, groundwater and
surfacewater) as of the Closing Date, whether known or unknown, existing at, on,
in or under or emanating from the real property or the business located at 5
Caxton Trading Estate, Printing House Lane, Hayes, Middlesex, UB3 1BE, United
Kingdom in concentrations or quantities which require investigation, assessment,
removal, remediation or monitoring pursuant to applicable Environmental Laws or
any Governmental Entity, (vi) any Indebtedness of the Company or its
Subsidiaries outstanding as of the Closing Date, to the extent not taken into
account in the determination of Net Debt for purposes of the Closing Payment
Amount or (vii) any Company Transaction Expenses. As used herein "Closing Date
Transfer Taxes" shall mean the amount of any income Taxes incurred by the
Company or its Subsidiaries arising from or relating to the transfer on the
Closing Date of cash from the Company's European Subsidiaries to the Company to
fund any portion of the Aggregate Merger Consideration or any of the costs or
expenses of the Company or any of its Subsidiaries incurred in connection with
the transactions contemplated by this Agreement.
(b) Subject to the limitations set forth in Sections 9.02(c), (d),
(e) and (f) and Section 10.10, each of the Management Shareholders, severally
and not jointly, agrees to indemnify and hold the Purchaser Indemnified Parties
harmless from and in respect of any and all Losses related to, resulting from,
arising out of or caused by, directly or indirectly, any breach by such
Management Shareholder of any representation and warranty made by such
Management Shareholder in Article IV(A).
(c) No Common Shareholder shall be liable for any Losses pursuant to
Section 9.02(a) and no Management Shareholder shall be liable for any Losses
pursuant to Section 9.02(b) unless a written claim for indemnification in
accordance with Section 9.03 is given by a Purchaser Indemnified Party to the
Payee Representative with respect thereto on or before April 30, 2004, except
that this time limitation shall not apply to (i) any Losses arising from any
breach of a covenant or agreement contained herein, or from Reiners Claims or in
relation to a breach of Section 4.03 or Section 4.21, or under Section
9.02(a)(vi), Section 9.02(a)(vii) or Section 9.02(b), as to which, in each case,
the applicable statute of limitations shall apply, (ii) any Losses arising under
Section 9.02(a)(ii) or arising from any Danish Environmental Claims, as to which
the time limitation shall be five (5) years after the Closing Date, or (iii) any
Losses arising under Section 9.02(a)(iv) or from any Specified Claim, as to
which the time limitation with respect to making claims for any particular Loss
shall be the shorter of (A) the applicable statute of limitations relating to
the subject matter of such Loss, and (B) 30 days after the date on which Final
Resolution is reached with the applicable tax authority with respect to the
matter giving rise to the claim for Losses under this Section 9.02. As used in
this Article IX, "Final Resolution" shall mean that, with respect to any item or
claim, (x) a final judicial determination which is not subject to further appeal
is entered by a court of competent jurisdiction, (y) a legally binding
compromise or settlement agreement is entered into between the Surviving
Corporation or its applicable Subsidiary and the taxing authority responsible
for administering the laws and regulations relating to such item or claim; or
(z) any liability for such claim or item has otherwise been legally discharged.
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(d) The maximum aggregate liability of each Management Shareholder
for indemnification under Section 9.02(a), Section 9.02(b) or any other
provision of this Agreement shall be limited to (x) with respect to Losses
arising in relation to a breach of Section 4.03 or Section 4.21 or under Section
9.02(a)(ii), Section 9.02(a)(iv), Section 9.02(a)(vi) or Section 9.02(a)(vii) or
from Specified Claims, such Management Shareholder's (and/or such Management
Shareholder's spouse's) pro rata portion (based on the percentage of aggregate
cash proceeds received by all Management Shareholders (and their spouses) ("Pro
Rata Portion")) of such Losses, not to exceed the cash proceeds received by such
Management Shareholder (including cash proceeds received by such Management
Shareholder's spouse) for his, her and/or its Shares pursuant to this Agreement,
less all other amounts paid by such Management Shareholder (and his or her
spouse) pursuant to this Section 9.02; (y) with respect to Losses arising under
Section 9.02(b), the cash proceeds received by such Management Shareholder
(including cash proceeds received by such Management Shareholder's spouse) for
his, her or its Shares pursuant to this Agreement, less all other amounts paid
by or on behalf of such Management Shareholder (and his or her spouse) pursuant
to this Section 9.02; and (z) with respect to Losses arising under Section
9.02(a)(i) (other than with respect to breaches of Sections 4.03 or 4.21) or
other provisions of this Agreement not referred to in the foregoing clauses (x)
and (y) or from the Reiners Claims or Danish Environmental Claims such
Management Shareholder's (including such Management Shareholder's spouse's) Pro
Rata Portion of such Losses, not to exceed twenty-five percent (25%) of the cash
proceeds received by such Management Shareholder (including cash proceeds
received by such Management Shareholder's spouse) for his, her and/or its Common
Shares pursuant to this Agreement, less all other amounts paid by such
Management Shareholder pursuant to this Section 9.02. As used in this Section
9.02(d), the "cash proceeds" received by any Shareholder (and his or her spouse)
shall include any disbursements received by such Shareholder (and his or her
spouse) from the Escrow Adjustment Amount, the Company Adjustment Amount or the
Escrow Amount. Notwithstanding the foregoing provisions of this Section 9.02(d),
the maximum aggregate liability of any Common Shareholder who is not a
Management Shareholder for indemnification under Section 9.02(a) or any other
provisions of this Agreement shall be limited to such Common Shareholder's pro
rata portion (based on the percentage of the aggregate Initial Common Share
Closing Payments received by such Common Shareholder) of the Escrow
Indemnification Funds. For purposes of this Agreement, the term "Escrow
Indemnification Funds" means, at any time, the amount (if any) of the Escrow
Indemnification Amount and (subject to the provisions of Section 9.02(g)) the
Escrow Specified Amount, deposited with the Escrow Agent which has not been
released at such time in accordance with the terms of the Escrow Agreement.
(e) None of the Purchaser Indemnified Parties shall be entitled to
seek payment under this Section 9.02 in respect of any specific indemnified Loss
arising (i) from a breach of a representation or warranty, other than Losses
arising from Specified Claims, Reiners Claims or Danish Environmental Claims,
(ii) arising in relation to a breach of Section 4.03 or Section 4.21 or (iii)
under Section 9.02(a)(iv), Section 9.02(a)(vi) or Section 9.02(a)(vii), until
the amount of such specific indemnified Loss is equal to or exceeds $20,000 (a
"Substantial Loss"), and not then until the aggregate total of such Substantial
Losses exceeds $1,000,000 (the "Deductible"), and then the Purchaser Indemnified
Parties may seek payment and indemnity from the Common Shareholders and the
Management Shareholders only for such excess, subject to the limitations set
forth in Section 9.02(d). In addition, none of the Purchaser Indemnified Parties
shall be entitled to seek payment under this Section 9.02 in respect of any
specific indemnified Loss arising from Danish Environmental Claims (x) relating
to the Holmelund 43 site, unless the aggregate total of such
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Losses exceeds $100,000, or (y) relating to the Vanvaerksvej 17 site, unless the
aggregate total of such Losses exceeds $100,000. Any claims involving Losses of
less than $10,000 which are not otherwise excluded hereunder and any claims for
Losses arising under Section 9.02(a)(ii) shall be aggregated and submitted by
the Purchaser Indemnified Parties on a quarterly basis within 30 days after the
end of each calendar quarter, except to the extent that such claims consist of
Third-Party Claims (which shall be submitted in accordance with Section
9.03(b)).
(f) For purposes of this Section 9.02 only, in determining whether
there has been any breach of any representation or warranty made by the Company
or the amount of any Losses of any Purchaser Indemnified Party related to,
resulting from, arising out of, or caused by any such breach, such
representations and warranties shall be read without regard to any materiality
or "Material Adverse Effect" qualifier contained therein, with the intent that
any breach of such representation or warranty so read which gives rise to a
Substantial Loss shall be subject to indemnification under this Section 9.02.
(g) Notwithstanding any provision herein to the contrary, with
respect to all claims for indemnification under Section 9.02(a), the Purchaser
Indemnified Parties shall seek payment for all amounts due to any of them with
respect to such claims only as follows: (i) first, out of the Escrow
Indemnification Funds in accordance with the provisions of the Escrow Agreement
(and any such distribution from the Escrow Indemnification Funds shall be deemed
to be made on a pro-rata basis from the amounts otherwise distributable to the
Common Shareholders from the Escrow Indemnification Funds) and (ii) second, to
the extent that amounts owing by the Management Shareholders to the Purchaser
Indemnified Parties with respect to such claims exceed the amount of the Escrow
Indemnification Funds released in payment thereof, the Purchaser Indemnified
Parties shall be entitled to seek payment from the Management Shareholders
directly for all such amounts subject to the limitations set forth in this
Agreement. With respect to all claims for Losses arising from items described on
Schedule 9.02(a)(iii)(A), any amounts paid to the Purchaser Indemnified Parties
from the Escrow Indemnification Funds shall be paid first from the Escrow
Specified Amount and thereafter from the Escrow Indemnification Amount. With
respect to all claims for Losses arising under Section 9.02(a)(iv), any amounts
paid to the Purchaser Indemnified Parties from the Escrow Indemnification Funds
may be paid (at the election of the Purchaser Indemnified Parties) from either
the Escrow Specified Amount or the Escrow Indemnification Amount. With respect
to all claims for Losses arising from matters other than Losses arising under
Section 9.02(a)(iv) and other than items described on Schedule 9.02(a)(iii)(A),
the amounts paid to the Purchaser Indemnified Parties from the Escrow
Indemnification Funds shall be limited to the Escrow Indemnification Amount.
Under no circumstances shall any Common Shareholder other than the Management
Shareholders be liable for any claims for indemnification under this Section
9.02 for any amount other than the Escrow Indemnification Funds.
(h) Notwithstanding any provision herein to the contrary, with
respect to all claims for indemnification under Section 9.02(b), the Purchaser
Indemnified Parties may seek payment either from the Management Shareholder who
is severally liable for such claim or from the amount of the Escrow
Indemnification Funds otherwise distributable to such Management Shareholder.
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SECTION 9.03 Claims.
(a) Notice. Any party seeking indemnification hereunder (the
"Indemnified Party") shall promptly notify the other party hereto (the
"Indemnifying Party", which term shall include all Indemnifying Parties if there
be more than one) of any action, suit, proceeding, demand or breach (a "Claim")
with respect to which the Indemnified Party claims indemnification hereunder;
provided that failure of the Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations under this Article IX except
to the extent, if at all, that such Indemnifying Party shall have been
prejudiced thereby.
(b) Third-Party Claims. If such Claim relates to any action, suit,
proceeding or demand instituted against the Indemnified Party by a third party
(a "Third-Party Claim"), the Indemnifying Party shall be entitled to assume the
defense of such Third-Party Claim after receipt of notice of such claim from the
Indemnified Party. Within thirty (30) days after receipt of notice of a
particular matter from the Indemnified Party, the Indemnifying Party may assume
the defense of any Third-Party Claim that does not involve a Claim for equitable
relief involving the ongoing operations of the Parent or any of its
Subsidiaries, in which case the Indemnifying Party shall have the authority to
negotiate, compromise and settle such Third-Party Claim; provided the following
conditions must be satisfied: (i) the Indemnifying Party shall have confirmed in
writing that it is obligated hereunder to indemnify the Indemnified Party with
respect to such Third-Party Claim, and (ii) the Indemnified Party shall not have
given the Indemnifying Party written notice that it has determined, in the
exercise of its reasonable discretion, that matters of corporate or management
policy or a conflict of interest make separate representation by the Indemnified
Party's own counsel advisable. The Indemnified Party shall not have the
authority to compromise or settle any Claim for equitable relief involving the
ongoing operations of the Parent or any of its Subsidiaries without the prior
written consent of the Indemnifying Party.
The Indemnified Party or the Indemnifying Party, as the case may be, shall
retain the right to employ its own counsel and to participate in the defense of
any Third-Party Claim, the defense of which is controlled by the other party
pursuant hereto, but such party shall bear and shall be solely responsible for
its own costs and expenses in connection with such participation.
SECTION 9.04 Method and Manner of Paying Claims. In the event of any
claims under this Article IX, the claimant shall advise the party or parties who
are required to provide indemnification therefore by written notice specifying
in reasonable detail the individual items of damages for which indemnification
is being sought, the date each such item was paid, or properly accrued or arose,
and the nature of the misrepresentation, breach of warranty or claim to which
such item is related. With respect to liquidated claims, if within thirty days
the other party has not contested such claim in writing, the other party will
pay the full amount thereof within ten days after the expiration of such period
(subject to Section 9.02(g)). Any amount owed by an Indemnifying Party hereunder
with respect to any Claim may be set off by the Indemnified Party against any
amounts owed by the Indemnified Party to any Indemnifying Party (including,
without limitation, any Additional Payments) and shall also be set off by the
Indemnifying Party by the amount of any insurance proceeds received by the
Indemnified Party for the Losses underlying such Claim. The unpaid balance of a
Claim shall bear interest at a rate per annum equal to the rate listed in The
Wall Street Journal as the "Prime Rate" plus two percent (2%) from the date
notice thereof is given by the Indemnified Party to the Indemnifying Party.
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SECTION 9.05 Exclusive Remedy. The remedies expressly set forth in
this Agreement with respect to any breach of any representation or warranty
herein contained are the sole and exclusive remedies for any such breach, and
such remedies are intended to be non-cumulative with respect to, and shall
preclude the assertion by any party hereto of, any other remedies which would
otherwise have been available in common law or by statute, except for any right
that may exist to seek redress for common law fraud.
SECTION 9.06 Net of Insurance; After-Tax Nature of Indemnity Payments.
Any payment or indemnity required to be made pursuant to this Article IX shall
be net of insurance proceeds received and shall include any amount necessary to
hold the Indemnified Party harmless on an after-tax basis from all Taxes
required to be paid with respect to the receipt of such payment or indemnity
(after taking into account any actual Tax benefit realized by the Indemnified
Party as a result of the Loss giving rise to the payment or indemnity).
SECTION 9.07 Escrow Disbursements.
(a) The Escrow Indemnification Amount, less the amount of any
indemnification claims paid therefrom and the amount of any unresolved claims
for payments therefrom, shall be released by the Escrow Agent on April 30, 2004
to the Common Payees as Subsequent Escrow Payments in accordance with the
provisions of the Escrow Agreement.
(b) The Escrow Specified Amount, less the amount of any
indemnification claims paid therefrom and the amount of any unresolved claims
for payments therefrom, shall be released by the Escrow Agent on October 31,
2008 (the "Escrow Specified Release Date") to the Common Payees as Subsequent
Escrow Payments in accordance with the provisions of the Escrow Agreement. In
addition, in the event of any Final Resolution of any item listed on Schedule
9.02(a)(iii)(A) (a "Specified Item") prior to the Escrow Specified Release Date,
the Company shall promptly notify the Payee Representatives, identifying the
applicable Specified Item and specifying in reasonable detail the nature of the
Final Resolution. Following such notification, the Company and the Payee
Representatives agree to promptly execute and deliver to the Escrow Agent
written disbursement instructions authorizing the Escrow Agent to make promptly
a distribution to (i) the Company of the portion of the Escrow Specified Amount
(and to the extent the available portion of the Escrow Specified Amount is
insufficient and the Escrow Indemnification Amount has not been released
pursuant to Section 9.07(a), such additional portion of the Escrow
Indemnification Amount) that equals the Company's Losses relating to the Final
Resolution of such matter and (ii) the Common Payees, as Subsequent Escrow
Payments, of the portion (if any) of the Escrow Specified Amount which equals
the excess (if any) of the amount set forth with respect to such Specified Item
on Schedule 9.02(a)(iii)(A) over the amount payable by the Escrow Agent to the
Company pursuant to clause (i). Notwithstanding the foregoing provisions of this
Section 9.07(b), in the event that (x) any indemnification claims by any
Purchaser Indemnified Party under Section 9.02(a)(iv) with respect to any matter
other than a Specified Item (a "Non-Specified Item") have been paid from, or are
pending against, the Escrow Specified Amount, or (y) any indemnification claims
by any Purchaser Indemnified Party with respect to any Specified Item in excess
of the amount set forth for such Specified Item on Schedule 9.02(a)(iii)(A) have
been paid from, or are pending against, the Escrow Specified Amount, then no
release of any portion of the Escrow Specified Amount shall be made to the
Common Payees as Subsequent Escrow Payments with respect to any Final Resolution
of any Specified Item except to the extent that the aggregate amount of all such
Subsequent Escrow
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Payments exceeds the sum of (A) any indemnification claims with respect to any
Non-Specified Items that have been paid from, or are pending against, the Escrow
Specified Amount and (B) the amount by which the aggregate amount of claims for
Specified Items paid from or pending against the Escrow Specified Amount exceeds
the amount set forth with respect to those Specified Items on Schedule
9.02(a)(iii)(A).
(c) Any Common Shareholder who, within 90 days after the Closing
Date, delivers to the Surviving Corporation an irrevocable letter of credit in
form satisfactory to, and from an issuing bank satisfactory to, the Surviving
Corporation and the lenders under the Senior Credit Facility and the Mezzanine
Credit Facility, will be permitted to have released to it by the Escrow Agent
from the Escrow Amount an amount equal to the lesser of (i) the amount available
for drawing under such letter of credit and (ii) such Common Shareholder's pro
rata portion of the Escrow Amount (determined on the basis of the Escrow
Indemnity Funding Payments deposited into escrow with respect to such Common
Shareholder's Common Shares). Any such letter of credit shall (A) be issued to
the Surviving Corporation as sole beneficiary, (B) permit the Surviving
Corporation to unilaterally draw an amount equal to such Common Shareholder's
pro rata portion of any claim by the Surviving Corporation against the Escrow
Amount at any time after the making of such claim, (C) permit the Surviving
Corporation to draw the entire amount of the letter of credit prior to its
expiration if the letter of credit expires prior to the date on which the Escrow
Amount is required to be released from escrow under the Escrow Agreement and the
letter of credit is not renewed or replaced with an identical letter of credit
with an extended expiration date at least 30 days prior to its expiration, and
(D) provide that all draws made by the Surviving Corporation under the letter of
credit will be funded by the issuing bank by wire transfer directly to the
escrow account established under the Escrow Agreement to hold the Escrow Amount.
Promptly after delivery of each such letter of credit, the Surviving Corporation
and the Payee Representatives shall deliver a notice to the Escrow Agent
directing the Escrow Agent to release to the Common Shareholder delivering such
letter of credit the portion of the Escrow Amount which is permitted to be
released to such Common Shareholder pursuant to this Section 9.07(c). In the
event of the delivery of one or more such letters of credit, appropriate
adjustments will be made to the Escrow Agreement to reflect the foregoing
provisions and to ensure that releases from the escrow account under the Escrow
Agreement are made on a pro rata basis with respect to all Common Shareholders.
In the event that any Common Shareholder is able to arrange for delivery of a
letter of credit containing the terms described above at the Closing, the Escrow
Indemnity Funding Payments that otherwise would have been deposited into the
escrow account under the Escrow Agreement with respect to such Common
Shareholder's Common Shares but which will be available for drawing under such
letter of credit will be paid directly to such Common Shareholder.
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ARTICLE X
MISCELLANEOUS
SECTION 10.01 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments
referred to herein) constitutes the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties hereto
with respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party hereto; provided, however, that at or after the Closing, the Parent or the
Purchaser may, without the consent of the Company, (i) assign its rights under
this Agreement to any of its Affiliates, or (ii) collaterally assign its rights
under this Agreement to the lender(s) of the Parent or the Purchaser. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
SECTION 10.02 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
SECTION 10.03 Notices. All notices, requests, claims, demands and
other communications ("Notices") hereunder shall be in writing and shall be
given to the parties at the following addresses (a) by personal delivery; (b) by
facsimile transmission; (c) by registered or certified mail, postage prepaid,
return receipt requested; or (d) by nationally recognized overnight or other
express courier services:
If to the Parent or the Purchaser:
c/o TA Associates, Inc.
High Street Tower
Suite 2500
125 High Street
Boston, MA 02110
Attention: P. Andrews (Andy) McLane
Telephone: (617) 574-6700
Facsimile: (617) 574-6728
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With a copy to:
Friedman Fleischer & Lowe, LLC
One Maritime Plaza, 10/th/ Floor
San Francisco, CA 94111
Attention: Christopher A. Masto
Telephone: (415) 401-2100
Facsimile: (415) 410-402-2111
and to:
Bingham McCutchen LLP
150 Federal Street
Boston, MA 02110
Attention: Robert M. Wolf
Telephone: (617) 951-8000
Facsimile: (617) 951-8736
If to the Company:
Tempur World, Inc.
1713 Jaggie Fox Way
Lexington, KY 40511
Attention: Robert B. Trussell, Jr., President and CEO
Telephone: (859) 514-4757
Facsimile: (859) 514-4422
With a copy to:
Frost Brown Todd LLC
250 West Main Street, Suite 2700
Lexington, Kentucky 40507
Attention: Jeffrey L. Hallos
Telephone: 859/231-0000
Facsimile: 859/231-0011
and to:
Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, New York 10019
Attention: Lori Anne Czepiel
Telephone: 212/839-5300
Facsimile: 212/839-5599
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If to the Management Shareholders:
Fagerdala Holding B.V.
c/o Aranthals Grant Thornton
P.O. Box 71003
1008 BA Amsterdam
The Netherlands
Attention:Ludo Gribling
Telephone:+31 20 547 57 57
Fagerdala Industri A.B.
134 82 Gustavsberg
Sweden
Attention:Thomas Lindberg
Telephone:+46 8 570 132 00
Facsimile:+46 570 134 56
Chesterfield Properties, Limited
c/o Rathbone Trust Company Jersey Limited
Seaton House
Seaton Place
St. Helier
Jersey JE1 1BG
Channel Islands
Attention:Nicola Bennett
Telephone:+44 1534 495547
Facsimile:+44 1534 495688
Viking Investments S.a.r.l.
3 Boulevard Prince Henri
1724 Luxembourg
Attention: Mr. Valery Beuken, Account Manager
Intertrust Luxembourg S.A.
Telephone:+35 2 22 18 88
Facsimile:+35 2 22 18 99
Robert B. Trussell, Jr.
David Fogg
Jeffrey P. Heath
and
Thomas Bryant
each at
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1713 Jaggie Fox Way
Lexington, KY 40511
Telephone: (859) 514-4757
Facsimile: (859) 514-4422
If to the Payee Representatives:
Mikael Magnusson
The Old Manor
Upper Lambourn
Nr Hungerford
Berks RG17 8RG
United Kingdom
Telephone:+44 1488 72967 or +44 1488 73966
Facsimile:+44 1488 72978
and to
Dag Landvik
c/o Fagerdala World Foams AB
Odelbergs Vag 19
S-134 82 Gustavsberg, Sweden
Telephone: 08 570 132 10
Facsimile:08 570 132 80
All Notices shall be effective and shall be deemed delivered (i) if by
personal delivery, on the date of delivery if delivered during normal business
hours of the recipient and, if not delivered during such normal business hours,
on the next Business Day following delivery; (ii) if by facsimile transmission,
on the next Business Day following dispatch of such facsimile; (iii) if by
courier service, on the third (3rd) Business Day after dispatch hereof; and (iv)
if by mail, on the fifth (5th) Business Day after dispatch thereof. Any party
hereto may change its address by Notice to all other parties hereto delivered in
accordance with this Section 10.03. For purposes of this Section 10.03 only,
Business Day shall mean a day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the Commonwealth of Kentucky or
the United Kingdom.
SECTION 10.04 Governing Law; Consent to Jurisdiction.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof or
otherwise.
(b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the non-exclusive jurisdiction of the
Delaware Court of Chancery in any action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby or for
recognition or enforcement of any judgment relating thereto, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
Delaware State court or, to the extent permitted by
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law, in any Federal court located in the State of Delaware. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(c) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby in any Delaware State or Federal court. Each of
the parties hereto hereby irrevocably and unconditionally waives, to the fullest
extent permitted by law, the defense of any inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) Each party hereto acknowledges and agrees that any controversy
which may arise under this Agreement is likely to involve complicated and
difficult issues, and, therefore, it hereby irrevocably and unconditionally
waives any right it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of or relating to this Agreement or the
transactions contemplated hereby.
(e) Each of the parties hereto irrevocably consents to service of
process in the manner provided for Notices in Section 10.03. Notwithstanding the
foregoing, each of the parties hereto shall have the right to serve process in
any other manner permitted by law.
SECTION 10.05 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 10.06 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 10.07 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and except with
respect to Sections 3.06 and 6.06, the provisions of which may be enforced by
the intended beneficiaries thereof, nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
SECTION 10.08 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity, subject to the
limitations set forth in this Agreement on such other remedies.
SECTION 10.09 Expenses. Each party hereby shall bear and pay all costs
and expenses incurred by it in connection with the transactions contemplated by
this Agreement, including, without limitation, fees and expenses of its own
financial consultants, accountants and legal counsel; provided, however, that if
the Closing occurs, the Surviving Corporation shall
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reimburse the Parent and the Purchaser for all of their reasonable costs and
expenses incurred in connection with the transactions contemplated by this
Agreement.
SECTION 10.10 No Consequential Damages. Except as prohibited by law,
each party hereto waives any right it may have to claim or recover any special,
exemplary, punitive or consequential damages, or any damages other than, or in
addition to, actual damages.
SECTION 10.11 Rules of Interpretation.
(a) The singular includes the plural, and the plural includes the
singular.
(b) The word "or" is not exclusive.
(c) A reference to a Person includes its permitted successors and
permitted assigns.
(d) The words "include," "includes" and "including" are not limiting.
(e) A reference in a document to an Article, Section, Exhibit,
Schedule, Annex or Appendix is to the Article, Section, Exhibit, Schedule, Annex
or Appendix of such document unless otherwise indicated. Exhibits, Schedules,
Annexes or Appendices to any document shall be deemed incorporated by reference
in such document.
(f) References to any document, instrument or agreement (i) shall
include all exhibits, schedules and other attachments thereto, (ii) shall
include all documents, instruments or agreements issued or executed in
replacement thereof, and (iii) shall mean such document, instrument or
agreement, or replacement or predecessor thereto, as amended, modified and
supplemented from time to time and in effect at any given time.
(g) The words "hereof," "herein" and "hereunder" and words of similar
import when used in any document shall refer to such document as a whole and not
to any particular provision of such document.
(h) References to "days" shall mean calendar days, unless the term
"Business Days" shall be used.
(i) This Agreement is the result of negotiations among, and has been
reviewed by, the Parent, the Purchaser, the Company and the Management
Shareholders. Accordingly, this Agreement shall be deemed to be the product of
all parties hereto, and no ambiguity shall be construed in favor of or against
any party.
(j) Unless otherwise specifically provided herein, any accounting
term used in this Agreement shall have the meaning customarily given to such
term in accordance with United States generally accepted accounting principles.
SECTION 10.12 Payee Representatives. By execution and delivery of this
Agreement, the Management Shareholders hereby irrevocably constitute and
appoint, and upon the Effective Time each of the other Shareholders and the
Payees shall be deemed to have irrevocably
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constituted and appointed, Mikael Magnusson and Dag Landvik as the true and
lawful agents and attorneys-in-fact (the "Payee Representatives") of the
Shareholders and the Payees with full power of substitution to act in the name,
place and stead of the Shareholders and the Payees in connection with the
transactions contemplated by the Transaction Documents, and to do or refrain
from doing all such further acts and things, and to execute all such documents
as the Payee Representatives shall deem necessary or appropriate, in connection
with the transactions contemplated by the Transaction Documents, including,
without limitation, the exclusive power and authority:
(i) to execute the Escrow Agreement as the representative of the
Shareholders and the Payees, and to take such further actions under the
Escrow Agreement as the Payee Representatives deem to be necessary or
appropriate;
(ii) to act for the Shareholders and the Payees with regard to
matters pertaining to the Final Closing Statement and the Final Net Working
Capital Adjustment, including, without limitation, settling any claims and
executing instructions to the Escrow Agent with respect to disbursement of
the Escrow Adjustment Amount, and giving notice regarding objections to, or
disputes relating to, the determination of the Final Net Working Capital
Adjustment;
(iii) to act for the Shareholders and the Payees with regard to
matters pertaining to indemnification referred to in the Transaction
Documents, including the power to compromise any Claim on behalf of the
Shareholders and the Payees, to transact matters of litigation or
arbitration with respect to any Claim and to execute instructions to the
Escrow Agent with respect to disbursement of the Escrow Indemnification
Amount and the Escrow Specified Amount;
(iv) to act for the Shareholders and the Payees with regard to
matters pertaining to the EBITDA Statement, the determination of Company
EBITDA and Company Consolidated Net Revenues and the payment of the
Additional Payments, including without limitation, giving notice regarding
objections to, or disputes relating to, the determination of Company EBITDA
and Company Consolidated Net Revenues;
(v) to execute any subordination agreement on behalf of the Payees
with respect to the Additional Payments;
(vi) to execute and deliver all ancillary agreements, certificates
and documents that the Payee Representatives deem necessary or appropriate
in connection with the consummation of the transactions contemplated by the
Transaction Documents;
(vii) to receive funds and give receipts for funds in connection with
the transactions contemplated by the Transaction Documents;
(viii) to do or refrain from doing any further act or deed on behalf
of the Payees or the Shareholders that the Payee Representatives deem
necessary or appropriate in their sole discretion relating to the subject
matter of the Transaction Documents as fully and completely as the
Shareholders or the Payees could do if personally present; and
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(ix) to receive service of process on behalf of any Shareholder or
Payee in connection with any Claims under any of the Transaction Documents.
Notwithstanding any other provision hereof to the contrary, the Payee
Representatives shall consult with the Preferred Payees prior to taking, or
refraining from taking, any action described in this Section 10.12. If Mikael
Magnusson or Dag Landvik or any replacement therefor dies or becomes
incapacitated or is otherwise unable or unwilling to serve as a Payee
Representative, the other Payee Representative shall select another individual
to serve as the replacement Payee Representative. The appointment of the Payee
Representatives shall be deemed coupled with an interest and shall be
irrevocable, and the Surviving Corporation and any other Person may conclusively
and absolutely rely, without inquiry, upon any action of the Payee
Representatives in all matters referred to in this Section 10.12 or as otherwise
expressly stated herein. All payments and notices made or delivered by the
Surviving Corporation to the Payee Representatives for the benefit of the
Shareholders or the Payees shall discharge in full all liabilities and
obligations of the Surviving Corporation to the Shareholders or the Payees, as
applicable, with respect thereto. The Management Shareholders hereby confirm,
and upon the Effective Time the other Shareholders and the Payees shall be
deemed to have confirmed, all that the Payee Representatives shall do or cause
to be done by virtue of their appointment as the Payee Representatives. The
Payee Representatives shall act for the Shareholders and the Payees on all of
the matters set forth in this Agreement in the manner the Payee Representatives
believe to be in the best interest of the Shareholders and the Payees, but the
Payee Representatives shall not be responsible to the Shareholders or the Payees
for any loss or damages the Shareholders or the Payees may suffer by the
performance of their duties under this Agreement, other than loss or damage
arising from the willful violation of the law or gross negligence in the
performance of their duties under this Agreement. The Payee Representatives
shall not be responsible to the Surviving Corporation or the Parent for any Loss
or damages whatsoever that the Surviving Corporation or the Parent may suffer by
the performance of their duties under this Agreement. Any action required or
permitted to be taken by the Payee Representatives shall be taken only upon the
unanimous consent or approval of the Payee Representatives; provided, however,
that the Payee Representatives shall be entitled to act separately with respect
to giving notice regarding objections to, or disputes relating to, the
determination of the Final Net Working Capital Adjustment, Company EBITDA or
Company Consolidated Net Revenues. By their execution of this Agreement, Mikael
Magnusson and Dag Landvik hereby consent to the foregoing appointment to act as
a Payee Representative.
SECTION 10.13 Foreign Currency Conversion. For purposes of
calculations under this Agreement, amounts denominated in foreign currencies as
of a particular date shall be converted into U.S. dollars in accordance with
GAAP (utilizing SFAS 52).
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its respective authorized
representative, all as of the day and year first above written.
THE COMPANY: TEMPUR WORLD, INC.
By: /s/ Robert B. Trussell, Jr.
---------------------------------
Name: Robert B. Trussell, Jr.
---------------------------------
Title: Chief Executive Officer
---------------------------------
THE PURCHASER: TWI ACQUISITION CORP.
By: /s/ Christopher A. Masto
---------------------------------
Name: Christopher A. Masto
---------------------------------
Title: President
---------------------------------
THE PARENT: TWI HOLDINGS, INC.
By: /s/ Christopher A. Masto
---------------------------------
Name: Christopher A. Masto
---------------------------------
Title: President
---------------------------------
MANAGEMENT SHAREHOLDERS: FAGERDALA HOLDING B.V.
By: /s/ Dag Landvik
---------------------------------
Name: Dag Landvik
---------------------------------
Title: Director
---------------------------------
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FAGERDALA INDUSTRI A.B.
By: /s/ Dag Landvik
---------------------------------
Name: Dag Landvik
---------------------------------
Title: Director
---------------------------------
CHESTERFIELD PROPERTIES LIMITED
By: /s/ Martin Tupper
---------------------------------
Name: Martin Tupper
---------------------------------
Title: Director
---------------------------------
VIKING INVESTMENTS S.A.R.L.
By: /s/ Colm Smith
---------------------------------
Name: Colm Smith
---------------------------------
Title: Director
---------------------------------
/s/ Robert B. Trussell, Jr.
----------------------------------------
Robert B. Trussell, Jr.
/s/ Jeffrey P. Heath
----------------------------------------
Jeffrey P. Heath
/s/ David Fogg
----------------------------------------
David Fogg
/s/ Thomas Bryant
----------------------------------------
Thomas Bryant
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PAYEE REPRESENTATIVES:
/s/ Mikael Magnusson
----------------------------------------
Mikael Magnusson
/s/ Dag Landvik
----------------------------------------
Dag Landvik
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LIST OF SCHEDULES AND ANNEXES
TO AGREEMENT AND PLAN OF MERGER*
Schedules:
Schedule A Net Working Capital Exclusions
Schedule B State Sales and Use Tax Settlement Agreements
Schedule 2.07 Management Options
Schedule 4.01 Subsidiaries
Schedule 4.03(a)(i) Stock Ownership
Schedule 4.03(a)(ii) Options
Schedule 4.03(a)(iii) Stock Purchase Rights
Schedule 4.03(b) Equity Interests Held by Company
Schedule 4.05(a) Conflicts
Schedule 4.05(b) Consents
Schedule 4.06 Financial Statements
Schedule 4.06(a) Financial Statements
Schedule 4.07 Material Adverse Change
Schedule 4.08 Certain Developments
Schedule 4.09 Title Exceptions; Real Property Leases
Schedule 4.10 Tax Matters
Schedule 4.11(a) Contracts
Schedule 4.12(a)(i) Owned Intellectual Property
Schedule 4.12(a)(ii) Licensed Intellectual Property
Schedule 4.12(b) Intellectual Property
Schedule 4.12(d) Foam Formula Access
Schedule 4.13 Permits, Licenses, Etc.
Schedule 4.14 Litigation
Schedule 4.16(a) Employee Benefit Plans
Schedule 4.16(d) Employee Benefit Plan Legal Actions, Etc.
Schedule 4.16(f) Payment
Schedule 4.17 Insurance
Schedule 4.18 Compliance with Laws
Schedule 4.19 Environmental Compliance
Schedule 4.20 Affiliated Transactions
Schedule 4.21 Brokers
Schedule 4.23 Suppliers and Customers
Schedule 4.28 Indebtedness
Schedule 4.29 Bank Accounts, Etc.
Schedule 4A Exceptions to Title, Authority, Etc.
Schedule 7.03(d) Third Party Consents for Material Contracts
Schedule 7.03(l) Indebtedness Payoff
Schedule 7.03(o) European Restructuring
Schedule 7.03(p) Employment Agreement Waivers
Schedule 7.03(q) Resignations
Schedule 9.02(a)(iii)(A) Specified Claims
Schedule 9.02(a)(iii)(B) Other Items
Schedule 9.02(a)(iii)(C) Danish Environmental Claims
Annexes:
Annex A Support Agreements
Annex B Written Consents
Annex C Escrow Agreement
Annex 3.02(a) Letter of Transmittal (Common Stock)
Annex 3.02(b) Letter of Transmittal (Preferred Stock)
Annex 3.06(a) EBITDA Statement
Annex 3.06(d) Confidentiality Agreement
Annex 5.07 Commitment Letters
Annex 6.10 2002 Stock Option Plan
Annex 7.02(e) Opinion of Bingham McCutchen LLP
Annex 7.03(f)(1)(A) Non-Competition Agreement (Landvik)
Annex 7.03(f)(1)(B) Non-Competition Agreement (Magnusson)
Annex 7.03(f)(2) Confidentiality Agreement
Annex 7.03(k)(1) Opinion of Frost Brown Todd LLC
Annex 7.03(k)(2) Opinion for Corporate Shareholders
Annex 7.03(m) Consulting Service and Support Agreement
Annex 7.03(n) Administrative Services Agreement
* A copy of any omitted schedule or annex will be furnished supplementally to
the Commission upon request.