EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
CORRPRO INVESTMENTS, LLC
AND
CORRPRO COMPANIES, INC.
DATED AS OF DECEMBER 15, 2003
TABLE OF CONTENTS
Page
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1. Definitions.................................................................................................1
2. Purchase And Sale of the Securities; Closing...............................................................10
2.1. Purchase and Sale of the Securities..................................................................10
2.2. Closing..............................................................................................10
3. Representations and Warranties of the Company..............................................................10
3.1. Organization and Qualification.......................................................................10
3.2. Articles of Incorporation and Code of Regulations....................................................10
3.3. Corporate Power and Authorization....................................................................11
3.4. Capitalization.......................................................................................11
3.5. Authorization of Issuance; Reservation of Shares.....................................................12
3.6. Title to Properties..................................................................................12
3.7. Related-Party Transactions...........................................................................13
3.8. Permits; Compliance with Applicable Law..............................................................13
3.9. Proprietary Rights...................................................................................13
3.10. Material Contracts...................................................................................14
3.11. No Conflicts.........................................................................................15
3.12. Litigation...........................................................................................15
3.13. Consents.............................................................................................15
3.14. Labor Relations; Employees...........................................................................15
3.15. Employee Benefit Plans...............................................................................16
3.16. Tax Returns, Payments and Elections..................................................................19
3.17. Brokers or Finders...................................................................................20
3.18. Offering Exemption...................................................................................20
3.19. Environmental Matters................................................................................20
3.20. Offering of Securities...............................................................................21
3.21. AMEX Compliance......................................................................................21
3.22. SEC Documents........................................................................................22
3.23. Financial Statements.................................................................................22
3.24. No Suspension or Debarment...........................................................................22
3.25. Liability for Cost and Pricing Data..................................................................23
3.26. Government Contracts.................................................................................23
3.27. No Adverse Changes...................................................................................24
3.28. Existing Registration Rights.........................................................................25
3.29. Suppliers and Customers..............................................................................25
3.30. Foreign Corrupt Practices Act........................................................................26
3.31. Work in Progress.....................................................................................26
3.32. Warranty and Related Matters.........................................................................26
3.33. Export Controls......................................................................................26
3.34. Restrictions on Bank Fees............................................................................27
4. Representations and Warranties of Purchaser................................................................27
4.1. Authorization........................................................................................27
4.2. Purchase Entirely for Own Account....................................................................27
4.3. Disclosure of Information............................................................................27
4.4. Investment Experience................................................................................27
4.5. Accredited Investor..................................................................................27
4.6. Restricted Securities; Legends.......................................................................28
4.7. No Conflicts.........................................................................................28
4.8. Brokers or Finders...................................................................................28
5. Pre-Closing Covenants......................................................................................28
5.1. Satisfaction of Conditions...........................................................................28
5.2. Shareholders Meeting; Proxy Materials................................................................28
5.3. Operation of Business Prior to Closing...............................................................29
5.4. Restriction on Issuance of Capital Stock.............................................................30
5.5. Reservation of Shares................................................................................30
5.6. Listing; AMEX Compliance.............................................................................30
5.7. No Solicitation......................................................................................30
5.8. Restrictions on Bank Fees............................................................................31
6. Conditions of the Parties at Closing.......................................................................32
6.1. Conditions of Purchaser's Obligations at Closing.....................................................32
6.2. Conditions of Company's Obligations at Closing.......................................................35
6.3. Further Conditions of Company's Obligations at Closing...............................................36
7. Indemnification............................................................................................36
7.1. General Indemnification..............................................................................36
7.2. Environmental Indemnification........................................................................36
7.3. Indemnification Principles...........................................................................36
7.4. Claim Notice; Right to Defend........................................................................36
7.5. Indemnification Basket...............................................................................37
7.6. Indemnification Cap..................................................................................37
8. Miscellaneous..............................................................................................38
8.1. Survival of Representations and Warranties...........................................................38
8.2. Successors and Assigns...............................................................................38
8.3. Governing Law........................................................................................38
8.4 Execution............................................................................................38
8.5. Headings.............................................................................................38
8.6. Notices..............................................................................................38
8.7. Expenses.............................................................................................39
8.8. Amendments...........................................................................................39
8.9. Severability.........................................................................................39
8.10. Entire Agreement.....................................................................................39
8.11. Delays or Omissions..................................................................................40
8.12. Interpretation.......................................................................................40
8.13. Other Remedies.......................................................................................40
8.14. Further Assurances...................................................................................40
8.15. Termination..........................................................................................41
8.16. Tax Treatment........................................................................................41
Exhibits:
Exhibit A - Form of Warrant
Exhibit B - Binding Commitment Letter for Senior Credit Facility
Exhibit C - Binding Commitment Letter for Subordinated Notes
Exhibit D - Amended and Restated Articles of Incorporation
Exhibit E - Amended and Restated Code of Regulations
Exhibit F - Investor and Registration Rights Agreement
Exhibit G - Services Agreement
Exhibit H - Purchaser Designees
Exhibit I - Resigning Board Members
Schedules:
Schedule 3.4(b) - Capitalization
Schedule 3.6 - Title to Properties
Schedule 3.7 - Related-Party Transactions
Schedule 3.8 - Permits
Schedule 3.9 - Proprietary Rights
Schedule 3.10(a) - Material Contracts
Schedule 3.10(b) - Material Contracts; Arrearages or Waivers
Schedule 3.10(d) - Material Contracts; Non-Compete Agreements
Schedule 3.11 - No Conflicts
Schedule 3.12 - Litigation/Claims/Legal Proceedings
Schedule 3.13A - Consents for Transaction Documents
Schedule 3.13B - Consents for Securities
Schedule 3.14(a) - Material Compensation
Schedule 3.14(b) - Employee Payment Delinquencies
Schedule 3.14(c) - Employee Termination Plans
Schedule 3.14(d) - Labor Relations
Schedule 3.15(a) - Employee Benefit Plans
Schedule 3.15(b) - Employee Benefit Plans
Schedule 3.15(f) - Acceleration of Benefits
Schedule 3.15(g) - Premium Increases
Schedule 3.15(i) - Foreign Benefit Plans
Schedule 3.16 - Tax Returns
Schedule 3.17 - Brokers or Finders
Schedule 3.19(a) - Environmental Compliance; Permits
Schedule 3.19(c) - Environmental Law Violations
Schedule 3.19(f) - Hazardous Materials
Schedule 3.19(g) - Environmental Restrictions
Schedule 3.21 - AMEX Compliance
Schedule 3.22 - SEC Documents
Schedule 3.23 - Financial Statements
Schedule 3.26(a) - Government Contracts
Schedule 3.26(b) - Compliance with Government Contracts
Schedule 3.26(c) - Government Investigations
Schedule 3.26(d) - Claims Under Government Contracts
Schedule 3.26(e) - Rates and Rate Schedules
Schedule 3.26(f) - Competitive Procurement Process; Termination
Schedule 3.27 - No Adverse Changes
Schedule 3.28 - Existing Registration Rights
Schedule 3.29 - Suppliers and Customers
Schedule 3.31 - Work in Progress
Schedule 3.32 - Warranty and Related Matter
SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of the 15th day of December, 2003, by and between CorrPro
Investments, LLC, a
Delaware limited liability company ("Purchaser"), and
Corrpro Companies, Inc., an Ohio corporation (the "Company").
WITNESSETH:
WHEREAS, the Company desires to issue and sell, and Purchaser desires
to purchase, (i) an aggregate of 13,000 shares (the "Shares") of the Company's
Series B Cumulative Redeemable Voting Preferred Stock, without par value (the
"Series B Preferred Stock"), and (ii) detachable warrants in substantially the
form attached hereto as Exhibit A (the "Purchaser Warrants") to purchase up to
that number of shares of the Company's common shares, without par value (the
"Common Stock"), that is equal to forty percent (40%) of the aggregate number of
Fully Diluted Shares (the Shares and the Purchaser Warrants, collectively, the
"Securities");
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agrees as follows:
1. Definitions. For the purposes of this Agreement, the following terms shall
have the following meanings:
"1997 Directors Plan" shall mean the 1997 Non-Employee Directors' Stock
Option Plan of the Company, as amended.
"1997 Incentive Plan" shall mean the 1997 Long-Term Incentive Plan of
the Company, as amended.
"Adjusted Working Capital" shall mean, immediately prior to the
Closing, an amount of net working capital of the Company which is equal to (i)
the amount of "current assets" of the Company (excluding "assets held for sale")
at such time minus (ii) the amount of "current liabilities" of the Company
(excluding (I) "liabilities held for sale" and (II) "short-term borrowings and
current portion of long term debt") at such time, minus the amount of excess
cash (as described in Section 6.1(w)(ii)) at such time, in each case for any
item set off in quotes as set forth in the appropriate line item of the
Company's financial statements, as determined in accordance with GAAP. For
purposes of the foregoing, (1) the term Adjusted Working Capital shall be based
upon an assumption that the exchange rates (A) between the United States dollar
and the Canadian dollar and (B) between the United States dollar and the British
pound shall remain at a constant level from those rates that existed on June 30,
2003, and (2) the amount of any Transaction Costs that are incurred after June
30, 2003 and included in the calculation of Adjusted Working Capital shall be
added back to the amount of Adjusted Working Capital.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including, but not limited to, all directors
and executive officers of such Person), controlled by, or under direct or
indirect common control with, such Person.
"Agreement" shall mean have the meaning set forth in the preamble.
"Alternative Transaction" shall mean any (i) tender or exchange offer
involving the Company, (ii) merger, consolidation or other business combination
involving the Company or any of its
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Subsidiaries, other than a merger, consolidation or other business combination
solely between the Company and one or more of its Subsidiaries, (iii)
acquisition by any Person (other than the Company or any of its Subsidiaries) of
any interest in equity securities (either currently outstanding or newly issued)
of the Company or any of its Subsidiaries whereby after the consummation of such
acquisition such acquiring Person would be the beneficial owner of twenty
percent (20%) or more of the outstanding equity securities of the Company or any
of its Subsidiaries, (iv) acquisition of all or substantially all of the assets
of the Company or any of its Subsidiaries, (v) recapitalization or restructuring
with respect to the Company; or (vi) any other transaction similar to any of the
foregoing with respect to the Company or any of its Subsidiaries; provided,
however, that the term "Alternative Transaction" (i) shall not include the
transactions contemplated by this Agreement and the Transaction Documents or
(ii) only if this Agreement is validly terminated by the Company in accordance
with Section 8.15(a)(ii), shall not include any transaction consummated by the
Company after such valid termination of this Agreement by the Company in
accordance with Section 8.15(a)(ii).
"AMEX" shall mean the American Stock Exchange.
"Amended Articles" shall have the meaning set forth in Section 3.2.
"Amended Regulations" shall have the meaning set forth in Section 3.2.
"Amendment and Termination Agreements" shall mean, collectively, the
Amendment and Termination Agreement effective October 23, 2003 by and between
the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the Amendment and Termination Agreement
effective October 23, 2003 by and between the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the
Amendment and Termination Agreement effective October 23, 2003 by and between
the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇, the Amendment and Termination Agreement
effective October 23, 2003 by and between the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the
Amendment and Termination Agreement effective October 23, 2003 by and between
the Company and ▇▇▇▇ ▇. ▇▇▇▇▇, the Amendment and Termination Agreement effective
October 23, 2003 by and between the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, and the
Amendment and Termination Agreement effective October 23, 2003 by and between
the Company and ▇▇▇▇▇▇ ▇. ▇▇▇.
"Average Annual Warranty Cost" shall have the meaning set forth in
Section 3.32.
"Board" shall mean the Board of Directors of the Company, including any
committees thereof.
"Break-Up Fee" shall have the meaning set forth in Section 5.7(e).
"Business Day" shall mean any day other than a Saturday, Sunday, public
holiday under the laws of the State of New York or any other day on which
banking institutions are authorized to close in New York City.
"CERCLA" shall have the meaning set forth in Section 3.19(a).
"Certifications" shall have the meaning set forth in Section 3.22.
"Claim Notice" shall have the meaning set forth in Section 7.4.
"Closing" shall have the meaning set forth in Section 2.2(a).
"Closing Fee" shall mean the closing fee payable by the Company
pursuant to Section 1 of the Services Agreement.
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"Closing Date" shall have the meaning set forth in Section 2.2(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Preamble.
"Company Benefit Plans" shall have the meaning set forth in Section
3.15.
"Company Product" shall have the meaning set forth in Section 3.32.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement dated as of April 24, 2003 by and between Purchaser and the Company.
"Consolidated" or "Consolidating" shall mean, when used with reference
to any financial term in this Agreement, the aggregate for two or more Persons
of the amounts signified by such term for all such Persons determined on a
consolidated basis in accordance with GAAP. Unless otherwise specified herein,
references to consolidated financial statements or data of Company includes
consolidation with its Subsidiaries in accordance with GAAP.
"Current Terms" shall mean (i) with respect to an account payable for
which a related invoice or other agreement governing payment terms exists, the
payment terms as defined in the invoice or other agreement related to such
account payable; (ii) with respect to an account payable with no related invoice
or other agreement governing payment terms, the payment terms for an account
payable that are consistent with the customary payment practices in the Ordinary
Course of Business of non-distressed businesses in the Company's industry or
line of business; and (iii) with respect to amounts owed by the Company to its
employees, the aggregate amounts owed by the Company in the Ordinary Course of
Business to its employees, including, without limitation, bonuses, salaries, and
vacation, sick leave and other benefits, without any extension for, postponement
of or out of the ordinary rollover of the payment or accrual of such amounts.
"Determination Date" shall mean the date of the later to occur of (i)
the approval by Company's shareholders of the Shareholder Proposals and (ii) the
consummation of the sale of the Company's Middle East operations in accordance
with the conditions set forth in Section 6.1(y); provided that if the events
described in both clause (i) and clause (ii) above have not yet occurred, the
Determination Date shall be a date in the future that is not yet determined.
"Environmental Laws" shall have the meaning set forth in Section
3.19(a).
"Environmental Permits" shall have the meaning set forth in Section
3.19(b).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code and the regulations in effect from time
to time thereunder.
"ERISA Affiliates" shall have the meaning set forth in Section 3.15(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
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"Existing Articles" shall have the meaning set forth in Section 3.2.
"Existing Regulations" shall have the meaning set forth in Section 3.2.
"Existing Senior Lenders" shall mean the Company's senior lenders under
the Prior Credit Agreement.
"Existing Senior Notes" shall mean the Senior Notes due 2008 issued by
the Company pursuant to the terms and conditions of the Prior Note Agreement.
"Financial Statements" shall have the meaning set forth in Section
3.23.
"Foreign Collectively Bargained Benefit Plan" shall mean each Foreign
Benefit Plan that covers or benefits any current or former employee of the
Company or any of its Subsidiaries that is not a Foreign Governmental Benefit
Plan and that is sponsored by any Person other than the Company or any of its
Subsidiaries.
"Foreign Benefit Plan" shall mean each employee benefit plan, cafeteria
plan, flexible spending arrangement, sick leave and vacation policy, bonus,
stock option, stock purchase, restricted stock, incentive compensation, deferred
compensation, retirement, severance, medical, life, dental, disability or other
welfare benefit plan, or any other benefit plans, programs, agreements,
policies, or arrangements and all employment termination, severance, assignment,
or other employment contracts or employment agreements governed, required, or
imposed by the law of any jurisdiction outside of the United States, whether
written or oral, and any insurance policies or arrangements related thereto,
maintained, sponsored, established, or contributed to or required to be
contributed, or with respect to which any liability is borne, outside the fifty
(50) states of the United States of America by the Company or any of its
Subsidiaries including but not limited to, any Foreign Governmental Plan.
"Foreign Governmental Benefit Plan" shall mean any Foreign Benefit Plan
sponsored by any government or governmental entity.
"Fully Diluted Shares" shall mean that number of shares of Common Stock
which is equal to the sum, without duplication, of (i) the number of shares of
Common Stock outstanding as of the Closing Date, (ii) the number of shares of
Common Stock issuable upon exercise of the Outstanding Warrants, (iii) the
number of shares of Common Stock issuable upon exercise of the Purchaser
Warrants and the Lender Warrants, (iv) a number of shares of Common Stock,
issuable upon exercise of the Outstanding Options and options that may be
granted under the Option Plans or the New Option Plan, equal to fifteen percent
(15%) of the aggregate number of shares of Common Stock contemplated by clauses
(i) - (v) herein and (v) the number of shares of Common Stock issuable due to
the effects of any anti-dilution adjustment to any of the foregoing upon the
issuance of the Purchaser Warrants, the Lender Warrants or any of the securities
contemplated in clauses (ii), (iii) and (iv) above.
"GAAP" shall have the meaning set forth in Section 3.23.
"Government" shall mean the government of the United States of America,
its agencies and instrumentalities.
"Governmental Approval" shall mean any approval, order, consent,
waiver, authorization, certificate, license, permit or validation of, or
exemption or other action by, or filing, recording or registration with, or
notice to, any Governmental Authority.
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"Governmental Authority" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Government Bid" shall mean any offer to sell made by the Company or
any of its Subsidiaries prior to the Closing Date which, if accepted, would
result in a Government Contract and for which an award has not been issued more
than thirty (30) days prior to the date of this Agreement.
"Government Contract" shall mean any prime contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering agreement,
pricing agreement, letter contract, grant, cooperative agreement or other
similar arrangement of any kind, between the Company or any of its Subsidiaries
on one hand, and (i) any Governmental Authority, (ii) any prime contractor of a
Governmental Authority in its capacity as a prime contractor, or (iii) any
subcontractor at any tier with respect to a contract with a Governmental
Authority if such subcontractor is acting in its capacity as a subcontractor, on
the other hand. A task, purchase or delivery order under a Government Contract
shall not constitute a separate Government Contract, for purposes of this
definition, but shall be part of the Government Contract to which it relates.
"Hazardous Material" shall mean any element, compound, substance or
other material (including, without limitation, any pollutant, contaminant,
hazardous waste, hazardous substance, chemical substance, or product) that is
listed, classified or regulated pursuant to any Environmental Law, including,
without limitation, any petroleum product, by-product or additive, asbestos,
presumed asbestos-containing material, asbestos-containing material, medical
waste, chlorofluorocarbon, hydrochlorofluorocarbon, lead-containing paint,
polychlorinated biphenyls, radioactive material or radon.
"Indebtedness" of any Person shall mean (a) all liabilities and
obligations of such Person, contingent or otherwise, (i) in respect of borrowed
money, (ii) evidenced by bonds, notes, debentures or similar instruments, (iii)
representing the deferred and unpaid balance of the purchase price of any
property or services, except those incurred in the Ordinary Course of Business
that would constitute ordinarily a trade payable to trade creditors, (iv)
evidenced by bankers' acceptances, or (v) for payment of money relating to
leases that are required to be capitalized for financial reporting purposes
under GAAP, (b) all liabilities and obligations of any other Person of the kind
described in the preceding clause (a) that such Person has guaranteed or that is
otherwise its legal liability or which are secured by the assets or property of
such Person and (c) all obligations of such Person to purchase, redeem or
acquire any of its capital stock.
"Indebtedness Cap" shall initially mean $49,000,000, minus the amount
of Run-Off Insurance Costs, minus any net proceeds from the sale of any
non-current assets and any assets reflected in "assets held for sale" on the
Company's Form 10-Q for the quarterly period ended June 30, 2003 (including, but
not limited to the Company's Middle East operations and as adjusted to exclude
the reclassification of the Company's U.K. operations, as set forth in Exhibit C
of the LOI), plus the amount of any net proceeds from the sale of the Company's
Middle East operations that are used and allocated to pay Yield Maintenance
Amounts, plus the amount, if any, by which net proceeds ((i) after deducting
fees and expenses paid or payable to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ relating to the sale of the
Company's Middle East operations and (ii) excluding any amounts subject to
earnout, holdback, escrow, delayed payment or other similar arrangements)
received by the Company prior to the Closing from the sale of the Company's
Middle East operations (excluding such amounts that are used and allocated to
pay Yield Maintenance Amounts) exceeds an amount equal to the Prior Note
Prepayment Amount as of the Closing Date, plus the amount, if any, by which
excess cash (as described in Section 6.1(w)(ii)) exceeds $4,100,000, plus the
amount, if any, by which Transaction Costs paid by the Company at any time prior
to the calculation of the
5
Indebtedness Cap exceeds $220,000; provided, however, that if the Adjusted
Working Capital shall be less than the Initial Adjusted Working Capital, then
the Indebtedness Cap shall be reduced by an amount which is equal to (i) the
Initial Adjusted Working Capital minus (ii) the Adjusted Working Capital; and,
provided, further, that if the Adjusted Working Capital shall be greater than
the Initial Adjusted Working Capital, then the Indebtedness Cap shall be
increased by an amount which is equal to (A) the Adjusted Working Capital minus
(B) the Initial Adjusted Working Capital.
"Indemnified Party" shall have the meaning set forth in Section 7.4.
"Indemnifying Party" shall have the meaning set forth in Section 7.4.
"Investor and Registration Rights Agreement" shall have the meaning set
forth in Section 6.1(i).
"Initial Adjusted Working Capital" shall mean $18,121,000.
"Knowledge" shall mean with respect to the Company, the actual
knowledge of ▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
"Law" shall mean the Existing Articles, the Existing Regulations and
any foreign, federal, state or local law, statute, rule, regulation, ordinance,
code, directive, writ, injunction, decree, judgment or order applicable to the
Company or any of its Subsidiaries.
"Lender Warrants" shall mean the detachable warrants to be issued by
the Corporation to the holders of Subordinated Notes in connection with the
issuance of the Subordinated Notes.
"Letter Agreement" shall mean that certain letter agreement, dated as
of August 14, 2003, by and between the Company and Purchaser.
"Losses" shall have the meaning set forth in Section 7.3.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including any conditional sale or title retention arrangement, and
any assignment, deposit arrangement or lease intended as, or having the effect
of, security.
"LOI" shall mean that certain Letter of Intent, dated as of September
11, 2003, by and between the Company and Purchaser, as amended.
"Major Shareholder" shall mean a beneficial or record owner of a number
of shares of Common Stock equal to or in excess of ten percent (10%) of the
outstanding shares of Common Stock.
"Material Adverse Effect" shall mean an event, occurrence or condition
that has had, or could reasonably be expected to have, a material adverse change
or effect on the business, condition (financial or otherwise), assets,
liabilities, working capital, prospects or results of operations of the Company
and its Subsidiaries, taken as a whole.
"Material Contracts" shall have the meaning set forth in Section 3.10.
"Minimum Excess Cash Amount" shall mean an amount equal to $4,100,000;
provided that if the amount of Indebtedness of the Company and its Subsidiaries
on a consolidated basis immediately prior to
6
the Closing shall be less than the Indebtedness Cap, then the Minimum Excess
Cash Amount shall be reduced by an amount which is equal to (i) the Indebtedness
Cap minus (ii) the amount of Indebtedness of the Company and its Subsidiaries on
a consolidated basis immediately prior to the Closing.
"New Option Plan" shall mean the new incentive plan of the Company to
be approved by the Board subsequent to the Closing.
"Option Plans" shall mean, collectively, (i) the 1997 Incentive Plan
and (ii) the 1997 Directors Plan.
"Ordinary Course of Business" means any action taken by a Person that
is:
(a) consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar authority);
and
(c) similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors of such Person (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Outstanding Options" shall have the meaning set forth in Section
3.4(a).
"Outstanding Warrants" shall have the meaning set forth in Section
3.4(a).
"Qualified Plan" shall have the meaning set forth in Section 3.15(b).
"Permits" shall have the meaning set forth in Section 3.8.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated organization, joint
venture, joint stock company, or a government or any agency or political
subdivision thereof or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in Section 3.4(a).
"Prior Credit Agreement" shall mean that certain Amended and Restated
Credit Agreement dated as of June 9, 2000, as amended, by and between Bank One,
NA, the Company and the other parties thereto.
"Prior Note Agreement" shall mean that certain Note Purchase Agreement
dated as of January 21, 1998, as amended, by and between the Company and The
Prudential Insurance Company of America.
"Prior Note Prepayment Amount" shall mean, as of any date of
determination, the aggregate amount of all Yield Maintenance Amounts paid by the
Company on or after September 11, 2003 but prior to such date of determination,
plus the aggregate amount of all Yield Maintenance Amounts payable on such date
of determination if the entire principal of the Existing Senior Notes were
prepaid on such date of determination.
"Proprietary Rights" shall have the meaning set forth in Section 3.9.
7
"Proxy Materials" shall mean the proxy statement and other proxy
materials, including any amendments and supplements thereto, to be used to
solicit proxies on behalf of the Board in connection with the Shareholders
Meeting.
"Purchase Price" shall have the meaning set forth in Section 2.1.
"Purchaser Entity" shall have the meaning set forth in Section 7.2.
"Purchaser Proxy Information" shall have the meaning set forth in
Section 5.2(c).
"Purchaser Warrants" shall have the meaning set forth in the Recitals.
"Release" shall mean any past or present release, spill, leak,
leaching, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping.
"Required Consents" shall mean those consents, approvals, waivers,
orders, authorizations, declarations, registrations, filings or notifications
required under the agreements set forth on Schedule 3.13A.
"Rights Agreement" shall have the meaning set forth in Section 3.4(c).
"Run-Off Insurance Costs" shall mean the aggregate costs of any
insurance policies that provide run-off and/or tail coverage deemed to be
reasonably necessary by Purchaser as a result of the transactions contemplated
by this Agreement and the other Transaction Documents. The parties hereto agree
that the current estimate of the Run-Off Insurance Costs is $900,000, which
estimate has been used in establishing the amount of the Indebtedness Cap.
"SAR Plan" shall have the meaning set forth in Section 3.4(b).
"SEC" shall mean the Securities and Exchange Commission, or any
successor agency thereto.
"SEC Documents" shall have the meaning set forth in Section 3.22.
"Securities" shall have the meaning set forth in the Recitals.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Senior Credit Facility" shall mean the Master Credit Facility
consisting of a proposed revolving credit line and a term loan from
CapitalSource Finance LLC to the Company, upon substantially the terms as set
forth in that certain Binding Commitment Letter, dated as of the date hereof, by
and between CapitalSource Finance LLC and the Company, as set forth on Exhibit
B.
"Series B Preferred Stock" shall have the meaning set forth in the
Recitals.
"Services Agreement" shall have the meaning set forth in Section
6.1(i).
"Shareholders Meeting" shall have the meaning set forth in Section
5.2(a).
"Shareholder Proposals" shall have the meaning set forth in Section
5.2(a).
8
"Shares" shall have the meaning set forth in the Recitals.
"Subordinated Notes" shall mean the Senior Secured Subordinated Notes
of the Company proposed to be issued to American Capital Strategies, Ltd. upon
substantially the terms as set forth in that certain Binding Commitment Letter,
dated as of the date hereof, by and between American Capital Strategies, Ltd.
and the Company, as set forth on Exhibit C.
"Subsidiary" or "Subsidiaries" shall mean any other corporation,
limited liability company, association, joint stock company, joint venture or
business trust of which, as of the date hereof or hereafter, (i) more than fifty
percent (50%) of the outstanding voting stock, share capital or other equity
interests is owned either directly or indirectly by any Person or one or more of
its Subsidiaries, or (ii) the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries, or both, by any
Person and/or its Subsidiaries.
"Superior Proposal" shall mean any proposal relating to an Alternative
Transaction (on its most recently amended or modified terms, if amended or
modified) which the Board determines in its good faith judgment (after
consultation with a financial advisor of nationally recognized reputation) to be
(i) more favorable to the Company's creditors and shareholders, from a financial
point of view, than the transactions contemplated by this Agreement and the
Transaction Documents (including any changes to the financial terms hereof and
thereof proposed by Purchaser in response to such Alternative Transaction), (ii)
for which the Board has received evidence reasonably demonstrating that any
financing required in connection with the Alternative Transaction has been
obtained or is then committed, and (iii) reasonably assured of being
consummated, taking into account all financial, legal, regulatory and other
aspects of such Alternative Transaction.
"Superior Proposal Notice" shall have the meaning set forth in Section
5.7(b).
"Superior Proposal Period" shall have the meaning set forth in Section
5.7(b).
"Third Party" shall have the meaning set forth in Section 5.7(a).
"Transaction Costs" shall mean the aggregate amount of transaction and
financing fees, expenses and costs (including, without limitation, all legal,
accounting, financial, investment banking, due diligence and advisory fees,
expenses and costs) incurred or paid, or expected to be incurred or paid, by the
Company, Purchaser and/or their Affiliates in connection with the transactions
contemplated by this Agreement, the other Transaction Documents, the Senior
Credit Facility, and the Subordinated Notes, excluding (a) Yield Maintenance
Amounts, (b) all legal fees and expenses of ▇▇▇▇, ▇▇▇▇▇▇ & Parks, LLP other than
those in connection with this Agreement, the other Transaction Documents, the
Senior Credit Facility and the Subordinated Notes and the transactions related
thereto and (c) legal fees and expenses paid or payable to ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
in connection with this Agreement and the transactions related thereto, but
including, without limitation, (i) all amounts to be paid pursuant to the
Amendment and Termination Agreements, which will be paid six (6) months after
Closing, (ii) the Closing Fee, (iii) Run-Off Insurance Costs, (iv) expenses
related to the Proxy Materials, (v) fees and expenses paid or payable to ▇▇▇▇▇
▇▇▇▇▇▇▇▇ relating to the United Kingdom operations and (vi) fees, costs and
expenses related to the termination or redemption of the Rights Agreement.
"Transaction Documents" shall mean, collectively, this Agreement, the
Investor and Registration Rights Agreement, the Purchaser Warrants, the Services
Agreement, the Amended Articles, the Amended Regulations and all other
agreements and instruments and any other documents, certificates, instruments or
agreements executed pursuant to or in connection herewith or therewith, as such
documents may be amended from time to time.
9
"Yield Maintenance Amounts" shall mean yield maintenance amounts, as
defined in the Prior Note Agreement.
"Warrant Shares" shall have the meaning set forth in Section 3.5.
2. Purchase And Sale of the Securities; Closing.
2.1. Purchase and Sale of the Securities. Subject to the terms and
conditions of this Agreement, at the Closing, the Company agrees to sell and
issue to Purchaser, and Purchaser agrees to purchase from the Company, the
Securities for an aggregate purchase price of $13,000,000 (the "Purchase
Price").
2.2. Closing.
(a) The purchase and sale of the Securities (the "Closing") shall
take place at the offices of ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, within five (5) Business Days of the satisfaction or waiver
of the closing conditions set forth in Section 6, or on such other date and at
such other time as the Company and Purchaser shall mutually agree. The date of
the Closing is referred to herein as the "Closing Date."
(b) At the Closing,
(i) the Company shall deliver to Purchaser (A) one or more
certificates representing the Shares in such denominations as Purchaser shall
designate, and (B) the Purchaser Warrants; and
(ii) Purchaser shall deliver to the Company the Purchase Price
payable by wire transfer of immediately available funds to such account or
accounts as the Company shall designate.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser that:
3.1. Organization and Qualification. Each of the Company and its
Subsidiaries has been duly incorporated or organized and is validly existing and
in good standing under the laws of the state of its jurisdiction or
organization, and has the requisite power and authority to own, lease and
operate its assets, properties and businesses and to carry on its businesses as
it is presently being conducted. Each of the Company and its Subsidiaries is
duly qualified to transact business, and is in good standing, in each
jurisdiction where it owns or leases real property or maintains employees or
where the nature of its activities make such qualification necessary, except
where such failure to qualify would not have a Material Adverse Effect.
3.2. Articles of Incorporation and Code of Regulations. The Company has
delivered to Purchaser true, correct, and complete copies of (i) the Amended and
Restated Articles of Incorporation of the Company as in effect on the date
hereof (the "Existing Articles"), (ii) the Amended and Restated Code of
Regulations of the Company as in effect on the date hereof (the "Existing
Regulations"), (iii) the Amended and Restated Articles of Incorporation of the
Company, including all certificates of amendment and including the designation
of the rights, powers and preferences of the Series B Preferred Stock in the
form attached hereto as Exhibit D as will be in effect at the Closing assuming
shareholder approval of the Shareholder Proposals (the "Amended Articles"), and
(iv) the Amended and Restated Code of
10
Regulations of the Corporation in the form attached hereto as Exhibit E as will
be in effect at the Closing assuming shareholder approval of the Shareholder
Proposals (the "Amended Regulations").
3.3. Corporate Power and Authorization. The Company has all required
corporate power and authority to (i) execute and deliver this Agreement and each
of the other Transaction Documents, and (ii) assuming shareholder approval of
the Shareholder Proposals, perform its obligations hereunder and thereunder, and
consummate the transactions contemplated hereby and thereby. The execution and
delivery by the Company of this Agreement and each of the other Transaction
Documents, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by all necessary corporate action of the
Company (except for shareholder approval of the Shareholder Proposals). This
Agreement has been duly executed and delivered by the Company and constitutes,
and each of the other Transaction Documents when executed by the Company on or
prior to the Closing as provided herein will constitute, a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws relating to
or affecting creditors' rights generally and (ii) general equitable principles.
The sale, issuance and delivery of the Securities and the performance of all of
the obligations of the Company under this Agreement and each of the other
Transaction Documents have been authorized or will be authorized prior to the
Closing, and, other than the approval of the Company's shareholders of the
Shareholder Proposals and the consents listed on Schedule 3.13A and Schedule
3.13B, no other corporate or other approval or authorization is required on the
part of the Company, any of its Subsidiaries or any other Person by Law or
otherwise in order to make this Agreement and each of the other Transaction
Documents the valid, binding and enforceable obligation of the Company,
enforceable against the Company in accordance with its terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws relating to or affecting creditors'
rights generally and (ii) general equitable principles.
3.4. Capitalization.
(a) As of the date hereof, the authorized capital stock of the
Company consists of (i) 40,000,000 shares of Common Stock and (ii) 1,000,000
shares of the Company's Serial Preferred Shares, without par value (the
"Preferred Stock"). As of November 12, 2003, 8,454,847 shares of Common Stock
have been issued and are outstanding and no shares of Preferred Stock are issued
and outstanding. As of December 10, 2003, (A) 1,309,277 shares of Common Stock
are issuable upon exercise of outstanding options granted pursuant to the 1997
Incentive Plan and (B) 55,000 shares of Common Stock are issuable upon exercise
of outstanding options granted pursuant to the 1997 Directors Plan
(collectively, the "Outstanding Options"). As of the date hereof and the Closing
Date, the maximum number of shares of Common Stock that are issuable upon
exercise of additional options that may be granted (I) under the 1997 Incentive
Plan is 276,461; provided that shares issued upon exercise of option awards, and
shares subject to issuance but not issued due to surrender, lapse, expiration or
termination, shall once again be available for issuance, (II) under the 1997
Directors Plan is 7,500, and (III) under the Outstanding Warrants is 774,962
(collectively, the "Unissued Options"). The Company has reserved a sufficient
number of Common Stock for issuance upon exercise of the Outstanding Options,
the Unissued Options and the Outstanding Warrants. As of the date hereof and the
Closing Date, (1) 387,481 shares of Common Stock are issuable upon exercise of
warrants issued to Bank One, N.A. pursuant to that certain Common Stock Purchase
Warrant, dated as of September 23, 2002, and (2) 387,481 shares of Common Stock
are issuable upon exercise of warrants issued to The Prudential Insurance
Company of America pursuant to that certain Common Stock Purchase Warrant, dated
as of September 23, 2002 (collectively, the "Outstanding Warrants"). The Company
is a party to the Rights Agreement, which entitles shareholders of the Company
to buy, upon certain triggering events, one one-hundredth of a Series A
11
Junior Participating Preferred Share at an exercise price of $75 per share
(subject to certain adjustments provided therein).
(b) Except as set forth in Section 3.4(a), as contemplated by this
Agreement or as set forth in Schedule 3.4(b) hereto, there are no outstanding
(i) shares of capital stock or other voting securities of the Company; (ii)
securities of the Company convertible into or exchangeable for shares of capital
stock or other voting securities of the Company; (iii) subscriptions, options,
warrants, calls, commitments, preemptive rights or other rights of any kind to
acquire from the Company, and no obligation of the Company to issue or sell, any
shares of capital stock or other voting securities of the Company or any
securities of the Company convertible into or exchangeable for such capital
stock or voting securities; or (iv) other than 30,000 Stock Appreciation Rights
granted under the Company's 2001 Non-Employee Directors Stock Appreciation
Rights Plan (the "SAR Plan"), equity equivalents, interests in the ownership or
earnings or other similar rights of or with respect to the Company. Except as
set forth on Schedule 3.4(b) or as set forth in this Agreement, there are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of Common Stock or any other securities of the type
described in clauses (i)-(iv) of the preceding sentence. Except as provided in
this Agreement, applicable securities laws, the Company's 401(k) Savings Plan
and the Company's Employee Stock Purchase Plan, there are no restrictions upon
the voting or transfer of any shares of the capital stock or other voting
securities of the Company pursuant to the Existing Articles, the Existing
Regulations or other governing documents or any agreement or other instrument to
which the Company is a party or by which the Company is bound.
(c) The execution and delivery of this Agreement is not and will
not be deemed to be a triggering event and will not otherwise accelerate, create
or result in any redemption rights under that certain Rights Agreement, dated as
of July 23, 1997, by and between the Company and ComputerShare, as successor
rights agent (the "Rights Agreement"). As of the Closing Date, the Company will
have taken any and all action necessary to terminate the Rights Agreement.
3.5. Authorization of Issuance; Reservation of Shares. At the Closing,
(i) the Shares to be acquired by Purchaser from the Company will be duly
authorized and validly issued, fully paid and nonassessable and not issued in
violation of any preemptive or similar rights and (ii) upon execution of the
Purchaser Warrants, the shares of Common Stock issuable upon exercise of the
Purchaser Warrants (the "Warrant Shares") will be duly authorized and reserved
for issuance, and upon issuance thereof upon exercise of the Purchaser Warrants,
will be validly issued, fully paid and nonassessable and not subject to, or
issued in violation of, any preemptive or similar rights.
3.6. Title to Properties. Except as set forth on Schedule 3.6, the
Company and its Subsidiaries have good and marketable title to, or valid and
subsisting leasehold interests in, all of their respective real properties and
other properties, whether tangible or intangible. Except as set forth on
Schedule 3.6, none of the real properties or other properties, whether tangible
or intangible, of the Company and its Subsidiaries is subject to any Lien. The
Company and each of its Subsidiaries has performed all the obligations required
to be performed by it in all material respects under the applicable lease or
other agreement with respect to all of its real properties and other properties,
whether tangible or intangible, leased by it. All such leases are valid, binding
and enforceable with respect to the Company and its Subsidiaries, to the extent
each is a party thereto, in accordance with their terms (except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws relating to or affecting creditors'
rights generally, and (ii) general equitable principles) and are in full force
and effect, no material event of default has occurred and is continuing under
such leases on the part of the Company or any of its Subsidiaries, and the
Company has no Knowledge of the occurrence of any uncured event of default under
such leases by any other Person.
12
3.7. Related-Party Transactions. Except as set forth in Schedule 3.7,
no director, officer, employee, Major Shareholder, or consultant of the Company
or any of its Subsidiaries or member of the immediate family (defined as
parents, spouse, siblings or lineal descendants) of any such director, officer,
employee, Major Shareholder, or consultant is indebted to the Company or any of
its Subsidiaries for borrowed money, and neither the Company nor any of its
Subsidiaries is indebted for borrowed money (or committed to make loans or
extend or guarantee credit) to any of them, other than for reimbursement of
expenses incurred in connection with their service to the Company and/or its
Subsidiaries. Except as provided in this Agreement or the other Transaction
Documents or except as set forth in Schedule 3.7, no director, officer or Major
Shareholder of the Company or any of its Subsidiaries or, to the Knowledge of
the Company, any consultant or any member of the immediate family of any such
director, officer, Major Shareholder, or, to the Knowledge of the Company,
consultant, directly or indirectly, (i) is a party to or beneficially owns of
record in excess of ten percent (10%) of any person that is a party to any
Material Contract or has any other business relationship with the Company or any
of its Subsidiaries, except for stock ownership in, and employment by, the
Company or any of its Subsidiaries, or (ii) has any business relationship with
any competitor of the Company or any of its Subsidiaries.
3.8. Permits; Compliance with Applicable Law. Except as set forth on
Schedule 3.8, the Company and each of its Subsidiaries has all franchises,
permits, licenses, authorizations, approvals, registrations and any similar
authority ("Permits") required for the conduct of its business as now being
conducted by it. The Permits shall include, without limitation, licenses and
registrations as appropriate for conduct of the Company's and Subsidiaries'
businesses the absence of which would have a Material Adverse Effect. Except as
set forth in Schedule 3.8, neither the Company nor any of its Subsidiaries is in
violation of, or has defaulted under, any such Permits. All such Permits are in
full force and effect, and no violations that are continuing have been recorded
in respect of any such Permits. No proceeding is pending or, to the Company's
Knowledge, threatened to revoke or limit any such Permit. No Permit will be
suspended, cancelled or adversely modified as a result of the execution and
delivery of this Agreement and each of the other Transaction Documents. Except
as set forth on Schedule 3.8, the Company and each of its Subsidiaries has
complied with, is not in violation of, and has not received any written notice
alleging any violation with respect to, any Law, except for failures or
violations that would not have a Material Adverse Effect.
3.9. Proprietary Rights. Except as set forth on Schedule 3.9, the
Company and its Subsidiaries are the sole owners, free and clear of any Liens,
of all Proprietary Rights. As used herein, the term "Proprietary Rights" means
the Company's or its Subsidiaries' patents, trademarks, trade names, service
marks, logos, designs, formulations, copyrights, and other trade rights and all
registrations and applications therefor, all know-how, trade secrets, technology
or processes, research and development, all Internet domain names, Web sites and
computer programs, data bases and software documentation and all other
intellectual property owned, licensed or otherwise used by the Company and its
Subsidiaries. Set forth in Schedule 3.9 is a true and correct list of all
patents and patent applications; trademarks, trade names, service marks, logos
and all applications and registrations of the foregoing; Internet domain names;
copyright applications and registrations; and a list describing all software
owned or licensed by the Company and its Subsidiaries. The Company and each of
its Subsidiaries has taken all reasonable actions to protect its rights in
Proprietary Rights owned by it. The rights of the Company and each of its
Subsidiaries in the Proprietary Rights are valid and enforceable. Except as
disclosed in Schedule 3.9, neither the Company nor any of its Subsidiaries has
received any demand, claim, notice or inquiry from any person or entity in
respect of the Proprietary Rights which challenges, threatens to challenge or
inquires as to whether there is any basis to challenge, the validity of, or the
rights of the Company and the Subsidiaries in any of the Proprietary Rights, and
the Company has no Knowledge of any basis for any such challenge. To the
Company's Knowledge, neither the Company nor any of its Subsidiaries is in
violation or infringement of, and has not violated or infringed, any
intellectual property rights of any other Person. To the Company's Knowledge,
except as set forth in Schedule 3.9, no third party is infringing on
13
the rights of the Company and its Subsidiaries in and to the Proprietary Rights.
Except on an arm's-length basis for value and other commercially reasonable
terms, neither the Company nor any of its Subsidiaries has granted any license
with respect to the Proprietary Rights to any Person.
3.10. Material Contracts.
(a) Set forth in Schedule 3.10(a) is a true and complete list of
all material contracts, agreements, powers of attorney, undertakings,
commitments, notes, bonds, indentures, mortgages, deeds of trust, guarantees,
pledges, instruments, leases, decrees or obligations that are currently in
effect to which the Company or any of its Subsidiaries is a party, or by which
the Company or any of its Subsidiaries is bound, including, without limitation,
(i) any agreement or purchase or task order that requires future expenditures by
the Company or any of its Subsidiaries in excess of $200,000 in any given year,
or $350,000 in the aggregate, or that could result in payments to the Company or
any of its Subsidiaries in excess of $500,000 in the aggregate, (ii) any
employment agreements and material consulting agreements, (iii) any agreement
with any current or former Major Shareholder, officer or director of the Company
or any of its Subsidiaries, or any Affiliate of such Major Shareholder, officer
or director, including, without limitation, any agreement or other arrangement
providing for the furnishing of services by, the rental of real or personal
property from, the licensing of intellectual property from, or otherwise
requiring payments to, any such Major Shareholder, officer or director, (iv) any
material agreement relating to the development, manufacture, marketing or
distribution of the products or services of the Company or any of its
Subsidiaries, (v) any material agreement relating to the licensing of
intellectual property where the Company and/or its Subsidiaries is the licensee
or licensor, and (vi) any other agreement material to the business of the
Company or any of its Subsidiaries, regardless of the dollar value of the
amounts receivable by, or payment obligations of, the Company or its
Subsidiaries thereunder (collectively, the "Material Contracts").
(b) Assuming the due execution and delivery by the other parties
thereto, each of the Material Contracts is legal, valid and binding, and in full
force and effect, and enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors' rights generally and (ii) general equitable
principles. There is no breach, violation or default by the Company or any of
its Subsidiaries (or, to the Company's Knowledge, any other party thereto) under
any Material Contract, and no event has occurred which, with notice or lapse of
time or both, would (A) constitute a material breach, violation or default by
the Company or any of its Subsidiaries (or, to the Company's Knowledge, any
other party thereto) under any such Material Contract, (B) give rise to any Lien
or right of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration against the Company or any of its
Subsidiaries under any such Material Contract or (C) to the Knowledge of the
Company, give rise to any material claims for indemnification against the
Company or any of its Subsidiaries under any Material Contract. Except as set
forth in Schedule 3.10(b), neither the Company nor any of its Subsidiaries is
and, to the Company's Knowledge, no other party to any of such Material Contract
is, in arrears in any material respect of the performance or satisfaction of any
terms or conditions on its part to be performed or satisfied under any of such
Material Contracts, except as set forth in Schedule 3.12, neither the Company
nor any of its Subsidiaries has received notice of, or otherwise has Knowledge
of, any material claim for indemnification under any Material Contract that is
currently pending, or has been asserted during the past twenty four (24) months,
and neither the Company nor any of its Subsidiaries has and, to the Company's
Knowledge, no other party thereto has, granted or been granted any waiver or
indulgence under any of such Material Contracts or repudiated any provision
thereof.
(c) The Company has provided or made available to Purchaser or
its representatives complete copies of each of the Material Contracts,
including all amendments, modifications, supplements, schedules, exhibits and
attachments thereto.
14
(d) Except as set forth in Schedule 3.10(d), neither the Company
nor its Subsidiaries is a party to or otherwise bound by any contracts,
agreements, undertakings, commitments, notes, bonds, indentures, mortgages,
deeds of trust, guarantees, pledges, instruments, leases, decrees or other
obligations that are currently in effect and that contain any noncompete
provisions or similar provisions that would place any restriction on or
otherwise affect the business and operations of Purchaser after the consummation
of the transactions contemplated by this Agreement and the other Transaction
Documents.
3.11. No Conflicts. The execution and delivery by the Company of this
Agreement and each of the Transaction Documents, and the performance by it of
the transactions contemplated hereby and thereby, do not and will not (i)
conflict with or result in a violation of any provision of the Existing Articles
(except as expressly addressed in the Amended Articles), the Existing
Regulations (except as expressly addressed in the Amended Regulations), the
Amended Articles, the Amended Regulations, or the charter, bylaws, or other
governing instruments of any Subsidiary of the Company, (ii) except as set forth
on Schedule 3.11, conflict with or result in a violation of any provision of,
constitute (with or without the giving of notice or the passage of time or both)
a default or event of default under, give rise (with or without the giving of
notice or the passage of time or both) to any loss of any benefit under, give
rise to any right of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration under, or require any consent
under, any Material Contract, (iii) result in the creation or imposition of any
Lien upon the properties of the Company or any of its Subsidiaries other than as
contemplated under the Senior Credit Facility or Subordinated Notes, or (iv)
violate in any respect any Law binding upon the Company or any of its
Subsidiaries or any rules, regulations or published policies of the AMEX.
3.12. Litigation. Except as set forth in Schedule 3.12, there is no
action, claim, litigation, tax or compliance audit, suit or proceeding,
regulatory or administrative enforcement action or Governmental inquiry or
investigation pending or, to the Company's Knowledge, threatened against the
Company or any of its Subsidiaries, any of their officers or directors that,
only with respect to such officers and directors, is related to the Company's
business, or the assets of the Company or its Subsidiaries. To the Company's
Knowledge, there is no reason to believe that any of the foregoing may occur
which would have, or any of the items set forth in Schedule 3.12 would
reasonably be likely to result in, in the aggregate, a Material Adverse Effect.
Except as set forth in Schedule 3.12, neither the Company nor any of its
Subsidiaries is subject to any outstanding judgment, order or decree directed
against the Company or any of its Subsidiaries or, to the Company's Knowledge,
any officer or director thereof. There is no action, suit or proceeding pending
or, to the Company's Knowledge, threatened against the Company seeking to
restrain, prohibit, or obtain damages or other relief in connection with this
Agreement, the Transaction Documents, or the transactions contemplated hereby
and thereby.
3.13. Consents. No consent, approval, waiver, order or authorization
of, declaration, registration or filing with, or notice to any Person or
Governmental Authority is required to be obtained or made by the Company or any
of its Subsidiaries in connection with (i) the execution, delivery and
performance of this Agreement and the other Transaction Documents or (ii) the
offer, sale or issuance of the Securities, except for such consents, approvals,
waivers, orders, authorizations, declarations, registrations, filings or
notifications listed on Schedule 3.13A and Schedule 3.13B.
3.14. Labor Relations; Employees.
(a) Set forth on Schedule 3.14(a) is a true and correct list of
each employee of the Company and each of its Subsidiaries whose annual base
compensation is equal to or exceeds $100,000, which list provides, among other
things, the name, title, job description and compensation information
15
concerning each such employee as of November 23, 2003 and whether such employee
is party to a confidentiality, nondisclosure and/or noncompete agreement with
the Company and/or its Subsidiaries.
(b) Except as set forth in Schedule 3.14(b), neither the Company
nor any of its Subsidiaries is delinquent in payments to its employees for any
wages, salaries, commissions, bonuses or other direct compensation for any
services performed by the date hereof or amounts required to be reimbursed to
any employee as of the date hereof.
(c) The Company and each of its Subsidiaries is in compliance in
all material respects with all Laws relating to employment and classification of
persons as employees, including, without limitation, all such Laws relating to
wages, hours, leave rights, discrimination, anti-retaliation, civil rights,
immigration, safety and the collection and payment of withholding and/or Social
Security taxes and similar taxes and the provision of employee benefits. Except
as set forth in Schedule 3.14(c), to the Company's Knowledge, no officer,
executive or manager of the Company or its Subsidiaries has any current plans to
terminate his or her employment with the Company or such Subsidiary.
(d) Except as set forth in Schedule 3.14(d), (i) neither the
Company nor any of its Subsidiaries employs members of any labor union; (ii) no
labor organization or group of employees of the Company or any of its
Subsidiaries has made a pending demand for recognition or request for
certification of representation of the Company or any of its Subsidiaries; (iii)
there are no representation or certification proceedings or petitions seeking a
representation election presently pending or threatened, to be brought or filed
with the National Labor Relations Board or other labor relations tribunal in
connection with employees of the Company or any of its Subsidiaries; (iv) there
are no strikes, lockouts, work stoppages or slowdowns pending or threatened
against or involving the Company or any of its Subsidiaries; and (v) there are
no unfair labor practice charges, arbitrations, grievances or complaints pending
or threatened in writing against the Company or any of its Subsidiaries relating
to the employment or termination of employment by the Company or any of its
Subsidiaries of any of its employees.
3.15. Employee Benefit Plans.
(a) Except as set forth in Schedules 3.10(a), 3.10(b) or 3.15(a),
the Company and its Subsidiaries do not sponsor, maintain or contribute to, are
not required to contribute to, and do not have any liability (contingent or
otherwise) with respect to any "employee benefit plans" as defined by Section
3(3) of ERISA, specified fringe benefit plans as defined in Section 6039D of the
Code, or any other bonus, incentive compensation, deferred compensation, profit
sharing, stock option, stock appreciation right, stock bonus, stock purchase,
employee stock ownership, savings, severance, supplemental unemployment, layoff,
salary continuation, retirement, pension, health, life insurance, dental,
disability, accident, group insurance, vacation, holiday, sick leave, fringe
benefit or welfare plan, or any other employee compensation or benefit plan,
agreement, policy, practice, commitment or contract (whether qualified or
nonqualified, currently effective or terminated, written or unwritten), or any
trust, escrow or other agreement related thereto, subject to U.S. Law (each a
"Company Benefit Plan" and together the "Company Benefit Plans"). Except as set
forth on Schedule 3.15(a), neither the Company, its Subsidiaries nor any other
trade or business (whether or not incorporated) which is or at any time within
the six (6)-year period ending on the Closing Date would have been treated as a
"single employer" with either the Company or its Subsidiaries under Section
414(b), (c), (m), or (o) of the Code (the "ERISA Affiliates") has contributed
to, been required to contribute to, or has had any liability (contingent or
otherwise) at any time within the last six (6) years with respect to any
"multiemployer plan," as that term is defined in Section 4001 of ERISA or any
"employee benefit plan" (as defined in Section 3(3) of ERISA) subject to Title
IV of ERISA or Section 412 of the Code.
16
(b) Each Company Benefit Plan (and each related trust, insurance
contract or fund) complies in form and in operation in all material respects
with the applicable requirements of all Laws governing or applying to such
Company Benefit Plan, including, without limitation, ERISA and the Code, and, to
the Knowledge of the Company, no statement, either written or oral, has been
made by the Company with regard to any Company Benefit Plan that is not
materially in accordance with its terms. Except as set forth on Schedule
3.15(b), the Company and its Subsidiaries have each performed, in all material
respects, all of their obligations under all Company Benefit Plans, and all
contributions (including all employer and employee salary reduction
contributions) to any Company Benefit Plan with respect to any period ending
before, at or including the Closing Date have been made or will be made within
the permitted time period therefor. Neither the Company nor its Subsidiaries has
engaged in or permitted to occur and, to the Knowledge of the Company, no other
party has engaged in or permitted to occur, any transaction prohibited by
Section 406 of ERISA or "prohibited transaction" under Section 4975(c) of the
Code or any breach of fiduciary duty under ERISA with respect to any Company
Benefit Plan, except for any transactions that are exempt under Section 408 of
ERISA or Section 4975 of the Code. Except as set forth on Schedule 3.15(b) and
except for any formal written qualification requirement with respect to which
the remedial amendment period set forth in Section 401(b) of the Code, and any
regulations, rulings or other Internal Revenue Service releases thereunder, has
not expired, (i) each Company Benefit Plan that is intended to be "qualified"
within the meaning of Section 401(a) of the Code ("Qualified Plan") has received
a favorable determination letter from the Internal Revenue Service and is
qualified in form and operation under Section 401(a) of the Code, and each trust
for each such Company Benefit Plan is exempt from federal income tax under
Section 501(a) of the Code, and (ii) no event has occurred or circumstance
exists that gives rise to disqualification or loss of tax-exempt status of any
such Company Benefit Plan or trust. All filings required by ERISA and the Code
as to each Company Benefit Plan have been timely filed, and all notices and
disclosures to participants required by either ERISA or the Code have been
timely provided. The Company, its Subsidiaries and each ERISA Affiliate has
complied with all of the provisions of Parts 6 and 7 of Title I of ERISA and
Section 4980B of the Code.
(c) The Company has delivered or made available to Purchaser or
its designated representatives true, accurate, and complete copies of (i) all
documents setting forth the terms of each Company Benefit Plan that exists in
written form, including without limitation, the plan documents, related
contracts, summary plan descriptions, insurance policies, all related trust
agreements, and other documents describing the funding agreements for each such
Company Benefit Plan, except those provisions arising by operation of law that
have not yet been formally adopted but are required to conform the operation of
such plans to applicable law, (ii) the most recent determination letter received
from the Internal Revenue Service, where applicable, for each Qualified Plan,
(iii) the Form 5500 Annual Report filed in each of the three most recent plan
years, where applicable, (iv) all written agreements with third-party
administrators, actuaries, investment managers, consultants, and any other third
parties providing services with respect to or on behalf of any Company Benefit
Plan currently in force or for which the Company or any of its Subsidiaries
currently has any liability (contingent or otherwise); (v) all reports,
including discrimination testing reports conducted within the four (4) years
preceding the Closing Date; (vi) a copy of the form of notice, if any, used by
any Company Benefit Plan to notify participants and beneficiaries of their
rights under Section 601 et seq. of ERISA and Sections 4980B and 9801 et seq. of
the Code, and under all other applicable federal and state laws regulating the
notice requirements of "group health plans" (as defined in Section 607(1) of
ERISA); (vii) all documents that set forth the terms of each Foreign Benefit
Plan; together with all amendments thereto, and, if applicable, all current
trust agreements and other documents establishing other funding arrangements,
together with all amendments thereto, and the latest financial statements and
actuarial valuation report, as applicable, thereof and (viii) all such other
documents requested by the Purchaser prior to the Closing Date with respect to
each Company Benefit Plan.
17
(d) There are no pending, or, to the Knowledge of the Company,
threatened, claims by or on behalf of any Company Benefit Plan, or by any
Person, (other than ordinary claims for benefits submitted by participants and
beneficiaries) that, individually or in the aggregate, could result in material
liability on the part of Purchaser, the Company, its Subsidiaries or any
fiduciary of any such Company Benefit Plan.
(e) Neither the Company nor its Subsidiaries maintains or is
obligated to provide benefits under any life, medical, or health plan (other
than as an incidental benefits under a Qualified Plan) which provides benefits
to retirees or other terminated employees other than benefit continuation rights
under Section 601 et seq. of ERISA and Section 4980B of the Code or other
applicable law.
(f) Except as set forth on Schedule 3.15(f), no employee of
either the Company or its Subsidiaries shall be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Company Benefit Plan as a result of the transactions contemplated by
this Agreement or the other Transaction Documents. Assuming effectiveness of the
Amendment and Termination Agreements, which effectiveness is expressly
conditioned upon the Closing, no Person is entitled to receive any additional
payment from the Company, its Subsidiaries or any other party that could result
in a loss of deduction for the Company under Section 280G of the Code.
(g) Except as set forth on Schedule 3.15(g), to the Company's
Knowledge, no event has occurred or circumstance exists that could result in a
material increase in premium costs of any Company Benefit Plans that are insured
or a material increase in benefit costs of such Company Benefit Plans that are
self-funded.
(h) Neither the Company, its Subsidiaries nor any ERISA Affiliate
has violated Sections 306 or 402 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the
execution of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby will not cause
such a violation.
(i) Foreign Benefit Plans.
(i) Schedule 3.15(i) contains a true and complete list of
each Foreign Benefit Plan other than a Foreign Governmental Benefit Plan.
(ii) Each Foreign Benefit Plan other than a Foreign
Collectively Bargained Benefit Plan or a Foreign Governmental Benefit Plan has
been maintained in compliance in all material respects with its terms and with
the requirements of any and all applicable laws, statutes, rules, regulations
and orders and has been maintained, where required, in good standing with
applicable regulatory authorities. All contributions, premiums or other payments
required to be made by the Company or any of its Subsidiaries with respect to
each Foreign Benefit Plan have been timely made and have been paid in full. To
the knowledge of the Company, neither the Company nor any of its Subsidiaries
has made any announcement, agreement, or proposal or has incurred or is likely
to incur on or prior to Closing any obligation in connection with the amendment
of, termination of, or withdrawal from any Foreign Benefit Plan.
(iii) The present value of the accrued benefit liabilities
(whether or not vested) attributable to employees of the Company or any of its
Subsidiaries or for which the Company or any of its Subsidiaries is or may be
liable under each Foreign Benefit Plan that is a pension or retirement plan
(including, without limitation, any superannuation fund) or that provides for
actuarially-determined benefits, determined as of the end of the most recently
ended fiscal year of the Company or any such Subsidiary, on the basis of
actuarial assumptions, each of which is reasonable, did not exceed the current
18
value of the assets of such Foreign Benefit Plan allocated to such benefit
liabilities, or, alternatively, the Company or any such Subsidiary has
established adequate reserves for the present value of such accrued benefit
liabilities, determined as described herein, in the Financial Statements.
(iv) No action, litigation, audit examination, investigation
or administrative proceeding has been made, commenced or, threatened with
respect to any Foreign Benefit Plan that would reasonably be expected to result
in a material liability of the Company or any of its Subsidiaries. No Foreign
Benefit Plan which is not a Foreign Governmental Benefit Plan provides for
post-employment or retiree health, life insurance and/or other welfare benefits
and has unfunded liabilities, and neither the Company nor any of its
Subsidiaries has any obligation to provide any such benefits to any active
employees following such employees' retirement or termination of service, to any
retired or former employees, or to any beneficiary of any retired or former
employee following such employees' death.
(v) There are no material liabilities of the Company or any
of its Subsidiaries with respect to any Foreign Benefit Plan that are not
accrued or otherwise disclosed in the Financial Statements. To the knowledge of
the Company, no condition or circumstance exists that would prevent the
amendment or termination of any Foreign Benefit Plan other than a Foreign
Collectively Bargained Benefit Plan or Foreign Governmental Benefit Plan. With
respect to each Foreign Benefit Plan (other than a Foreign Governmental Benefit
Plan), to the knowledge of the Company, no event has occurred and no condition
or circumstance exists that could result in a material increase in the benefits
under or the expense of maintaining any such Foreign Benefit Plan from the level
of benefits or expense incurred for the most recent fiscal year ended thereof.
To the knowledge of the Company, no event has occurred and no condition or
circumstance exists that could result in a material increase in the benefits
under or the expense of maintaining any Foreign Collectively Bargained Benefit
Plan from the level of benefits or expense incurred for the most recent fiscal
year ended thereof.
(vi) The execution of this Agreement and the consummation of
the Contemplated Transactions will not constitute a triggering event under any
Foreign Benefit Plan, whether or not legally enforceable, which (either alone or
upon the occurrence of any additional or subsequent event) will or may result in
any payment, acceleration, vesting or increase in benefits to any employee or
former employee or director of the Company or any of its Subsidiaries. No
Foreign Benefit Plan (other than a Foreign Governmental Benefit Plan) provides
for the payment of severance, termination, change of control or similar-type
payments or benefits.
3.16. Tax Returns, Payments and Elections. The Company and each of its
Subsidiaries has filed all tax returns and reports (including information
returns and reports) as required by law. Such returns and reports are true and
correct in all material respects. The Company and each of its Subsidiaries has
paid all taxes shown as due on such returns. The provision for taxes of the
Company and its Subsidiaries as shown in the Financial Statements (as
hereinafter defined) is adequate in all respects for all taxes, assessments and
governmental charges due or accrued as of the date thereof with respect to its
business, properties and operations of the Company and its Subsidiaries. Neither
the Company nor any of its Subsidiaries has elected pursuant to the Code to be
treated as a Subchapter S corporation pursuant to Section 1362(a) or a
collapsible corporation pursuant to Section 341(f) of the Code, nor has the
Company or any of its Subsidiaries made any other elections pursuant to the Code
(other than elections that relate solely to methods of accounting, depreciation
or amortization) that would have a Material Adverse Effect. Except as set forth
on Schedule 3.16, neither the Company nor any of its Subsidiaries has had any
tax deficiency proposed or assessed that has not been paid in full against it by
the Internal Revenue Service or any other foreign, federal, state or local
taxing authority and, other than those that have been paid in full or closed,
none have been asserted in writing or, to the Company's Knowledge, currently
threatened at any time for additional taxes. Neither the Company nor any of its
Subsidiaries has executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge that
19
remains outstanding. Except as set forth on Schedule 3.16, within the six (6)
year period preceding the date hereof, none of the Company's or any of its
Subsidiary's foreign, federal, state or local income or franchise tax or sales
or use tax returns are currently subject to audit by governmental authorities
and, to the Company's Knowledge, none is threatened. Since the date of the
Financial Statements, neither the Company nor any of its Subsidiaries has
incurred any taxes, assessments or governmental charges other than in the
Ordinary Course of Business. The Company and each of its Subsidiaries has
withheld or collected from each payment made to each of its respective
employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) and foreign taxes required to be withheld or collected therefrom,
and has paid or will pay within the time permitted therefore, the same to the
proper tax receiving officers or authorized depositories.
3.17. Brokers or Finders. Except as set forth in Schedule 3.17, neither
the Company or any of its Subsidiaries has incurred, or will incur, directly or
indirectly, as a result of any action taken by the Company or any of its
Subsidiaries, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
other Transaction Document or the transactions contemplated hereby or thereby.
3.18. Offering Exemption. Assuming the approval of the Shareholder
Proposals and the truth and accuracy of the representations and warranties of
Purchaser contained in Sections 4.2, 4.3, 4.4 and 4.5, the offer, sale and
issuance of the Securities to Purchaser are, and the offer, sale and issuance of
the Warrant Shares to Purchaser upon exercise of the Purchaser Warrants will be,
exempt from registration under the Securities Act and under any applicable state
securities and "blue sky" laws, as currently in effect.
3.19. Environmental Matters.
(a) Except as set forth on Schedule 3.19(a), the Company complies
and has at all times complied in all material respects with all federal, state
and local laws, judgments, decrees, orders, consent agreements, authorizations,
permits, licenses, rules, regulations, common or decision law (including,
without limitation, principles of negligence and strict liability) relating to
the protection, investigation or restoration of the environment (including,
without limitation, natural resources) or the health or safety matters of humans
and other living organisms, including, without limitation, the Resource
Conservation and Recovery Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Federal
Clean Water Act, as amended, the Federal Clean Air Act, as amended, the Toxic
Substances Control Act, and any state or local analog (hereinafter
"Environmental Laws").
(b) Except as set forth on Schedule 3.19(a), the Company has
obtained, and has timely filed renewal applications for, all permits, approvals,
identification numbers, certificates, registrations, licenses, and other
authorizations necessary for its operations under any Environmental Law
(hereinafter "Environmental Permits") and all such Environmental Permits are in
good standing.
(c) Except as set forth in Schedule 3.19(c), (i) the Company has
no Knowledge of, and has not received notice of, any complaint, order,
directive, lien, claim, notice of violation, request for information or
citation, and to the Company's Knowledge no proceeding has been instituted
raising a claim against the Company or any predecessor or any of their
respective real properties or other assets currently or formerly owned, leased
or operated indicating or alleging any damage to the environment or any
liability or obligation under or violation of any Environmental Law, which claim
has not been settled,
20
and (ii) the Company is not subject to any order, decree, injunction or other
directive of any Governmental Authority relating to any Environmental Laws.
(d) The Company has not disposed of, sent, or arranged for the
transportation of Hazardous Materials on or to any site that, pursuant to CERCLA
or any similar or analogous state law, has been placed or is proposed to be
placed on the federal "National Priorities List" or any similar state list.
(e) The Company has not been identified as a potentially
responsible party under CERCLA or any similar or analogous state law.
(f) Except as set forth in Schedule 3.19(f), (i) the Company has
not used and, to the Company's Knowledge, no other person has used, any portion
of any property owned, operated or leased by the Company for the disposal of
Hazardous Materials and, except in the normal course of business and in
accordance with applicable Environmental Laws, for the generation, handling,
processing, treatment, or storage of Hazardous Materials; (ii) the Company does
not own or operate, and has not owned or operated, any underground tank or other
underground storage receptacle for Hazardous Materials or any structure or
equipment containing any asbestos-containing materials or polychlorinated
biphenyls, and, to the Company's Knowledge, no underground tank or other
underground storage receptacle for Hazardous Materials, and no
asbestos-containing materials or polychlorinated biphenyls are located on any
portion of any property currently, or to Company's Knowledge, formerly owned,
operated or leased by the Company; and (iii) there have been no Releases or
threatened Releases of Hazardous Materials on, at, in, under, above, to, from or
about any property currently or formerly owned, operated or leased by the
Company except in compliance with Environmental Laws and in such amounts that
would not reasonably create liabilities, obligations, or restrictions under any
Environmental Laws.
(g) Except as set forth in Schedule 3.19(g), the execution,
delivery and performance of this Agreement is not subject to any Environmental
Laws which condition, restrict or prohibit the sale, lease or other transfer of
property or operations, including any so-called "environmental cleanup
responsibility acts" or requirements for the transfer of permits, approvals, or
licenses. The Company has delivered or made available to Purchaser or its
designated representatives true, accurate and complete copies of all
environmentally related audits, studies, reports, analyses (including soil and
groundwater analyses), or investigations in the Company's possession of any kind
performed within the last five (5) years with respect to the currently or
formerly owned, leased, or operated properties of the Company. The Company has
made all of its facilities available to Purchaser and its representatives for
purposes of conducting further environmentally related assessments.
3.20. Offering of Securities. No form of general solicitation or
general advertising has been used by the Company or any of its agents or
representatives in connection with the offer and sale of the Securities. Neither
the Company nor any of its agents or representatives has, directly or
indirectly, offered the Securities to, or solicited any offers to buy the
Securities from, any other Person.
3.21. AMEX Compliance. The Common Stock is registered pursuant to
Section 12(b) of the Exchange Act and is listed for trading on the AMEX, and the
Company has taken no action that could reasonably be expected to have the effect
of the termination of the registration of the Common Stock under the Exchange
Act or the delisting of the Common Stock from the AMEX. Except as set forth on
Schedule 3.21, the Company has not been notified of any action or potential
action by the AMEX, or of any violation of the rules and regulations of the
AMEX, that could result in the delisting of the Common Stock from the AMEX.
21
3.22. SEC Documents. Except as set forth on Schedule 3.22, the Company
has filed in a timely manner all documents that the Company was required to file
under the Exchange Act and the rules and regulations of the AMEX since March 31,
2001 including, without limitation, all Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, registration statements and
proxy statements, including any amendments, supplements or exhibits thereto,
filed by the Company with the SEC since March 31, 2001 (collectively, the "SEC
Documents"). Except as set forth on Schedule 3.22, the SEC documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act as of their respective filing dates, and none of the SEC Documents,
including any financial statements or schedules included or incorporated by
reference therein, when filed, contained any untrue statement of material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Since August 29, 2002, the Chief Executive
Officer and the Chief Financial Officer of the Company have signed, and the
Company has furnished to, or filed with, the SEC all certifications required by
Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "Certifications").
The Certifications did not contain any qualifications or exceptions to the
matters certified therein and have not been modified or withdrawn, and neither
the Company nor any of its officers has received any notice from any
Governmental Authority questioning or challenging the accuracy, completeness,
content, form or manner of filing or submission of the Certifications.
3.23. Financial Statements. The Company has delivered to Purchaser
copies of the audited financial statements of the Company and its Subsidiaries
as at and for the years ended March 31, 2001, 2002 and 2003 and the unaudited
financial statements of the Company and its Subsidiaries as at and for the
fiscal quarters ended June 30, 2003, September 30, 2003 and the month ended
October 31, 2003 (the "Financial Statements"). Except as set forth on Schedule
3.23, the Financial Statements have been prepared in accordance with generally
accepted accounting principles in effect in the United States, consistently
applied ("GAAP"), and fairly present the financial condition and operating
results of the Company and its Subsidiaries as of the date, and for the period,
indicated therein, except that the unaudited financial statements of the Company
and its Subsidiaries as at and for the fiscal quarters ended June 30, 2003,
September 30, 2003 and the month ended October 31, 2003 are subject to normal
year-end adjustments and do not contain all notes required under GAAP. Except as
set forth in the Financial Statements, the Company and its Subsidiaries have no
liabilities, obligations or commitments of any nature (whether accrued,
absolute, contingent, unliquidated or otherwise), which are required to be
included in the Financial Statements in accordance with GAAP, other than (i)
liabilities that are listed on Schedule 3.23, (ii) liabilities that have arisen
in the Ordinary Course of Business since October 31, 2003 and have not had and
could not reasonably be expected to have a Material Adverse Effect and (iii)
obligations to perform after the date hereof any contracts or agreement which
have been disclosed on Schedules 3.10(a) or 3.10(b) or which are not required to
be disclosed on Schedules 3.10(a) or 3.10(b) because such contracts and
agreements do not meet the disclosure thresholds under Schedules 3.10(a) or
3.10(b). Except as disclosed in the Financial Statements, neither the Company
nor any of its Subsidiaries is a guarantor or indemnitor of any Indebtedness of
any other Person.
3.24. No Suspension or Debarment. Neither the Company nor any of its
Subsidiaries during the last five (5) years has been and, to the Company's
Knowledge, none of their respective directors, officers, employees, consultants
or agents during the last five (5) years has been, suspended or debarred from
eligibility for award of contracts with the Government or any other Governmental
Authority or is or was the subject of a finding of non-responsibility or
ineligibility for Government or Governmental Authority contracting. During the
past five (5) years, no Government or Governmental Authority contracting
suspension or debarment action has been threatened or commenced against the
Company or any of its Subsidiaries or, to the Company's Knowledge, any of its
directors, officers, employees, consultants or agents. To the Company's
Knowledge, there is no basis for, nor any specific circumstance that is or, with
the passage of time, would likely become a basis for, the Company's or any of
its
22
Subsidiaries' suspension or debarment from award of contracts with the
Government or any other Governmental Authority.
3.25. Liability for Cost and Pricing Data. There exists no basis for a
claim of any liability of the Company or any of its Subsidiaries by the
Government or any other Governmental Authority as a result of any defective,
inaccurate, incomplete or out-of-date cost or pricing data submitted to the
Government, any Governmental Authority or a Government or Governmental Authority
contractor or subcontractor including, without limitation, any such data
relating to liabilities accrued on the Company's books or in its financial
accounts for deferred compensation to any employee of the Company. To the
Company's Knowledge, neither the Company nor any of its Subsidiaries is in
violation of, or is currently alleged to be in violation of, the Truth in
Negotiations Act, as amended. Neither the Company nor any of its Subsidiaries
has submitted to the Government, Governmental Authority or a Government or
Governmental Authority contractor or subcontractor a materially inaccurate
certification regarding cost or pricing data.
3.26. Government Contracts.
(a) A true and correct list of each Government Contract and
Government Bid to which the Company or any of its Subsidiaries is a party is set
forth in Schedule 3.26(a). Prior to the Closing Date, the Company shall amend
Schedule 3.26(a) to include a true and correct list of each Government Contract
and Government Bid which is entered into by the Company or any of its
Subsidiaries between the date of this Agreement and the Closing Date.
(b) Except as set forth in Schedule 3.26(b), (i) the Company and
each of its Subsidiaries has fully complied with all terms and conditions of
each Government Contract and Government Bid to which it is a party, (ii) the
Company and each of its Subsidiaries has complied with all requirements of any
Law pertaining to any such Government Contract or Government Bid, (iii) all
representations and certifications made by the Company and each of its
Subsidiaries with respect to any such Government Contract or Government Bid were
accurate, current and complete in every material respect as of their effective
date, and the Company and each of its Subsidiaries has fully complied with all
such representations and certifications in all material respects, (iv) neither
the Company nor any of its Subsidiaries is in violation of, or is currently
alleged to be in violation of, the False Statements Act, as amended, the False
Claims Act, as amended, or any other federal requirement relating to the
communication of false statements or submission of false claims to the
Government, and (v) no termination or default notice, cure notice or show cause
notice has been issued to the Company or any of its Subsidiaries and remains
unresolved, and the Company has no Knowledge of any plan or proposal of any
Governmental Authority or Person to issue any such notice.
(c) Except as set forth in Schedule 3.26(c), (i) none of the
directors or officers of the Company or its Subsdiaries or, to the Knowledge of
the Company, employees, consultants or agents of the Company or its Subsidiaries
is, or during the last five (5) years has been, under administrative, civil or
criminal investigation or indictment by any Governmental Authority with respect
to the conduct of the business of the Company or its Subsidiaries, (ii) there is
no pending, nor during the past five (5) years has there been any, audit or
investigation of the directors or officers of the Company or its Subsidiaries
or, to the Knowledge of the Company, employees, consultants or agents of the
Company or its Subsidiaries resulting in a material adverse finding with respect
to any alleged irregularity, misstatement or omission arising under or relating
to any Government Contract or Government Bid, and (iii) during the last five
years, neither the Company nor any of its Subsidiaries has made any voluntary
disclosure in writing to the Government or any other Governmental Authority with
respect to any alleged irregularity, misstatement or omission arising under or
relating to a Governmental Contract or Government Bid that has led to any
23
of the consequences set forth in clause (i) or (ii) above or any other damage,
penalty assessment, recoupment of payment or disallowance of cost.
(d) Except as set forth in Schedule 3.26(d), there are (i) no
outstanding written claims against the Company, either by any Governmental
Authority, the Government or by any prime contractor, subcontractor, vendor or
other Person, arising under or relating to any Government Contract or Government
Bid, and (ii) to the Company's Knowledge, no outstanding disputes (A) between
the Company or any of its Subsidiaries, on the one hand, and the Government or
any Governmental Authority, on the other hand, under the Contract Disputes Act
or any other federal statute or (B) between the Company or any of its
Subsidiaries, on the one hand, and any prime contractor, subcontractor, vendor
or other Person, on the other hand, arising under or relating to any Government
Contract or Government Bid.
(e) Except as set forth in Schedule 3.26(e), the rates and rate
schedules submitted to the Government and any other Governmental Authority by
the Company or its Subsidiaries with respect to the Government Contracts have
been audited and closed out for all years prior to 1997.
(f) Except as set forth in Schedule 3.26(f), all Government
Contracts that are required to be subject to competitive bidding procedures have
been awarded, and all Government Bids have been submitted, under a full and open
competitive procurement process without preferential treatment of any kind. None
of the Government Contracts listed on Schedule 3.26(f) are subject to
termination by a Governmental Authority as a result of the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents.
3.27. No Adverse Changes. Except as expressly contemplated by this
Agreement and the other Transaction Documents or as set forth in Schedule 3.27,
since September 30, 2003, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company and its Subsidiaries from that reflected in the
Financial Statements, except changes in the Ordinary Course of Business that
would not have a Material Adverse Effect;
(b) any intentional waiver or cancellation of any right of the
Company or any of its Subsidiaries, or the cancellation of any debt or claim
held by the Company or any of its Subsidiaries other than in the Ordinary Course
of Business;
(c) any payment, discharge or satisfaction of any claim, liability
or obligation of the Company or any of its Subsidiaries other than in the
Ordinary Course of Business;
(d) any creation or incurrence of any Lien upon the assets of the
Company or any of its Subsidiaries other than in the Ordinary Course of
Business;
(e) any declaration or payment of dividends on, distribution with
respect to, or any direct or indirect redemption or acquisition of, any
securities of the Company or any of its Subsidiaries;
(f) any sale, assignment or transfer of any tangible or intangible
assets of the Company or any of its Subsidiaries other than in the Ordinary
Course of Business;
(g) any loan by the Company or any of its Subsidiaries to any
officer, director, employee, consultant or Major Shareholder of the Company or
any of its Subsidiaries, other than advances in the Ordinary Course of Business
to employees who are not executive officers;
24
(h) any increase, direct or indirect, in the compensation paid
or payable to any officer or director of the Company or any of its Subsidiaries
or, other than in the Ordinary Course of Business, to any other employee,
consultant or agent of the Company or any of its Subsidiaries;
(i) any change in the accounting methods, practices or
policies of the Company or any of its Subsidiaries;
(j) any change in the manner of business or operations of the
Company or any of its Subsidiaries (including, without limitation, any
accelerations or deferral of the payment of any accounts payable or other
current liabilities or deferral of the collection of any accounts or notes
receivable);
(k) any capital expenditures or commitments therefor by the
Company or any of its Subsidiaries in excess of an aggregate of $250,000.
(l) other than pursuant to an Outstanding Option or as
otherwise disclosed in this Agreement, any issuance of any stock, bonds or other
securities of the Company or any of its Subsidiaries;
(m) other than as contemplated by this Agreement, any
amendment of the Existing Articles, the Existing Regulations or other
organizational documents of the Company or any amendment of the organizational
or formation documents of any of its Subsidiaries;
(n) any incurrence, assumption or guarantee by the Company or
any of its Subsidiaries of any Indebtedness, other than (1) in the Ordinary
Course of Business or (2) in connection with the Senior Credit Facility or the
Subordinated Notes;
(o) any acquisition, disposition or similar transaction
involving any assets, properties or liabilities of the Company or any of its
Subsidiaries, other than in the Ordinary Course of Business;
(p) any damage, destruction or other casualty loss, whether or
not covered by insurance, that would have a Material Adverse Effect; or
(q) any agreement or commitment (contingent or otherwise) by
the Company or any of its Subsidiaries to do any of the foregoing.
3.28. Existing Registration Rights. Except as set forth in Schedule
3.28, the Company has not granted rights that are outstanding or agreed to grant
rights to any Person to require the Company to register its securities under the
Securities Act, including, without limitation, piggyback registration rights.
3.29. Suppliers and Customers. Except as set forth in Schedule 3.29,
since December 31, 2002, none of the Company's or any of its Subsidiaries'
suppliers, vendors, or customers has (i) terminated or cancelled a Material
Contract or material business relationship, (ii) threatened in writing to
terminate or cancel a Material Contract or material business relationship, (iii)
expressed dissatisfaction in writing with the performance of the Company or any
of its Subsidiaries with respect to a Material Contract or material business
relationship, or (iv) demanded in writing any material modification, termination
or limitation of a Material Contract or material business relationship with the
Company or any of its Subsidiaries (excluding any contracts or business
relationship which, if so terminated, cancelled, modified or limited, would not
result in a Material Adverse Effect), nor does the Company have Knowledge that
any of the events described in clauses (i-iv), whether in writing or otherwise,
could reasonably be expected to occur within the ninety (90) day period
immediately following the Closing Date.
25
3.30. Foreign Corrupt Practices Act. Neither the Company, any of its
Subsidiaries nor, to the Company's Knowledge, any Major Shareholder, director,
officer, agent, or employee of the Company or any of its Subsidiaries, in the
course of such person's employment by the Company, has violated, during the five
(5) year period preceding the date hereof, any Law pertaining to corruption or
bribery (including but not limited to the United States Foreign Corrupt
Practices Act, as amended). Except as to entries leading to the restatement of
the Company's Australian Subsidiary financial statements in fiscal 2001 and
fiscal 2002, each transaction of the Company and its Subsidiaries is properly
and accurately recorded on the books and records in all material respects of the
Company or its Subsidiary, as applicable, and each document upon which such
recordings are based is complete and accurate in all material respects. Each of
the Company and its Subsidiaries maintains a system of internal accounting
controls adequate to ensure that it uses its best efforts to maintain no
off-the-books accounts and that its assets are used only in accordance with its
management directives.
3.31. Work in Progress. Schedule 3.31 contains a complete list of all
contracts on which the Company and its Subsidiaries are currently working or
which have not been completed, the customer for whom the work is being
performed, and the amount and basis for payment and the status of the contract
and the work being performed thereunder. Except as set forth on Schedule 3.31,
there is currently no work being performed for which there is either (i) no
written agreement signed by the customer, or (ii) no funding available and
committed by the customer, in the case of contracts with a Governmental
Authority.
3.32. Warranty and Related Matters. Schedule 3.32 sets forth a copy of
the Company's standard form of product and service warranty for the products or
services that the Company or any of its Subsidiaries distributes, services,
markets or sells for itself or any other Person (each such product or service
shall be referred to herein as a "Company Product"), although individual
warranties or guarantees may differ materially therefrom. During the last two
(2) fiscal years, for each such year the total average annual costs and expenses
resulting from any warranties or guarantees on Company Products has been less
than $200,000 ("Average Annual Warranty Cost"), and, except as set forth in
Schedule 3.32, to the Company's Knowledge, there are no existing warranties or
guaranties or any omissions or events that have occurred with respect to such
warranties or guaranties that could result in a material increase in such
Average Annual Warranty Cost in the future. There are no existing or, to the
Company's Knowledge, threatened, products liability, warranty or other similar
claims against the Company or any of its Subsidiaries alleging that any Company
Product is defective or fails to meet any product or services warranties, except
as set forth in Schedule 3.32.
3.33. Export Controls. None of the Company, its Subsidiaries or, to the
Company's Knowledge, any of the Company's or its Subsidiaries' employees, in the
course of such person's employment by the Company, have violated, during the
five (5) year period preceding the date hereof, any Law pertaining to export
controls, technology transfer, trade embargoes, or industrial security
including, without limitation, the Export Administration Act, as amended, the
International Emergency Economic Powers Act, as amended, the Trading With The
Enemy Act, as amended, the Arms Export Control Act, as amended, the National
Industrial Security Program Operating Manual, as amended, or any regulation,
order, license or other legal requirement issued pursuant to the foregoing
(including, without limitation, the Export Administration Regulations, the
International Traffic in Arms Regulations) and regulations administered by the
United States Office of Foreign Assets Control, excluding any violations that,
in the aggregate, would not result in a Material Adverse Effect. Neither the
Company, any Subsidiary nor, to the Company's Knowledge, any employee of the
Company or any Subsidiary is the subject of an action by a Governmental
Authority that restricts such person's ability to engage in export transactions.
Each of the Company and its Subsidiaries uses its best efforts to maintain
appropriate
26
screening procedures to ensure compliance with the Laws referred to in this
Section 3.33, to the extent such Laws apply to such parties.
3.34. Restrictions on Bank Fees. Since November 15, 2003, the Company
has not paid or otherwise committed to pay, other than any amounts (including,
but not limited to, professional fees) that as of November 15, 2003 are
contractually committed to be paid, any fees of any kind in connection with or
pursuant to the terms of the Prior Credit Agreement, the Prior Note Agreement or
any documents related thereto or amendments of any of the foregoing.
4. Representations and Warranties of Purchaser. Purchaser hereby represents and
warrants that:
4.1. Authorization. Purchaser has all required limited liability
company power and authority to execute and deliver this Agreement and each of
the other Transaction Documents to which it is a party, perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by Purchaser of this Agreement and each
of the other Transaction Documents, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary limited liability company action of Purchaser. This Agreement has been
duly executed and delivered by Purchaser and constitutes, and each of the other
Transaction Documents when executed by Purchaser at the Closing as provided
herein will constitute, a valid and legally binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws relating to or affecting creditors'
rights generally and (ii) general equitable principles.
4.2. Purchase Entirely for Own Account. The Securities will be acquired
for investment for Purchaser's own account, and not with a view to the resale or
distribution of any part thereof, except that Purchaser may transfer the
Warrants to its members or interest holders to the extent permitted under
applicable securities laws. Purchaser's principal office is located in the State
of Texas for purposes of state securities laws. Purchaser is aware that the
Company is issuing the Securities pursuant to Section 4(2) of the Securities Act
and Regulation D promulgated thereunder. Purchaser is also aware that the
Company is relying upon, among other things, the representation and warranties
of Purchaser contained in this Agreement for purposes of complying with
Regulation D.
4.3. Disclosure of Information. Purchaser represents that the Company
has made available to Purchaser, at a reasonable time prior to the date of this
Agreement, an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities and the
business, properties and financial condition of the Company. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 3 of this Agreement or the right of Purchaser to rely
thereon.
4.4. Investment Experience. Purchaser acknowledges that it is able to
fend for itself, can bear the economic risk of its investment in the Securities,
and has such knowledge and experience in investing in companies similar to the
Company and in financial or business matters such that it is capable of
evaluating the merits and risks of the investment in the Securities. Purchaser
has made the determination to enter into this Agreement and the other
Transaction Documents and to acquire the Securities based upon its own
independent evaluation and assessment of the value of the Company and its
present and prospective business prospects.
4.5. Accredited Investor. Purchaser is an "accredited investor" within
the meaning of Rule 501 of Regulation D, as presently in effect.
27
4.6. Restricted Securities; Legends. Purchaser recognizes that the
Securities will not be registered under the Securities Act or other applicable
state securities laws. Purchaser understands that the Securities it is
purchasing are characterized as "restricted securities" under the Securities Act
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering. Purchaser agrees not to sell or transfer the
Securities unless such Securities are registered under the Securities Act and
any other applicable state securities laws, unless, to the reasonable
satisfaction of Company's counsel, an exemption from such registration is
available therefor. The certificates evidencing the Securities may bear a legend
substantially similar to the following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER.
4.7. No Conflicts. The execution and delivery by Purchaser of this
Agreement and each of the Transaction Documents, and the performance by it of
the transactions contemplated hereby and thereby, do not and will not (i)
conflict with or result in a violation of any provision of its organizational
documents, (ii) conflict with or result in a violation of any provision of,
constitute (with or without the giving of notice or the passage of time or both)
a default or event of default under, give rise (with or without the giving of
notice or the passage of time or both) to any loss of any benefit under, give
rise to any right of termination, cancellation, or acceleration under, or
require any consent under, any material agreement to which Purchaser is a party,
(iii) result in the creation or imposition of any Lien upon the properties of
Purchaser, or (iv) violate in any respect any Law binding upon Purchaser.
4.8. Brokers or Finders. Purchaser has not incurred, nor will it incur,
directly or indirectly, as a result of any action taken by Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any other Transaction Document or
the transactions contemplated hereby or thereby.
5. Pre-Closing Covenants.
5.1. Satisfaction of Conditions.
(a) After the date hereof and prior to the Closing, the
Company shall use its reasonable best efforts to cause the conditions set forth
in Section 6.1 to be satisfied.
(b) After the date hereof and prior to the Closing, Purchaser
shall use its reasonable best efforts to cause the conditions set forth in
Section 6.2 to be satisfied.
(c) Immediately prior to the Closing, the Company shall
provide Purchaser with a certificate setting forth the calculations related to
Sections 6.1(w) and 6.1(y). Such certificate shall be signed by a duly
authorized officer of the Company and shall be true and accurate as of its date.
5.2. Shareholders Meeting; Proxy Materials.
(a) As soon as practicable after the date hereof, the Company
shall take all action necessary in accordance with the Existing Articles, the
Existing Regulations, the rules and regulations of the AMEX, and applicable Law
to duly call, give notice of, convene and hold a meeting of its shareholders
(the "Shareholders Meeting") to obtain the approval of the Company's
shareholders of all
28
matters required under applicable law to be approved by shareholders in
connection with the transactions contemplated by this Agreement and the
Transaction Documents. The Board shall (i) recommend to the Company's
shareholders that they vote in favor of each of the following proposals: (A) the
transactions contemplated by this Agreement and the other Transaction Documents,
(B) the Amended Articles, (C) the Amended Regulations and (D) the election of
the representatives designated by Purchaser to the Board (collectively, the
"Shareholder Proposals"), (ii) use its best efforts to solicit from the
Company's shareholders proxies in favor of the Shareholder Proposals and (iii)
take all other action reasonably necessary to secure the approval of the
Shareholder Proposals by the Company's shareholders.
(b) As soon as practicable after the date hereof, the Company
shall take, or cause to be taken, all actions, and to do, or cause to be done,
all things necessary, proper or advisable to (i) prepare and file with the SEC,
no later than five (5) days after the date of the execution hereof, any
documents or materials, including, but not limited to, the preliminary Proxy
Materials, pertaining to the Shareholders Meeting and the Shareholders Proposals
and (ii) have the Proxy Materials cleared by the SEC (including with respect to
clauses (i) and (ii) above by consulting with Purchaser and responding promptly
to any comments thereto received from the SEC). The Proxy Materials shall
contain the recommendation of the Board that the shareholders of the Company
vote in favor of the Shareholders Proposals. The Company shall notify Purchaser
promptly upon the receipt of any comments on, or any requests for amendments or
supplements to, the Proxy Materials by the SEC, and the Company shall provide
Purchaser with copies of all written correspondence between the Company and its
representatives, on the one hand, and the SEC or members of its staff, on the
other hand, with respect to the Proxy Materials. The Company, after consultation
with Purchaser, shall use its best efforts to respond promptly to any comments
provided by the SEC with respect to the Proxy Materials. The Company and
Purchaser shall cooperate with each other in preparing the Proxy Materials, and
the Company and Purchaser shall each use its reasonable best efforts to obtain
and furnish the information required to be included in the Proxy Materials. The
Company and Purchaser each agrees promptly to correct any information provided
by it for use in the Proxy Materials if, and to the extent that, such
information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to cause the Proxy
Materials, as so corrected, to be filed with the SEC and to be disseminated
promptly to the Company's shareholders to the extent required by the rules and
regulations of AMEX and applicable Law.
(c) The Company agrees that (i) except with respect to
information provided by Purchaser ("Purchaser Proxy Information"), the
information contained in the Proxy Materials will not, at the date of mailing to
the Company's shareholders or at the date of the Shareholders Meeting, contain
any statement which, at the time it is made and in light of the circumstances
under which it is made, is false or misleading with respect to any material fact
required to be stated therein or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Shareholders Meeting and will not omit to state a material fact necessary to
make the statements made therein not misleading, and (ii) the Proxy Materials
will comply as to form in all material respects with the provisions of the
Exchange Act.
(d) Purchaser agrees that the Purchaser Proxy Information will
not contain any statement which, at the time it is made and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact required to be stated therein and will not omit to state a
material fact necessary to make the statements made therein not misleading.
(e) The Company shall deliver to Purchaser copies of all Proxy
Materials prior to the filing thereof with the SEC.
5.3. Operation of Business Prior to Closing. After the date hereof and
prior to the Closing, the Company shall operate its business and the business of
its Subsidiaries in the Ordinary Course of
29
Business. Except as otherwise expressly permitted by this Agreement, after the
date hereof and prior to the Closing, neither the Company nor any of its
Subsidiaries shall take any affirmative action, or fail to take any action, the
result of which any of the changes or events listed in Section 3.28 hereof is
likely to occur (other than, with respect to Section 3.27(f) hereof, the sale of
the Company's Middle East operations).
5.4. Restriction on Issuance of Capital Stock. After the date hereof
and prior to the Closing, the Company shall not authorize the issuance of any
capital stock of the Company except for shares of capital stock issuable (i)
upon the exercise of Outstanding Options or Outstanding Warrants and (ii) in
accordance with the terms and provisions of Section 2 hereof.
5.5. Reservation of Shares. At the Closing, the Company will have, and
will maintain at all times while the Purchaser Warrants are outstanding, a
reserve of an adequate number of shares of duly authorized Common Stock for
issuance in connection with the exercise of the Purchaser Warrants.
5.6. Listing; AMEX Compliance. Prior to the Closing Date, the Company
will list the Warrant Shares on the AMEX or any relevant market or system on
which the Common Stock is listed or quoted. As of the Closing, the Company has
complied with all requirements of the rules and regulations of the AMEX with
respect to the issuance of the Securities and the issuance of the Warrant Shares
upon exercise of the Purchaser Warrants.
5.7. No Solicitation.
(a) Subject to Section 5.7(b), after the date hereof and prior
to the earlier of the Closing or a valid termination of this Agreement by the
Company in accordance with Section 8.15(a)(ii), the Company agrees that it will
not, and it will use all commercially reasonable efforts to ensure that each of
the its directors, officers, agents, advisors (including its legal counsel and
financial advisors) and employees do not, directly or indirectly, (i) initiate,
solicit, encourage or take any action to facilitate the making of any offer or
proposal from any Person (other than Purchaser or its representatives) (a "Third
Party") that constitutes, or would reasonably be expected to result in, an
Alternative Transaction or inquiries, discussions, offers or proposals with
respect thereto, (ii) enter into any agreement with respect to any Alternative
Transaction, or (iii) engage in negotiations or discussions with, or provide any
information or data to, any Third Party relating to any Alternative Transaction,
or otherwise cooperate in any way with, assist or participate in, or facilitate
or encourage, any effort or attempt by any Third Party to do or seek any of the
foregoing.
(b) Notwithstanding anything set forth in Section 5.7(a) to
the contrary, after the date hereof and prior to the Closing, the Company may
furnish information in response to an unsolicited written proposal (provided
such proposal was not solicited by the Company or its Affiliates or
representatives) regarding an Alternative Transaction and engage in negotiations
with a Third Party relating to any such Alternative Transaction if, but only if,
the Board determines in good faith that (i) such Alternative Transaction is
reasonably expected to result in a Superior Proposal and (ii) after consultation
with its independent outside counsel, the failure to furnish such information or
engage in such negotiations would reasonably be expected to violate the Board's
fiduciary duties under applicable Law; provided, however, that the Company shall
immediately notify Purchaser orally (with written confirmation to follow within
one (1) Business Day) of any inquiries, expressions of interest, or proposals or
offers received by the Company or its Affiliates or representatives relating to
any Alternative Transaction indicating in such notice the name of the Third
Party submitting the Alternative Transaction proposal in question and the terms
and conditions of such proposal; and, provided, further, that the Company shall
immediately notify Purchaser orally (with written confirmation to follow within
one (1) Business Day) of any Superior Proposal, which notice shall identify the
Third Party submitting the
30
Superior Proposal and include a summary of the terms and conditions of such
Superior Proposal (a "Superior Proposal Notice"). The Company shall permit
Purchaser a period of five (5) Business Days after receipt of a Superior
Proposal Notice (the "Superior Proposal Period") to submit to the Company a new
proposal in response to the Superior Proposal that is the subject of the
Superior Proposal Notice. After the expiration of a Superior Proposal Period,
the Board shall determine whether, in light of its fiduciary obligations under
applicable Law, to proceed with respect to the Superior Proposal or Purchaser's
response thereto.
(c) The Company agrees that it will use its best efforts to
cause its directors, officers, employees, Affiliates and representatives to
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Third Party conducted heretofore with
respect to any Alternative Transaction.
(d) After the date hereof and prior to the Closing, the Board
shall not, except as permitted by this Section 5.7(d), (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Purchaser, the
approval or recommendation by the Board to the Company's shareholders
contemplated by Section 5.2 hereto, (ii) approve or recommend, or propose
publicly to approve or recommend, any Alternative Transaction, or (iii)
authorize the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement relating to any
Alternative Transaction. Notwithstanding the foregoing, if the Board determines
in good faith after it has received a Superior Proposal, and after consultation
with independent outside counsel, that the failure to approve or recommend such
Superior Proposal would reasonably be expected to violate the Board's fiduciary
duties under applicable Law, the Board may withdraw or modify its approval or
recommendation to the Company's shareholders contemplated by Section 5.2 hereto,
but only after such time that the Board considers any adjustments in the terms
and conditions of this Agreement and the other Transaction Documents submitted
by Purchaser during the Superior Proposal Period. The Board shall provide
Purchaser with no less than five (5) Business Days prior written notice of its
intention to so withdraw or modify its approval and/or recommendation
contemplated by Section 5.2 hereof in response to a Superior Proposal.
(e) In the event that the Company consummates an Alternative
Transaction with a Third Party on or before the one (1) year anniversary of the
date of this Agreement, including, without limitation, any Alternative
Transaction that constitutes a Superior Proposal, the Company shall pay to
Purchaser a fee (the "Break-Up Fee") that is equal to the greater of (i) all
fees, expenses and costs (including, but not limited to, legal, financial, due
diligence and advisory fees, expenses and costs) incurred by Purchaser and its
Affiliates in connection with the transactions contemplated by this Agreement,
the other Transaction Documents, the Senior Credit Facility and the Subordinated
Notes and (ii) $500,000; provided, however, that the amount of the Break-Up Fee
shall be reduced by any amount paid by the Company to Purchaser for due
diligence expenses under the Letter Agreement.
5.8. Restrictions on Bank Fees. Other than any amounts (including, but
not limited to, professional fees) that as of November 15, 2003 are
contractually committed to be paid, the Company shall not pay or otherwise
commit to pay any fees of any kind in connection with or pursuant to the terms
of the Prior Credit Agreement, the Prior Note Agreement or any documents related
thereto or amendments of any of the foregoing.
5.9. Required Consents. Prior to the Closing, the Company shall use its
best efforts to obtain each Required Consent.
31
6. Conditions of the Parties at Closing.
6.1. Conditions of Purchaser's Obligations at Closing. The obligations
of Purchaser to consummate the transactions contemplated by this Agreement are
subject to the satisfaction by the Company on or before the Closing of each of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 3 that are qualified as to
materiality or Material Adverse Effect shall be true and correct in all respects
and the representations and warranties of the Company that are not qualified as
to materiality or Material Adverse Effect shall be true and correct in all
material respects, in all cases, on and as of the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date (except where such representation or warranty is made
as of a specific date, it shall be true and correct as of such date).
(b) Performance. The Company shall have performed and complied
with all conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing.
(c) No Proceedings. No action, suit or proceeding shall be in
effect or pending by or before any Governmental Authority that would reasonably
be expected to result in an unfavorable judgment, order, decree, stipulation, or
injunction that would (i) prevent the consummation of the transactions
contemplated by this Agreement or the other Transaction Documents, (ii) cause
any of the transactions contemplated by this Agreement or the other Transaction
Documents to be rescinded following the consummation thereof, (iii) affect
materially or adversely the right of Purchaser to own the Securities or (iv)
affect materially and adversely the right of the Company or any of its
Subsidiaries to own its assets and to operate its business.
(d) No Material Adverse Effect; Compliance Certificate. No
Material Adverse Effect shall have occurred and there shall have been no event,
occurrence, action or inaction that would be reasonably likely to result in any
Material Adverse Effect between the date hereof and the Closing Date, and the
President and/or Chief Executive Officer of the Company shall deliver to
Purchaser at the Closing a certificate stating that the conditions specified in
Sections 6.1(a), (b), (c), (d), (e), (h), (j), (p), (q), (r), (t), (u), (v),
(w), (x), (y) and (z) have been fulfilled.
(e) Consents and Approvals. All authorizations, approvals, or
permits, if any, of any Governmental Authority or regulatory body of the United
States or of any state or any other Person (including, without limitation, the
approval of the Shareholder Proposals by the Company's shareholders, all written
instruments or documents evidencing all Required Consents, and any
authorizations, consents, approvals or permits required by the AMEX) that are
required in connection with the lawful issuance and sale of the Securities
pursuant to this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby shall be duly
obtained and effective as of the Closing, and all applicable waiting periods
under any applicable laws, including the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or been
terminated, and the purchase of, and payment for, the Securities to be purchased
by Purchaser at the Closing on the terms and conditions as provided herein shall
not violate any applicable Law.
(f) Purchaser Warrants. The Company shall execute and deliver
to Purchaser the Purchaser Warrants.
32
(g) Shares. The Company shall deliver to Purchaser one or more
certificates representing the Shares in such denomination as Purchaser shall
request.
(h) Rights Agreement. The Company has taken any and all action
necessary to terminate the Rights Agreement.
(i) Other Agreements. The Company shall have executed and
delivered (i) an Investor and Registration Rights Agreement, substantially in
the form attached hereto as Exhibit F (the "Investor and Registration Rights
Agreement"), and (ii) a Services Agreement, substantially in the form attached
hereto as Exhibit G (the "Services Agreement") and all conditions contained
therein shall have been satisfied, including the payment of the Closing Fee.
(j) Amended Articles. On or prior to the Closing, there shall
have been filed with the Secretary of State of the State of Ohio, the Amended
Articles, and the Amended Articles shall be in full force and effect at the
Closing.
(k) Good Standing; Qualification to do Business. The Company
shall have delivered to Purchaser certificates of good standing and existence of
the Company from the State of Ohio and each jurisdiction in which it has
qualified to do business dated as of a date no earlier than fifteen (15) days
prior to the Closing.
(l) Secretary's Certificate. The Company shall have delivered
to Purchaser a certificate executed by its Secretary certifying with respect to
(i) a copy of the Amended Articles and the Amended Regulations, (ii) resolutions
of the Board authorizing the transactions contemplated by this Agreement and the
other Transaction Documents, (iii) copies of all minutes of all meetings (or
excerpts thereof) of the shareholders of the Company approving the Shareholder
Proposals and (iv) incumbency matters.
(m) Opinion of Company Counsel. Purchaser shall have received
from ▇▇▇▇, ▇▇▇▇▇▇ & Parks, LLP, counsel to the Company, an opinion, dated the
Closing Date, in such form and substance reasonably satisfactory to Purchaser.
(n) Closing Fee. The Company shall have delivered the Closing
Fee to Purchaser (or such other Persons designated by Purchaser).
(o) Cross-Receipt of the Company. The Company shall have
executed and delivered a cross-receipt acknowledging (A) the Company's delivery
of (1) the Purchaser Warrants and certificates representing the Shares to
Purchaser and (2) the Closing Fee to Purchaser (or such other Persons designated
by Purchaser) and (B) Purchaser's payment of the Purchase Price.
(p) No Acceleration of Vesting, etc. Except as disclosed in
Schedule 3.11, no event shall have occurred that could result in the
acceleration of the vesting of rights to exercise (i) the Outstanding Options,
or cause an accelerated pay-out of any such Outstanding Options, under the
Option Plans, or (ii) the Outstanding Warrants.
(q) Election of Directors; Resignations. All necessary
corporate action shall have been taken to effect the appointment of Purchaser's
designees (as identified on Exhibit H hereto, which Exhibit H may be revised by
Purchaser prior to Closing with the consent of the Company) as directors of the
Company to take office at the Closing. The Company shall have obtained executed
irrevocable letters of resignation to be effective at the Closing from each of
the members of the Board of Directors identified on Exhibit I hereto and shall
have delivered copies thereof to Purchaser.
33
(r) Amendment of Code of Regulations. On or prior to the
Closing, all necessary action shall have been taken to adopt the Amended
Regulations and the Amended Regulations shall be in full force and effect at the
Closing.
(s) Fairness Opinion. The Company shall have delivered to
Purchaser a copy of the fairness opinion rendered by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ &
Company Securities to the Board of Directors (or its Special Committee) that the
transactions contemplated hereby are fair to the shareholders of the Company
from a financial point of view and any bringdowns and supplements to such
opinion; provided, that the Company shall not be required to obtain any such
bringdowns or supplements.
(t) Employees. Neither the Company nor any of its Subsidiaries
shall have (i) made any increase in the salary, wages or other compensation of
any officer or employee of the Company or its Subsidiaries, other than increases
which are consistent with the prior practice and policy of the Company and its
Subsidiaries for such employee; (ii) adopted, entered into, or become bound by
any "employee benefit plan" (as defined by Section 3(3) of ERISA),
employment-related contract or collective bargaining agreement, or amended,
modified, or terminated (either partially or completely) any Company Benefit
Plan, employment-related contract or collective bargaining agreement; or (iii)
established or modified any targets, goals, pools, or similar provisions in
respect of any fiscal year under any Company Benefit Plan, employment-related
contract or other employee compensation arrangement or any salary ranges,
guidelines, or similar provisions in respect of any Company Benefit Plan,
employment-related contract or other employee compensation arrangement.
(u) Senior Credit Facility. The Company shall have entered
into the Senior Credit Facility providing for $40,000,000 principal amount of
senior debt financing.
(v) Subordinated Notes. The Company shall have issued
$14,000,000 principal amount of Subordinated Notes.
(w) Satisfaction of Financial Conditions.
(i) The amount of Indebtedness of the Company and its
Subsidiaries on a consolidated basis immediately prior to the Closing shall not
exceed the Indebtedness Cap.
(ii) The Company shall have an amount of excess cash
(excluding the amount of any net proceeds from the sale of any non-current
assets and any assets reflected in "assets held for sale" on the Company's Form
10-Q for the quarterly period ended June 30, 2003, including, but not limited
to, the Company's Middle East operations) immediately prior to the Closing that
is equal to or greater than the Minimum Excess Cash Amount, which excess cash
shall be available and used to fund the transactions contemplated by this
Agreement and the other Transaction Documents (unless Purchaser waives such
condition for good and valuable consideration of a type and amount acceptable to
Purchaser in its sole discretion).
(iii) Any payment required to bring the accounts
payable of the Company and its Subsidiaries (excluding accounts payable for
Transaction Costs) and amounts owed by the Company to its employees up to
Current Terms shall not exceed $800,000 (unless Purchaser waives such condition
for good and valuable consideration of a type and amount acceptable to Purchaser
in its sole discretion).
(iv) The aggregate amount of Transaction Costs shall
not exceed the sum of $5,334,000, plus the amount of Run-Off Insurance Costs
(unless Purchaser waives such condition for good and valuable consideration of a
type and amount acceptable to Purchaser in its sole discretion).
34
(x) Listing Application. The Company shall (i) have filed a
listing application with the AMEX for the Warrant Shares, (ii) continue to have
its shares of Common Stock listed trading on the AMEX and (iii) have not been
notified by the AMEX, after the date hereof, of any action or potential action
by the AMEX or any violation of any AMEX rule that could result in the delisting
of the Common Stock from the AMEX.
(y) Middle East Operations. On or prior to the Closing Date,
the Company shall have consummated the sale of its Middle East operations (i)
pursuant to which the Company shall have received, prior to the Closing, net
proceeds ((i) after deducting fees and expenses paid or payable to ▇▇▇▇▇
▇▇▇▇▇▇▇▇ relating to the sale of the Company's Middle East operations and (ii)
excluding any amounts subject to earnout, holdback, escrow, delayed payment or
other similar arrangements) from such sale (which proceeds shall include a
payment of $1,500,000 received by the Company pursuant to such sale that was
remitted to the Existing Senior Lenders) of at least the lesser of (A)
$2,700,000 and (B) an amount equal to or greater than the Prior Note Prepayment
Amount as of the date of such sale or (ii) pursuant to terms that when combined
with all other consideration or concessions to Purchaser result in an overall
agreement that is acceptable to Purchaser in its sole discretion.
(z) Prior Note Prepayment Amount. The aggregate amount of the
Prior Note Prepayment Amount as of the Closing Date shall not exceed $2,700,000.
6.2. Conditions of Company's Obligations at Closing. The obligations of
the Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction by Purchaser on or before the Closing of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser contained in Section 4 that are qualified as to
materiality or Material Adverse Effect shall be true and correct in all
respects, and the representations and warranties of Purchaser that are not
qualified as to materiality or Material Adverse Effect shall be true and correct
in all material respects, in all cases, on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date (except where such representation is made as
of a specific date, it shall be true and correct as of such date).
(b) Performance. Purchaser shall have performed and complied
with all conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing.
(c) Other Agreements. Purchaser shall have executed and
delivered (i) the Investor and Registration Rights Agreement and (ii) the
Services Agreement.
(d) Cross-Receipt of Purchaser. Purchaser shall have executed
and delivered a cross-receipt acknowledging (A) the Company's delivery of (1)
the Purchaser Warrants and certificates representing the Shares to Purchaser and
(2) the Closing Fee to Purchaser (or such other Persons designated by Purchaser)
and (B) Purchaser's payment of the Purchase Price.
(e) Purchase Price. Purchaser shall have delivered to the
Company the Purchase Price.
(f) Opinion of Purchaser Counsel. Company shall have received
from ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, counsel to Purchaser, an opinion, dated the Closing
Date, in such form and substance reasonably satisfactory to the Company.
35
6.3. Further Conditions of Company's Obligations at Closing. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the satisfaction on or before the Closing of each of
the following conditions:
(a) Consents and Approvals. All authorizations, approvals, or
permits, if any, of any Governmental Authority or regulatory body of the United
States or of any state or any other Person (including, without limitation, the
approval of the Shareholder Proposals by the Company's shareholders and any
authorizations, consents, approvals or permits required by the AMEX) that are
required in connection with the lawful issuance and sale of the Securities
pursuant to this Agreement and the other Transaction Documents shall be duly
obtained and effective as of the Closing, and all applicable waiting periods
under any applicable laws, including the HSR Act shall have expired or been
terminated, and the purchase of, and payment for, the Securities to be purchased
by Purchaser at the Closing on the terms and conditions as provided herein shall
not violate any applicable Law.
(b) Company Financing Documents. All conditions to Closing to
be satisfied by parties other than the Company that are contained in the
Subordinated Notes (and the documents related to the purchase thereof) and the
Senior Credit Facility shall have been satisfied or waived.
7. Indemnification.
7.1. General Indemnification. The Company shall indemnify, defend and
hold Purchaser, its affiliates and its officers, directors, partners (general
and limited), employees, agents, attorneys successors and assigns (each a
"Purchaser Entity") harmless from and against all Losses incurred or suffered by
a Purchaser Entity as a result of the breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or any
of the other Transaction Documents, except to the extent that such Losses are
the result of the gross negligence, willful misconduct or fraud of such
Purchaser Entity.
7.2. Environmental Indemnification. In addition to, and without
duplication of, the indemnification of Section 7.1, the Company shall indemnify,
defend and hold each Purchaser Entity harmless from and against all Losses
incurred or suffered by such Purchaser Entity as a result of (i) the breach of
any of the representations, warranties, covenants or agreements made by the
Company in Section 3.19 of this Agreement, (ii) the presence, Release, or
threatened Release of Hazardous Materials first occurring prior to, or on, the
Closing Date, or (iii) any violation, or obligation, under any Environmental Law
resulting from acts or omissions first occurring prior to, or on, the Closing
Date, except to the extent that such Losses are the result of the gross
negligence, willful misconduct or fraud of such Purchaser Entity.
7.3. Indemnification Principles. For purposes of this Section 7,
"Losses" shall mean each and all of the following items: claims, losses
(including, without limitation, losses of earnings), liabilities, obligations,
payments, damages (actual, punitive or consequential), charges, judgments,
fines, penalties, amounts paid in settlement, costs and expenses (including,
without limitation, interest which may be imposed in connection therewith, costs
and expenses of investigation, actions, suits, proceedings, demands, assessments
and reasonable fees, expenses and disbursements of counsel, consultants and
other experts).
7.4. Claim Notice; Right to Defend. A party seeking indemnification
(the "Indemnified Party") under this Section 7 shall promptly upon becoming
aware of the facts indicating that a claim for indemnification may be warranted,
give to the party from whom the indemnification is being sought (the
"Indemnifying Party") a claim notice relating to such Loss (a "Claim Notice").
Each Claim Notice shall
36
specify the nature of the claim, the applicable provision(s) of this Agreement
or other instrument under which the claim for indemnity arises, and, if
possible, the amount or the estimated amount thereof. No failure or delay in
giving a Claim Notice (so long as the same is given prior to expiration of the
representation or warranty upon which the claim is based) and no failure to
include any specific information relating to the claim (such as the amount or
estimated amount thereof) or any reference to any provision of this Agreement or
other instrument under which the claim arises shall affect the obligation of the
Indemnifying Party unless such failure materially and adversely prejudices the
Indemnifying Party. If such Loss relates to the commencement of any action or
proceeding by a third person, the Indemnified Party shall give a Claim Notice to
the Indemnifying Party regarding such action or proceeding and the Indemnifying
Party shall be entitled to participate therein to assume the defense thereof
with counsel reasonably satisfactory to the Indemnified Party. After the
delivery of notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such action or proceeding, the Indemnifying
Party shall not be liable (except to the extent the proviso to this sentence is
applicable, in which event it will be so liable) to the Indemnified Party under
this Section 7 for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation, provided that each Indemnified Party shall have the
right to employ separate counsel to represent it and assume its defense (in
which case, the Indemnifying Party shall not represent it) if (i) upon the
advice of counsel, the representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them,
(ii) in the event the Indemnifying Party has not assumed the defense thereof
within ten (10) days of receipt of notice of such claim or commencement of
action, and in which case the fees and expenses of one such separate counsel
shall be paid by the Indemnifying Party or (iii) if such Indemnified Party who
is a defendant in any action or proceeding which is also brought against the
Indemnifying Party reasonably shall have concluded that there may be one or more
legal defenses available to such Indemnified Party which are not available to
the Indemnifying Party. If any Indemnified Party employs such separate counsel
it will not enter into any settlement agreement which is not approved by the
Indemnifying Party, such approval not to be unreasonably withheld. If the
Indemnifying Party so assumes the defense thereof, it may not agree to any
settlement of any such claim or action as the result of which any remedy or
relief, other than monetary damages for which the Indemnifying Party shall be
responsible hereunder, shall be applied to or against the Indemnified Party,
without the prior written consent of the Indemnified Party. In any action
hereunder as to which the Indemnifying Party has assumed the defense thereof
with counsel reasonably satisfactory to the Indemnified Party, the Indemnified
Party shall continue to be entitled to participate in the defense thereof, with
counsel of its own choice, but, except as set forth above, the Indemnifying
Party shall not be obligated hereunder to reimburse the Indemnified Party for
the costs thereof.
7.5. Indemnification Basket. Notwithstanding the other provisions of
this Section 7, the Company shall have liability to any Purchaser Entity with
respect to any claims under this Agreement only if the sum of the Purchaser
Entities' Losses related to such breaches exceed $250,000 in the aggregate (the
"Basket"), after which the Purchaser Entities shall be fully indemnified for all
such Losses, including the amount of the Basket. Notwithstanding the foregoing,
the Basket shall not apply to, and the Purchaser Entities shall be entitled to
indemnification without regard to satisfaction of the Basket with respect to
claims for gross negligence, willful misconduct or fraud.
7.6. Indemnification Cap. Notwithstanding the other provisions of this
Section 7 and other than in the event of gross negligence, willful misconduct or
fraud, other than with respect to breaches of representations and warranties
contained in Section 3.19 and other than claims made pursuant to Section 7.2 of
this Agreement, in all such cases, for which there shall be no limit, the
Company's aggregate liability pursuant to this Section 7 for breaches of
representations and warranties contained in this Agreement shall be limited to
an amount equal to the total amount of the Purchase Price.
37
8. Miscellaneous.
8.1. Survival of Representations and Warranties. The representations
and warranties of the Company and Purchaser contained in or made pursuant to
this Agreement (other than those made in Sections 3.15, 3.16 and 3.19) shall
survive the execution and delivery of this Agreement and the other Transaction
Documents and the Closing until the two (2) year anniversary of Closing Date and
the representations and warranties of the Company made in Sections 3.15, 3.16
and 3.19 shall survive the execution and delivery of this Agreement and the
other Transaction Documents and the Closing for a period of six (6) months after
the applicable statute of limitations has expired, and, in each case, such
representations and warranties shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of Purchaser or the Company.
8.2. Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties
(including permitted transferees of any Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
8.3. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of
Delaware, excluding the application of any
conflicts of laws principles which would require the application of the laws of
another state.
8.4. Execution. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
one and the same Agreement. The exchange of copies of this Agreement and of
signature pages by facsimile transmission shall constitute effective execution
and delivery of this Agreement as to the parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the parties transmitted by
facsimile shall be deemed to be their original signatures for any purpose
whatsoever.
8.5. Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
8.6. Notices. All notices and other communications required or
permitted hereunder shall be in writing. Notices shall be delivered personally,
via recognized overnight courier (such as Federal Express, DHL or Airborne
Express) or via certified or registered mail, and shall be effective upon
receipt. Notices may be delivered via facsimile or e-mail, provided that by no
later than two days thereafter such notice is confirmed in writing and sent via
one of the methods described in the previous sentence. Notices shall be
addressed as follows:
(a) if to Purchaser, to
CorrPro Investments, LLC
▇▇▇ ▇. ▇▇. ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
38
with a copy to
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to
Corrpro Companies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, ▇▇▇▇▇▇ & Parks, LLP
▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: F. ▇▇▇▇▇▇ ▇'▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
8.7. Expenses. Upon consummation of the transactions contemplated
hereby, the Company shall pay all fees, costs and expenses that each of the
Company and Purchaser and their Affiliates incurs or pays, or expects to incur
or pay, with respect to the negotiation, execution, delivery and performance of
this Agreement, the other Transaction Documents, the Senior Credit Facility and
the Subordinated Notes and the transactions contemplated hereby and thereby,
including, but not limited to, all Transaction Costs, the Prior Note Prepayment
Amount, and legal fees and expenses paid or payable to (i) ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
in connection with this Agreement and the transactions related thereto and (ii)
▇▇▇▇, ▇▇▇▇▇▇ & Parks, LLP other than those in connection with this Agreement,
the other Transaction Documents, the Senior Credit Facility and the Subordinated
Notes and the transactions related thereto. The Company shall pay all costs and
expenses (including reasonable legal fees and expenses) incurred by Purchaser in
connection with any filing pursuant to the HSR Act that may be incurred by
Purchaser as a result of the purchase or ownership of the Securities.
8.8. Amendments. This Agreement may be amended or modified only upon
the written consent of the Company and Purchaser.
8.9. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable Law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction to the greatest extent
possible to carry out the intentions of the parties hereto.
8.10. Entire Agreement. Each party hereby acknowledges that no other
party or any other person or entity has made any promises, warranties,
understandings or representations whatsoever, express or implied, not contained
in the Transaction Documents, the LOI, the Letter Agreement or the
39
Confidentiality Agreement, or any documents, certificates, instruments or other
writing contemplated thereby and acknowledges that it has not executed the
Transaction Documents in reliance upon any such promises, representations,
understandings or warranties not contained herein or therein and that the
Transaction Documents, the LOI, the Letter Agreement and the Confidentiality
Agreement supersede all prior agreements and understandings between the parties
with respect thereto. There are no promises, covenants or undertakings other
than those expressly set forth or provided for in the Transaction Documents, the
LOI, the Letter Agreement and the Confidentiality Agreement.
8.11. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such nonbreaching or nondefaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring.
8.12. Interpretation. As used in this Agreement, (i) the term
"includes" and the word "including" and words of similar import shall be deemed
to be followed by the words "without limitation"; (ii) "control" (including its
correlative meanings, "controlled by" and "under common control with") shall
mean the possession, directly or indirectly, of the power to (A) vote ten
percent (10%) or more of the securities having ordinary voting power for the
election of directors of a Person or (B) direct or cause the direction of
management or policies of a Person, whether through the ownership of securities
or partnership or other interests, by contract or otherwise; (iii) definitions
contained in this Agreement apply to singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such terms; (iv) words in the singular shall be held to include the plural and
vice versa, and words of one gender shall be held to include the other gender as
the context requires; (v) the terms "hereof," "herein," and "herewith" and words
of similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Article, Section, subsection, paragraph, Schedule and Exhibit references are to
the Articles, Sections, subsections, paragraphs, Schedules and Exhibits to this
Agreement unless otherwise specified; and (vi) the word "or" shall not be
exclusive.
8.13. Other Remedies. In addition to those remedies specifically set
forth herein and in the Transaction Documents, if any, each party may proceed to
protect and enforce its rights under this Agreement and the Transaction
Documents either by suit in equity and/or by action at law, including, but not
limited to, an action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement contained in
this Agreement or in the Transaction Documents. No right or remedy conferred
upon or reserved to any party under this Agreement or the Transaction Documents
is intended to be exclusive of any other right or remedy, and every right and
remedy shall be cumulative and in addition to every other right and remedy given
under this Agreement and the Transaction Documents or now and hereafter existing
under applicable law.
8.14. Further Assurances. At any time or from time to time prior to and
after the Closing, the Company, on the one hand, and Purchaser, on the other
hand, shall cooperate with each other, provide information or access reasonably
requested by the other party and its Affiliates, directors, officers, employees,
representatives and advisors and at the request of the other party, execute and
deliver any further instruments or documents and take all such further action as
the other party may reasonably request in order to assist, complete, evidence or
effectuate the consummation of the transactions contemplated by this Agreement,
the other Transaction Documents, the Senior Credit Facility and the Subordinated
Notes and to otherwise carry out the intent of the parties hereunder and
thereunder.
40
8.15. Termination.
(a) This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time on or prior to the Closing (i)
by Purchaser (A) if the approval by the Company's shareholders of the
Shareholder Proposals is not obtained by ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) after any breach of
Section 5.8, (C) if, by March 31, 2004, the Company has not consummated the sale
of the Company's Middle East operations in accordance with the conditions set
forth in Section 6.1(y) or (D) if, without giving effect to the transactions
contemplated hereby, on the earlier of (x) the projected or intended date of
Closing, (y) the fifteenth (15th) Business Day after the Determination Date and
(z) March 31, 2004, the Company shall not have satisfied the condition set forth
in Section 6.1(w)(i) as of such above referenced date and the Company fails to
satisfy such condition on a Closing Date within two Business Days after such
above referenced date (unless Purchaser waives such condition for good and
valuable consideration of a type and amount acceptable to Purchaser in its sole
discretion), (ii) by the Company after the twentieth (20th) Business Day after
the Determination Date only if Purchaser has not yet satisfied and is unable to
satisfy any of the conditions set forth in Sections 6.2(a) through (f) hereof
(other than as a result of the failure of the Company to comply with its
obligations under the Agreement) on or before the twentieth (20th) Business Day
after the Determination Date, (iii) by the Company after the sixtieth (60th) day
after the Determination Date if any of the conditions set forth in Section 6.3
have not been satisfied (other than as a result of the failure of the Company to
comply with its obligations under this Agreement) on or before the sixtieth
(60th) day after the Determination Date, or (iv) by mutual written consent of
the Company and Purchaser.
(b) In the event this Agreement is terminated pursuant to
Section 8.15(a)(i), the Company shall pay a termination fee to Purchaser by wire
transfer of immediately available funds in an amount that is equal to the
greater of (i) the sum of (A) all fees, expenses and costs (including, but not
limited to, legal, accounting, financial, investment banking, due diligence and
advisory fees, expenses and costs) incurred or paid by Purchaser and its
Affiliates (including, without limitation, the deposits paid by Purchaser and
its Affiliates (x) in the amount of $50,000 to American Capital Strategies, Ltd.
pursuant to that certain Letter dated October 20, 2003 and (y) in the amount of
$50,000 to CapitalSource Finance, LLC pursuant to that certain Letter dated
October 20, 2003) in connection with the transactions contemplated by this
Agreement and the other Transaction Documents, the Senior Credit Facility and
the Subordinated Notes and (B) $250,000, and (ii) $1,250,000.
(c) In the event this Agreement is terminated pursuant to
Section 8.15(a) hereof, all rights and obligations of the parties hereto under
this Agreement shall terminate; provided, however, that (i) no such termination
shall relieve any party hereto from liability for any breach of this Agreement
prior to such termination and (ii) the rights and obligations of the parties
hereto under Sections 5.7(e), 7.1, 7.2, 7.3, 7.4, 8.3, 8.7, 8.13 and 8.15 hereof
and the Confidentiality Agreement shall survive any such termination.
8.16. Tax Treatment. The Company hereby acknowledges and agrees that it
will treat (i) the Securities in all circumstances as equity for purposes of
federal and state taxes, unless otherwise requested by Purchaser and (ii) any
amounts actually or constructively paid or to be paid on the Shares in the same
manner as reasonably chosen by Purchaser.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CORRPRO INVESTMENTS, LLC
By: ▇▇▇▇▇▇▇ Partners III, L.P.,
its sole member
By: ▇▇▇▇▇▇▇ Management Company III, L.P.,
its general partner
By: ▇▇▇▇▇▇▇ Management Limited III, LLC,
its general partner
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
Title: Principal
--------------------------------
CORRPRO COMPANIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇
---------------------------------
Title: Chairman, CEO & President
--------------------------------
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