Exhibit 2(a)
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CONTRIBUTION AGREEMENT
Dated as of December 31, 1998
by and between
CII ACQUISITION, L.L.C.
and
CONTICO INTERNATIONAL, INC.
TABLE OF CONTENTS
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ARTICLE I Certain Definitions 1
ARTICLE II Contribution of the Contributed Assets 11
2.1 Contributed Assets. 11
2.2 Transfer of Contributed Assets 11
2.3 Further Assurances 11
2.4 Limited Power of Attorney 11
ARTICLE III Assumption of Liabilities 12
3.1 Assumed Liabilities 12
3.2 Instruments of Assumption 12
3.3 Further Assurances 12
3.4 No Expansion of Third Party Rights 12
ARTICLE IV Issuance of Units; Closing Date Net Worth 13
4.1 Issuance of Units 13
4.2 Closing Date Net Worth 13
ARTICLE V Closing 13
5.1 Closing Date 13
5.2 Deliveries by the Company 13
5.3 Deliveries by Contico 14
5.4 Simultaneous Delivery 15
5.5 Risk of Loss 15
ARTICLE VI Conditions to Closing 16
6.1 Conditions Precedent to Obligations of the Company 16
6.2 Conditions Precedent to Obligations of Contico 17
ARTICLE VII Representations and Warranties 17
7.1 Representations and Warranties of Contico 17
7.2 Representations and Warranties of the Company 32
ARTICLE VIII Covenants and Agreements 33
8.1 Satisfaction of Excluded Liabilities 33
8.2 Environmental 33
8.3 Conduct Prior to Closing 35
8.4 Employment and Related Matters 36
8.5 Consents and Approvals 38
8.6 Real Property Requirements 38
8.7 Product Liability Matters 40
8.8 Payment of Certain Taxes 40
8.9 Maintenance of Net Worth 42
8.10 Self-Insurance Programs 42
8.11 Bond Financed Facility 42
ARTICLE IX Termination and Abandonment 43
9.1 Termination and Abandonment 43
9.2 Effect of Termination 44
ARTICLE X Indemnification 44
10.1 Contico's Indemnification 44
10.2 Company's Indemnification 45
10.3 Losses 46
10.4 Procedure for Indemnification 46
10.5 Sole Remedy 47
ARTICLE XI Expenses 48
11.1 Professional Expenses 48
11.2 Transfer Expenses 48
ARTICLE XII Miscellaneous 48
12.1 Entire Agreement; Amendment 48
12.2 Binding Effect; Assignment 48
12.3 Notices 49
12.4 Severability 49
12.5 Mutual Contribution; Third Party Beneficiaries 50
12.6 Waivers 50
12.7 Operative Language; Currency 50
12.8 Headings; Gender; Number 50
12.9 Applicable Law 50
12.10 Forum Choice and Venue 50
12.11 Non-Binding Mediation 51
CONTRIBUTION AGREEMENT
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THIS CONTRIBUTION AGREEMENT is made and entered into as of December 31,
1998, by and between CII ACQUISITION, L.L.C., a Delaware limited liability
company (the "Company"), and CONTICO INTERNATIONAL, INC., a Missouri
corporation ("Contico"). The Company and Contico are referred to collectively
herein as the "Parties." Capitalized terms used herein but not otherwise
defined are defined in Article I.
RECITALS
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A. Contico owns, directly or indirectly, certain assets used in,
among others, the janitorial, consumer products and industrial packaging
businesses (such businesses conducted by Contico from time to time are
referred to herein as the "Business").
B. Contico and ▇▇▇▇▇▇ (as hereinafter defined) are the sole parties
to that certain Limited Liability Company Agreement of even date herewith (the
"LLC Agreement"), pursuant to which (i) the Company has been established, with
Contico and ▇▇▇▇▇▇ as the initial members, to succeed to the assets and
liabilities of the Business, (ii) ▇▇▇▇▇▇ shall contribute to the Company, as
his initial capital contribution to the Company and in exchange for his
receipt of the ▇▇▇▇▇▇ Common Units (as defined in the LLC Agreement), his
entire right, title and interest in and to the share capital of the
Subsidiary (as hereinafter defined), (iii) Contico shall contribute to the
Company, as its initial capital contribution to the Company and in exchange
for its receipt of the Preferred Units and the Contico Common Units (each as
defined in the LLC Agreement), the Contributed Assets (as hereinafter
defined), and (iv) the Company shall assume and/or accept the Assumed
Liabilities (as hereinafter defined).
NOW, THEREFORE, in consideration of the Recitals, the mutual promises
made herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE I
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Certain Definitions
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"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Act of 1934, as amended.
"Agreement" means this Contribution Agreement, as amended from time to
time in accordance with the provisions hereof.
"Allibert-Contico" means Allibert-Contico, L.L.C., a Missouri limited
liability company.
"Allowances" means the reserves set forth on the books and records
of Contico and the Subsidiary in accordance with past practices with respect
to the accounts receivable of the Business for warranty claims, product
returns and allowances, and accruals for anticipated customer allowances,
offsets and deductions.
"Assumed Liabilities" means (i) all trade account payables, accrued
operating expenses, Tax Accruals and Current Property Taxes of Contico
relating to the Business which (A) have arisen in the ordinary course of
business consistent with past practice, (B) would, in accordance with GAAP and
consistent with past practice, be classified as current liabilities and
reflected in a balance sheet, and (C) have not been or will not be satisfied
or discharged on or prior to the Closing Date, (ii) all obligations of Contico
accruing and to be performed after the Closing Date under all the Business
Contracts, Benefit Arrangements and other agreements, leases, licenses and
arrangements referred to in the definition of Contributed Assets, (iii) all
Liabilities of Contico associated with Claims arising out of the operations of
the Business that are either (A) covered by a policy or policies of insurance
that are included in the Contributed Assets, but not in excess of the limits
under such policy or policies, or (B) covered by Contico's self-insured
worker's compensation program as disclosed in this Agreement or the Schedules
hereto, (iv) the liabilities specified on Schedule 1.1 hereto, (v) all
Liabilities of Contico relating to warranty service and returns and
allowances,(vi) all Liability of Contico or the Subsidiary (as applicable)
under the Mercantile Agreement and the NatWest Agreement, (vii) the Liability
of Contico to Beyond Design, Inc. under the note payable in the principal
amount of $470,000 dated October 8, 1998 (the "Beyond Design Note"), (viii)
all Liability of Contico with respect to the guarantee of the obligations of
the Subsidiary under the Lease dated January 16, 1981, for the property in
▇▇▇▇▇, Middlesex, England, and (ix) all Liability of Contico and the
Subsidiary to indemnify any present or former officer, director, employee,
trustee or agent thereof with respect to any matter otherwise falling within
this definition of Assumed Liabilities; provided, however, that the Assumed
Liabilities shall not include any of the Excluded Liabilities.
"Baseline Balance Sheet" means the balance sheet contained within
the Baseline Financial Statements.
"Baseline Financial Statements" has the meaning set forth in Section
7.1(e).
"Baseline Financial Statements Date" means May 31, 1998.
"Basket" has the meaning set forth in Section 10.1(c).
"Benefit Arrangements" has the meaning set forth in Section
7.1(q)(iii).
"Beyond Design Note" has the meaning set forth in the definition
of Assumed Liabilities.
"Business" has the meaning set forth in Recital A.
"Business Contracts" means all agreements, contracts, leases,
subleases, licenses, sublicenses and other arrangements and commitments to
which Contico is a party or by which it is bound that relate to the Business
and that, as of the Closing, have not been fully performed by Contico or any
other party thereto; provided, however, that the Business Contracts shall not
include any of the Excluded Contracts.
"Claims" means all pending and threatened claims, actions, causes
of action, demands, orders, notices, suits, grievances, proceedings, disputes,
arbitrations and investigations.
"Closing" has the meaning set forth in Section 5.1.
"Closing Date" has the meaning set forth in Section 5.1.
"Closing Date Net Worth" has the meaning set forth in Section 4.2(a).
"Closing Date Net Worth Statement" has the meaning set forth in
Section 4.2(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Units" means the Contico Common Units and the ▇▇▇▇▇▇ Common
Units, collectively.
"Company" has the meaning set forth in the initial paragraph of this
Agreement.
"Company Group" has the meaning set forth in Section 10.1(b).
"Contico" has the meaning set forth in the initial paragraph of this
Agreement.
"Contico Common Units" has the meaning set forth in the LLC
Agreement.
"Contico Group" has the meaning set forth in Section 10.2(b).
"Contico Leased Real Property" has the meaning set forth in Section
7.1(s)(ii).
"Contico Leased Real Property Leases" has the meaning set forth in
Section 7.1(s)(ii).
"Contributed Assets" means all right, title and interest of Contico
in and to all of the assets owned, used in the conduct of, or otherwise
relating to the Business, including all of its (i) accounts, notes and other
amounts receivables, (ii) prepayments, prepaid expenses, deferred items,
claims, deposits, refunds, causes of action, choses in action, rights of
recovery, rights of set off and rights of recoupment, and all other Claims of
Contico against third parties arising out of the operation of the Business,
(iii) tangible personal property (such as inventories of raw materials,
components, supplies, packaging goods, finished goods, equipment, manufactured
and purchased parts, machinery, goods in process, consigned goods, furniture,
tooling, computer hardware, automobiles, trucks, tractors and trailers, and
spare parts) and all rights under warranties, manuals and return policies
relating thereto, (iv) rights under the Business Contracts (such as purchase
orders, agreements, contracts, policies, indentures, mortgages, instruments,
liens, guaranties, rebates, sales incentives and other similar arrangements
and rights thereunder), (v) the Contributed Real Property, including the
fixtures, improvements and fittings thereon, (vi) leaseholds and subleaseholds
in real property, including without limitation, the Contico Leased Real
Property, (vii) the leasehold improvements and fittings on the items referred
to in subsection (vi) above, (viii) leases, subleases and rights thereunder,
(ix) transferable franchises, approvals, permits, licenses, orders,
registrations, certificates, variances, exemptions and similar rights obtained
from governments and governmental agencies, (x) Intellectual Property as
defined within this Agreement, licenses and sublicenses granted and obtained
with respect thereto, and rights thereunder, remedies against infringements
thereof, and rights to protection of interests therein under the laws of all
jurisdictions, (xi) share capital of the Subsidiary owned by Contico and by
▇▇▇▇▇▇, (xii) books, records, ledgers, files, documents, correspondence,
lists, plats, architectural plans, drawings and specifications, creative
materials, advertising and promotional materials, studies, reports,
certificates of registration and underlying files and other printed or
written materials, (xiii) all telephone and facsimile numbers, and white and
yellow page listings and contracts, (xiv) the goodwill of the Business as a
going concern, and (xv) rights under transferable policies of insurance
maintained by or for the account of the Company (including but not limited to
rights of defense, reimbursement and/or indemnity), except to the extent such
policies insure against risks included in the Excluded Liabilities; provided,
however, that the Contributed Assets shall not include any of the Excluded
Assets.
"Contributed Real Property" has the meaning set forth in Section
7.1(s)(i).
"Current Property Taxes" means the Liability of Contico to pay
property, ad valorem and similar taxes to any state or local governmental
authority or taxing district for which the assessment date for such taxes
occurs prior to the date of Closing and the due date for payment of such taxes
occurs after the date of the Closing, including without limitation, any
Liability of Contico to pay such taxes on behalf of any other person under the
Contico Leased Real Property.
"Discontinued Operations" means all business activities of Contico
conducted at any time prior to the date of this Agreement that are not
activities of the Business, including without limitation, the business
activities conducted by the former Hoky and Continental Sprayers International
divisions of Contico.
"Employee Welfare Benefit Plans" has the meaning set forth in
Section 7.1(q)(i).
"Employee Pension Benefit Plans" has the meaning set forth in
Section 7.1(q)(i).
"Environmental Laws" has the meaning set forth in Section 7.1(m)(i).
"EPA" has the meaning set forth in Section 7.1(m)(iv).
"ERISA" has the meaning set forth in Section 7.1(q)(i).
"Excluded Assets" means all of the following assets and rights of
Contico: (i) cash and cash equivalents, (ii) claims and other rights of
Contico under the Excluded Contracts (including those set forth on Schedule
1.2 (Excluded Compensation and Other Arrangements)), (iii) the Excluded Real
Property, (iv) Claims and other rights of Contico, including without
limitation payments due or to become due, in connection with the ownership,
operation, sale and disposition of any of the Discontinued Operations, (v)
Contico's investment in Allibert-Contico and all payments due and other Claims
of Contico associated with the ownership, operation, sale and disposition of
Allibert-Contico and the presses and auxiliary equipment listed on Schedule
1.3 attached hereto, (vi) rights under non-transferable policies of insurance
maintained by or for the account of Contico (including but not limited to
rights of defense, reimbursement and/or indemnity), (vii) the corporate
charter, bylaws, qualifications to conduct business as a foreign corporation,
arrangements with registered agents relating to foreign qualifications,
taxpayer and other identification numbers, seals, minute books, stock transfer
books, blank stock certificates and other documents relating to the
organization, maintenance and existence of Contico as a corporation, (viii)
Contico's general ledger and other accounting records (provided that the
Company shall be given copies of the general ledger and other accounting
records as such documents exist as of the Closing Date), (ix) Claims and other
rights of Contico arising under the LLC Agreement and this Agreement or any
other agreement, instrument, certificate or document executed and delivered by
or on behalf of Contico in connection with the transactions contemplated by
any of such agreements, (x) the Preferred Units and the Contico Common Units,
(xi) Claims and other rights of Contico against the holders of any of the
Liabilities of Contico that are among the Excluded Liabilities, but only with
respect to the subject matter of such Excluded Liabilities, and (xii) deposits
with the Internal Revenue Service or any federal, state, local or foreign
taxing authority, except to the extent any such deposit relates to an Assumed
Liability.
"Excluded Contracts" means all agreements, contracts, leases,
subleases, licenses, sublicenses and other arrangements and commitments to
which Contico is a party or by which it is bound that (i) relate to the
Business and have been fully performed by Contico and each other party thereto
as of the Closing, (ii) relate to Indebtedness for Borrowed Money other than
(A) that certain facility letter dated 7 January 1998, by and between Contico
and National Westminster Bank, PLC and the documents and instruments executed
in connection therewith (collectively, the "NatWest Agreement") and (B) that
certain Credit Agreement dated as of May 22, 1998, by and between Contico,
Nationsbank, N.A., as a lender, and Mercantile Bank National Association, as
a lender and agent, and the documents and instruments executed in connection
therewith (collectively, the "Mercantile Agreement"), (iii) relate exclusively
to a Liability of Contico that is included among the Excluded Liabilities,
(iv) relate exclusively to the ownership, operation, sale or disposition of
any of the Discontinued Operations (unless otherwise disclosed herein as a
Business Contract, other than the sublease of Contico's facility in Redruth,
Cornwall, England), (v) are listed on the Schedule of Excluded Compensation
and Other Arrangements attached hereto as Schedule 1.2, or (vi) relate to this
Agreement or any other agreement, instrument, certificate or document executed
and delivered by or on behalf of Contico in connection with the transactions
contemplated by this Agreement.
"Excluded Liabilities" means the following Liabilities (whether
asserted before, on or after the Closing: (i) any Liability of Contico for (A)
federal, state, local and foreign income, excise or value-added taxes
attributable to periods ending on or prior to the date of the Closing except
to the extent of the Tax Accruals related thereto, and (B) any sales or use
taxes attributable to transactions by Contico on or prior to the date of
Closing for which the legal obligation to collect and/or remit such sales or
use taxes is imposed on Contico except to the extent of the Tax Accruals
related thereto, (ii) any Liability of Contico or the Subsidiary to indemnify
any Person (including the shareholders of Contico) by reason of the fact that
such Person was a director, officer, employee, trustee or agent of any of
Contico, the Discontinued Operations or Allibert-Contico or was serving at the
request of any such entity as a partner, trustee, director, officer, employee,
or agent of another entity (whether such indemnification is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses, expenses
or otherwise and whether such indemnification is pursuant to any statute,
charter document, bylaw, agreement or otherwise) except, with respect to
directors, officers, employees, trustees and agents of Contico or the
Subsidiary, such indemnification Liabilities to the extent arising in
connection with a Claim that otherwise is an Assumed Liability, (iii) any
Liability of Contico for any breach of a representation, warranty or covenant,
or for any claim for indemnification, contained in any Excluded Contract, (iv)
any Liability of Contico for medical, disability or similar benefit which
arises under any Employee Welfare Benefit Plan or otherwise by reason of or in
connection with an employment relationship at any time with any of the
Discontinued Operations or Allibert-Contico (unless otherwise defined herein
as an Assumed Liability), (v) subject to Section 8.2 hereof, any Liability for
any adverse impact to soil or groundwater on or emanating from any Real
Property which pre-dates the Closing, regardless of whether it was discovered
or capable of discovery prior to the Closing, any Liability associated with a
Pre-existing Condition at Contico's facility on ▇▇▇▇▇▇▇▇▇▇ Road in the City of
St. Louis, Missouri, and any Liability of Contico of whatever nature arising
out of or in connection with any transportation and/or disposal of any
Hazardous Materials, (vi) any Liability relating to the repair or replacement
of any product manufactured, sold or delivered by any of the Discontinued
Operations or Allibert-Contico, (vii) any Liability of Contico to present or
former shareholders of Contico or the Subsidiary or any former subsidiary of
either of them, (viii) any Liability of Contico or the Subsidiary for costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby, (ix) any Liability of Contico under this Agreement or any
other agreement, instrument, certificate or document executed and delivered by
or on behalf of Contico in connection with the transactions contemplated by
this Agreement, (x) any Liability of Contico or the Subsidiary resulting from
any failure by Contico or the Subsidiary to comply with any or all laws,
statutes, rules, regulations and other requirements imposed by foreign,
federal, state, local and other governmental authorities applicable to Contico
and/or the Subsidiary in the operation and ownership of the Business, the
Contributed Assets and the Subsidiary's assets, (xi) any Liability (including
any termination Liability) of Contico arising out of the Excluded Contracts,
(xii) any Indebtedness for Borrowed Money of Contico and/or the Subsidiary,
including any interest due thereon or fees or charges with respect thereto,
except any Indebtedness for Borrowed Money associated with the Beyond Design
Note and outstanding borrowings pursuant to the NatWest Agreement and the
Mercantile Agreement, (xiii) any Liability of Contico imposed by the Worker
Adjustment Retraining and Notification Act in connection with the notice or
failure to provide notice of a plant closing, mass layoff or termination of
employees prior to the Closing Date, (xiv) any Liability of Contico with
respect to accrued compensation benefits, severance and other obligations due
employees of the Company, except and to the extent as properly accrued for on
the books and records of Contico in accordance with GAAP, (xv) any Liability
or obligation of Contico of a type or kind different than those included in
the Assumed Liabilities, (xvi) any Liability or obligation of the Subsidiary
of a type or kind different than those included in the Assumed Liabilities (to
be construed by reference to that defined term as if the references to the
"Business" therein were references to the "Subsidiary"), (xvii) any Liability
or obligation to repay any Regional Development Assistance Grant to the extent
such Liability or obligation results (A) from an action, inaction or
occurrence prior to the Closing, (B) solely from a the transactions to be
effected pursuant to this Agreement, or (C) directly or indirectly from the
imposition of standards in relation to the project for which any such grant
was provided different from those imposed prior to the Closing, or (xviii) any
other Liability or obligation not relating to the Business, in each case
whether or not GAAP would require or permit any such Liability to be accrued
on the books and records of the Company and whether or not so accrued.
"Excluded Real Property" means the owned real property and the
fixtures, improvements, fittings and other rights described in Schedule 1.4
attached hereto.
"GAAP" means United States generally accepted accounting principles,
as in effect from time to time applied on a basis consistent with past
practice.
"Hazardous Material" shall include, but is not limited to, hazardous
chemicals, hazardous wastes, petroleum, petroleum substances, PCBs, resins,
asbestos and hazardous, dangerous or toxic substances or materials including
any "hazardous substances," (as defined in any Environmental Laws), regulated
by any Environmental Laws as now or hereinafter in effect.
"Indebtedness for Borrowed Money" means without duplication: (i) all
obligations for borrowed money or in respect of loans or advances, (ii) all
obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations in respect of letters of credit, whether or
not drawn, and bankers' acceptances issued for an account, (iv) all
capitalized lease liabilities, (v) all interest rate protection agreements
(valued on a market quotation basis), (vi) all obligations secured by a
contractual lien, and (vii) all guarantees in connection with any of the
foregoing.
"Indemnified Party" has the meaning set forth in Section 10.4(a).
"Indemnifying Party" has the meaning set forth in Section 10.4(a).
"Indemnity Cap" has the meaning set forth in Section 10.1(d).
"Intellectual Property" means (i) all trade secrets and confidential
business information (including customer and supplier lists, ideas, research
and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, pricing and cost information, and business and marketing plans
and proposals), (ii) all common law and registered trademarks, service marks,
brand marks, trade dress, corporate names, domain names, tradenames,
brandnames, logos and all other names and slogans used in the Business,
including but not limited to "Contico" and "Continental Manufacturing
Company," together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (iii) all
inventions and discoveries (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (iv) all copyrightable works, all copyrights, design
rights, registered designs, moral rights and all applications, registrations,
and renewals in connection therewith, (v) all mask works and all applications,
registrations, and renewals in connection therewith, (vi) all computer
software, websites (including all content), codes and databases (including
data and related documentation), (vii) all other proprietary rights, and
(viii) all copies and tangible embodiments thereof (in whatever form or
medium); in each case whether registered or not and in each case wherever such
rights exist throughout the world, and including the right to recover for any
past infringement.
"Lease(s)" has the meaning set forth in Section 5.2(c).
"Lease Assignment(s)" has the meaning set forth in Section 5.2(c).
"Leased Real Property" has the meaning set forth in Section 7.1(s)(i).
"Liability" means any liability or obligation (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.
"License Agreement" has the meaning set forth in Section 5.2(d).
"Liens" means, collectively, any security interest, mortgage, lien,
charge, restriction, encumbrance, hypothecation, pledge, conditional sale
agreement, claim, or other encumbrance.
"LLC Agreement" has the meaning set forth in Recital B.
"Losses" has the meaning set forth in Section 10.3.
"Main System" has the meaning set forth in Section 7.1(aa).
"Major Customer" has the meaning set forth in Section 7.1(w).
"Mediator" has the meaning set forth in Section 12.12.
"Mercantile Agreement" has the meaning set forth in the definition
of Excluded Contracts.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ ▇▇▇▇▇▇, an individual resident of the State of
Florida.
"▇▇▇▇▇▇ Common Units" has the meaning set forth in the LLC
Agreement.
"NatWest Agreement" has the meaning set forth in the definition of
Excluded Contracts.
"Net Worth" means, as of the date of determination, the total
stockholders' equity of Contico determined in accordance with GAAP.
"Parties" has the meaning set forth in the initial paragraph of
this Agreement.
"Permitted Exceptions" has the meaning set forth in Section
7.1(s)(i).
"Permitted Liens" has the meaning set forth in Section 7.1(h).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company or
partnership, a trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"Phase I Audits" means the Phase I Environmental Site Assessments
and Compliance Audits conducted by ▇▇▇▇▇ International, Inc. and EAG Environ
(in the case of any Contico facility in England) at the following facilities:
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Warson"); 105-123 ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Hazelwood"); ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ ("Bridgeton"); ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Earth
City"); ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇"); ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Norwalk"); ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ ("Cornet Santa Fe"); ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ("Spring Ave.-Santa Fe"); ▇▇▇-▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("Winters"); and ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇").
"Phase II Assessments" means the Limited Phase II Environmental Site
Assessments conducted by ▇▇▇▇▇ International, Inc. at the following
facilities: Warson, Hazelwood, Bridgeton, Norwalk and ▇▇▇▇▇▇▇.
"Plans" means Employee Welfare Benefit Plans and Employee Pension
Benefit Plans, collectively.
"Preferred Units" has the meaning set forth in the LLC Agreement.
"Products" has the meaning set forth in Section 7.1(x).
Preclosing Sales Taxes" has the meaning set forth in Section 8.8(c).
"Pre-existing Conditions" has the meaning set forth in Section 8.2(a).
"Real Property" means the Contributed Real Property, the Leased Real
Property and the Contico Leased Real Property.
"Required Consents" has the meaning set forth in Section 6.1(e).
"Stub Income Taxes" has the meaning set forth in Section 8.8(b).
"Subsidiary" means Contico Manufacturing Limited, a corporation
organized under the laws of England and Wales.
"Subsidiary Assumption Agreement" has the meaning set forth in
Section 5.3(e).
"Tax" or "Taxes" means for all past periods ending on or prior to
the Closing Date, whenever due, all taxes, as the context requires, including
without limitation, income, capital stock, corporation, gross receipts, net
proceeds, ad valorem, value added, goods and services, turnover, sales, use,
real estate transfer, real property, personal property (tangible and
intangible), stamp, leasing, lease, user, excise, franchise, transfer, fuel,
vehicle sales, excess profits, occupational and interest equalization,
unitary, severance, withholding, employment and other taxes, duties,
assessments, imposts and charges (including without limitation, the recapture
of any tax items such as investment tax credits), together with all fines,
interest, penalties and additions imposed on or in respect of, or in lieu of,
or for non-collection of such amounts with respect to such amounts, which are
due or claimed to be due by any federal, state, foreign or local taxing
authorities or which are payable with respect to the Contributed Assets, the
Subsidiary and its assets or the Business.
"Tax Accruals" means the sum of (i) the aggregate amount accrued, in
connection with the determination of the Closing Date Net Worth Statement and
pursuant to this Agreement, as of the Closing Date with respect to all taxes
of Contico for periods ending prior to or that include the Closing Date, and
(ii) that portion of the accounts receivable of Contico, as of the Closing
Date, that consists of sales taxes payable from the account debtor.
"Third Party Claim" has the meaning set forth in Section 10.4(b).
"Title Commitments" has the meaning set forth in Section 8.6(a).
"Title Company" has the meaning set forth in Section 8.6(a).
"Title Policies" has the meaning set forth in Section 8.6(a).
"Transition Agreement" has the meaning set forth in Section 5.2(e).
"UK Regulations" means the Transfer of Undertaking (Protection of
Employment) Regulations 1981 as embodied in English law.
"Year 2000 Compliant" has the meaning as set forth in Section
7.1(aa).
ARTICLE II
----------
Contribution of the Contributed Assets
--------------------------------------
2.1 Contributed Assets.
(a) Contributed Assets. On and subject to the terms and conditions
set forth in this Agreement, Contico shall contribute, transfer, assign,
convey and deliver to the Company, and the Company shall accept and acquire
from Contico, all of the Contributed Assets at the Closing free and clear of
all Liens other than the Permitted Liens.
(b) Excluded Assets. The provisions of Section 2.1(a)
notwithstanding, Contico shall not contribute, transfer, assign, convey or
deliver to the Company, and the Company shall not accept or acquire any of
the Excluded Assets.
2.2 Transfer of Contributed Assets. At the Closing, Contico shall
assign, transfer, convey and deliver to the Company all of the Contributed
Assets by special warranty deeds, bills of sale, assignments, endorsements and
other good and sufficient instruments of transfer to vest in the Company good,
complete and indefeasible title to the Contributed Assets, free and clear of
all Liens other than Permitted Liens. In its discretion, Contico may cause
the Contributed Real Property to be conveyed to the Company in advance of the
Closing in order that the Company shall be the record owner thereof at the
time of Closing. All such documents shall be in form and substance reasonably
satisfactory to Contico and the Company.
2.3 Further Assurances. From time to time after the Closing Date, at
the Company's request and without further consideration therefor, Contico
shall perform, execute and deliver or cause to be performed, executed and
delivered, all such further acts, deeds, assignments, transfers, conveyances
and assurances as the Company may reasonably require for the more effective
assigning, transferring, granting, conveying, assuring and confirming to the
Company and its successors and assigns, and for aiding and assisting in reduc-
ing to possession, the Contributed Assets transferred or to be transferred
pursuant to this Agreement and as may be appropriate to carry out the
transactions contemplated hereby.
2.4 Limited Power of Attorney. Without limiting any provision
hereof, effective as of the Closing, the Company and its successors and
assigns shall be, and they hereby are, constituted and appointed the true and
lawful attorney-in-fact of Contico with respect to the Contributed Assets,
with full power of substitution, in the name of the Company or in the name of
Contico or otherwise, and for the benefit and at the sole expense of the
Company, to institute and prosecute all proceedings that the Company may deem
proper in order to collect, assert or enforce any claim, right or title of any
kind in and to the Contributed Assets, to defend or compromise any and all
suits and proceedings in respect of any of said assets, and to do all such
acts and things in relation thereto as the Company shall deem advisable.
Specifically, but not in limitation of the foregoing, from and after the
Closing Date, the Company shall have the right and authority to enforce and
collect, for its own account, all items that are included in the Contributed
Assets, and to endorse with the name of the Company or Contico, as the case
may be, any checks or drafts received on account of any such items. Contico
acknowledges that the foregoing powers are coupled with an interest and shall
not be revocable by Contico in any manner or for any reason. Contico shall
promptly pay to the Company any amounts that may be received by Contico after
the Closing Date with respect to any of the Contributed Assets. The Company
shall be entitled to retain for its own account any amounts collected pursuant
to the foregoing powers. The Company shall promptly pay to Contico any
amounts that may be received by the Company after the Closing Date with
respect to any of the Excluded Assets.
ARTICLE III
-----------
Assumption of Liabilities
-------------------------
3.1 Assumed Liabilities. On and subject to the terms and conditions
of this Agreement, the Company agrees to assume and become responsible for all
of the Assumed Liabilities in accordance with their respective terms at the
Closing. The Company will not assume or have any responsibility, however,
with respect to any of the Excluded Liabilities, all of which remain the
responsibility of Contico.
3.2 Instruments of Assumption. The Company shall assume from Contico
all of the Assumed Liabilities by executing and delivering one or more
instruments of assumption in form and substance reasonably satisfactory to
Contico and the Company at the Closing, as more specifically identified in
Article V below.
3.3 Further Assurances. From time to time after the Closing Date, at
Contico's request and without further consideration therefor, the Company
shall perform, execute and deliver or cause to be performed, executed and
delivered, all such further acts, instruments and assurances as Contico may
reasonably require for the more effective assumption by the Company of the
Assumed Liabilities, consistent with the terms of this Agreement and as may
be appropriate to carry out the transactions contemplated hereby.
3.4 No Expansion of Third Party Rights. The assumption by the
Company of the Assumed Liabilities shall not in any way expand the rights or
remedies of any third party against the Company or Contico as compared to the
rights and remedies which such third party would have had against any such
party had the Company not assumed such liabilities. Without limiting the
generality of the foregoing, the assumption by the Company of the Assumed
Liabilities shall not (i) limit the right of the Company to require any third
party to comply with its contractual or legal obligations, nor (ii) limit the
right of the Company to assert any defense.
ARTICLE IV
----------
Issuance of Units; Closing Date Net Worth
-----------------------------------------
4.1 Issuance of Units. At the Closing, the Company shall issue the
Contico Common Units and the Preferred Units to Contico and the ▇▇▇▇▇▇ Common
Units to ▇▇▇▇▇▇.
4.2 Closing Date Net Worth.
(a) Definition. The term "Closing Date Net Worth" means the
aggregate book value of the Contributed Assets less the aggregate book value
of the Assumed Liabilities without regard to Indebtedness for Borrowed Money
associated with the NatWest Agreement and the Mercantile Agreement, determined
as of the Closing Date on a consolidated basis in accordance with GAAP.
(b) Calculation. Attached hereto as Schedule 4.2(b) is Contico's
calculation of the estimated Closing Date Net Worth and the components
thereof, prepared in good faith by Contico (the "Closing Date Net Worth
Statement").
ARTICLE V
---------
Closing
-------
5.1 Closing Date. Subject to Section 2.2 above, the contribution and
assumption of the Contributed Assets and Assumed Liabilities shall be
consummated at a closing (the "Closing") to be held at 10:00 a.m. local time
at the offices of counsel to Contico, on January 1, 1999, or on such
subsequent Friday as the Parties may mutually determine (the "Closing Date").
5.2 Deliveries by the Company. At the Closing, the Company shall
execute and/or deliver to Contico the following (each dated the Closing Date,
except as otherwise indicated):
(a) Certificates evidencing the Common Units and the Preferred Units;
(b) One or more assumption agreements relating to the Assumed
Liabilities (including without limitation the Business Contracts), consistent
with the terms of this Agreement;
(c) Leases of the Leased Real Property, each substantially in the
form of Exhibit A-1 (except for the ▇▇▇▇▇▇▇▇▇▇ facility which is substantially
in the form of Exhibit A-2) attached hereto (each, a "Lease" and,
collectively, the "Leases"), and assignments of leases of the Contico Leased
Real Property, each in substantially the form of Exhibit B attached hereto
(each a "Lease Assignment" and collectively the "Lease Assignments") and as
executed by the Company;
(d) A license agreement in favor of Contico, granting a license that
includes the right to sublicense or assign the license, to use the name
"Contico" and related ▇▇▇▇ in the business of Allibert-Contico, substantially
in the form of Exhibit C attached hereto (the "License Agreement"), executed
by the Company;
(e) All documents relating to the acquisition or lease of the
Contributed Real Property and the Leased Real Property required of the Company
under any Environmental Law, including without limitation, any approvals,
licenses, permits and consents; and
(f) Such other documents and certificates, consistent with the terms
of this Agreement, as Contico shall reasonably request.
5.3 Deliveries by Contico. At the Closing, or prior thereto, Contico
shall execute and/or deliver to the Company the following (each dated the
Closing Date, except as otherwise indicated):
(a) One or more bills of sale, in a form satisfactory to Contico and
the Company consistent with the terms of this Agreement, conveying the non-
real estate Contributed Assets to the Company;
(b) One or more assignments, in a form satisfactory to Contico and
the Company consistent with the terms of this Agreement, conveying the right,
title and interest of Contico in and to the Business Contracts to the Company,
together with any written consents to transfer that have been obtained from
third parties whose consent is required under the terms of an applicable
Business Contract;
(c) Special warranty deeds and (only in the case of the Contributed
Real Property located in England and Wales) a freehold property transfer, in
a form satisfactory to Contico and the Company consistent with the terms of
this Agreement, conveying the Contributed Real Property to the Company,
together with other documents relating thereto as described in Section 8.6;
(d) Such other instruments of transfer and assignment, consistent
with this Agreement, as shall be reasonably requested by the Company, to
effectuate the transfer, assignment and conveyance of the Contributed Assets
to the Company, and to vest in the Company good and marketable title to the
Contributed Assets, free and clear of all Liens (other than Permitted Liens),
including all instruments necessary to assign (i) Contico's right, title and
interest in and to any registered patents, trademarks, trade names, copyrights
or other intellectual property to the Company, in form sufficient for
recording with the United States Patent and Trademark Office and Register of
Copyrights and all applicable foreign governmental offices, (ii) Contico's and
▇▇▇▇▇▇'▇ right, title and interest in and to the share capital of the
Subsidiary to the Company, and (iii) all right, title and interest in and to
those vehicles included in the Contributed Assets to the Company;
(e) An assumption agreement relating to Excluded Liabilities of the
Subsidiary, consistent with the terms of this Agreement (the "Subsidiary
Assumption Agreement");
(f) A copy of resolutions duly adopted by the Board of Directors and
the shareholders of Contico, authorizing Contico's execution, delivery and
performance of this Agreement and all related agreements, documents and
certificates, duly certified by the Secretary of Contico;
(g) A copy of resolutions duly adopted by the Board of Directors of
the Subsidiary approving the transfer of the entire issued share capital of
the Subsidiary to the Company;
(h) A Certificate of Good Standing of Contico, certified as of a date
not more than seven (7) days prior to the Closing Date, from the Secretary of
State of Missouri;
(i) A certificate of the Secretary of Contico, certifying: (i) a copy
of Contico's By-Laws, (ii) a copy of the memorandum and articles of
association of the Subsidiary, (iii) a copy of the Certificate of
Incorporation of Contico and the Subsidiary, and (iv) the incumbency and
signatures of Contico and the Subsidiary's officers;
(j) The Leases and Lease Assignments, executed by Contico;
(k) The License Agreement, executed by Contico;
(l) All documents relating to the conveyance or lease of the
Contributed Real Property and the Leased Real Property as required of Contico
under any Environmental Law;
(m) One or more certificates of insurance as contemplated in Section
8.7 hereof;
(n) Documentation, in form suitable for filing, changing the name of
Contico to a sufficiently dissimilar name;
(o) Evidence of termination of all financing statements and security
interests, including without limitation, those filed under the Uniform
Commercial Code and with the U.S. Patent and Trademark Office, other than
financing statements relating to Permitted Liens; and
(p) Such other documents and certificates, consistent with the terms
of this Agreement, as the Company shall reasonably request.
5.4 Simultaneous Delivery. All documents and instruments to be
delivered pursuant to this Article V shall be regarded as having been
delivered simultaneously, and no document or instrument shall be regarded as
having been delivered until all such documents and instruments have been
delivered.
5.5 Risk of Loss. Risk of loss for each of the Contributed Assets
shall be borne by Contico until the Closing, after which time the Company
shall bear the risk of loss for each of the Contributed Assets.
ARTICLE VI
----------
Conditions to Closing
---------------------
6.1 Conditions Precedent to Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to and conditioned on the satisfaction of each of the
following conditions:
(a) Representations, Warranties and Covenants. All of the
representations and warranties of Contico contained herein shall be true and
correct in all material respects on and as of the date hereof and on and as of
the Closing Date, and Contico shall have complied with and performed in all
material respects, all of the covenants and agreements to be complied with and
performed by Contico on or prior to the Closing Date.
(b) Compliance with Applicable Laws. Contico shall have complied
with all applicable federal, state, foreign and local laws necessary to
consummate the transactions contemplated hereby.
(c) No Adverse Proceedings. As of the Closing Date, no action,
investigation, suit or proceeding by any foreign, federal, state, or local
governmental or regulatory commission, agency or authority, and no action,
suit or proceeding by any other Person shall be pending or threatened which
challenges or seeks to enjoin, prohibit or prevent this Agreement or any
transaction contemplated hereby.
(d) No Material Adverse Change. There shall have been no material
adverse change in or material loss or damage to the Contributed Assets, the
Assumed Liabilities, the Subsidiary and its assets or the operations or
financial condition of the Business, whether or not covered by insurance, from
the Baseline Financial Statements Date through the Closing Date.
(e) Required Consents. All third party consents, waivers and
releases identified on Schedule 6.1(e) (collectively, the "Required
Consents"), shall have been obtained and attained on or prior to, and shall be
in full force and effect as of, the Closing Date.
(f) Deliveries. Contico shall have delivered to the Company all
documents, instruments and other items required to be delivered to the Company
on or prior to the Closing Date pursuant to Section 5.3 hereof in connection
with the contribution and assumption of the Contributed Assets and Assumed
Liabilities.
(g) Closing Date Net Worth. The Closing Date Net Worth Statement
shall reflect that the Closing Date Net Worth is not less than One Hundred
Five Million and No/100 Dollars ($105,000,000.00).
(h) Consent Relating to Collective Bargaining Agreement. Contico
shall have received the written consent of the relevant labor union to the
union and the Company being bound by the existing collective bargaining
agreement to which Contico is currently a party, as set forth in Schedule
7.1(p), for the remainder of its term.
6.2 Conditions Precedent to Obligations of Contico. The obligations
of Contico to consummate the transactions contemplated by this Agreement are
subject to and conditioned on the satisfaction of each of the following
conditions:
(a) Representations, Warranties and Covenants. All of the
representations and warranties of the Company contained herein shall be true
and correct in all material respects on and as of the date hereof and on and
as of the Closing Date, and the Company shall have complied with and performed
in all material respects all of the covenants and agreements to be complied
with and performed by the Company on or prior to the Closing Date.
(b) No Adverse Proceedings. As of the Closing Date, no action,
investigation, suit or proceeding by any governmental or regulatory
commission, agency or authority, and no action, suit or proceeding by any
other Person, shall be pending or threatened which challenges or seeks to
enjoin, prohibit or prevent this Agreement or any transaction contemplated
hereby.
(c) Compliance with Applicable Laws. The Company shall have complied
with all applicable federal, state, foreign and local laws necessary to
consummate the transactions contemplated hereby.
(d) Required Consents. All Required Consents shall have been
obtained and attained on or prior to, and shall be in full force and effect as
of, the Closing Date.
(e) Deliveries. The Company shall have delivered to Contico all
documents, instruments and other items required to be delivered to Contico on
or prior to the Closing Date, as appropriate, pursuant to Section 5.2 hereof.
ARTICLE VII
-----------
Representations and Warranties
------------------------------
7.1 Representations and Warranties of Contico. Contico hereby
represents and warrants to the Company as follows:
(a) Organization, Capitalization and Standing.
(i) Contico is a corporation duly organized, validly existing
and in good standing under the laws of the State of Missouri. The
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of England and Wales under number 1338772. The
Company is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of
Contico and the Subsidiary is, and at Closing the Company will be, duly
qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned or held under lease by it or
the nature of the Business makes such qualification necessary, except
where the failure to qualify to do business would not have a material
adverse effect on Contico or its ability to perform the transactions
contemplated by this Agreement or on the Company or the Subsidiary or
their respective properties.
(ii) Each of Contico and the Subsidiary has all requisite
corporate power and authority and all requisite and sufficient licenses,
franchises, permits and authorizations (collectively, the "Licenses") to
own and lease the Contributed Assets (or, in the case of the Subsidiary,
its assets) and to carry on the Business as and where presently
conducted, as applicable. All material Licenses held by Contico and/or
the Subsidiary in connection with the Business are more particularly
described on Schedule 7.1(a) attached hereto. Such Licenses are all of
the Licenses necessary to the conduct of the Business by the Company in
the same manner as heretofore conducted by Contico and, except as noted
on Schedule 7.1(a) attached hereto, all are included as part of the
Contributed Assets. No governmental proceeding is pending or, to
Contico's knowledge, threatened to cancel, modify or fail to renew any
such License. Contico has no subsidiaries the operations of which are
included in or related to the Business, other than the Subsidiary. No
Person owns any interest in the Subsidiary other than Contico and ▇▇▇▇▇▇.
(b) Corporate Action. Contico has full corporate power and authority
to execute and deliver this Agreement, to contribute, assign, transfer and
deliver the Contributed Assets to the Company, and otherwise to perform all of
its obligations hereunder and to consummate the transactions contemplated
hereby. All shareholder, corporate and other proceedings required to be taken
by or on the part of Contico to execute, deliver and carry out this Agreement
and to authorize Contico to contribute, assign, transfer, convey and deliver
the Contributed Assets to the Company have been duly and properly taken. This
Agreement constitutes the legal, valid and binding obligation of Contico,
enforceable in accordance with its terms, and all instruments of transfer and
other documents to be delivered in connection herewith, when executed and
delivered by or on behalf of Contico, will constitute legal, valid and binding
obligations of Contico, enforceable in accordance with their respective terms.
(c) Negation of Default. Except as set forth on Schedule 7.1(c)
attached hereto, the execution and delivery of this Agreement by Contico, its
compliance with the terms hereof and its consummation of the transactions
contemplated hereby will not violate, conflict with or result in a breach of
any provision of the Articles of Incorporation or By-laws of Contico or the
constitution of the Subsidiary, or (whether with due notice or lapse of time
or otherwise) constitute a default, give rise to any right of acceleration or
result in the creation of any Lien under, or otherwise result in a breach or
violation of, (i) any contract, agreement, lease, commitment, indenture,
mortgage, trust deed, note, bond, debenture, License or other instrument or
obligation relating to the Business, the Contributed Assets or the
Subsidiary's assets that is disclosed, or required to be disclosed, in the
Schedules to this Agreement, or (ii) any judgment, order or decree of any
court, administrative agency or other governmental authority, to which Contico
is a party or otherwise subject or by which Contico may be bound. Neither the
execution and delivery of this Agreement by Contico, nor its compliance with
the terms hereof and Contico's consummation of the transactions contemplated
hereby, will violate, conflict with or contravene in any material respect any
statute or any judicial or governmental regulation, order, injunction,
judgment or decree binding on Contico, and Contico has not received any notice
which is inconsistent with the foregoing. Except as set forth on Schedule
7.1(c) attached hereto, no bulk transfer provisions of any foreign, federal or
state statute or administrative regulation are applicable to the transactions
contemplated hereby, nor is any notice required to be given to any foreign,
federal, state, local or other governmental authority to consummate the
transactions contemplated hereby or to transfer the Contributed Assets free of
any Lien (other than Permitted Liens).
(d) Consents. Other than consents and approvals of or filings or
registrations required by federal and state securities laws, and except as set
forth on Schedule 7.1(d) attached hereto, the execution and delivery of this
Agreement by Contico, and its consummation of the transactions contemplated
hereby, will not require the approval, consent or authorization of any third
party, any foreign, federal, state or local court, government authority or
regulatory body or other Person, or give any party with rights under any
Business Contract, judgment, award, order or other restriction the right to
terminate, modify or otherwise change any of the current rights or obligations
of Contico thereunder. Except as set forth on Schedule 7.1(d) attached
hereto, the failure of any Person not a party hereto to authorize or approve
this Agreement and the transactions contemplated hereby will not give any
Person the right to enjoin, rescind or otherwise prevent or impede the sale of
the Contributed Assets to the Company in accordance with the terms of this
Agreement in any material respect, to reach in any fashion the Contributed
Assets in the hands of the Company following the Closing, or to obtain damages
from, or any other judicial relief against, the Company, as a result of any
transactions carried out in accordance with the provisions of this Agreement.
(e) Financial Statements. Attached hereto as Schedule 7.1(e)(i) are
the audited financial statements of Contico for the fiscal year ended May 31,
1998 (the "Baseline Financial Statements") and the audited financial
statements of Contico for the fiscal years ended May 31, 1996 and 1997,
including a balance sheet and statement of operations (income), all of which
were prepared in conformity with GAAP. Such financial statements are true and
correct in all respects and fairly present the financial condition and results
of operations of Contico for the periods and as at the dates thereof, taking
into account the fact that the assets, liabilities and results of operations
of the Discontinued Operations are reflected therein. Contico has not changed
any of its accounting methods or practices since January 1, 1996, except as
set forth on Schedule 7.1(e)(ii). Except as set forth in the footnotes to the
Baseline Financial Statements or on Schedule 7.1(e)(ii) attached hereto, the
Baseline Financial Statements do not reflect any intercompany or related party
assets, liabilities, or transactions, including without limitation, any
intercompany or related party sales, purchases, expenses, licenses,
commissions or transactions.
(f) Inventory. The inventory of Contico and the Subsidiary is
carried on the books and records of Contico at the lower of cost or market
value, and in the case of Contico such inventory is carried on a last-in
first-out basis. The inventory carried for value on the books and records of
Contico and the Subsidiary, in the aggregate, consists of items useable or
saleable in the ordinary course of the Business consistent with past practice.
Schedule 7.1(f) attached hereto is a true copy of Contico's inventory
obsolescence report as of August 31, 1998, which accurately reflects, in all
material respects, the obsolete, discontinued, defective and damage inventory
of Contico and the Subsidiary as of such date. Since such date, there has
been no material adverse change in the proportion of inventory of Contico and
the Subsidiary that is obsolete, discontinued, defective or damaged. Based
upon Contico's historical experience, the current level of inventory of the
Business, taken as a whole, is reasonably likely to satisfy the volume of
purchases expected from customers in connection with the Business in the
ordinary course of business. Except as set forth on Schedule 7.1(f), no such
items of inventory are subject to any buyback arrangement or similar sales
promotion offered by Contico or the Subsidiary. Neither Contico nor the
Subsidiary has received any written request that Contico or the Subsidiary
accept a significant return of Products sold in connection with the Business.
(g) Absence of Undisclosed Liabilities. Neither Contico nor the
Subsidiary has any debts, obligations or liabilities (whether contingent,
accrued or absolute with respect to the Business), of a nature required to be
reflected on a balance sheet prepared in accordance with GAAP, other than
those debts, obligations or liabilities clearly and fully reflected or
reserved against in the Baseline Financial Statements or incurred since the
date thereof in the ordinary course of the Business and those reflected in
this Agreement and the Schedules hereto. Since the Baseline Financial
Statements Date, neither Contico nor the Subsidiary has incurred any debt,
obligation or liability (whether fixed, absolute, accrued, contingent or
otherwise and whether direct or indirect, primary or secondary, known or
unknown) with respect to the Business, except those in the ordinary course
of the Business and those reflected in this Agreement and the Schedules
hereto.
(h) Title to and Sufficiency of Contributed Assets. Contico has and
will convey to the Company good, marketable and legal title to all of the
Contributed Assets, free and clear of any Liens (and the Subsidiary's assets
are free and clear of all Liens), except those Liens set forth on Schedule
7.1(h) attached hereto (the "Permitted Liens"). The Contributed Assets, taken
together with the Leased Real Property, comprise all of the assets, property
and rights of Contico necessary to the operation of the Business as currently
conducted.
(i) Condition of Assets. All Contributed Assets and all assets held
by the Subsidiary are in good, useable condition and repair, ordinary wear and
tear excepted, except for those Contributed Assets that in the aggregate are
immaterial to the financial condition or operations of the Business. The
Contributed Real Property and Leased Real Property are in conformity with all
applicable building, zoning, occupational safety and other laws, ordinances,
rules, regulations and other requirements.
(j) Intellectual Property. Attached hereto as Schedule 7.1(j) is a
complete and correct list of all registered Intellectual Property including
known marks used at common law owned or used by or registered in the name of
Contico and/or the Subsidiary in connection with the Business (including
without limitation, all licensing or similar agreements relating to the
foregoing, whether Contico or the Subsidiary is the licensor or licensee
thereunder), whether registered with any United States or foreign governmental
entity or agency or whether any applications for such registration are
pending. Notwithstanding the above, Contico also transfers all marks owned by
Contico and the goodwill symbolized thereby, regardless of whether they have
been listed in Schedule 7.1(j). Contico or the Subsidiary owns or possesses
adequate and enforceable licenses or other rights to use all Intellectual
Property in the conduct of the Business. Except as disclosed on Schedule
7.1(j), neither Contico nor the Subsidiary is in default under any such
licensing or similar agreement, is aware of any other party to any such
license or agreement being in default thereunder or has received any notice or
other knowledge of conflict with or infringement or misappropriation (or
alleged infringement or misappropriation) of any rights of any Person, and no
officer, director, employee, customer, vendor, shareholder or former
shareholder of Contico or the Subsidiary nor any other Person has any rights
in or to any of such Intellectual Property. To Contico's knowledge, no
Intellectual Property identified herein is being infringed upon or
appropriated by any third party. Contico or the Subsidiary owns and possesses
adequate and enforceable rights to use all of the Intellectual Property and
all design drawings, trade secrets, processes, and other technical data used
or useful in the Business, all of which are included in the Contributed Assets
or assets held by the Subsidiary. None of such Intellectual Property or any of
the technology covered thereby has been misappropriated by Contico or the
Subsidiary from any Person. Except as disclosed on Schedule 7.1(j), the use
in the Business of any Intellectual Property and other technical or
proprietary data does not require the payment of any royalty or similar
payment to any Person, and, on the Closing Date, Contico will transfer to the
Company good and marketable title thereto.
(k) Litigation. Except as set forth on Schedule 7.1(k) attached
hereto, there are no claims, actions, suits, legal or administrative
proceedings, governmental investigations or any labor matters that involve a
potential liability of Fifty Thousand Dollars ($50,000) or more, individually,
pending or, to Contico's knowledge, threatened against Contico or the
Subsidiary with respect to the Business, the Contributed Assets or the
Subsidiary's assets, nor has Contico or the Subsidiary received written notice
from a third party asserting a basis for any such claim, action, suit, legal
or administrative proceeding, governmental investigation or labor matter.
There are no judgments, decrees, settlements, orders, rulings, writs or
injunctions involving the Business, any of the Contributed Assets or any of
the Subsidiary's assets that (either by reason of compliance or default) may
adversely affect the Business, any of the Contributed Assets or any of the
Subsidiary's assets, or which relate in any way to the transactions
contemplated by this Agreement, except as set forth on Schedule 7.1(k).
(l) Compliance with Laws. Except as set forth on Schedule 7.1(l) or
as otherwise disclosed in this Agreement or in any Schedule hereto, Contico's
and the Subsidiary's operation and ownership of the Business, the Contributed
Assets and the Subsidiary's assets, as applicable, are currently in compliance
with all laws, statutes, rules, regulations and other requirements imposed by
foreign, federal, state, local and other governmental authorities applicable
to Contico and/or the Subsidiary in the operation and ownership of the
Business, the Contributed Assets and the Subsidiary's assets. The
representations in this Section 7.1(1) are not made with respect to the
subject matter of any other representation in this Agreement that includes
representations with respect to compliance with a particular set of laws,
statutes, rules, regulations and other requirements, such as those pertaining
to taxation, labor, employment benefits and the environment, and the
representations in this Section apply only with respect to laws, statutes,
rules, regulations and other requirements that are not the subject of a more
specific representation contained in this Agreement.
(m) Environmental. Except as disclosed on Schedule 7.1(m) and/or the
Phase I Audits and/or the Phase II assessments:
(i) To Contico's knowledge, with respect to the Real Property
and Contico's and the Subsidiary's operation and ownership of the
Business, neither Contico nor the Subsidiary has received any outstanding
written notice from any governmental authority that it is not in
compliance with any applicable foreign, federal, state, municipal and
local laws, statutes and regulations regulating pollution or
contamination by, and the transportation, handling, storage, labeling or
disposition of, Hazardous Material, the protection of the environment,
health, safety, or the protection or conservation of natural habitat or
resources (collectively, the "Environmental Laws").
(ii) Neither Contico nor the Subsidiary has received any
written notice from the U.S. Environmental Protection Agency or any
state, local or other domestic or foreign governmental agency or
authority (collectively, the "EPA"), or any other public or private
entity, advising that Contico or the Subsidiary is responsible or
potentially responsible for corrective action or investigation or
response costs with respect to a release, a threatened release or cleanup
of Hazardous Material on or about the Contributed Real Property or Leased
Real Property or any other real property. There are no underground
storage tanks located on the Contributed Real Property or Leased Real
Property.
(iii) Copies of all environmental reports and environmental
data with respect to the Contico Leased Real Property, the Leased Real
Property and the Contributed Real Property prepared by or on behalf of
Contico prior to the Closing Date, or otherwise in the possession of
Contico, have been delivered to the Company.
(n) Taxes. The representations and undertakings in this Section
7.1(n) are subject in all respects to the provisions of Section 8.8 below.
All Taxes payable by Contico and/or the Subsidiary which are due or to become
due by reason of the contribution of the Contributed Assets or the operation
of the Business by Contico and/or the Subsidiary prior to the Closing Date
have been or will be paid when due, except to the extent any such Taxes
constitute an Assumed Liability, in which event they will be paid by the
Company or the Subsidiary. Except for any Taxes included within the Assumed
Liabilities, with respect to any Taxes payable by Contico which are not due
and, therefore, have not been paid prior to the Closing Date, such Taxes
payable will be duly and timely paid by Contico. There are no Tax liens upon
any property or assets of Contico or the Subsidiary pertaining to the Business
or the Contributed Assets or the Subsidiary's assets, except liens for Taxes
not yet due and payable and liens disclosed on Schedule 7.1(n). Except as set
forth on Schedule 7.1(n), all foreign, federal, state, and local tax reports
and returns, including without limitation, income tax returns, withholding tax
returns, goods and services and retail sales tax returns, use tax returns and
value added tax returns, required to be filed by or on behalf of Contico
and/or the Subsidiary on or prior to the Closing Date with any government or
any foreign or domestic governmental agency or authority have been or will be
duly prepared and filed when due (as appropriately extended), and were and
will be true, correct and complete. Except as set forth on Schedule 7.1(n),
there is no examination or proceeding pending or, to Contico's knowledge,
threatened by any authority or agency relating to the assessment or collection
of any Taxes, or any interest or penalties thereon, due from or remittable by
Contico or the Subsidiary. Except as set forth on Schedule 7.1(n), neither
Contico nor the Subsidiary has entered into any agreement with any
governmental agency or authority in effect of which would be to extend the
statute of limitations with respect to any tax period.
(o) Insurance. Attached hereto as Schedule 7.1(o) is a true and
complete list of all policies of fire, liability, indemnity and other forms of
insurance currently in force relating to the Business, the Contributed Assets
and/or the Subsidiary's assets, setting forth the type and amount of coverage,
policy number, policy periods, the status of premiums paid thereon and
information concerning whether such policies are assignable to the Company and
whether such assignment requires the consent of any Person. Except as set
forth on Schedule 7.1(o) attached hereto, there have been no product liability
claims asserted against Contico or the Subsidiary pertaining to the Business
during the immediately preceding two (2) years.
(p) Labor Relations. Except as set forth on Schedule 7.1(p) attached
hereto, neither Contico nor the Subsidiary (i) is a party to or bound by any
collective bargaining agreement or other contract with any labor or employee
union or association representing any of the employees of Contico or the
Subsidiary working in connection with the Business, (ii) is currently
conducting negotiations with any labor union or (iii) is aware of any current
attempt to organize any employees for the purpose of collective bargaining.
There are no strikes or work stoppages pending or, to Contico's knowledge,
threatened, nor, except as set forth on Schedule 7.1(p) attached hereto, any
labor disputes or grievances pending or, to Contico's knowledge, threatened
against Contico or the Subsidiary or affecting the Business. Contico and the
Subsidiary have generally good relations with their employees, and no strikes
or work stoppages are pending or have been threatened by such employees. With
respect to any employees of the Business operated in the United Kingdom,
Contico (or the Subsidiary) has complied with all recommendations made by the
Advisory Conciliation and Arbitration Service and with all awards and
declarations made by the Central Arbitration Committee.
(q) Employee Benefit Plans.
(i) Schedule 7.1(q) attached hereto lists all "Employee
Welfare Benefit Plans" and "Employee Pension Benefit Plans" (as defined
in Sections 3(1) and 3(2) respectively of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) existing on the date hereof
or at any time within the five (5) year period immediately preceding the
Closing Date that are or have been maintained or contributed to by
Contico for the benefit of any employees working in connection with the
Business (including, for this purpose and for the purpose of all of the
representations contained in this Section 7.1(q), the Subsidiary and any
other entities which by reason of Section 414 of the Internal Revenue
Code of 1986, as amended (the "Code"), are treated together with Contico
as a single employer under Code Section 414), and are referred to in this
Section 7.1(q) collectively as "Contico").
(ii) Except as noted in Schedule 7.1(q) attached hereto,
Contico does not maintain or contribute to, nor has it maintained or
contributed to at any time during the five (5) year period immediately
preceding the Closing Date, any "Employee Pension Benefit Plan" subject
to Title IV of ERISA for the benefit of any employees working in
connection with the Business. Except as noted in Schedule 7.1(q)
attached hereto, Contico does not maintain or contribute to, nor has it
maintained or contributed to, at any time during the five (5) year
period immediately preceding the Closing Date, any "Multiemployer
Plans," as defined in Section 3(37) of ERISA. Except as noted on
Schedule 7.1(q) attached hereto, all current and material documents
relating to each Multiemployer Plan have been furnished to the Company
and the Subsidiary, and, other than those so furnished, there are no
collective bargaining agreements, Plan and trust documents, Plan rules
with respect to withdrawal, estimates of withdrawal liability and
statements of unfunded vested benefits and contribution history.
Contico and the Subsidiary have made all contributions required in
connection with any Multiemployer Plan as of the date hereof by the terms
of the Multiemployer Plan or by the terms of any collective bargaining
agreement. Except as noted in Schedule 7.1(q) attached hereto, none of
Contico nor the Subsidiary has terminated or withdrawn from, or expects
to terminate or withdraw from (in a complete withdrawal as defined in
Section 4203 of ERISA or a partial withdrawal as defined in Section 4205
of ERISA), or is aware of any withdrawal liability (as defined in section
4201 of ERISA) assessed against Contico or the Subsidiary with respect
to, any Multiemployer Plan.
(iii) Except as listed in Schedule 7.1(q) attached hereto,
Contico does not maintain any retirement, pension or deferred
compensation plan or arrangement, savings, incentive or non-qualified
stock option, restricted stock, stock appreciation rights, stock purchase
or phantom stock plan, unemployment compensation plan, salary reduction
agreement, change-in-control or golden or tin parachute agreement,
severance plan or agreement, employment agreement, consulting agreement,
personnel policy (including, but not limited to, holiday pay, moving
expense reimbursement, sick leave, vacation pay, bonus or benefit
arrangement), insurance or hospitalization program or any other fringe
benefit arrangement, whether written or oral (all such plans and
arrangements hereinafter referred to collectively as "Benefit
Arrangements") for any employee, consultant or agent of Contico working
for or in connection with the Business, whether pursuant to contract,
arrangement, custom or informal understanding, which does not constitute
an "Employee Benefit Plan" (as defined in Section 3(3) of ERISA), or for
which the Company may have any liability after the Closing Date.
(iv) Except as noted in Schedule 7.1(q) attached hereto, a
true and complete copy of each of the Plans and Arrangements listed in
Schedule 7.1(q) attached hereto, and in effect on the date hereof,
together with related trusts, any amendments to the Plans, Arrangements
or trusts, insurance contracts, annuity contracts, investment management
or investment advisor contracts, summary plan descriptions, favorable
Internal Revenue Service determination letters, and the annual reports,
summary annual reports, audit reports, financial statements and
government filings prepared or filed for each such Plan and Arrangement
for the most recent two (2) plan years, has been supplied to the Company.
(v) Except as noted in Schedule 7.1(q) attached hereto, all
Employee Pension Benefit Plans, Employee Welfare Benefit Plans and
Benefit Arrangements listed in Schedule 7.1(q) comply, and in the past
have complied, in all material respects in form and operation with their
terms and with all requirements of applicable federal, state, local and
other laws and regulations, whether domestic or foreign.
(vi) Except as noted in Schedule 7.1(q) attached hereto, all
group health plans, as defined under Code Section 5000(b)(1) and ERISA
Section 607, maintained by or for current and former employees of Contico
and their dependents comply in all respects with all COBRA health
continuation coverage requirements under Section 4980B of the Code and
Sections 601-609 of ERISA.
(vii) There have been no non-exempt "prohibited transactions"
(as described in Section 406 of ERISA or Section 4975 of the Code) at any
time with respect to any Employee Pension Benefit Plan or Employee
Welfare Benefit Plan or Benefit Arrangement (other than a Multiemployer
Plan) maintained by Contico or to which Contico has been a party for the
benefit of any employee, that could result in the imposition of any
material excise tax upon the Company.
(viii) All accrued obligations of Contico relating to the
Business, as of the Closing Date, whether arising by operation of law, by
contract or by past custom, for compensation, including bonuses, to its
employees, consultants or agents, for taxes and other obligations to any
governmental entity payable in connection with such compensation, and for
payments with respect to any Plan or Arrangement listed in Schedule
7.1(q) have been paid, or adequate accruals for such obligations have
been and are being made by Contico. Except as noted in Schedule 7.1(q),
there is no suit, arbitration or other private or governmental proceeding
concerning any benefit claim (other than routine claims for benefits) or
other matter, under any Employee Pension Benefit Plan, Employee Welfare
Benefit Plan or Benefit Arrangement, whether brought by or against a
participant or beneficiary, a trustee, a plan administrator, Contico or
any director, officer, employee or agent thereof.
(ix) With respect to any severance pay agreement, the
consummation of the transactions contemplated by this Agreement will not
result in any liability to the Company by reason of an acceleration in
the time of payment or vesting or an increase in the amount of
compensation due to any individual covered by a severance pay agreement.
(x) Each Employee Pension Benefit Plan intended to meet the
qualification requirements of the Code (together with its related funding
instrument) is qualified and tax-exempt under Sections 401 and 501 of the
Code, and is the subject of a favorable Internal Revenue Service
determination issued within the past eight (8) years with respect to such
qualification and exemption.
(xi) Except as set forth on Schedule 7.1(q), there are no
Employee Welfare Benefit Plans, Employee Pension Benefit Plans or
Arrangements to which Contico is a party, or by which it is bound, and
under which, as a result of this Agreement, any director, officer,
employee or other agent of Contico, or any other party claiming through
such a person, shall or may acquire rights with respect to any such Plan
or Arrangement(including without limitation the creation, increase or
extension of new or existing rights), become entitled to a distribution
or a payment with respect to any such Plan or Arrangement, or otherwise
receive or become vested in rights or benefits with respect to any such
Plan or Arrangement, at a date earlier than if this Agreement had not
been executed.
(xii) No Employee Welfare Benefit Plan provides medical or
death benefits (whether or not insured) with respect to any current or
former employee of the Business, or any of their dependents, which
continue beyond their retirement or other termination of service other
than coverage mandated by Code Section 4980B or ERISA Sections 601-609 or
comparable provisions of state law.
(r) Leases, Contracts and Other Commitments.
(i) Except as set forth on Schedule 7.1(r) attached hereto,
neither Contico nor the Subsidiary has any outstanding contracts,
agreements or other commitments, written or oral, for the performance or
receipt of services, the payment of moneys, the purchase, sale, lease,
license, use or acquisition of real or personal property of any kind or
character relating to the Business or the Contributed Assets, or
otherwise, other than (A) contracts, agreements and commitments not
requiring aggregate payments in excess of One Hundred Thousand Dollars
($100,000) in the case of any single contract, agreement or commitment or
in excess of Two Hundred and Fifty Thousand Dollars ($250,000) in the
aggregate and not otherwise individually or collectively material to the
conduct of the Business, (B) purchase orders or sales orders entered into
in the ordinary course of the Business not requiring aggregate payments
in excess of One Million Dollars ($1,000,000) in the case of any single
purchase order or sales order, or (C) contracts, agreements and
commitments not otherwise terminable without penalty on thirty (30) days'
or less notice and not otherwise individually or collectively material to
the conduct of the Business. Specifically, and not in limitation of the
foregoing, neither Contico nor the Subsidiary has any written or oral
contract, agreement or understanding with any supplier, sales
representative, commission agent, distributor, dealer, customer,
consultant or similar person, nor any written or oral employment
contract, agreement or understanding with any person, which relates to
the Business or the Contributed Assets, other than as identified on
Schedule 7.1(r) attached hereto (true and complete copies of which have
been provided to the Company), nor is there any oral agreement or
understanding with any employee of the Business which cannot be
terminated without cause on reasonable notice and without penalty.
(ii) Contico has made available to the Company a copy of all
Business Contracts set forth on Schedule 7.1(r) attached hereto, all of
which are true and complete.
(iii) Each of Contico and the Subsidiary, as applicable, is
in compliance with the provisions of each of the personal property leases
and other Business Contracts set forth on Schedule 7.1(r) attached
hereto, and no default exists by Contico or, to Contico's knowledge, any
other party to any such contract, lease or commitment. All such personal
property leases and other Business Contracts are valid, subsisting and in
full force and effect and enforceable in accordance with their respective
terms, and no event has occurred which, with the passage of time or
giving of notice or both, would constitute a default under any such lease
or contract.
(s) Owned Real Property.
(i) Contico or the Subsidiary owns (A) the real estate in fee
simple, set forth on Schedule 7.1(s)(i) attached hereto and listed under
the heading "Contributed Real Property" (the "Contributed Real Property")
(except for any Contributed Real Property situated in England in which
case Contico is the legal and beneficial owner (as such terms are defined
in English law)), (B) the real estate in fee simple, set forth on
Schedule 7.1(s)(i) attached hereto and listed under the heading
"▇▇▇▇▇▇▇▇▇▇ Property," and (C) the other real estate in fee simple, set
forth on Schedule 7.1(s)(i) attached hereto and listed under the heading
"Leased Real Property" (the "Leased Real Property"), and neither Contico
nor the Subsidiary has any other owned real estate or owned property
interests in connection with the operation of the Business other than the
Excluded Real Property. The Contributed Real Property and the Leased Real
Property (except for the Winters, Texas property) are owned by Contico
free and clear of all Liens, charges, easements, covenants and conditions
of record or other restrictions, except Liens for current real property
taxes and covenants, conditions and restrictions of record that do not
adversely affect the use or value of the Contributed Real Property or the
Leased Real Property; provided, however, that in the case the Winters,
Texas property, it is owned by Contico free and clear of all Liens,
charges, easements, covenants and conditions of record or other
restrictions, except (A) Liens for current real property taxes and (B)
covenants, conditions and restrictions of record that (i) do not
materially adversely affect the use or value of such property, (ii) are
not included in the Assumed Liabilities, and (iii) will be removed by
Contico prior to Closing or as soon thereafter as practicable
(collectively, "Permitted Exceptions"). Except as disclosed on Schedule
7.1(s)(i) attached hereto, all of the buildings, structures and
appurtenances situated on the Contributed Real Property and the Leased
Real Property are in good operating condition, subject to ordinary wear
and tear, and in a state of maintenance and repair adequate and suitable
for the purposes for which such buildings, structures and appurtenances
are presently being used. Except as disclosed on Schedule 7.1(s)(i), with
respect to each such building, structure and appurtenance, Contico or the
Subsidiary, as applicable, has adequate rights of ingress and egress for
operating the Business in the ordinary course and no such building,
structure or appurtenance is located within a flood plain. Contico has
no knowledge that any such building, structure or appurtenance (i)
violates or breaches any restrictive covenant or any provision of any
foreign, federal, state, or local law, or (ii) encroaches on any property
owned by any other Person or on any public utility easements. No
condemnation or rezoning or local or planning authority proceeding is
pending or, to Contico's knowledge, threatened which would preclude or
impair the use of the Contributed Real Property and the Leased Real
Property by the Company or the Subsidiary, as applicable, for the
purposes for which it is currently used or anticipated to be used. In
the event of Contico's default under the loan documents consisting of a
Secured Promissory Note in the principal amount of $8,000,000 dated May
18, 1993, and a Deed of Trust, Security Agreement, Assignment of Rents
and Fixture Filing dated May 18, 1993, and an Assignment of Leases and
Rents dated May 18, 1993 (the "Loan Documents") given by Contico to
Principal Life Insurance Company ("Principal") on the Leased Real
Property at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, Contico
acknowledges that the Company has the option to pay all principal,
interest, make whole premiums and any other amounts due under the Loan
Documents in consideration for an assignment by Principal of the Loan
Documents to the Company, and Contico shall cooperate in good faith in
all ways reasonably requested by the Company, including without
limitation, executing and tendering documents, to assist in effecting
such assignment.
(ii) Contico Leased Real Property. Contico leases the real
property, set forth on Schedule 7.1(s)(ii) attached hereto (the "Contico
Leased Real Property"), and neither Contico nor the Subsidiary has any
other leased real property interests in connection with the operation of
the Business. The Contico Leased Real Property is leased solely upon the
terms of the leases, set forth on Schedule 7.1(s)(ii) attached hereto
(the "Contico Leased Real Property Leases"). All of the buildings,
structures and appurtenances situated on the Contico Leased Real Property
are in good operating condition, subject to ordinary wear and tear, and
in a state of maintenance and repair adequate and suitable for the
purposes for which such buildings, structures and appurtenances are
presently being used. Except as disclosed on Schedule 7.1(s)(ii)
attached hereto, with respect to each such building, structure and
appurtenance, Contico or the Subsidiary, as applicable, has adequate
rights of ingress and egress for operating the Business in the ordinary
course and no such building, structure or appurtenance is located within
a flood plain. Contico has no knowledge that any such building,
structure or appurtenance (i) violates or breaches any restrictive
covenant or any provision of any foreign, federal, state, or local law,
or (ii) encroaches on any property owned by any other Person or on any
public utility easements. No condemnation or rezoning or local or
planning authority proceeding is pending or, to Contico's knowledge,
threatened which would preclude or impair the use of the Contico Leased
Real Property by the Company or the Subsidiary, as applicable, for the
purposes for which it is currently used or anticipated to be used.
(iii) Additional Provisions Relating to Real Property
Situated in England and Wales. Planning Permission has been granted or
is deemed to have been granted for the purposes of planning legislation
in respect of the development of the Real Property situated at Cardrew
Way, Redruth, Cornwall, and all development carried out in relation to
that property has been lawful and all necessary consents and permissions
have been obtained for that development. Compliance is being made and
has at all times been made with all applicable statutory and bye-law
requirements with respect to the Real Property situated at Cardrew Way,
Redruth, Cornwall, and in particular (but without limitation) with the
requirements as to fire precautions and means of escape in case of fire
and with requirements under the Public Health Acts, the Housing Acts, the
Highways Acts, the Office Shops and Railways Premises ▇▇▇ ▇▇▇▇, the
Health and Safety at Work etc. ▇▇▇ ▇▇▇▇ and the Factory Acts (as the
same exist under English law) and Contico does not anticipate it will be
obliged to incur the expenditure of any substantial sum of money within
the next two years in connection with such compliance. All deeds and
documents disclosed by Titmuss ▇▇▇▇▇▇ Dechert to ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ as
being title deeds for the Real Property situated in England and Wales are
under the control of Contico or theSubsidiary (as appropriate) (save to
the extent that Titmuss ▇▇▇▇▇▇ Dechert has already informed Dibb ▇▇▇▇▇▇
▇▇▇▇▇ that the originals of such title deeds havebeen mislaid by
Contico). So far as Contico is aware, neither Contico nor the Subsidiary
have any continuing liability in respect of any other property formerly
owned or occupied by Contico or the Subsidiary either as original
contracting party or by virtue of any direct covenant having been given
on a sale or assignment to Contico or the Subsidiary or as a guarantor of
the obligations of any other person in relation to such property.
So far as title to and the state and condition of the Real Property
situated in England and Wales is concerned, with the exception of the
title covenants to be given in the transfer of the Redruth Property, no
other warranty or representation whatsoever is given by or on behalf of
Contico or the Subsidiary save insofar as such warranty or representation
is expressly contained in writing in replies to preliminary enquiries
raised by Dibb ▇▇▇▇▇▇ ▇▇▇▇▇ on behalf of the Company.
(t) Accounts Receivable. The accounts receivable of the Business
reflected on the books and records of Contico and the Subsidiary (i) arose in
the ordinary course of business; (ii) except to the extent of the Allowances
reflected on the books and records of Contico and the Subsidiary, (A)
represent valid, bona fide and subsisting claims, (B) are legally enforceable
according to their terms and, in the aggregate, are correct as to amount, and
(C) have no current right of defense, counterclaim or setoff against them; and
(iii) are owned by Contico or the Subsidiary free of any Liens, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, other than Permitted Liens.
(u) No Adverse Change. Since the Baseline Financial Statements Date,
Contico and the Subsidiary have conducted the Business in the ordinary and
regular course and, except as set forth on Schedule 7.1(u) attached hereto,
there has not been: (i) any material adverse change in the financial condition
or, results of operations of the Business; (ii) any material adverse change in
any of Contico's or the Subsidiary's relationships with any significant
supplier, distributor or customer of or to the Business; (iii) any change in
the accounting methods or practices followed by Contico or the Subsidiary or
in the manner in which the books, records and accounts of Contico and the
Subsidiary are maintained; (iv) any Lien incurred against any of the
Contributed Assets or any of the Subsidiary's assets other than a Permitted
Lien; (v) any waiver or release of any material right or claim of Contico or
the Subsidiary relating to the Business, except in the ordinary course of the
Business; (vi) any payment, discharge, satisfaction or forgiveness by Contico
or the Subsidiary of any claim, liability, obligation or debt due it or waiver
or release by Contico or the Subsidiary of any right or claim, in each case
relating to the Business, other than any payment, discharge or satisfaction
reflected or reserved against on the Baseline Financial Statements; (vii) any
damage, destruction or other casualty loss with respect to the Contributed
Assets or the assets of the Subsidiary, whether or not covered by insurance;
(viii) any strike, work stoppage, slowdown, or any known threat of any of the
foregoing, affecting the Business; (ix) any purchase, sale, assignment, lease,
transfer or other disposal of any amount of the Contributed Assets or assets
of the Subsidiary by Contico or the Subsidiary, except in the ordinary course
of the Business; (x) any capital expenditure made or incurred by Contico or
the Subsidiary in connection with the Business in excess Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate, except as reflected on its
Baseline Financial Statements; (xi) any agreement by Contico or the Subsidiary
to incur any liability or obligation (in the case of Contico, relating to the
Business) (absolute, accrued, contingent or otherwise) other than in ordinary
and usual course of the Business; (xii) any failure by Contico or the
Subsidiary to maintain any insurance in effect on the Baseline Financial
Statements Date relating to the Business, the Contributed Assets or the assets
of the Subsidiary; (xiii) any failure to apply or reapply for necessary
permits and Licenses in the ordinary course of business; (xiv) any transfer or
granting of any rights under, or entry into any settlement regarding the
breach or infringement of, any license, patent, copyright, trademark, trade
name, invention or similar right relating to the Business, or modification of
any existing right with respect thereto; (xv) any change in the rate of
compensation, commission, or other direct or indirect remuneration payable, or
paid or agreed or orally promised to pay, conditionally or otherwise, any
bonus, extra compensation, pension, severance or vacation pay, to any officer,
employee, salesman, distributor or agent of Contico or the Subsidiary relating
to the operation of the Business, other than in the ordinary course of
business; or (xvi) any agreement by Contico or the Subsidiary (whether oral or
written, contingent or otherwise), or any amendment to or modification of any
existing agreement, to do any of the things described in clauses (i) through
(xv) above.
(v) Suppliers. Attached hereto as Schedule 7.1(v) is a complete and
accurate list of the top twenty (20) suppliers of products and services (by
dollar amount to the Business) during the twelve (12) month period ended
May 31, 1998 and there are no sole-source suppliers of significant materials
or services to the Business for which alternative sources of supply are not
reasonably available.
(w) Customers. Attached hereto as Schedule 7.1(w) is a complete and
accurate list of the twenty (20) largest customers (by dollar volume) of the
Business during the twelve (12) month period ended May 31, 1998 (each a "Major
Customer"), indicating the existing contractual arrangements, if any, with
each Major Customer. To Contico's knowledge, there are no outstanding
disputes with any Major Customer and, since January 1, 1998, no Major Customer
has stated its intention not to continue its relationship with Contico or the
Subsidiary, nor has any Major Customer materially changed its arrangements
with Contico or the Subsidiary with respect to the Business.
(x) Product Warranty Costs and Returns; Product Defects. Attached
hereto as Schedule 7.1(x) is a true and complete description of all published
product warranties, return policies and procedures and other credit and sales
practices offered by Contico and/or the Subsidiary to its customers in
connection with the Business which have been in force or effect at any time
during the twenty-four (24) month period immediately preceding the date
hereof. There are no material defects in the design, construction,
manufacturing or installation of any of the products (the "Products") made,
manufactured, distributed, sold or installed by Contico and/or the Subsidiary
in connection with the Business prior to the Closing Date that would adversely
affect the performance or quality of all of the Products sold by Contico
and/or the Subsidiary to customers of the Business. There have been no
significant product recalls of any Products during the last five (5) years.
(y) Certain Payments; Absence of Certain Business Practices. Except
as set forth on Schedule 7.1(y), neither Contico nor the Subsidiary, nor to
Contico's knowledge any of their respective representatives or agents, has
made or will cause to be made by or on behalf of the Business prior to the
Closing Date, any payments, loans or gifts or promises or offers of payments,
loans or gifts of any money or anything of value, directly or indirectly, to
or for the use or benefit of any official or employee of any United States or
foreign governmental entity, department or agency.
(z) Transactions with Interested Persons. Except as set forth on
Schedule 7.1(z) attached hereto, no officer, director, shareholder or employee
of Contico or the Subsidiary, or their respective spouses or children is or
owns, directly or indirectly, on an individual or joint basis, any material
interest in, or serves as an officer or director of, any customer, competitor
or supplier of the Business or any organization which has a contract,
agreement, arrangement or commitment with Contico or the Subsidiary relating
to the Business.
(aa) Year 2000 Compliance. Attached hereto as Schedule 7.1(aa) is a
copy of Contico's project plan to ensure that Contico's and the Subsidiary's
principal computer hardware and network systems (the "Main System") are Year
2000 Compliant. For such purposes, "Year 2000 Compliant" means that the Main
System will (A) correctly store, represent, and process (including sort) all
dates (including single and multi-century formulas and leap year
calculations), such that errors will not occur when the date being used is in
the Year 2000, or in a year preceding or following the Year 2000, and (B)
operate and will not cause or result in an abnormal termination or ending.
To Contico's knowledge, the Business has not suffered any material
interruption of, or interference with, its operations or activities by reason
of any failure of the Main System to be Year 2000 Compliant, and upon
completion of such project plan, Contico believes that no such material
interruption or interference shall occur.
(bb) Fees and Commissions. No agent, broker, investment banker or
other Person acting on behalf or under the authority of Contico or the
Subsidiary is or will be entitled to any broker's, finder's, originator's or
investment banker's fees or any other commission or similar fee directly or
indirectly from any of the Parties hereto in connection with the transactions
contemplated hereby, and no such fees are or will be chargeable to or for the
account of the Company or the Subsidiary, nor have any such fees been paid,
nor will any such fees be paid or payable out of, or in any manner constitute
a Lien against, the Contributed Assets or the assets of the Subsidiary.
(cc) Misstatement or Omission. To Contico's knowledge, no
representation or warranty by Contico in this Agreement or in any other
agreement, document or instrument executed in connection herewith, including
any exhibit, schedule, written statement, certificate or other document
furnished or to be furnished by Contico pursuant hereto or thereto or in
connection with the transactions contemplated hereby or thereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact required to be stated herein or therein necessary to
make the statements contained herein or therein not misleading. Copies of all
documents heretofore furnished by Contico to the Company are true, correct and
complete copies of such documents, including all amendments or modifications
thereto.
7.2 Representations and Warranties of the Company. The Company
hereby represents and warrants to Contico as follows:
(a) Organization and Standing. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority and all requisite and sufficient licenses, franchises, permits and
authorizations to own and lease its properties and assets and to carry on its
business as and where currently conducted.
(b) Company Action. The Company has full power and authority to
execute and deliver this Agreement, to acquire the Contributed Assets from
Contico, and otherwise to perform all of its obligations hereunder and to
consummate the transactions contemplated hereby. All proceedings required to
be taken by or on the part of the Company to authorize, execute, deliver and
carry out this Agreement and to acquire the Contributed Assets have been duly
and properly taken. This Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, and all
other documents to be delivered in connection herewith, when executed and
delivered by the Company, will constitute legal, valid and binding obligations
of the Company, enforceable in accordance with their respective terms.
(c) Negation of Default. The execution and delivery of this
Agreement by the Company, its compliance with the terms hereof and its
consummation of the transactions contemplated hereby will not violate,
conflict with or result in a breach of any provision of the Certificate of
Formation of the Company, the LLC Agreement or any other governing document of
the Company, or (whether with due notice or lapse of time or otherwise)
constitute a default, require the consent of any third party, give rise to any
right of acceleration, or otherwise result in a breach or violation of, any
contract, agreement, lease, commitment, indenture, mortgage, trust deed, note,
bond, debenture, license or other instrument or obligation, or any judgment,
order or decree of any court, administrative agency or other governmental
authority, to which the Company is a party or otherwise subject.
(d) Consents. The execution and delivery of this Agreement by the
Company, and its consummation of the transactions contemplated hereby, will
not require the approval, consent or authorization of any third party, any
federal, state or local court, government authority or regulatory body or
creditor, or give any party with rights under any instrument, agreement,
contract, mortgage, judgment, award, order or other restriction the right to
terminate, modify or otherwise change any of the current rights or obligations
of Company thereunder, except as set forth on Schedule 7.2(d) attached hereto
and made a part hereof.
(e) Fees and Commissions. No agent, broker, investment banker or
other Person acting on behalf or under the authority of the Company is or will
be entitled to any broker's, finder's, originator's or investment banker's
fees or any other commission or similar fee directly or indirectly from any of
the Parties hereto in connection with the transactions contemplated hereby.
(f) Misstatement or Omission. To the Company's knowledge, no
representation or warranty by the Company in this Agreement or in any other
agreement, document or instrument executed in connection herewith, including
any exhibit, schedule, written statement, certificate or other document
furnished or to be furnished by the Company pursuant hereto or thereto or in
connection with the transactions contemplated hereby or thereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact required to be stated herein or therein necessary to
make the statements contained herein or therein not misleading. Copies of all
documents heretofore furnished by the Company to Contico are true, correct and
complete copies of such documents, including all amendments or modifications
thereto.
ARTICLE VIII
------------
Covenants and Agreements
------------------------
8.1 Satisfaction of Excluded Liabilities. From and after the Closing
Date, (a) Contico agrees to and shall pay, perform and otherwise satisfy in
full when due all indebtedness, liabilities and obligations which relate to or
which may affect the Excluded Liabilities in accordance with their respective
terms, and (b) the Company shall pay, perform and otherwise satisfy in full
when due all indebtedness, liabilities and obligations which relate to or
which may affect the Assumed Liabilities in accordance with their respective
terms. In the event that either Contico or the Company shall inadvertently
pay, perform or otherwise satisfy any such indebtedness, liabilities or
obligations of the other party, the other party agrees to reimburse Contico or
the Company, as appropriate, therefor not later than five (5) business days
after receipt of notice thereof.
8.2 Environmental.
Contico and the Company agree to allocate environmental liabilities,
risks and responsibilities as set forth in this Section 8.2 and in Article X,
which allocation agreements shall control, replace and supersede any
conflicting or general provision in this Agreement or in any related agreement
between the Parties with respect to the subject matter hereof.
(a) Any impact to soil or groundwater on or emanating from any of the
Real Property which pre-dates the Closing, regardless of whether it was
discovered or capable of discovery prior to the Closing is a "Pre-existing
Condition," for the purposes of this Section 8.2 and Article X.
(b) The Company has engaged certain consultants to perform certain
sampling, testing and compliance review with respect to the Real Property.
Based on its review of such reports, the Company will not require remediation
of any Pre-existing Condition the existence of which is known as a result of
sampling data developed prior to Closing. Following the Closing, either Party
may conduct additional soil or groundwater testing at any of the Company's
Warson, ▇▇▇▇▇▇▇▇▇ and Redruth facilities. For a period of ten (10) years
after the Closing, if either Party determines that any Pre-existing Condition
(whether currently known or subsequently discovered) requires remediation in
order to achieve compliance with any applicable Environmental Laws in effect
at the time, then the Parties shall proceed as follows:
(i) The Party who believes such remediation is required shall
notify the other Party in writing, and the Parties shall agree on a
remediation plan and approach which is necessary to bring the property
into compliance with Environmental Laws as an industrial property.
Contico and the Company agree not to unreasonably withhold their approval
of such plan and approach.
(ii) Notwithstanding the provisions of Article X or any other
provision of this Agreement, Contico and the Company will share
remediation costs equally up to an aggregate amount of $2 million
($1 million each). Contico and the Company jointly will be responsible
for managing or contracting the management of the remediation, unless and
until $2 million in remediation costs is exceeded. Contico shall be
solely responsible for managing and completing such remediation, and
shall be solely responsible for the costs thereof, after such remediation
costs reach $2 million, and Company shall provide Contico and its agents
with access to the Real Property at times reasonably required by Contico
and shall cooperate fully therewith.
(iii) For the purposes of this Section 8.2, remediation costs
shall include, but shall not be limited to, capital costs, sampling costs
pursuant to the plan, removal costs, monitoring costs, consultant and
contractor costs related to the remediation, and other out-of-pocket
costs and expenses necessary or appropriate to implement the remediation
plan or approach agreed to by the Parties.
(iv) The Parties' obligations under this Section 8.2 shall
terminate on the tenth anniversary of the Closing Date, except only with
respect to remediation plans then in process and not yet completed.
(c) Promptly after Closing, but in no event not more than ninety (90)
days after Closing, the Company will identify and/or properly dispose of all
waste oils and other unidentified liquids stored in fifty-five (55) gallon
drums or larger containers at the Real Property (excluding the ▇▇▇▇▇▇▇▇▇▇
facility, which shall be the responsibility of Contico as set forth below) as
of the Closing Date. Contico will sign all appropriate documentation as
generator of such wastes and materials and shall reimburse the Company for
seventy percent (70%) of all costs of such disposal. The Company shall pay
thirty percent (30%) of all costs of such disposal. Contico and the Company
shall each be responsible for one-half of any uninsured liability associated
with such disposal. The Company shall provide to Contico copies of invoices
and other appropriate documentation of disposal and costs associated
therewith, along with each reimbursement request.
(d) The Company will assume responsibility for complying with the
permitting and reporting obligations of the Business identified in the Phase
I Audits, following the Closing. With regard to Contico's ▇▇▇▇▇▇▇▇▇▇
facility, the Company shall cooperate with Contico in connection with any
remediation measures undertaken at such facility to address any Pre-existing
Conditions or to comply with applicable Environmental Laws.
8.3 Conduct Prior to Closing. During the period from the date hereof
through the Closing Date:
(a) Operations in the Ordinary Course of Business. Contico has and
shall conduct the Business and its operations only in the usual, ordinary and
regular course, and shall exert all commercially reasonable efforts to
maintain and preserve the Business, the Contributed Assets and the assets of
the Subsidiary intact in such a manner as will cause the representations of
Contico in Section 7.1 to be true. Contico shall use all commercially
reasonable efforts to preserve intact the officers and employees working in
the Business and to preserve good business relationships with employees,
suppliers, customers, licensors, licensees, contractors, distributors,
business partners or others having business relationships with Contico or the
Subsidiary relating to the Business, including without limitation, suppliers
and Major Customers, to keep in force existing agreements, and otherwise act
to cause fulfillment of all conditions to Closing which are reasonably within
Contico's or the Subsidiary's control, all in the ordinary course of business
and consistent with past practices.
(b) Forbearances by Contico. Without limiting the generality of the
foregoing, prior to the Closing, Contico shall not and shall not permit the
Subsidiary to, without the prior written consent of the Company, take or fail
to take any action that could result in Contico or the Subsidiary:
(i) incurring any material liability or obligation (absolute,
accrued, contingent or otherwise) falling within the definition of
Assumed Liabilities other than in the ordinary course of business;
(ii) except to the extent consistent with practices in prior
years or as set forth on Schedule 8.3(b), adopting or amending any salary
or bonus, Employee Pension Benefit Plan, Employee Welfare Benefit Plan,
Benefit Arrangement, employment or other employee benefit plan,
agreement, trust, fund or other arrangement, or granting, or becoming
obligated to grant, any increase in the rate of pay, commission or other
compensation of officers, distributors, sales representatives or
employees, in each case with respect to the Business, including any such
increase pursuant to any employee arrangement or grant, instituting any
welfare program or any employee arrangement or grant, making any change
in any welfare program or any employee arrangement or grant, or entering
into any employment or similar agreement or arrangement with any employee
working for the Business;
(iii) creating, assuming or permitting to exist any Lien on any
of the Contributed Assets or the assets of the Subsidiary, other than
Permitted Liens; or
(iv) selling, transferring, assigning, encumbering,
mortgaging, leasing or otherwise disposing of, or agreeing to sell, transfer,
assign, encumber, mortgage, ease or dispose of, any of the Contributed Assets
or assets of the Subsidiary other than the disposition of excess, obsolete or
worn-out items and sales of inventory in the ordinary course of business.
Without limiting the generality of the foregoing, prior to the Closing,
Contico shall not and shall not permit the Subsidiary to, without the
Company's prior written approval, knowingly perform any act or transaction of
a type that would have been inconsistent with the representations and
warranties of Contico set forth in Section 7.1 hereof had the same occurred
prior to the date hereof or that would have been required to be set forth on a
disclosure schedule hereto had such act or transaction taken place prior to
the date of this Agreement.
In addition, without limiting the generality of the foregoing provisions
of this Section 8.3, Contico shall take all necessary action to:
(A) maintain its and the Subsidiary's books, records and
accounts in accordance with GAAP;
(B) maintain all currently existing fire and extended
coverage, worker's compensation, general and product liability and other
property and casualty insurance with respect to the Business, the
Contributed Assets and the assets of the Subsidiary;
(C) apply or reapply for any Licenses necessary for the
Business in the ordinary course of business; and
(D) in the event of casualty loss to any of the Contributed
Assets or the assets of the Subsidiary, to the extent permitted under
applicable contracts, mortgages, deeds of trust, leases, agreements or
other instruments, transfer any received insurance proceeds, or the
rights thereto, to the Company as part of the Contributed Assets.
8.4 Employment and Related Matters.
(a) Employees. Schedule 8.4(a) attached hereto is a true and correct
copy of Contico's payroll register as of September 18, 1998, which lists all
of the individuals actively employed by Contico or the Subsidiary as of the
date of such report, their respective positions and the wages or base salary
of such individuals for the period covered by such report. Contico shall use
all commercially reasonable efforts prior to Closing to assist the Company in
arriving at continuing employment arrangements with each of the individuals
listed on Schedule 8.4(a) attached hereto on substantially the same terms and
conditions as he or she is employed by Contico or the Subsidiary immediately
prior to the Closing Date, or otherwise on such other terms and conditions as
are acceptable to the Company.
(b) No Solicitation. Between the date of this Agreement and the
Closing Date, and for a period of two (2) years after the Closing Date,
Contico shall not, directly or indirectly, solicit or attempt to induce any
person who is currently employed by Contico or the Subsidiary in connection
with the Business, or then employed by the Company (or any successor), to
leave the employ of the Company (or any successor), as the case may be.
(c) Certain Employee Rights. Contico agrees that the Company shall
be under no contractual obligation to continue any Employee Pension Benefit
Plans, Employee Welfare Benefit Plans or Benefit Arrangements of Contico or
the Subsidiary for any specific period of time after the Closing Date.
Contico covenants that it shall be solely responsible for all contributions to
and liabilities arising from any and all such Employee Pension Benefit Plans,
Employee Welfare Benefit Plans and Benefit Arrangements for all periods on or
before the Closing Date, except to the extent specifically included in the
Assumed Liabilities. Contico covenants that all contributions and other
payment obligations required to be made on or before the Closing Date under or
in connection with such Plans and Arrangements have been or will be paid in
full on or as of the Closing Date.
(d) Additional Provisions for Employees Based in England. In respect
of those employees of the Business as carried on in England, Contico warrants
that where applicable it has fully complied with Regulation 10 of the UK
Regulations and will indemnify the Company in full against any compensation
for which the Company may become liable as a result of any breach thereof.
Notwithstanding the foregoing, the Company agrees that it shall indemnify
Contico against any costs, claims and liabilities whatsoever and however
arising as a result of any breach of Regulation 10 of the UK Regulations
caused by failure on the part of the Company promptly and fully to comply
with its obligations under Regulation 10(3) of the UK Regulations. The
Company warrants that as of the date of this Agreement and as of the Closing
Date, the Company does not envisage, in relation to any employee whose
employment will transfer from Contico to the Company as a result of this
transaction, taking any measures as referred to in Regulation 10(2)(d) of
the UK Regulations. Contico agrees that it will indemnify the Company in full
against all costs, claims and liabilities whatsoever and howsoever arising,
incurred or suffered by it in relation to any claim of whatsoever nature made
by any person (not being an employee listed in Schedule 8.4(a)) against the
Company who shall claim to have become an employee of the Company or otherwise
for which he shall claim the Company is liable by virtue of the UK
Regulations. For the avoidance of doubt, Contico acknowledges that the
provisions of Section 8.4(c) shall apply in respect of all employees of the
Business as carried on in England irrespective of whether or not such
liability passes to the Company pursuant to the terms of the UK Regulations.
8.5 Consents and Approvals. Contico shall take or cause to be taken
all acts reasonably necessary, and shall promptly make all filings or
submissions as are reasonably required (i) to obtain all third party consents
required pursuant to Article VI hereof, including without limitation, any and
all consents required under leases and other contracts, in order to consummate
the transactions contemplated hereby, and (ii) to obtain any approval,
consent, license, clearance, exemption, waiver or registration of or with any
applicable foreign, federal, state or local governmental authority necessary
in order to consummate lawfully the transactions contemplated hereby. Each
party hereto shall furnish to the other such reasonably necessary information
and assistance as the other may reasonably request in connection with its
preparation of any filing or submission which is necessary to obtain any
governmental approval, as applicable. Contico and the Company shall each keep
the other apprised of the status of any communications with, and any inquiries
or requests for additional information made by, any governmental authority and
shall comply promptly with any such inquiry or request. In addition, to the
extent not obtained prior to the Closing, Contico agrees to cooperate with the
Company and to use all reasonable efforts, at the request of the Company, to
obtain all consents and authorizations described on Schedule 7.1(d) attached
hereto and any other consents and/or authorizations of third parties necessary
to complete the transactions contemplated hereby. To the extent that any such
consent or authorization is not so obtained, Contico will use all reasonable
efforts to (i) provide to the Company, at the request of the Company, the
benefits (and the burdens) of the related contract, lease, agreement or
License, (ii) cooperate in any reasonable and lawful arrangement designed to
provide such benefits and burdens to the Company, without incurring any
obligation to any other person or entity (other than to provide such benefits
and burdens to the Company), and (iii) enforce, at the request of the Company
for the account of the Company, any rights of Contico arising from the related
contract, lease, agreement or License (including, without limitation, the
right to terminate in accordance with the terms thereof).
8.6 Real Property Requirements.
(a) Contico shall cause the Company to obtain, on or prior to January
8, 1999, extended coverage commitments for title insurance on the Leased Real
Property (leasehold interest), Contico Leased Real Property (leasehold
interest) and the Contributed Real Property (fee interest) (the "Title
Commitments") dated as of a recent date, from Old Republic Title Company or
its affiliate (the "Title Company") with respect to the real property
identified on Schedule 8.6(c) attached hereto, subject only to the Permitted
Exceptions. At the Closing, Contico shall cause the Company to obtain title
policies (the "Title Policies") consistent with the Title Commitments, and
including a GAP endorsement, a zoning 3.1 endorsement, an access endorsement
and such other endorsements as are appropriate in the Company's reasonable
discretion given specific site conditions, from the Title Company insuring
(i) the Company's fee simple title to the Contributed Real Property or its
designee, (ii) the Company's leasehold interest in the Leased Real Property
and (iii) the Company's leasehold interest in the Contico Leased Real
Property, all in amounts satisfactory to the Company in its reasonable
discretion. All fees of the Title Company in connection with the Title
Commitments and the Title Policies shall be the responsibility of Contico.
(b) Contico shall cause the Company to obtain on or prior to January
8, 1999 (or, with respect to the Winters, Texas property, as soon as
practicable following the Closing Date), current surveys of the Real Property
identified on Schedule 8.6(b) attached hereto certified in favor of the
Company and the Title Company, prepared by a registered land surveyor
containing the Minimum Standard Detail Requirements for an ALTA/ACSM Land
Title Survey most recently adopted by the American Land Title Association and
American Congress on Surveying and Mapping, including without limitation, a
flood plain certification, designation of wetlands and location of all
easements, licenses or other real property interests identified in the Title
Commitments and indicating that none of the Contributed Real Property in the
United States lies in a flood plain or in a wetlands area and otherwise in
form sufficient for the Title Company to waive or provide title insurance over
any matters which would be disclosed by an accurate survey. Survey costs
shall be the responsibility of Contico.
(c) At or immediately prior to the Closing, Contico shall deliver to
the Company the following additional instruments and documents with respect to
the Real Property identified on Schedule 8.6(c) attached hereto:
(i) All permits, plans and specifications and all
construction, building and equipment guarantees and warranties in
Contico's possession; and
(ii) A "GAP Undertaking," an ALTA Statement, transfer
declarations and any instrument, assurance or deposit (to be paid by
Contico) necessary to induce the Title Company to insure over unpermitted
exceptions in such form, terms, conditions and amount as may be required
by the Title Company.
(d) On or prior to January 8, 1999, Contico shall deliver to the
Company estoppel certificates (if applicable) and consents received from all
of the landlords of the Contico Leased Real Property, consistent with the
terms of this Agreement.
(e) Sections 8.6(b) through (c) inclusive shall not be applicable to
any Real Property situated in England.
(f) With respect only to any Real Property situated in England, if so
requested to do so by the Company at any time after the Closing, Contico will
provide the Company with statutory declarations, in a form reasonably
requested by the Company and to be executed by a duly authorized signatory of
Contico, with respect to any title deeds or documents relating to the
Contributed Real Property and the Contico Leased Real Property which are
missing or which Contico is not able to locate.
(g) In relation to the property at part ground floor, Croft House,
Progress Business Centre, ▇▇▇▇▇▇▇ Park Way, Bath Road, Slough Berkshire,
England (the "Slough Property"):
(i) Contico will assign to the Company the benefit of its
rights of occupation at Closing by completion of the Deed of Assignment
substantially in the form attached hereto as Exhibit E.
(ii) If a new lease of the Slough Property has not been
granted to Contico prior to Closing, Contico will use reasonable efforts
to procure the grant of a new lease of the Slough Property direct to the
Company, the form of such lease to be previously approved by the Company.
(iii) If the lease of the Slough Property is granted to
Contico before or after Closing, Contico will use reasonable efforts to
procure the consent of the landlord of the Slough Property to assign the
lease of the Slough Property to the Company and, provided that Closing
has occurred and upon receipt of such landlord's consent, Contico will
assign the lease of the Slough Property to the Company, the deed of
assignment to be in a form reasonably acceptable to the Parties.
(h) Contico shall cause to be delivered to the Company on or prior to
January 8, 1999, an agreement between Principal and the Company executed by
Principal that Principal shall give written notice to the Company of any
default beyond any grace period under the Loan Documents given by Contico to
Principal on the Leased Real Property at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, at least sixty (60) days prior to foreclosure, and that the Company
shall have an option, by written notice to Principal, to pay all principal,
interest, make whole premiums and any other amounts due under the Loan
Documents in consideration for an assignment by Principal of the Loan
Documents to the Company.
8.7 Product Liability Matters. At or prior to the Closing, Contico
shall cause the Company to be named as an additional insured under each of its
retained occurrence-type policy or policies of insurance insuring against
claims for personal injury and property damage arising out of or resulting
from any products of the Business shipped prior to the Closing Date. At the
Closing, Contico shall deliver to the Company one or more certificates of
insurance evidencing that the insurance retained by it is in effect and
providing for notification to the Company at least thirty (30) calendar days
prior to the effective date of any termination or cancellation of such
insurance.
8.8 Payment of Certain Taxes.
(a) Tax Accruals. The Parties acknowledge that the Tax Accruals
shall be determined as of the Closing Date, concurrently with the preparation
of the Closing Date Net Worth Statement, by estimating the accrued and unpaid
liability of Contico, as of the Closing Date, for all taxes attributable to
periods ending on or before or which include the Closing Date. Such estimate
shall be prepared by Contico in accordance with GAAP with respect to such
accruals.
(b) Payment of Income Taxes. Following the Closing Date, Contico
shall prepare and deliver to the Company, at least five business days prior to
the due date thereof (taking into account any valid extensions), copies of
every state or local income tax return required to be filed by Contico for any
period (i) that ends on or before the Closing Date, or which includes the
Closing Date, and (ii) for which the return and/or taxes shown thereon need
not be filed or paid prior to the Closing Date. In addition, Contico shall
identify, and provide supporting calculations of, that portion of the balance
of any tax due (after application of all estimated payments attributable
thereto) that is attributable to income of the Business for the period ending
on the Closing Date (the "Stub Income Taxes"). At least two days prior to the
due date of each such return as represented by Contico, the Company shall pay
to Contico an amount equal to the Stub Income Taxes reflected on such return,
but subject to Section 8.8(e) below.
(c) Payment of Sales and Use Taxes. Following the Closing Date,
Contico shall prepare and deliver to the Company, promptly after the filing
thereof, copies of each sales, use and similar transfer tax return required to
be filed by Contico with respect to transactions occurring on or before the
Closing Date. In addition, to the extent applicable Contico shall identify,
and provide supporting calculations of, that portion of the balance of such
taxes (after application of any estimated payments or prepayment of Taxes
attributable thereto) that are attributable to transactions of the Business
(the "Preclosing Sales Taxes"). Within five business days after its receipt
of each such return, the Company shall pay to Contico an amount equal to the
Preclosing Sales Taxes reflected on such return, but subject to Section 8.8(e)
below. To the extent feasible, however, the Company may satisfy its
obligations under this Section 8.8(c) by paying the Preclosing Sales taxes
directly to the applicable taxing authority on behalf of Contico.
(d) Payment of Property Taxes. Following the Closing Date, Contico
shall promptly forward to the Company all assessments, schedules and notices
received from any taxing authority with respect to Current Property Taxes.
The Company shall be solely responsible for responding to all such
communications, where required, and for timely paying the full amount of all
Current Property Taxes as and when the same shall become due and payable, or
as otherwise set forth in applicable agreements to which the Company is or
becomes a party.
(e) Limitation. Notwithstanding the foregoing provisions of this
Section 8.8, the Company shall cease to be obligated to pay or reimburse
Contico with respect to Stub Income Taxes, Current Property Taxes and
Preclosing Sales Taxes at such time, if any, as the sum of the Current
Property Taxes paid by the Company and the amounts paid under subsection
8.8(b) and (c) equals the amount of the Tax Accruals.
(f) Subsidiary. In connection with the preparation of the Closing
Date Net Worth Statement, the Parties shall calculate the accrued tax
obligations of the Subsidiary, as of the Closing Date, for the Subsidiary's
tax year that began June 1, 1998. The Company shall cause the Subsidiary to
timely file all appropriate returns and reports and to pay all such tax
obligations as the same shall become due and payable. Contico agrees to
reimburse the Company, or at the Company's direction, the Subsidiary for any
taxes, interest or penalties paid by the Subsidiary for any tax period ending
prior to or that includes the Closing Date to the extent in excess of amounts
accrued therefore as of the Closing Date. For purposes of this Section
8.8(f), the Parties agree that the accrued tax obligation of the Subsidiary
for the tax period that includes the Closing Date shall be determined on an
annualized basis as if the Subsidiary's tax period ended as of the Closing
Date.
8.9 Maintenance of Net Worth. Contico shall not permit its Net
Worth, measured as of the end of each calendar quarter, to be less than (i)
during the five (5) year period immediately following Closing, $30,000,000,
and (ii) during the immediately following five (5) year period, $20,000,000;
provided, however, that Contico shall be permitted to liquidate during such
ten (10) year period, if, and only if, prior to such liquidation, the
shareholders of Contico execute indemnification agreements in favor of the
Company, in form and substance reasonably satisfactory to the Company, having
aggregate indemnification obligations in an amount equal to the Net Worth
requirements for Contico provided above.
8.10 Self-Insurance Programs. If, following the Closing Date, the
aggregate amount paid by the Company with respect to those Assumed Liabilities
described in clause (iii)(B) of the definition of the term Assumed Liabilities
herein exceeds $2,250,000, then Contico shall indemnify the Company for such
excess, subject to Section 10.1(c) herein. The Company shall furnish such
reports and information as Contico shall reasonably request to verify the fact
and/or amount of reimbursement due under this Section.
8.11 Bond Financed Facility. The Company acknowledges that a portion
of the Contributed Assets and a portion of the Leased Real Property located at
305 and ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ were
financed with the proceeds of $8,700,000 Variable Rate Demand Private Activity
Revenue Bonds (Contico International, Inc., Project), Series 1989 (the
"Bonds"), issued by the Industrial Development Authority of the City of
Bridgeton, Missouri, the interest on which Bonds was intended to be excluded
from gross income for purposes of federal income taxation and exempt from
State of Missouri income taxation. The portions of the Contributed Assets and
the Leased Real Property so financed are referred to herein as the "Project."
The Bonds are currently outstanding and are intended to remain outstanding.
In order to avoid having a material adverse impact on the financial benefits
to Contico of the Bonds, the Company hereby covenants and agrees, to the
extent within its control, to use the Project as a "manufacturing facility,"
as that term is defined in Section 144(a)(12)(C) of the Code; provided,
however, the Company's sole obligation hereunder with respect to that portion
of the Project that constitutes Contributed Assets shall be, in the event of
a sale or other disposition of any portion of such Contributed Assets, to
provide notice to Contico within thirty (30) days of such sale or other
disposition of (i) the description of such sold or otherwise disposed of
Contributed Assets, (ii) the identity of the transferee of such sold or
otherwise disposed of Contributed Assets, (iii) the amount of gain or loss by
the Company on such sale or other disposition, and (iv) the amount of proceeds
received by the Company from such sale or other disposition. It is intended
that the foregoing covenant and agreement bind future sublease or assignment
by the Company. Therefore, the Company further covenants and agrees that any
sublease or assignment by the Company shall contain a substantially similar
covenant and agreement from the sublessor or assignee thereunder and that
Contico shall be deemed a third party beneficiary of any such covenant and
agreement in any sublease or assignment.
ARTICLE IX
----------
Termination and Abandonment
---------------------------
9.1 Termination and Abandonment. This Agreement may be terminated
and abandoned at any time prior to the Closing:
(a) By mutual written consent of the Company and Contico;
(b) By the Company, if the conditions set forth in Section 6.1 hereof
shall not have been fulfilled in any material respect and cannot be fulfilled
on or before the Closing Date;
(c) By the Company, to the extent permitted under Section 8.3(b)
hereof;
(d) By Contico, if the conditions set forth in Section 6.2 hereof
shall not have been fulfilled in any material respect and cannot be fulfilled
on or before the Closing Date;
(e) By Contico or the Company, if any court action or proceeding
shall have been instituted by any party, or, to the knowledge of the Company
or Contico, shall have been threatened by any public or private authority or
third party, to restrain or prohibit the transactions contemplated by this
Agreement; or
(f) By Contico or the Company, if the Closing shall not have occurred
on or prior to January 22, 1999, or such later date as may be mutually
approved in writing by Contico and the Company.
9.2 Effect of Termination. In the event of the termination or
abandonment of this Agreement pursuant to the provisions of this Article IX,
this Agreement shall thereafter become void and have no effect; provided,
however, that the foregoing shall not be deemed to affect in any way any right
of action either party may have against the other for breach of its
representations, warranties or covenants hereunder. In such event, the
breaching party shall be liable to the non-breaching party for all Losses
arising as a result of such breach.
ARTICLE X
---------
Indemnification
---------------
10.1 Contico's Indemnification.
(a) Notwithstanding the investigation by the Company, its attorneys
or any of its agents or representatives, the representations, warranties and
covenants of Contico set forth herein, and the indemnification obligations of
Contico in this Article X with respect thereto, shall survive as follows: (i)
the representations, warranties and covenants set forth in (A) Section 2.2,
Section 2.3, Sections 7.1(a)(i), 7.1(b), 7.1(h) (but only with respect to
those Contributed Assets not consisting of Real Property or interests
therein), and 7.1(bb), and Sections 8.1, and 8.8 hereof shall survive the
Closing without limitation of time and shall not expire, (B) Sections 7.1(m)
and Section 8.2 shall survive the Closing for a period of ten (10) years, at
which time they will expire, and (C) Section 7.1(n) shall survive the Closing
for the applicable limitation period with respect to the matters described
therein, at which time they will expire; (ii) covenants that by their terms
survive for a different period of time shall survive for such period; and
(iii) all other representations, warranties and covenants contained herein
shall survive the Closing for a period of two (2) years, at which time they
shall expire, and thereafter no Claim may be asserted against Contico on the
basis of such representations, warranties and covenants. Notwithstanding the
preceding sentence, any Claim asserted in writing against Contico for
indemnity with respect to a surviving representation, warranty or covenant may
continue to be pursued after such time if written notice of the inaccuracy,
breach or nonperformance giving rise to such indemnity shall have been given
to Contico prior to the time that such right of indemnity otherwise would have
terminated. The representations and warranties in the second, fourth and fifth
sentences of Sections 7.1(s)(i) and (ii) shall expire upon receipt by the
Company of surveys and Title Policies, in form and substance reasonably
satisfactory to the Company, for the Leased Real Property, the Contico Leased
Real Property and the Contributed Real Property in accordance with the
provisions of Section 8.6 hereof, it being the Parties' intention that the
Company's recourse with respect to the matters described in such provisions,
if any, shall be under the terms of such Title Policies and the surveys
related thereto.
(b) Contico agrees to indemnify, defend and hold the Company, its
subsidiaries and affiliates and its and their respective shareholders,
directors, officers, employees, agents, representatives, successors and
assigns (collectively, the "Company Group"), harmless from and against any and
all Losses imposed on, accrued against, sustained or incurred by any of them
resulting from or arising out of or by virtue of: (i) any misrepresentation or
breach of warranty made herein by Contico or non-compliance with,
non-performance of or breach by Contico of any of the covenants of this
Agreement to be performed by Contico or otherwise set forth in any instrument
or document executed or delivered by Contico in connection with this
Agreement, (ii) any and all of the Excluded Liabilities, (iii) any and all
such liabilities, debts and claims asserted against the Company or the
Subsidiary in connection with contributions, and other payment obligations, or
any other liabilities, debts and claims asserted against the Company or the
Subsidiary arising from the continuance and operation of the Plans and
Arrangements for all periods ending on or prior to the Closing Date, as
described in Section 8.4(c) herein, (iv) any recall of a category, or
significant quantities of such category, of products shipped by Contico or the
Subsidiary prior to Closing to the extent such recall is reasonably required
to comply with applicable laws and regulations, to cause such products to be
in conformity with an express warranty extended by Contico or with the terms
of a customer's original order, or to comply with an order of a governmental
authority or agency, and (v) with respect to Environmental Laws, all
liabilities, fines or penalties associated with any pre-Closing noncompliance
by Contico with permit requirements, plans and reporting obligations (if any).
(c) Notwithstanding any other provision hereof to the contrary,
Contico shall have no obligation to indemnify the Company or the Company
Group, whether pursuant to this Article X, Section 8.10 or otherwise, for any
Losses otherwise indemnifiable hereunder, unless and until the aggregate
amount of all Losses exceeds One Million Dollars ($1,000,000) (the "Basket"),
whereupon the Losses in excess of such amount shall be indemnified as
aforesaid, subject to Section 10.1(d); provided, however, (A) the Basket
shall not apply to the failure of Contico to pay the Excluded Liabilities, and
(B) the first $500,000 of remediation costs borne by the Company under Section
8.2 of this Agreement shall not be counted as "Losses" for purposes of
computing the Basket.
(d) Notwithstanding any other provision hereof to the contrary,
Contico shall have no obligation to indemnify the Company or the Company Group
for any Losses otherwise indemnifiable hereunder in excess of Thirty Million
Dollars ($30,000,000) (the "Indemnity Cap"); provided, however, that the
Indemnity Cap shall not apply to any failure of Contico to pay the Excluded
Liabilities.
10.2 Company's Indemnification.
(a) The representations, warranties and covenants of the Company set
forth herein, or in any document or instrument delivered in connection
herewith or pursuant hereto, and the liabilities of the Company with respect
thereto, shall survive the Closing Date for a period of two (2) years, at
which time they shall expire, except for (i) covenants that by their terms
survive for different time periods, which shall survive for such periods, and
(ii) the representations, warranties and covenants set forth in Section 3.3,
Sections 7.2(a), 7.2(b) and 7.2(e) and Section 8.1 hereof shall survive the
Closing without limitation of time and shall not expire. Notwithstanding the
preceding sentence, any representation, warranty or covenant in respect of
which indemnity may be sought under Section 10.2(b) below shall survive the
time at which it would otherwise terminate pursuant to such sentence, if
written notice of the inaccuracy, breach or nonperformance giving rise to such
indemnity shall have been given to the Company prior to the time that it
otherwise would have terminated.
(b) The Company agrees to indemnify, defend and hold Contico, its
subsidiaries and affiliates and its and their respective shareholders,
directors, officers, employees, agents, representatives, successors and
assigns (collectively, the "Contico Group"), harmless from and against any
and all Losses imposed on, accrued against, sustained or incurred by any of
them resulting from or arising out of or by virtue of: (i) any
misrepresentation or breach of warranty made herein by the Company or non-
compliance with or breach by the Company of any of the covenants of this
Agreement to be performed by the Company, (ii) any and all of the Assumed
Liabilities, (iii) any and all Liabilities arising out of or in connection
with the conduct of the Business by the Company after the Closing Date, (iv)
with respect to Environmental Laws, any and all liabilities, fines or
penalties associated with violations of Environmental Laws by the Company or
at the Real Property (if any) which occur after Closing or with conditions
created after Closing, and (v) any and all Liabilities of the Subsidiary that
are not a part of the Excluded Liabilities.
10.3 Losses. For purposes of this Agreement, "Losses" means all
claims (whether meritorious or not), actions, suits, proceedings, judgments,
causes of action, liabilities (whether fixed, absolute, accrued, contingent or
otherwise and whether direct or indirect, primary or secondary, known or
unknown), losses, demands, costs, assessments, fines, damages, interest,
penalties or expenses (including without limitation, reasonable attorneys'
fees and expenses and costs of litigation); in each case after taking into
account available insurance and any tax benefit or detriment attributable
thereto; but the term "Losses" shall not include consequential, punitive or
exemplary damages attributable to any misrepresentation or breach of a
warranty or covenant of a party contained herein, other than those payable, if
any, to a third party.
10.4 Procedure for Indemnification.
(a) Upon becoming aware of a claim for any Losses for which a Person
is entitled to indemnity hereunder, the Person seeking indemnification under
this Article X (the "Indemnified Party") shall give prompt written notice of
such claim to the party from whom indemnification is sought (the "Indemnifying
Party"); provided, however, that no delay in giving notice hereunder shall
relieve the Indemnifying Party from its obligations hereunder, except and to
the extent either (i) that the Indemnifying Party demonstrates that the
defense of such action is prejudiced by the Indemnified Party's failure to
give such notice in a timely manner, or (ii) such notice is delivered after
expiration of an applicable survival period in Section 10.1.
(b) Within thirty (30) calendar days after such notice, the
Indemnifying Party may deliver to the Indemnified Party its written
acknowledgment that the Indemnified Party is entitled to indemnification
pursuant to this Article X for Losses arising out of such claim, suit or
action, together with evidence reasonably satisfactory to the Indemnified
Party that the Indemnifying Party has and will have the financial capability
to discharge any liability arising from such claim, suit or action. Upon
delivery by the Indemnified Party of such acknowledgment and evidence, the
Indemnifying Party shall, with counsel reasonably satisfactory to the
Indemnified Party, assume the defense of any such suit or action initiated by
a third party (a "Third Party Claim") including its compromise and settlement,
and the Indemnifying Party shall pay all costs and expenses thereof and shall
be fully responsible for the outcome thereof. If the Indemnifying Party so
assumes the defense of such Third Party Claim, (i) no compromise or settlement
thereof may be effected by the Indemnifying Party without the Indemnified
Party's consent (which shall not be unreasonably withheld) unless the sole
relief is monetary damages that are paid in full by the Indemnifying Party and
(ii) the Indemnified Party shall have no liability with respect to any
compromise or settlement thereof effected without its consent (which shall
not be unreasonably withheld). In the event that the Indemnifying Party does
not provide such acknowledgment and evidence, the Indemnified Party shall be
entitled to assume the defense of such Third Party Claim at the sole cost and
expense of the Indemnifying Party, with counsel reasonably satisfactory to the
Indemnifying Party; and in such event, all Losses resulting from the defense
or settlement of such Third Party Claim shall be subject to the
indemnification provisions of this Article X. In such case, the Indemnified
Party will give the Indemnifying Party not less than twenty (20) calendar
days' written notice of any proposed settlement or compromise of any Third
Party Claim. Any settlement or compromise made or caused to be made by the
Indemnified Party of any such Third Party Claim of the kind referred to above
shall be subject to the prior written consent of the Indemnifying Party, which
shall not be unreasonably withheld, and thereupon such settlement or
compromise shall be binding upon the Indemnifying Party in the same manner as
if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise.
(c) In case of any Third Party Claim, the Indemnified Party will
cooperate reasonably with the Indemnifying Party, cooperate reasonably in the
defense thereof, including affording to the Indemnifying Party the right of
access, during normal business hours, to the personnel of the Indemnified
Party and all pertinent books and records for purposes of inspection and
making copies, but all reasonable out-of-pocket expenses incurred by the
Indemnified Party in connection with the foregoing shall be reimbursed by the
Indemnifying Party. If the Indemnifying Party assumes the defense or
settlement thereof in accordance with Section 10.4(b), the Indemnified Party
shall have the right to observe and consult in the defense or settlement of a
Third Party Claim and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party. If the Indemnified Party conducts
the defense or settlement thereof after the Indemnifying Party has declined to
do so in accordance with Section 10.4(b), the Indemnifying Party shall have
the right to observe and consult in the defense of a Third Party Claim and to
employ counsel, at its own expense, separate from the counsel employed by the
Indemnified Party.
10.5 Sole Remedy. The indemnification provisions, procedures and
limitations of this Article X, together with the matters provided for in
Section 8.2, shall be the exclusive remedies and procedures relating thereto,
available to any party following the Closing Date as a result of any breach or
nonperformance of any representations, warranties, covenants, agreements and
obligations contained in this Agreement or any Schedule attached hereto, or
any liability or obligation of the Business. All other remedies at law or in
equity (including but not limited to common law and statutory rights of
contribution) hereby are waived by the Parties, and to the extent a survival
period contained in this Agreement extends beyond an otherwise applicable
statute of limitations, this Agreement shall constitute a waiver thereof.
Notwithstanding the foregoing, this Section 10.5 shall not preclude a party
from asserting a Claim (a) based on any act of fraud perpetrated upon a party
hereto by another party hereto, or (b) for any equitable remedy to enforce the
obligations of the Parties contained in this Agreement.
ARTICLE XI
----------
Expenses
--------
11.1 Professional Expenses. Except as otherwise specified in this
Agreement, each of the Parties hereto shall pay all of its own respective
costs and expenses with respect to legal, accounting, consulting, appraisal
and professional fees, as well as printing and other related expenses,
incurred or to be incurred by such party in connection with the negotiation
and preparation of this Agreement and the consummation of the transactions
contemplated hereby; provided, however, that no such fees or expenses shall
be paid or payable out of, or in any manner constitute a Lien against, the
Contributed Assets.
11.2 Transfer Expenses. All applicable sales, use, transfer,
documentary or similar taxes, filing and recording fees, title insurance
charges, survey fees, vehicle tax, intangible taxes, if any, and transfer fees
which are payable by reason of the transactions contemplated by this
Agreement, shall be paid by Contico; provided, however, that no such charges,
fees or expenses shall be paid or payable out of, or in any manner constitute
a Lien against, the Contributed Assets. Contico and the Company have not
elected and shall not elect to waive VAT exemption with respect to the
Contributed Assets situated in the United Kingdom.
ARTICLE XII
-----------
Miscellaneous
-------------
12.1 Entire Agreement; Amendment. This Agreement is the entire
agreement and understanding of the Parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous negotiations,
undertakings and agreements, written or oral, between the Parties. No
representation, inducement, agreement, promise, understanding or waiver
altering, modifying, taking from or adding to the terms and conditions hereof
shall have any force or effect unless the same is in writing and validly
executed by each of the Parties hereto.
12.2 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of, and be enforceable by, the Parties hereto
and their respective successors and permitted assigns. This Agreement shall
not be assignable by any Party prior to Closing without the prior written
consent of the other Party, and following the Closing no complete or partial
assignment by any Party of this Agreement or such Party's rights hereunder
shall operate to relieve the assigning Party of its obligations hereunder.
12.3 Notices. Any notice, request, instruction or other
communication to be given hereunder by any party hereto shall be in writing
and shall be deemed to have been duly given on the date of delivery, provided
delivery is actually tendered at the appropriate address, addressed to the
persons identified below (i) in person, or (ii) by overnight courier service
nationally recognized in the United States, or (iii) by facsimile copy (with
original copy mailed the same day), or (iv) five (5) calendar days after
deposit in the U.S. mail by first class certified mail, postage prepaid,
return receipt requested, all addressed as set forth below:
(i) If to Contico, to: Contico International, Inc.
c/o Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to the Company, to: CII Acquisition, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or persons at such address or addresses as may be
designated by written notice to the other party pursuant to this Section 12.3.
12.4 Severability. If any provision of this Agreement is found
invalid, unenforceable or in violation of any law by a court of competent
jurisdiction, such provision shall be modified only to the extent necessary to
enable such provision to be valid and enforceable, without affecting the
remaining portions of this Agreement, which shall remain in full force and
effect; provided, however, that the severing of any such provision will not
materially change the substance of this Agreement. As so amended, this
Agreement shall be enforced to the fullest extent possible to give effect to
the intention of the Parties expressed herein.
12.5 Mutual Contribution; Third Party Beneficiaries. The Parties to
this Agreement and their counsel have mutually contributed to its drafting.
Consequently, no provision of this Agreement shall be construed against any
party on the ground that such party drafted the provision or caused it to be
drafted, or the provision contains a covenant of such party. This Agreement
shall not confer any rights or remedies upon any person other than the Parties
and their respective successors and permitted assigns.
12.6 Waivers. No delay on the part of any party in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
waiver of any right, power or privilege operate as a waiver of any other
right, power or privilege, nor shall any single or partial exercise of any
right, power or privilege preclude any other or further exercise thereof or of
any other right, power or privilege. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies which the
Parties otherwise may have at law or in equity.
12.7 Operative Language; Currency. The English language shall
control the interpretation of this Agreement and all other writings and
communications between the Parties. All references to currency and currency
amounts herein shall refer solely to United States Dollars.
12.8 Headings; Gender; Number. The headings of articles and sections
of this Agreement and of the schedules and exhibits hereto are for convenience
only and are not intended to limit, restrict, expand or otherwise affect the
meaning or interpretation of the provisions of this Agreement. The use of any
gender hereunder shall include all genders and the use of the singular shall
include the plural, and vice versa, in each case as the context may require.
12.9 Applicable Law. This Agreement is governed by and shall be
construed and enforced in accordance with the internal laws of the State of
Delaware without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction).
12.10 Forum Choice and Venue. Any judicial proceeding brought
against any party hereto with respect to this Agreement or any transactio
contemplated hereby shall be brought in the United States District Court for
the Eastern District of Missouri, or, if such court does not have
jurisdiction, then in the courts of the State of Missouri, and, by execution
and delivery of this Agreement, each of the Parties hereto (i) accepts,
generally and unconditionally, the exclusive jurisdiction of such court and
any related appellate court, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement, subject, in each
case, to all rights to appeal such decisions to the extent available to the
Parties, and (ii) irrevocably waives any objection it may now or hereafter
have as to the venue of any such suit, action or proceeding brought in such
court or that such court is an inconvenient forum. Each party hereto hereby
waives personal service of process and consents that service of process upon
it may be made by delivery or by certified or registered mail, return receipt
requested, at its last known address and service so made shall be deemed
completed on the date of delivery or on the fifth (5th) business day after
such service is deposited in the mail, as the case may be. Nothing herein
shall affect the right to serve process in any other manner permitted by law.
12.11 Non-Binding Mediation. Any controversy or claim arising out of
or relating to this Agreement, its interpretation, the breach or the
consummation hereof, or the closing contemplated thereunder, or the respective
rights or obligations of the Parties, shall be first subject to non-binding
mediation administered by the American Arbitration Association (the
"Mediator"). In the event that such controversy or claim cannot be resolved
pursuant to mediation within thirty (30) days after such matter is submitted
to the Mediator as provided above, such controversy or claim may be settled by
arbitration upon the written arbitration agreement made at that time of all
Parties, and failing such arbitration agreement, by litigation.
12.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[Signature Pages Follow]
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement
to be duly executed as of the date first written above.
Company: Contico:
CII ACQUISITION, L.L.C. CONTICO INTERNATIONAL, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------- -----------------
Its:___CEO_____________ Its:__VP/CFO___________
Exhibit 2(b)
------------
UNIT PURCHASE AGREEMENT
Dated as of December 31, 1998
by and among
KATY INDUSTRIES, INC.,
CONTICO INTERNATIONAL, INC.
and
▇▇▇▇▇▇ ▇▇▇▇▇▇
TABLE OF CONTENTS
ARTICLE I Purchase and Sale of the Common Units 1
1.1 Purchase and Sale 1
1.2 Transfer of Common Units 1
1.3 Further Assurances 2
ARTICLE II Purchase Price and Payment 2
2.1 Purchase Price 2
2.2 Payment 2
2.3 Closing Date Net Worth 2
ARTICLE III Closing 4
3.1 Closing Date 4
3.2 Deliveries by the Purchaser 4
3.3 Deliveries by the Seller 5
3.4 Deliveries by ▇▇▇▇▇▇ 6
3.5 Simultaneous Delivery 7
ARTICLE IV Conditions to Closing 7
4.1 Conditions Precedent to Obligations of the Purchaser 7
4.2 Conditions Precedent to Obligations of the Seller and Miller8
ARTICLE V Representations and Warranties 9
5.1 Representations and Warranties of the Seller 9
5.2 Representations and Warranties of the Purchaser 24
5.3 Representations and Warranties of ▇▇▇▇▇▇ 26
ARTICLE VI Covenants and Agreements 27
6.1 Conduct Prior to Closing 27
6.2 Notice of Adverse Events 28
6.3 Right of Inspection; Access 29
6.4 Public Statements 29
6.5 [Reserved] 29
6.6 Consents and Approvals 29
6.7 Post-Closing Obligations of the Company 30
6.8 Allocation and Section 754 Election 30
6.9 Substitute Security for Letters of Credit 30
6.10 Payoff of Mercantile and NatWest Indebtedness 31
ARTICLE VII Termination and Abandonment 31
7.1 Termination and Abandonment 31
7.2 Effect of Termination 31
ARTICLE VIII Indemnification 32
8.1 The Seller's Indemnification 32
8.2 The Purchaser's Indemnification 33
8.3 Losses 33
8.4 Procedure for Indemnification 34
8.5 Sole Remedy 35
8.6 Single Recovery of Indemnifiable Losses 35
ARTICLE IX Expenses 36
9.1 Professional Expenses 36
9.2 Transfer Expenses 36
ARTICLE X Miscellaneous 36
10.1 Entire Agreement; Amendment 36
10.2 Binding Effect; Assignment 36
10.3 Notices 36
10.4 Severability 38
10.5 Mutual Contribution; No Third Party Beneficiaries 38
10.6 Waivers 38
10.7 Operative Language; Currency 39
10.8 Headings; Gender; Number 39
10.9 Applicable Law 39
10.10 Forum Choice and Venue 39
10.11 Non-Binding Mediation 39
10.12 Counterparts 39
UNIT PURCHASE AGREEMENT
-----------------------
THIS UNIT PURCHASE AGREEMENT (this "Agreement") is dated as of December
31, 1998, by and between KATY INDUSTRIES, INC., a Delaware corporation (the
"Purchaser"), CONTICO INTERNATIONAL, INC., a Missouri corporation (the
"Seller"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇, an individual resident of the State of Florida
("▇▇▇▇▇▇").
RECITALS
--------
A. The Seller and ▇▇▇▇▇▇ are the sole parties to that certain Limited
Liability Company Agreement of even date herewith (the "LLC Agreement"),
pursuant to which CII Acquisition, L.L.C., a Delaware limited liability
company (the "Company"), has been established with the Seller and ▇▇▇▇▇▇ as
the initial members.
B. The Seller owns or will own all of the Preferred Units and the
Contico Common Units (each as defined in the LLC Agreement). ▇▇▇▇▇▇ owns or
will own all of the ▇▇▇▇▇▇ Common Units (as defined in the LLC Agreement).
C. The Seller and ▇▇▇▇▇▇ desire to sell to the Purchaser, and the
Purchaser desires to purchase from the Seller and ▇▇▇▇▇▇, one hundred percent
(100%) of the Common Units (as defined in the LLC Agreement) of the Company on
the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the Recitals, the mutual promises
made herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
---------
Purchase and Sale of the Common Units
-------------------------------------
1.1 Purchase and Sale. Subject to the terms and conditions set forth
in this Agreement, at the Closing (as hereinafter defined), the Seller and
▇▇▇▇▇▇ shall each sell, transfer, assign, convey and deliver to the Purchaser,
and the Purchaser shall purchase, accept and acquire from each of the Seller
and ▇▇▇▇▇▇, the Common Units, free and clear of all Liens, but subject to the
terms of the LLC Agreement and the Members Agreement (as hereinafter defined).
1.2 Transfer of Common Units. On the Closing Date, each of the
Seller and ▇▇▇▇▇▇ shall sell, assign, transfer, convey and deliver or caused
to be sold, assigned, transferred, conveyed and delivered to the Purchaser all
of the Common Units by delivery of certificates evidencing the Common Units,
duly endorsed in blank (or together with assignments separate from
certificate, duly endorsed in blank), sufficient to vest in the Purchaser
good, complete and indefeasible title to the Common Units, free and clear of
all Liens, but subject to the terms of the LLC Agreement and Members
Agreement. All such documents shall be in form and substance consistent with
this Agreement and reasonably satisfactory to the Purchaser.
1.3 Further Assurances. From time to time after the Closing Date, at
the Purchaser's request and without further consideration therefor, each of
the Seller and ▇▇▇▇▇▇ shall perform, execute and deliver or cause to be
performed, executed and delivered, all such further acts, assignments,
instruments, conveyances and assurances as the Purchaser may reasonably
require for the more effective assigning, transferring, granting, conveying,
and selling of the Contico Common Units and ▇▇▇▇▇▇ Common Units (respectively)
to the Purchaser and as may be appropriate to carry out the transactions
contemplated hereby.
ARTICLE II
----------
Purchase Price and Payment
--------------------------
2.1 Purchase Price. The purchase price to be paid by the Purchaser
to the Seller for the Contico Common Units shall be One Hundred Thirty One
Million Eight Hundred Thousand Dollars ($131,800,000) and the purchase price
to be paid by the Purchaser to ▇▇▇▇▇▇ for the ▇▇▇▇▇▇ Common Units shall be
Three Hundred Thousand Dollars ($300,000) (the sum of $132,100,000.00 is
referred to herein as the "Purchase Price"), subject to the Net Worth
Adjustment.
2.2 Payment. At the Closing, the Purchaser shall deliver the
Purchase Price to the Seller and ▇▇▇▇▇▇ in proportion to their ownership of
the Common Units by wire transfer of immediately available funds to accounts
designated by the Seller and ▇▇▇▇▇▇.
2.3 Closing Date Net Worth.
(a) Net Worth Adjustment. The Purchase Price may be decreased as
provided in this Section 2.3. The "Net Worth Adjustment" shall be equal to
the difference, if positive, between (A) One Hundred Five Million Dollars
($105,000,000) (the "Base Net Worth"), and (B) the actual Closing Date Net
Worth of the Company (the "Final Closing Date Net Worth"). If the Base Net
Worth is greater than the Final Closing Date Net Worth, then the Purchase
Price will be decreased by the difference. If the Final Closing Date Net
Worth is greater than the Base Net Worth, then there shall be no adjustment
to the Purchase Price.
(b) Definition. The term "Closing Date Net Worth"means the
aggregate book value of the Company Assets (as defined in Section 5.1(d)
hereof) less the aggregate book value of the liabilities of the Company other
than the Revolving Debt (the "Company Liabilities"), determined as of the
Closing Date on a consolidated basis in accordance with generally accepted
accounting principles consistently applied with respect to the operations of
the Business, as defined in that certain Contribution Agreement dated December
31, 1998, by and between the Seller and Company (the "Contribution Agreement")
(whether operated by the Seller or the Company) over past periods ("GAAP").
All capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to such terms in the Contribution Agreement. "Revolving
Debt" means the aggregate principal amount and interest thereon owed under the
Mercantile Agreement and the NatWest Agreement as of the Closing Date.
(c) The Seller's Estimate. Attached hereto as Schedule 2.3(c) is
the Seller's calculation of the estimated Closing Date Net Worth and the
components thereof, prepared in good faith by the Seller (the "Estimated
Closing Date Net Worth Statement").
(d) Determination of Final Closing Date Net Worth Statement.
(i) Within forty-five (45) calendar days after the Closing
Date (as hereinafter defined), the Purchaser shall deliver to the Seller
a proposed statement of the Final Closing Date Net Worth (the "Final
Closing Date Net Worth Statement") prepared by the Company in accordance
with GAAP. The inventory included on the Final Closing Date Net Worth
Statement shall be determined by rolling forward to the Closing Date, the
physical inventory conducted by the Company as of December 31, 1998.
Inventory will be valued at the Company's standard cost in accordance
with GAAP, with appropriate reserves for obsolete, defective, damaged,
discontinued or slow moving inventory. The Seller and the Purchaser
shall have the right to observe the physical inventory conducted by the
Company and the preparation of the Final Closing Date Net Worth
Statement. The Seller, the Company and the Purchaser shall each pay
their respective expenses, if any, incurred in connection with the
physical inventory and preparation of the Final Closing Date Net Worth
Statement.
(ii) No later than fifteen (15) calendar days after the
Seller's receipt of the proposed Final Closing Date Net Worth Statement,
if, in the Seller's commercially reasonable judgment, adjustments are
necessary for such Final Closing Date Net Worth Statement to be prepared
in conformity with the accounting methods discussed above, the Seller
shall deliver to the Purchaser a written statement describing such
objections and the applicable bases for such adjustments. If the
Purchaser does not receive such written statement from the Seller within
such fifteen (15) day period, the proposed Final Closing Date Net Worth
Statement as prepared by the Company and delivered by the Purchaser shall
be deemed accepted by the Seller. In the event that the Seller does
deliver such a written statement to the Purchaser, the Purchaser shall
have the right, in its commercially reasonable judgment, to also prepare
adjustments to the proposed Final Closing Date Net Worth Statement
consistent with GAAP, by delivery of a written statement describing such
proposed adjustments to the Seller not later than five (5) calendar days
following receipt of the Seller's written statement. The Purchaser shall
cause the Company to provide the Seller with access to the books and
records of the Business during normal business hours to review the Final
Closing Date Net Worth Statement. The parties shall use reasonable
efforts to resolve any such objections or proposed adjustments by the
Seller and the Purchaser.
(iii) If the parties are unable to finally resolve all such
objections within thirty (30) calendar days after the Purchaser's or the
Seller's, if applicable, receipt of such objections, the parties shall,
within ten (10) calendar days after such thirty (30) day period, submit
the accounting issues in dispute to the St. Louis, Missouri office of
KPMG Peat Marwick LLP (the "Accountant") to resolve any such remaining
objections. The Accountant shall be furnished with a copy of this
Agreement, the proposed Final Closing Date Net Worth Statement, and any
objections of the Seller or the Purchaser to the proposed Final Closing
Date Net Worth Statement and the applicable bases therefor. Each party
shall have the right to submit supporting or explanatory material to the
Accountant, complete copies of which supporting and explanatory material
shall be provided to the other party. The determination of the
Accountant shall be made within fifteen (15) days of the submission to
such Accountant and shall be set forth in writing and be conclusive and
binding upon the parties hereto. The fees and expenses of the Accountant
shall be shared equally by the Purchaser and the Seller. The Purchaser
will revise the Final Closing Date Net Worth Statement to reflect the
resolution of any objections thereto pursuant to this Section
2.3(d)(iii).
(e) Determination of Final Purchase Price. If the Purchase Price
as adjusted by the Net Worth Adjustment determined utilizing the amounts set
forth on the Final Closing Date Net Worth Statement (the "Final Purchase
Price") shall be less than the Purchase Price, the amount of such difference
shall be refunded by the Seller and ▇▇▇▇▇▇ in proportion to their prior
ownership of the Common Units, to the Purchaser within five (5) days following
the earlier of (i) the date the parties agree upon the Net Worth Adjustment,
and (ii) the date of resolution in accordance herewith of any dispute among
the parties with respect to the Net Worth Adjustment. Any payment made
pursuant to this Section 2.3(e) shall include interest on the principal amount
of such payment after the Closing Date until the date of such payment at the
rate announced in The Wall Street Journal as the "Prime Rate" in effect on the
Closing Date.
ARTICLE III
-----------
Closing
-------
3.1 Closing Date. The transactions contemplated by this Agreement
shall be consummated at a closing (the "Closing") to be held at 10:00 a.m.
local time at the St. Louis, Missouri office of counsel to the Seller, on
January 8, 1999, or on such other Friday as the parties may mutually determine
(the "Closing Date").
3.2 Deliveries by the Purchaser. At the Closing, the Purchaser shall
execute and/or deliver to the Seller and ▇▇▇▇▇▇ the following (each dated the
Closing Date, except as otherwise indicated):
(a) The Purchase Price to Seller and ▇▇▇▇▇▇ in proportion to their
ownership of the Common Units;
(b) A copy of resolutions duly adopted by the Board of Directors of
the Purchaser, authorizing the execution, delivery and performance of this
Agreement and all related agreements, documents and certificates, duly
certified by the Secretary or an Assistant Secretary of the Purchaser;
(c) A legal opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, as counsel to the
Purchaser, in substantially the form attached hereto as Exhibit A;
(d) A Certificate of Good Standing of the Purchaser, certified as of
a date not more than seven (7) days prior to the Closing Date, from the
Secretary of State of Delaware;
(e) A certificate of the Secretary or an Assistant Secretary of the
Purchaser, certifying as to the incumbency and signatures of the Purchaser's
officers;
(f) A certificate of an authorized officer of the Purchaser
certifying that, to the best of his knowledge and belief, the conditions
specified in Section 4.2 hereof have been fully satisfied;
(g) A guaranty of the Company's obligations under the Leases,
substantially in the form of Exhibit B attached hereto (the "Lease Guaranty"),
executed by the Purchaser;
(h) A members agreement, substantially in the form of Exhibit C
attached hereto (the "Members Agreement"), executed by the Purchaser;
(i) Noncompetition agreement with the Seller, substantially in the
form of Exhibit D-1, attached hereto (the "Seller Noncompetition Agreement"),
executed by the Company;
(j) A transition services agreement in favor of the Seller,
substantially in the form of Exhibit G attached hereto (the "Transition
Agreement"), executed by the Company;
(k) The letter(s) of credit described in Section 6.9 hereof; and
(l) Such other documents and certificates, consistent with the terms
of this Agreement, as the Seller shall reasonably request to be executed or
delivered by the Purchaser at the Closing.
3.3 Deliveries by the Seller. At the Closing, the Seller shall
execute and/or deliver, or cause to be executed and/or delivered, to the
Purchaser the following (each dated the Closing Date, except as otherwise
indicated):
(a) Certificates evidencing the Contico Common Units, duly endorsed
in blank (or together with assignments separate from certificate, duly
endorsed in blank);
(b) A copy of resolutions duly adopted by the Board of Directors and
the shareholders of the Seller, authorizing the execution, delivery and
performance of this Agreement and all related agreements, documents and
certificates, duly certified by the Secretary or an Assistant Secretary of the
Seller;
(c) A legal opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as counsel to the Seller and
▇▇▇▇▇▇, in substantially the form attached hereto as Exhibit E;
(d) A Certificate of Good Standing of the Seller, certified as of a
date not more than seven (7) days prior to the Closing Date, from the
Secretary of State of Missouri.
(e) A certificate of the Secretary or an Assistant Secretary of the
Seller, certifying: (i) a copy of the Seller's By-laws; (ii) a copy of the
Certificate of Incorporation of the Seller; and (iii) as to the incumbency and
signatures of the Seller's officers;
(f) A certificate of Good Standing of the Company, certified as of a
date not more than seven (7) days prior to the Closing Date, from the
Secretary of State of Delaware;
(g) A certificate of the manager of the Company (the "Manager"),
certifying true and correct copies of the LLC Agreement, as amended, and the
certificate of formation of the Company;
(h) A certificate of an authorized officer of the Seller certifying
that to the best of his knowledge and belief the conditions specified in
Section 4.1 hereof have been fully satisfied;
(i) The Members Agreement, executed by the Seller;
(j) The Seller Noncompetition Agreement, as executed by the Seller;
(k) The Transition Agreement, executed by the Seller;
(l) All documents relating to the acquisition or lease of the
Contributed Real Property, the Leased Real Property and the Contico Leased
Real Property set forth in Section 8.6 of the Contribution Agreement, in form
and substance satisfactory to the Purchaser, except for the survey and Title
Policy for the Winters, Texas property which shall (i) be delivered by the
Seller to the Purchaser within twenty-one (21) days of the Closing, (ii)
conform to the requirements of Section 8.6 of the Contribution Agreement, and
(iii) be in form and substance satisfactory to the Purchaser;
(m) To the extent not delivered to the Company prior to the Closing
under the Contribution Agreement, those items set forth on Schedule 6.1(e) to
the Contribution Agreement;
(n) The written consent to the transfer to the Company of the
policies of insurance described on Schedule 7.1(o) to the Contribution
Agreement or the written assurance of the Seller to the Purchaser, in form and
substance reasonably satisfactory to the Purchaser, that the Seller will
retain responsibility for that portion of the Assumed Liabilities that are
covered by such policies of insurance until such time as such written consents
to the transfer of such policies to the Company are obtained; and
(o) Such other documents and certificates, consistent with the terms
of this Agreement, as the Purchaser shall reasonably request to be executed or
delivered by the Seller at the Closing.
3.4 Deliveries by ▇▇▇▇▇▇. At the Closing, ▇▇▇▇▇▇ shall execute
and/or deliver, or cause to be executed and/or delivered, to the Purchaser the
following (each dated the Closing Date):
(a) Certificates evidencing the ▇▇▇▇▇▇ Common Units, duly endorsed in
blank (or together with assignments separate from certificate, duly endorsed
in blank; and
(b) A certificate of ▇▇▇▇▇▇ certifying that to the best of his
knowledge and belief the conditions regarding ▇▇▇▇▇▇ specified in Section 4.1
hereof have been fully satisfied.
3.5 Simultaneous Delivery. All documents, instruments and funds to
be delivered by the Seller and the Purchaser at the Closing pursuant to this
Article III shall be regarded as having been delivered simultaneously, and no
document, instrument or funds shall be regarded as having been delivered until
all such documents, instruments and funds have been delivered.
ARTICLE IV
----------
Conditions to Closing
---------------------
4.1 Conditions Precedent to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by
this Agreement are subject to and conditioned on the satisfaction of each of
the following conditions:
(a) Representations, Warranties and Covenants. All of the
representations and warranties of each of the Seller and ▇▇▇▇▇▇ contained
herein, shall be true and correct in all material respects on and as of the
date hereof and on and as of the Closing Date, and each of the Seller and
▇▇▇▇▇▇ shall have complied with and performed in all material respects, all of
the covenants and agreements to be complied with and performed by the Seller
on or prior to the Closing Date.
(b) Compliance with Applicable Laws. Each of the Seller, ▇▇▇▇▇▇ and
the Company shall have complied with all applicable federal, state, foreign
and local laws necessary to consummate the transactions contemplated hereby.
(c) No Adverse Proceedings. As of the Closing Date, no action,
investigation, suit or proceeding by any foreign, federal, state, or local
governmental or regulatory commission, agency or authority, and no action,
suit or proceeding by any other Person (as defined hereinafter), shall be
pending or threatened which challenges or seeks to enjoin, prohibit or prevent
this Agreement or any transaction contemplated hereby. As used in this
Agreement, the term "Person" shall mean and include any individual, sole
proprietorship, partnership, joint venture, limited liability company, trust,
association, corporation, or any other entity and any governmental agency,
department or authority.
(d) No Material Adverse Change. There shall have been no material
adverse change in or material loss or damage to the Company Assets, the
Company Liabilities, the Subsidiary or its assets or the operations or
financial condition of the Business from the Baseline Financial Statements Date
through the Closing Date.
(e) Required Consents. The third party consents, waivers and
releases identified on Schedule 4.2(e) (collectively, the "Required
Consents"), shall have been obtained and attained on or prior to, and shall
be in full force and effect as of, the Closing Date.
(f) Deliveries.
(i) The Seller shall have delivered or shall have caused to
be delivered to the Purchaser all documents, instruments and other items
required to be delivered to the Purchaser pursuant to Section 3.3 hereof.
In addition, the Seller shall deliver or cause to be delivered to the
Purchaser noncompetition agreements with ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇,
substantially in the forms of Exhibit D-2 and Exhibit D-3 attached hereto
(collectively with the Seller Noncompetition Agreement, the
"Noncompetition Agreements"), executed by the Company and ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇, as applicable.
(ii) The Purchaser shall have received an employment
agreement with ▇▇▇▇▇ ▇. ▇▇▇▇ ("Hill"), substantially in the form of
Exhibit F, attached hereto (the "Employment Agreement"), executed by the
Company and Hill.
(g) Estimated Closing Date Net Worth. The Estimated Closing Date Net
Worth Statement shall reflect that the Closing Date Net Worth is not less than
One Hundred Five Million and No/100 Dollars ($105,000,000.00).
(h) Contribution Agreement. The closing of the transactions
contemplated by the Contribution Agreement shall have occurred and the
Purchaser shall be reasonably satisfied with the form and substance of all
documents and instruments, whether of transfer or otherwise, executed and
delivered in connection with such transactions.
(i) Payoff of Indebtedness. The Sellers shall have delivered or
shall have caused to be delivered to the Purchaser a payoff letter, in form
and substance satisfactory to Purchaser, regarding all outstanding
indebtedness of the Company to Mercantile Bank N.A., except pursuant to
outstanding letters of credit, and a certificate, in form and substance
satisfactory to Purchaser, setting forth the outstanding indebtedness to
National Westminster Bank, PLC.
4.2 Conditions Precedent to Obligations of the Seller and ▇▇▇▇▇▇.
The obligations of the Seller and ▇▇▇▇▇▇ to consummate the transactions
contemplated by this Agreement are subject to and conditioned on the
satisfaction of each of the following conditions:
(a) Representations, Warranties and Covenants. All of the
representations and warranties of the Purchaser contained herein shall be true
and correct in all material respects on and as of the date hereof and on and
as of the Closing Date, and the Purchaser shall have complied with and
performed in all material respects all of the covenants and agreements to be
complied with and performed by the Purchaser on or prior to the Closing Date.
(b) No Adverse Proceedings. As of the Closing Date, no action,
investigation, suit or proceeding by any governmental or regulatory
commission, agency or authority, and no action, suit or proceeding by any
other Person, shall be pending or threatened which challenges or seeks to
enjoin, prohibit or prevent this Agreement or any transaction contemplated
hereby.
(c) Compliance with Applicable Laws. The Purchaser shall have
complied with all applicable federal, state, foreign and local laws
necessary to consummate the transactions contemplated hereby.
(d) No Material Adverse Change. These shall have been no material
adverse change in or material loss or damage to the assets, operations or
business of the Purchaser and its subsidiaries since the date of the
Purchaser's most recently filed Form 10-Q.
(e) Required Consents. All Required Consents shall have been
obtained and attained on or prior to, and shall be in full force and effect
as of, the Closing Date.
(f) Contribution Agreement. The closing of the transactions
contemplated by the Contribution Agreement shall have occurred.
(g) Deliveries. The Purchaser shall have delivered to the Seller all
documents, instruments and other items required to be delivered to the Seller
on the Closing Date pursuant to Section 3.2 hereof.
ARTICLE V
---------
Representations and Warranties
------------------------------
5.1 Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Purchaser as follows:
(a) Organization and Standing of the Seller.
(i) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Missouri.
The Seller is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the properties owned or held
under lease by it or the nature of the Business makes such qualification
necessary, except where the failure to qualify to do business would not
have a material adverse effect on the Seller or its ability to perform
the transactions contemplated by this Agreement or on the Seller or its
properties.
(ii) The Seller has full corporate power and authority to
execute and deliver this Agreement, to transfer and deliver the Contico
Common Units to the Purchaser, and otherwise to perform all of its
obligations hereunder and to consummate the transactions contemplated
hereby. All shareholder, corporate and other proceedings required to be
taken by or on the part of the Seller to execute, deliver and carry out
this Agreement and to authorize the Seller to transfer the Contico Common
Units to the Purchaser have been duly and properly taken. This Agreement
constitutes the legal, valid and binding obligation of the Seller,
enforceable in accordance with its terms, and all instruments of transfer
and other documents to be delivered in connection herewith, when executed
and delivered by or on behalf of the Seller, will constitute legal, valid
and binding obligations of the Seller, enforceable in accordance with
their respective terms.
(b) Organization and Standing of the Company. The Company is a
limited liability company duly organized, validly existing and in good
standing under the laws of Delaware. The Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of England and
Wales under number 1338772. Each of the Company and the Subsidiary is, and at
Closing the Company will be, duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties owned
or held under lease by it or the nature of the Business makes such
qualification necessary, except where the failure to qualify to do business
would not have a material adverse effect on the Company or the Subsidiary or
their respective properties.
(c) Capitalization of the Company and Related Matters. The equity
interests of the Company at Closing consist solely of the Common Units and
Preferred Units set forth on Exhibit B to the LLC Agreement. The Company does
not have outstanding any securities convertible into or exchangeable for any
interest in the Company or containing any profit participation features, nor
does it have outstanding security appreciation rights or phantom security
plans. The Common Units at Closing shall have been validly issued. The
Company has not violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its securities,
including without limitation, the Common Units, and, taking into account the
Purchaser's representations hereunder, the offer, sale and issuance of the
Common Units hereunder do not require registration under the Securities Act or
any applicable state securities laws. Other than the LLC Agreement and the
Members Agreement, there are no agreements relating to the operation of the
Company or the ownership, voting or transfer of interests in the Company or
with respect to any other aspect of the Company's affairs. A true, correct
and complete copy of the LLC Agreement has been delivered to the Purchaser.
(d) Power of the Company. Each of the Company and the Subsidiary has
all requisite corporate or other power and authority and all requisite and
sufficient licenses, franchises, permits and authorizations (collectively, the
"Licenses") to own and lease the Contributed Assets and any and all additional
assets acquired by the Company subsequent to the closing contemplated by the
Contribution Agreement (the Contributed Assets, together with any such
subsequently acquired assets are referred to collectively herein as the
"Company Assets") (or, in the case of the Subsidiary, its assets) and to carry
on the Business as and where presently conducted, as applicable. All material
Licenses held by the Company and/or the Subsidiary in connection with the
Business are more particularly described on Schedule 7.1(a) attached to the
Contribution Agreement. Such Licenses are all of the Licenses necessary to
the conduct of the Business by the Company in the same manner as heretofore
conducted by the Seller and/or the Company and, except as noted on Schedule
5.1(d) attached hereto, all are included as part of the Company Assets. No
governmental proceeding is pending or, to the Company's or the Seller's
knowledge, threatened to cancel, modify or fail to renew any such License.
The Company has no subsidiaries the operations of which are included in or
related to the Business, other than the Subsidiary. No Person owns any
interest in the Subsidiary other than the Company.
(e) Negation of Default. Except as set forth on Schedule 5.1(e), the
execution and delivery of this Agreement by the Seller, its compliance with
the terms hereof and its consummation of the transactions contemplated hereby
will not violate, conflict with or result in a breach of any provision of the
Articles of Incorporation or By-laws of the Seller, the constitution of the
Subsidiary, the Certificate of Formation of the Company, the LLC Agreement or
any other governing document of the Company or (whether with due notice or
lapse of time or otherwise) result in a default, give rise to any right of
acceleration or result in the creation of any Lien under, or otherwise result
in a breach or violation of, (i) any contract, agreement, lease, commitment,
indenture, mortgage, trust deed, note, bond, debenture, License or other
instrument or obligation relating to the Business, the Company Assets or the
Subsidiary's assets that is disclosed or required to be disclosed in the
Schedules to this Agreement, or (ii) any judgment, order or decree of any
court, administrative agency or other governmental authority, to which the
Company is a party or otherwise subject or by which the Company may be bound.
(f) Consents. Other than consents and approvals or filings or
registrations required by federal and state securities laws, and except as set
forth on Schedule 5.1(f) attached hereto, the execution and delivery of this
Agreement by the Seller, and its consummation of the transactions contemplated
hereby, will not require the approval, consent or authorization of any third
party, any federal, state or local court, governmental authority or regulatory
body or other Person, or give any party with any rights under any instrument,
agreement, contract, commitment, lease or mortgage, judgment, award, order or
other restriction the right to terminate, modify or otherwise change any of
the current rights or obligations of the Seller thereunder.
(g) Title to Contico Common Units. The Seller has good and
marketable title to the Contico Common Units, free and clear of any and all
Liens.
(h) Financial Statements.
(i) Attached hereto as Schedule 5.1(h)(i) are the audited
financial statements of the Seller as of and for the fiscal year ended
May 31, 1998 (the "Baseline Financial Statements") and the audited
financial statements of the Seller as of and for the fiscal years ended
May 31, 1996 and 1997, including a balance sheet and statement of
operations (income), all of which were prepared in conformity with GAAP.
Such financial statements are true and correct in all material respects
and fairly present the financial condition and results of operations of
the Seller for the periods and as at the dates thereof, taking into
account the fact the assets, liabilities and results of operations of the
Discontinued Operations are reflected therein. The Seller has not
changed any of its accounting methods or practices since January 1, 1996,
except as set forth on Schedule 5.1(h)(i). Except as set forth in the
footnotes to the Baseline Financial Statements or on Schedule 5.1(h)(i)
attached hereto, the Baseline Financial Statements do not reflect any
intercompany or related party assets, liabilities, or transactions,
including, without limitation, any intercompany or related party sales,
purchases, expenses, licenses, commissions or transactions.
(i) Inventory. The inventory carried for value on the books and
records of the Seller or the Company, in the aggregate, consists of items of
usable or saleable in the ordinary course of the Business consistent with past
practice. Schedule 5.1(i) attached hereto is a true copy of Seller's
inventory obsolescence report as of August 31, 1998, which accurately
reflects, in all material respects, the obsolete, discontinued, defective and
damaged inventory of the Seller and the Subsidiary as of such date. Since
such date, there has been no material adverse change in the proportion of
inventory of Contico, the Subsidiary and the Company that is obsolete,
discontinued, defective or damaged. Based upon historical experience, the
current level of inventory of the Business, taken as a whole, is reasonably
likely to satisfy the volume of purchases expected from customers in
connection with the Business in the ordinary course of business. Except as
set forth on Schedule 5.1(i), no such items of inventory are subject to any
buyback arrangement or similar sales promotion offered by the Seller, the
Company or the Subsidiary. Neither the Company nor the Subsidiary has
received any written request that the Company or the Subsidiary accept a
significant return of goods or Products sold in connection with the Business.
(j) Absence of Undisclosed Liabilities. Neither the Company nor the
Subsidiary has any debts, obligations or liabilities (whether contingent,
accrued or absolute), other than the Assumed Liabilities (as defined in the
Contribution Agreement) and other obligations and liabilities incurred in the
ordinary course of the Business since the closing under the Contribution
Agreement.
(k) Title to and Sufficiency of Company Assets. The Company has good,
marketable and legal title to all of the Company Assets, free and clear of any
Liens (and the Subsidiary's assets are free and clear of all Liens), except
those Liens set forth on Schedule 5.1(k) attached hereto (the "Permitted
Liens"). The Company Assets, taken together with the Leased Real Property,
comprise all of the assets, property and rights to the operation of the
Business as currently conducted.
(l) Condition of Assets. All Company Assets and all assets held by
the Subsidiary are in good, useable condition and repair, ordinary wear and
tear excepted, except for those Company Assets that in the aggregate are
immaterial to the financial condition or operations of the Business. The
Contributed Real Property and Leased Real Property are in conformity with all
applicable building, zoning, occupational safety and other laws, ordinances,
rules, regulations and other requirements.
(m) Intellectual Property. Attached hereto as Schedule 5.1(m) is a
complete and correct list of all registered Intellectual Property including
known marks used at common law owned or used by or registered in the name of
the Company and/or the Subsidiary in connection with the Business (including,
without limitation, all licensing or similar agreements relating to the
foregoing, whether the Company or the Subsidiary is the licensor or licensee
thereunder), whether registered with any United States or foreign governmental
entity or agency or whether any applications for such registration are
pending. Notwithstanding the above, the Company also has had transferred to
it all marks owned by the Seller and the goodwill symbolized thereby,
regardless of whether they have been listed in Schedule 5.1(m). The Company
or the Subsidiary owns or possesses adequate and enforceable licenses or other
rights to use all Intellectual Property in the conduct of the Business.
Except as disclosed on Schedule 5.1(m), neither the Company nor the Subsidiary
is in default under any such licensing or similar agreement, is aware of any
other party to any such license or agreement being in default thereunder or
has received any notice or other knowledge of conflict with or infringement or
misappropriation (or alleged infringement or misappropriation) of any rights
of any Person, and neither the Seller nor any officer, director, employee,
customer, vendor, shareholder or former shareholder of the Seller or the
Subsidiary nor any other Person has any rights in or to any of such
Intellectual Property. To the Seller's knowledge, no Intellectual Property
identified herein is being infringed upon or appropriated by any third party.
The Company or the Subsidiary owns and possesses adequate and enforceable
rights to use all of the Intellectual Property and all design drawings, trade
secrets, processes, and other technical data used or useful in the Business,
all of which are included in the Company Assets or assets held by the
Subsidiary. None of such Intellectual Property or any of the technology
covered thereby has been misappropriated by the Seller, the Company or the
Subsidiary from any Person. Except as disclosed on Schedule 5.1(m), the use
in the Business of any Intellectual Property and other technical or
proprietary data does not require the payment of any royalty or similar
payment to any Person and the Company has good and marketable title thereto.
(n) Litigation. Except as set forth on Schedule 5.1(n) attached
hereto, there are no claims, actions, suits, legal or administrative
proceedings, governmental investigations or any labor matters that involve a
potential liability of Fifty Thousand Dollars ($50,000) or more, individually,
pending or, to the Company's or the Seller's knowledge, threatened against the
Company or the Subsidiary with respect to the Business, the Company Assets or
the Subsidiary's assets, nor has the Company, the Seller or the Subsidiary
received written notice from a third party asserting a basis for any such
claim, action, suit, legal or administrative proceeding, governmental
investigation or labor matter. There are no judgments, decrees, settlements,
orders, rulings, writs or injunctions involving the Business, any of the
Company Assets or any of the Subsidiary's assets that (either by reason of
compliance or default) may adversely affect the Business, any of the Company
Assets or any of the Subsidiary's assets, or which relate in any way to the
transactions contemplated by this Agreement, except as set forth on Schedule
5.1(n).
(o) Compliance with Laws. The Company's and the Subsidiary's
operation and ownership of the Business, the Company Assets and the
Subsidiary's assets, as applicable, are currently in compliance with all laws,
statutes, rules, regulations and other requirements imposed by foreign,
federal, state, local and other governmental authorities applicable to the
Company and/or the Subsidiary in the operation and ownership of the Business,
the Company Assets and the Subsidiary's assets. The representations in this
Section 5.1(o) are not made with respect to the subject matter of any other
representation in this Agreement that includes representations with respect
to compliance with a particular set of laws, statues, rules, regulations and
other requirements, such as those pertaining to taxation, labor, employment
benefits and the environment, and the representations in this Section apply
only with respect to laws, statutes, rules, regulations and other requirements
that are not the subject of a more specific representation contained in this
Agreement.
(p) Environmental. Except as disclosed on Schedule 5.1(p)(i) and/or
the Phase I Audits and/or the Phase II assessments:
(i) To the Seller's and the Company's knowledge, with respect
to the Real Property, and the Company's and the Subsidiary's operation
and ownership of the Business, neither the Seller, the Company nor the
Subsidiary has received any outstanding written notice from any
governmental authority that it is not in compliance with any applicable
foreign, federal, state, municipal and local laws, statutes, and
regulations regulating pollution or contamination by, and the
transportation, handling, storage, labeling, or disposition of, Hazardous
Material, the protection of the environment, health, safety, or the
protection or conservation of natural habitat or resources,(collectively,
the "Environmental Laws").
(ii) Neither the Seller, the Company nor the Subsidiary has
received any written notice from the U.S. Environmental Protection Agency
or any state, local or other domestic or foreign governmental agency or
authority (collectively, the "EPA"), or any other public or private
entity, advising that the Seller, the Company or the Subsidiary is
responsible or potentially responsible for corrective action or
investigation or response costs with respect to a release, a threatened
release or cleanup of Hazardous Material on or about the Contributed Real
Property or Leased Real Property or any other real property. There are
no underground storage tanks located on the Contributed Real Property or
Leased Real Property.
(iii) Copies of all environmental reports and environmental
data with respect to the Contico Leased Real Property, the Leased Real
Property and the Contributed Real Property (collectively, the "Real
Property"), prepared by or on behalf of the Seller or the Company prior
to Closing Date, or otherwise in the possession of the Seller, have been
delivered to the Purchaser.
(q) Taxes. All Taxes payable by the Seller, the Company and/or the
Subsidiary which are due or to become due by reason of the contribution of
Company Assets or the operation of the Business by the Seller and/or the
Subsidiary prior to the closing date under the Contribution Agreement have
been or will be paid when due, except to the extent any such Taxes constitute
an Assumed Liability, in which event they will be paid by the Company or the
Subsidiary. Except for any Taxes included within the Assumed Liabilities,
with respect to any Taxes payable by the Seller or the Company which are not
due and, therefore, have not been paid prior to the Closing Date, such Taxes
payable will be made by the Seller, and all such Taxes will be duly and timely
paid by the Seller. There are no Tax liens upon any property or assets of the
Company or the Subsidiary pertaining to the Business or the Company Assets or
the Subsidiary's assets, except liens for Taxes not yet due and payable and
liens disclosed on Schedule 5.1(q). Except as set forth on Schedule 5.1(q),
all foreign, federal, state, and local tax reports and returns, including
without limitation, income tax returns, withholding tax returns, goods and
services and retail sales tax returns, use tax returns and value added tax
returns, required to be filed by or on behalf of the Company and/or the
Subsidiary on or prior to the Closing Date with any government or any foreign
or domestic governmental agency or authority have been or will be duly
prepared and filed when due (as appropriately extended), and were and will be
true, correct and complete. Except as set forth on Schedule 5.1(q), there is
no examination or proceeding pending or, to the Company's or the Seller's
knowledge, threatened by any authority or agency relating to the assessment or
collection of any Taxes, or any interest or penalties thereon, due from or
remittable by the Company or the Subsidiary. Except as set forth on Schedule
5.1(q), none of Seller, the Company nor the Subsidiary has entered into any
agreement with any governmental agency or authority in effect of which would
be to extend the statute of limitations with respect to any tax period.
(r) Insurance. Attached hereto as Schedule 5.1(r) is a true and
complete list of all policies of fire, liability, indemnity and other forms of
insurance currently in force relating to the Business, the Company Assets
and/or the Subsidiary's assets, setting forth the type and amount of coverage,
policy number, policy periods, the status of premiums paid thereon. Except as
set forth on Schedule 5.1(r) attached hereto, there have been no product
liability claims asserted against the Seller, the Company or the Subsidiary
pertaining to the Business during the immediately preceding two (2) years.
(s) Labor Relations. Except as set forth on Schedule 5.1(s) attached
hereto, neither the Seller, the Company nor the Subsidiary (i) is or was a
party to or bound by any collective bargaining agreement or other contract
with any labor or employee union or association representing any of the
employees of the Company or the Subsidiary working in connection with the
Business, (ii) is currently conducting negotiations with any labor union or
(iii) is aware of any current attempt to organize any employees for the
purpose of collective bargaining. There are no strikes or work stoppages
pending or, to the Seller's or the Company's knowledge, threatened, nor,
except as set forth on Schedule 5.1(s) attached hereto, any labor disputes
or grievances pending or, to the Seller's or the Company's knowledge,
threatened against the Company or the Subsidiary or affecting the Business.
The Company and the Subsidiary have generally good relations with their
employees, and no strikes or work stoppages are pending or have been
threatened by such employees. With respect to any employees of the Business
operated in the United Kingdom, the Company (or the Subsidiary) has complied
with all recommendations made by the Advisory Conciliation and Arbitration
Service and with all awards and declaration made by the Central Arbitration
Committee.
(t) Employee Benefit Plans.
(i) Schedule 5.1(t) attached hereto lists all "Employee
Welfare Benefit Plans" and "Employee Pension Benefit Plans" (as defined
in Sections 3(1) and 3(2) respectively of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) existing on the date hereof
or at any time within the five (5) year period immediately preceding the
Closing Date that are or have been maintained or contributed to by the
Company or the Seller for the benefit of any employees working in
connection with the Business (including, for this purpose and for the
purpose of all of the representations contained in this Section 5.1(t),
the Subsidiary and any other entities which by reason of Section 414 of
the Internal Revenue Code of 1986, as amended (the "Code"), are treated
together with the Company or the Seller as a single employer under Code
Section 414), and are referred to in this Section 5.1(t) collectively as
the "Company").
(ii) Except as noted in Schedule 5.1(t) attached hereto, the
Company does not maintain or contribute to, nor has it or the Seller
maintained or contributed to at any time during the five (5) year period
immediately preceding the Closing Date, any "Employee Pension Benefit
Plan" subject to Title IV of ERISA for the benefit of any employees
working in connection with the Business. Except as noted in Schedule
5.1(t) attached hereto, the Company does not maintain or contribute to,
nor has it or the Seller maintained or contributed to, at any time during
the five (5) year period immediately preceding the Closing Date, any
"Multiemployer Plans," as defined in Section 3(37) of ERISA. Except as
noted on Schedule 5.1(t), all current and material documents relating to
each Multiemployer Plan have been furnished to the Purchaser, and, other
than those so furnished, there are no collective bargaining agreements,
Plan and trust documents, Plan rules with respect to withdrawal,
estimates of withdrawal liability and statements of unfunded vested
benefits and contribution history. The Seller, the Company and the
Subsidiary have made all contributions required in connection with any
Multiemployer Plan as of the date hereof by the terms of the
Multiemployer Plan or by the terms of any collective bargaining
agreement. Except as noted in Schedule 5.1(t) attached hereto, none of
the Seller, the Company nor the Subsidiary has terminated or withdrawn
from, or expects to terminate or withdraw from, (in a complete withdrawal
as defined in Section 4203 of ERISA or a partial withdrawal as defined
in Section 4205 of ERISA), or is aware of any withdrawal liability (as
defined in Section 4201 of ERISA) assessed against the Seller, the
Company or the Subsidiary with respect to, any Multiemployer Plan.
(iii) Except as listed in Schedule 5.1(t) attached hereto,
the Company does not maintain any retirement, pension or deferred
compensation plan or arrangement, savings, incentive or non-qualified
stock option, restricted stock, stock appreciation rights, stock purchase
or phantom stock plan, unemployment compensation plan, salary reduction
agreement, change-in-control or golden or tin parachute agreement,
severance plan or agreement, employment agreement, consulting agreement,
personnel policy (including, but not limited to, holiday pay, moving
expense reimbursement, sick leave, vacation pay, bonus or benefit
arrangement), insurance or hospitalization program or any other fringe
benefit arrangement, whether written or oral (all such plans and
arrangements hereinafter referred to collectively as "Benefit
Arrangements") for any employee, consultant or agent of the Company
working for or in connection with the Business, whether pursuant to
contract, arrangement, custom or informal understanding, which does not
constitute an "Employee Benefit Plan" (as defined in Section 3(3) of
ERISA), or for which the Company may have any liability after the Closing
Date.
(iv) Except as noted in Schedule 5.1(t) attached hereto, a
true and complete copy of each of the Plans and Arrangements listed in
Schedule 5.1(t) attached hereto, and in effect on the date hereof,
together with related trusts, any amendments to the Plans, Arrangements
or trusts, insurance contracts, annuity contracts, investment management
or investment advisor contracts, summary plan descriptions, favorable
Internal Revenue Service determination letters, and the annual reports,
summary annual reports, audit reports, financial statements and
government filings prepared or filed for each such Plan and Arrangement
for the most recent two (2) plan years, has been supplied to the
Purchaser.
(v) Except as noted in Schedule 5.1(t) attached hereto, all
Employee Pension Benefit Plans, Employee Welfare Benefit Plans and
Benefit Arrangements listed in Schedule 5.1(t) comply, and in the past
have complied, in all material respects in form and operation with their
terms and with all requirements of applicable federal, state, local and
other laws and regulations, whether domestic or foreign.
(vi) Except as noted in Schedule 5.1(t) attached hereto, all
group health plans, as defined under Code Section 5000(b)(1) and ERISA
Section 607, maintained by or for current and former employees of the
Seller and their dependents comply in all respects with all COBRA health
continuation coverage requirements under Section 4980B of the Code and
Sections 601-609 of ERISA.
(vii) There have been no non-exempt "prohibited transactions"
(as described in Section 406 of ERISA or Section 4975 of the Code) at any
time with respect to any Employee Pension Benefit Plan or Employee
Welfare Benefit Plan or benefit Arrangement (other than a Multiemployer
Plan) maintained by the Company or the Seller or to which the Company or
the Seller has been a party for the benefit of any employee, that could
result in the imposition of any material excise tax upon the Company.
(viii) All accrued obligations of the Company relating to the
Business, as of the Closing Date whether arising by operation of law, by
contract or by past custom, for compensation, including bonuses, to its
employees, consultants or agents, for taxes and other obligations to any
governmental entity payable in connection with such compensation, and for
payments with respect to any Plan or Arrangement listed in Schedule
5.1(t) have been paid, or adequate accruals for such obligations have
been and are being made by the Company, and are reflected in the Baseline
Financial Statements or otherwise on the books and records of the Company
in accordance with GAAP. Except as noted on Schedule 5.1(t), there is
no suit, arbitration or other private or governmental proceeding
concerning any benefit claim (other than routine claims for benefits) or
other matter, under any Employee Pension Benefit Plan, Employee Welfare
Benefit Plan or Benefit Arrangement, whether brought by or against a
participant or beneficiary, a trustee, a plan administrator, the Company
or any director, officer, employee or agent thereof.
(ix) With respect to any severance pay agreement, the
consummation of the transactions contemplated by this Agreement will not
result in any liability to the Company by reason of an acceleration in
the time of payment or vesting or an increase in the amount of
compensation due to any individual covered by a severance pay agreement.
(x) Each Employee Pension Benefit Plan intended to meet the
qualification requirements of the Code (together with its related funding
instrument) is qualified and tax-exempt under Sections 401 and 501 of the
Code, and is the subject of a favorable Internal Revenue Service
determination issued within the past eight (8) years with respect to such
qualification and exemption.
(xi) Except as set forth on Schedule 5.1(t), there are no
Employee Welfare Benefit Plans, Employee Pension Benefit Plans or
Arrangements to which the Company is a party, or by which it is bound,
and under which, as a result of this Agreement, any director, officer,
employee or other agent of the Company, or any other party claiming
through such a person, shall or may acquire rights with respect to any
such Plan or Arrangement (including without limitation the creation,
increase or extension of new or existing rights), become entitled to a
distribution or a payment with respect to any such Plan or Arrangement,
or otherwise receive or become vested in rights or benefits with respect
to any such Plan or Arrangement at a date earlier than if this Agreement
had not been executed.
(xii) No Employee Welfare Benefit Plan provides medical or
death benefits (whether or not insured) with respect to any current or
former employee of the Business, or any of their dependents, which
continue beyond their retirement or other termination of service other
than coverage mandated by Code Section 4980B or ERISA Sections 601-609 or
comparable provisions of state law.
(u) Leases, Contracts and Other Commitments.
(i) Except as set forth on Schedule 5.1(u) attached hereto,
neither the Seller, the Company nor the Subsidiary has any outstanding
contracts, agreements or other commitments, written or oral, for the
performance or receipt of services, the payment of moneys, the purchase,
sale, lease, license, use or acquisition of real or personal property of
any kind or character relating to the Business or the Company Assets, or
otherwise, other than (A) contracts, agreements and commitments not
requiring aggregate payments in excess of One Hundred Thousand Dollars
($100,000) in the case of any single contract, agreement or commitment
or in excess of Two Hundred and Fifty Thousand Dollars ($250,000) in the
aggregate and not otherwise individually or collectively material to the
conduct of the Business, (B) purchase orders or sales orders entered into
in the ordinary course of the Business not requiring aggregate payments
in excess of One Million Dollars ($1,000,000) in the case of any single
purchase order or sales order, or (C) contracts, agreements and
commitments not otherwise terminable without penalty on thirty (30) days'
or less notice and not otherwise individually or collectively material
to the conduct of the Business. Specifically, and not in limitation of
the foregoing, neither the Seller, the Company nor the Subsidiary has any
written or oral contract, agreement or understanding with any supplier,
sales representative, commission agent, distributor, dealer, customer,
consultant or similar person, nor any written or oral employment
contract, agreement or understanding with any person, which relates to
the Business or the Company Assets, other than as identified on Schedule
5.1(u) attached hereto, (true and complete copies of which have been
provided to the Company) nor is there any oral agreement or understanding
with any employee of the Business which cannot be terminated without
cause on reasonable notice and without penalty.
(ii) The Seller has made available to the Purchaser a copy of
all contracts, agreements and commitments set forth on Schedule 5.1(u)
attached hereto, all of which are true and complete.
(iii) Each of the Seller, the Company and the Subsidiary, as
applicable, is in compliance with the provisions of each of the personal
property leases and other real property leases and other contracts,
agreements and commitments, set forth on Schedule 5.1(u) attached hereto,
and no default exists by the Seller or the Company, or to the Company's
or the Seller's knowledge, any other party to any such contract, lease
or commitment. All such personal property leases and other contracts are
valid, subsisting and in full force and effect and enforceable in
accordance with their respective terms, and no event has occurred which,
with the passage of time or giving of notice or both, would constitute
a default under any such lease or contract.
(v) Real Property.
(i) The Company or the Subsidiary owns the real estate in fee
simple, set forth on Schedule 5.1(v)(i) attached hereto (the "Contributed
Real Property") (except for any Contributed Real Property situated in
England in which case the Company is the legal and beneficial owner (as
such terms are defined in English law)) and neither the Company nor the
Subsidiary has any other owned real estate or property interests. The
Contributed Real Property (except for the Winters, Texas property) is
owned by the Company free and clear of all Liens, charges, easements,
covenants and conditions of record or other restrictions, except Liens
for current real property taxes and covenants, conditions and
restrictions of record that do not adversely affect the use or value of
the Contributed Real Property; provided, however, that in the case the
Winters, Texas property, it is owned by the Company free and clear of all
Liens, charges, easements, covenants and conditions of record or other
restrictions, except (A) Liens for current real property taxes and (B)
covenants, conditions and restrictions of record that (i) do not
materially adversely affect the use or value of such property, (ii) are
not included in the Assumed Liabilities, and (iii) will be removed by
Company prior to Closing or as soon thereafter as practicable
(collectively, "Permitted Exceptions"). Except as disclosed on Schedule
5.1(v)(i) attached hereto, all of the buildings, structures and
appurtenances situated on the Contributed Real Property are in good
operating condition, subject to ordinary wear and tear, and in a state
of maintenance and repair adequate and suitable for the purposes for
which such buildings, structures and appurtenances are presently being
used. Except as disclosed on Schedule 5.1(v)(i) attached hereto, with
respect to each such building, structure and appurtenance, the Company
or the Subsidiary, as applicable, has adequate rights of ingress and
egress for operating the Business in the ordinary course and no such
building, structure or appurtenance is located within a flood plain. The
Company has no knowledge that any such building, structure or
appurtenance (i) violates or breaches any restrictive covenant or any
provision of any foreign, federal, state, or local law, or (ii)
encroaches on any property owned by any other Person or on any public
utility easements. No condemnation or rezoning or local or planning
authority proceeding is pending or, to the Company's knowledge,
threatened which would preclude or impair the use of the Contributed Real
Property by the Company or the Subsidiary, as applicable, for the
purposes for which it is currently used or anticipated to be used. In the
event of the Seller's default under the loan documents consisting of a
Secured Promissory Note in the principal amount of $8,000,000 dated May
18, 1993, and a Deed of Trust, Security Agreement, Assignment of Rents
and Fixture Filing dated May 18, 1993, and an Assignment of Leases and
Rents dated May 18, 1993 (the "Loan Documents") given by the Seller to
Principal Life Insurance Company ( "Principal") on the Leased Real
Property at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, the Seller
acknowledges that the Company has the option to pay all principal,
interest, make whole premiums and any other amounts due under the Loan
Documents in consideration for an assignment by Principal of the Loan
Documents to the Company, and the Seller shall cooperate in good faith
in all ways reasonably requested by the Company, including without
limitation, executing and tendering documents, to assist in effecting
such assignment.
(ii) The Company leases the real property from the Seller,
set forth on Schedule 5.1(v)(ii) attached hereto and listed under the
heading "Seller Leased Real Property" (the "Seller Leased Real
Property"), and leases the real property from third parties, set forth
on Schedule 5.1(v)(ii) attached hereto and listed under the heading
"Leased Real Property" (the "Leased Real Property"), and neither the
Company nor the Subsidiary has any other leased real property interests
in connection with the operation of the Business. The Seller Leased Real
Property is leased solely upon and in accordance with the terms of the
leases, set forth on Schedule 5.1(v)(ii) attached hereto and listed under
the heading "Seller Leased Real Property Leases" (the "Seller Leased Real
Property Leases"), and the Leased Real Property is leased solely upon and
in accordance with the terms of the leases set forth on Schedule
5.1(v)(ii) and listed under the heading "Leased Real Property Leases"
(the "Leased Real Property Leases"). All of the buildings, structures
and appurtenances situated on the Seller Leased Real Property and the
Leased Real Property are in good operating condition, subject to ordinary
wear and tear, and in a state of maintenance and repair adequate and
suitable for the purposes for which such buildings, structures and
appurtenances are presently being used. Except as disclosed on Schedule
5.1(v)(ii) attached hereto, with respect to each such building, structure
and appurtenance, the Company or the Subsidiary, as applicable, has
adequate rights of ingress and egress operating of the Business in the
ordinary course and no such building, structure or appurtenance is
located within a flood plain. The Company has no knowledge that any
such building, structure or appurtenance (i) violates or breaches any
restrictive covenant or any provision of any foreign, federal, state, or
local law, or (ii) encroaches on any property owned by any other Person
or on any public utility easements. No condemnation or rezoning or local
or planning authority proceeding is pending or, to the Company's
knowledge, threatened which would preclude or impair the use of the
Seller Leased Real Property and the Leased Real Property by the Company
or the Subsidiary, as applicable, for the purposes for which it is
currently used or anticipated to be used.
(iii) Additional Provisions Relating to Real Property
Situated in England and Wales. Planning Permission has been granted or
is deemed to have been granted for the purposes of planning legislation
in respect of the development of the Real Property situated at Cardrew
Way, Redruth, Cornwall, and all development carried out in relation to
that property has been lawful and all necessary consents and permissions
have been obtained for that development. Compliance is being made and
has at all times been made with all applicable statutory and bye-law
requirements with respect to the Real Property situated at Cardrew Way,
Redruth, Cornwall, and in particular (but without limitation) with the
requirements as to fire precautions and means of escape in case of fire
and with requirements under the Public Health Acts, the Housing Acts, the
Highways Acts, the Office Shops and Railways Premises ▇▇▇ ▇▇▇▇, the
Health and Safety at Work etc. ▇▇▇ ▇▇▇▇ and the Factory Acts (as the same
exist under English law) and Contico does not anticipate it will be
obliged to incur the expenditure of any substantial sum of money within
the next two years in connection with such compliance. All deeds and
documents disclosed by Titmuss ▇▇▇▇▇▇ Dechert to ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ as
being title deeds for the Real Property situated in England and Wales are
under the control of Contico or the Subsidiary (as appropriate) (save to
the extent that Titmuss ▇▇▇▇▇▇ Dechert has already informed Dibb ▇▇▇▇▇▇
▇▇▇▇▇ that the originals of such title deeds have been mislaid by
Contico). So far as Contico is aware, neither Contico nor the Subsidiary
have any continuing liability in respect of any other property formerly
owned or occupied by Contico or the Subsidiary either as original
contracting party or by virtue of any direct covenant having been given
on a sale or assignment to Contico or the Subsidiary or as a guarantor
of the obligations of any other person in relation to such property. So
far as title to and the state and condition of the Real Property situated
in England and Wales is concerned, with the exception of the title
covenants to be given in the transfer of the Redruth Property, no other
warranty or representation whatsoever is given by or on behalf of Contico
or the Subsidiary save insofar as such warranty or representation is
expressly contained in writing in replies to preliminary enquiries raised
by Dibb ▇▇▇▇▇▇ ▇▇▇▇▇ on behalf of the Company.
(w) Accounts Receivable. The accounts receivable of the Business
reflected on the books and records of the Seller, the Company and the
Subsidiary (i) arose in the ordinary course of business; (ii) except to the
extent of the Allowances reflected on the books and records of the Seller, the
Company and the Subsidiary, (A) represent valid, bona fide and subsisting
claims, (B) are legally enforceable according to their terms and, in the
aggregate, are correct as to amount, and (C) have no current right of defense,
counterclaim or setoff against them; and (iii) are owned by the Company or the
Subsidiary free of any Liens, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated,
other than Permitted Liens.
(x) No Adverse Change. Since the Baseline Financial Statements Date,
the Seller, the Company and the Subsidiary have conducted the Business in the
ordinary and regular course and, except as set forth on Schedule 5.1(x)
attached hereto, there has not been: (i) any material adverse change in the
financial condition or results of operations of the Business; (ii) any
material adverse change in any of the Seller's, the Company's or the
Subsidiary's relationships with any significant supplier, distributor or
customer of or to the Business; (iii) any change in the accounting methods or
practices followed by the Seller, the Company or the Subsidiary or in the
manner in which the books, records and accounts of the Seller, the Company and
the Subsidiary are maintained; (iv) any Lien incurred against any of the
Seller, the Company Assets or any of the Subsidiary's assets other than a
Permitted Lien; (v) any waiver or release of any material right or claim of
the Seller, the Company or the Subsidiary relating to the Business, except in
the ordinary course of the Business; (vi) any payment, discharge, satisfaction
or forgiveness by the Seller, the Company or the Subsidiary of any claim,
liability, obligation or debt due it or waiver or release by the Seller, the
Company or the Subsidiary of any right or claim, in each case relating to the
Business, other than any payment, discharge or satisfaction reflected or
reserved against on the Baseline Financial Statements; (vii) any damage,
destruction or other casualty loss with respect to the Company Assets or the
assets of the Subsidiary, whether or not covered by insurance; (viii) any
strike, work stoppage, slowdown, or any known threat of any of the foregoing,
affecting the Business; (ix) any purchase, sale, assignment, lease, transfer
or other disposal of any amount of the Company Assets or assets of the
Subsidiary by the Seller, the Company or the Subsidiary, except in the
ordinary course of the Business consistent with past practices; (x) any
capital expenditure made or incurred by the Seller, the Company or the
Subsidiary in connection with the Business in excess of Two Hundred and Fifty
Thousand Dollars ($250,000) in the aggregate, except as reflected on the
Baseline Financial Statements; (xi) any agreement by the Seller, the Company
or the Subsidiary to incur any liability or obligation (absolute, accrued,
contingent or otherwise) other than in the ordinary and usual course of the
Business; (xii) any failure by the Seller, the Company or the Subsidiary to
maintain any insurance in effect on the Baseline Financial Statements Date
relating to the Business, the Company Assets or the assets of the Subsidiary;
(xiii) any failure to apply or reapply for necessary permits and Licenses in
the ordinary course of business; (xiv) any transfer or granting of any rights
under, or entry into any settlement regarding the breach or infringement of,
any license, patent, copyright, trademark, trade name, invention or similar
right relating to the Business, or modification of any existing right with
respect thereto; (xv) any change in the rate of compensation, commission, or
other direct or indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus, extra compensation,
pension, severance or vacation pay, to any officer, employee, salesman,
distributor or agent of the Seller, the Company or the Subsidiary relating to
the operation of the Business, other than in the ordinary course of business;
or (xvi) any agreement by the Seller, the Company or the Subsidiary (whether
oral or written, contingent or otherwise), or any amendment to or modification
of any existing agreement, to do any of the things described in clauses (i)
through (xv) above.
(y) Suppliers. Attached hereto as Schedule 5.1(y) is a complete and
accurate list of the top twenty (20) suppliers of products and services by
dollar amount to the Business during the twelve (12) month period ended May
31, 1998 and there are no sole-source suppliers of significant materials or
services to the Business for which alternative sources of supply are not
reasonably available.
(z) Customers. Attached hereto as Schedule 5.1(z) is a complete and
accurate list of the twenty (20) largest customers (by dollar volume) of the
Business during the twelve (12) month period ended May 31, 1998 (each a "Major
Customer"), indicating the existing contractual arrangements, if any, with
each Major Customer. To the Seller's knowledge, there are no outstanding
disputes with any Major Customer and , since January 1, 1998, no Major
Customer has stated its intention not to continue its relationship with the
Company or the Subsidiary, nor has any Major Customer materially changed its
arrangements with the Seller, the Company or the Subsidiary with respect to
the Business.
(aa) Product Warranty Costs and Returns; Product Defects. Attached
hereto as Schedule 5.1(aa) is a true and complete description of all published
product warranties, return policies and procedures and other credit and sales
practices offered by the Seller, the Company and/or the Subsidiary to its
customers in connection with the Business which have been in force or effect
at any time during the twenty-four (24) month period immediately preceding the
date hereof. There are no material defects in the design, construction,
manufacturing or installation of any of the products (the "Products") made,
manufactured, distributed, sold, or installed by the Seller, the Company
and/or the Subsidiary in connection with the Business prior to the Closing
Date that would adversely affect the performance or quality of all of the
Products sold by the Seller, the Company and/or the Subsidiary to customers
of the Business. There have been no significant product recalls of any
Products during the last five (5) years.
(bb) Certain Payments; Absence of Certain Business Practices. Except
as set forth on Schedule 5.1(bb) attached hereto, none of the Seller, the
Company nor the Subsidiary, nor to the Seller's knowledge any of their
respective representatives or agents, has made or will cause to be made by or
on behalf of the Business prior to the Closing Date, any payments, loans or
gifts or promises or offers of payments, loans or gifts of any money or
anything of value, directly or indirectly, to or for the use or benefit of any
official or employee of any United States or foreign governmental entity,
department or agency.
(cc) Transactions with Interested Persons. Except as set forth on
Schedule 5.1(cc) attached hereto, no officer, director, shareholder or
employee of the Seller, the Company or the Subsidiary, or their respective
spouses or children is or owns, directly or indirectly, on an individual or
joint basis, any material interest in, or serves as an officer or director of,
any customer, competitor or supplier of the Business or any organization which
has a contract, agreement, arrangement or commitment with the Company or the
Subsidiary relating to the Business.
(dd) Year 2000 Compliance. Attached hereto as Schedule 5.1(dd) is a
copy of the Seller's project plan to ensure that the Seller's, the Company's
and the Subsidiary's principal computer hardware and network systems (the
"Main System") are Year 2000 Compliant. For such purposes, "Year 2000
Compliant" means that the Main System will (A) correctly store, represent,
and process (including sort) all dates (including single and multi-century
formulas and
leap year calculations), such that errors will not occur when the date being
used is in the Year 2000, or in a year preceding or following the Year 2000,
and (B) operate and will not cause or result in an abnormal termination or
ending. To the Seller's and the Company's knowledge, the Business has not
suffered any material interruption of, or interference with, its operations or
activities by reason of any failure of the Main System to be Year 2000
Compliant, and upon completion of such project plan, the Seller and the
Company believe that no such material interruption or interference shall
occur.
(ee) Fees and Commissions. No agent, broker, investment banker or
other Person acting on behalf or under the authority of the Seller, the
Company or the Subsidiary is or will be entitled to any broker's, finder's,
originator's or investment banker's fees or any other commission or similar
fee directly or indirectly from any of the parties hereto in connection with
the transactions contemplated hereby, and no such fees are or will be
chargeable to or for the account of the Seller, the Company or the Subsidiary,
nor have any such fees been paid, nor will any such fees be paid or payable
out of, or in any manner constitute a Lien against, the Company Assets or the
assets of the Subsidiary.
(ff) Misstatement or Omission. To the Seller's knowledge, no
representation or warranty by the Seller in this Agreement or in any other
agreement, document or instrument executed in connection herewith, including
any exhibit, schedule, written statement, certificate or other document
furnished or to be furnished by the Seller pursuant hereto or thereto or in
connection with the transactions contemplated hereby or thereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact required to be stated herein or therein necessary to
make the statements contained herein or therein not misleading. Copies of all
documents heretofore furnished by the Seller to the Purchaser are true,
correct and complete copies of such documents, including all amendments or
modifications thereto.
5.2 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Seller as follows:
(a) Organization and Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. The Purchaser is duly qualified to transact business and is in
good standing in each jurisdiction where its failure to qualify to do business
would materially adversely affect its ability to perform the transactions
contemplated by this Agreement. The Purchaser has all requisite corporate
power and authority and all requisite and sufficient licenses, franchises,
permits and authorizations to own and lease its properties and assets and to
carry on its business as and where currently conducted.
(b) Corporate Action. The Purchaser has full corporate power and
authority to execute and deliver this Agreement, to purchase the Common Units
from the Seller, and otherwise to perform all of its obligations hereunder and
to consummate the transactions contemplated hereby. All corporate and other
proceedings required to be taken by or on the part of the Purchaser to
execute, deliver and carry out this Agreement and to authorize the Purchaser
to purchase the Common Units have been duly and properly taken. This
Agreement constitutes the legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, and all other documents
to be delivered in connection herewith, when executed and delivered by the
Purchaser, will constitute legal, valid and binding obligations of the
Purchaser, enforceable in accordance with their respective terms.
(c) Negation of Default. The execution and delivery of this
Agreement by the Purchaser, its compliance with the terms hereof and its
consummation of the transactions contemplated hereby will not violate,
conflict with or result in a breach of any provision of the Certificate of
Incorporation or By-laws of the Purchaser, or (whether with due notice or
lapse of time or otherwise) constitute a default, give rise to any right of
acceleration or otherwise result in a breach or violation of, any contract,
agreement, lease, commitment, indenture, mortgage, trust deed, note, bond,
debenture, License or other instrument or obligation, or any judgment, order
or decree of any court, administrative agency or other governmental authority,
to which the Purchaser is a party or otherwise subject.
(d) Consents. The execution and delivery of this Agreement by the
Purchaser, and its consummation of the transactions contemplated hereby, will
not require the approval, consent or authorization of any third party, any
federal, state or local court, government authority or regulatory body or
creditor, or give any party with rights under any instrument, agreement,
contract, mortgage, judgment, award, order or other restriction the right to
terminate, modify or otherwise change any of the current rights or obligations
of the Purchaser thereunder, except as set forth on Schedule 5.2(d) attached
hereto and made a part hereof.
(e) Fees and Commissions. No agent, broker, investment banker, or
other Person acting on behalf or under the authority of the Purchaser is or
will be entitled to any broker's, finder's, originator's or investment
banker's fees or any other commission or similar fee directly or indirectly
from any of the parties hereto in connection with the transactions
contemplated hereby.
(f) Misstatement or Omission. To the Purchaser's knowledge, no
representation or warranty by the Purchaser in this Agreement of in any other
agreement, document or instrument executed in connection herewith contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact required to be stated herein necessary to make the
statements contained herein not misleading.
(g) The Purchaser's Investment Representations.
(i) This Agreement is entered into by the Seller with the
Purchaser in reliance upon the Purchaser's representations and covenants
made in this Section 5.2(g).
(ii) The Purchaser understands that the Common Units have not
been registered under the Securities Act of 1993, as amended (the
"Securities Act"), and are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part
upon the representations of the Purchaser contained herein.
(iii) The Purchaser is acquiring the Common Units sold
hereunder for its own account for investment and not with a view to
the distribution thereof in violation of the Securities Act. The
Purchaser understands that it must bear the economic risk of this
investment indefinitely unless the Common Units are registered pursuant
to the Securities Act, or an exemption from such registration is
available, and that the Company has no present intention of registering
such securities. The Purchaser further understands that there is no
assurance that any exemption under the Securities Act will be available
or, if available, that such exemption will allow the Purchaser to dispose
of or otherwise transfer any or all of the Common Units under the
circumstances, in the amounts or at the times the Purchaser might
otherwise propose.
(iv) By reason of its business and financial experience, the
Purchaser has the capacity to evaluate the merits of its investment in
the Common Units hereunder and has the ability to hear the economic risk
(including the risk of total loss) of its investment hereunder.
(v) The Purchaser acknowledges that it has participated in
the negotiation and preparation of this Agreement, the Exhibits and the
Schedules attached hereto and the transactions contemplated by this
Agreement with its own legal counsel.
(vi) The Purchaser's principal place of business is currently
set forth in Section 10.3 hereof.
(h) 1934 Act Reports. Purchaser has timely filed all reports
required to be filed under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), since January 1, 1996, and all such reports comply in all
material respects with the requirements of the 1934 Act.
(i) Absence of Changes. Since the date of the most recent
consolidated financial statements of the Purchaser reflected in the
Purchaser's most recent Form 10-Q filed under the 1934 Act, except as
disclosed in any current report on Form 8-K, there has not been any material
adverse changes in the assets, liabilities, earnings, business, financial
condition or operations of the Purchaser and its various subsidiaries taken
as a whole.
(j) Claims and Litigation. Except as set forth in Schedule 5.2(j)
attached hereto, there are no actions, suits, proceedings, claims or disputes
pending or, to Purchaser's knowledge, threatened against the Purchaser or any
of its subsidiaries that would reasonably be expected to have a material
adverse effect on the operations, business, properties, condition or prospects
of the Purchaser and its subsidiaries taken as a whole. Neither the Purchaser
nor any subsidiary is a party or, to the knowledge of Purchaser, is threatened
to be made a party to any action, suit, proceedings, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or before any arbitrator, which
affects the ability of the Purchaser to perform its obligations under this
Agreement and the transactions contemplated hereby.
(k) Reservation of Shares. On or prior to Closing, Purchaser will
have duly and validly reserved, by all appropriate action of its board of
directors, a number of shares of common stock of the Purchaser, sufficient to
satisfy the obligations of Purchaser under the LLC Agreement and the Members
Agreement upon a complete put by the Seller of its Preferred Units in which
the Purchaser's obligations are satisfied solely by the issuance of common
stock of the Purchaser. When shares of common stock are issued to the Seller
or to its permitted assigns in accordance with the terms of the Members
Agreement, all such shares of Common Stock shall be duly and validly issued,
fully paid and nonassessable, and free of all liens, claims, encumbrances,
preemptive rights and restrictions on transfer.
5.3 Representations and Warranties of ▇▇▇▇▇▇. ▇▇▇▇▇▇ hereby
represents and warrants to the Purchaser as follows:
(a) Authority of ▇▇▇▇▇▇. ▇▇▇▇▇▇ has all requisite power and
authority to execute and deliver this Agreement, to transfer and deliver
the ▇▇▇▇▇▇ Common Units to the Purchaser, and otherwise to perform all of his
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement constitutes the legal, valid and binding obligations of ▇▇▇▇▇▇,
enforceable in accordance with its terms, and all instruments of transfer and
other documents to be delivered by ▇▇▇▇▇▇ in connection herewith, when
executed and delivered by ▇▇▇▇▇▇, ▇▇▇▇ constitute legal, valid and binding
obligations of ▇▇▇▇▇▇ enforceable in accordance with their respective terms.
(b) Title to ▇▇▇▇▇▇ Common Units. Immediately following the closing
under the Contribution Agreement, ▇▇▇▇▇▇ will have good and marketable title
to the ▇▇▇▇▇▇ Common Units, free and clear of any and all liens, but subject
to the terms of the LLC Agreement.
ARTICLE VI
----------
Covenants and Agreements
------------------------
6.1 Conduct Prior to Closing. During the period from the date hereof
through the Closing Date:
(a) Operations in the Ordinary Course of Business. The Seller shall,
and shall cause the Company to, conduct the Business only in the usual,
ordinary and regular course, and shall exert all commercially reasonable
efforts to maintain and preserve the Business and the Company Assets intact in
such a manner as will cause the representations of the Seller in Section 5.1
hereof to be true as of Closing. The Seller shall, and shall cause the
Company to, use all commercially reasonable efforts to preserve intact the
officers and employees working in the Business and to preserve good business
relationships with employees, suppliers, customers, licensors, licensees,
contractors, distributors, business partners and others having business
relationships with the Seller, the Subsidiary or the Company relating to the
Business, including, without limitation, suppliers and Major Customers, to
keep in force existing agreements, and otherwise act to cause fulfillment of
all conditions to Closing which are reasonably within the Seller's or the
Subsidiary's control, all in the ordinary course of business and consistent
with past practices.
(b) Forbearances by the Seller. Without limiting the generality of
the foregoing, prior to the Closing, the Seller shall not, and shall not
permit the Company or the Subsidiary to, without the prior written consent
of the Purchaser, take or fail to take any action that could result in the
Company or the Subsidiary:
(i) incurring any material liability or obligation (absolute,
accrued, contingent or otherwise) falling within the definition of
Assumed Liabilities other than in the ordinary course of business;
(ii) except in the ordinary course of business or as set
forth on Schedule 8.3(b) to the Contribution Agreement, adopting or
amending any salary, bonus, Employee Welfare Benefit Plan, Employee
Pension Benefit Plan, Benefit Arrangement, employment or other employee
benefit plan, agreement, trust, fund or other arrangement, or granting,
or becoming obligated to grant, any increase in the rate of pay,
commission or other compensation of officers, distributors, sales
representatives or employees, in each case with respect to the Business,
including any such increase pursuant to any employee arrangement or
grant, instituting any welfare program or any employee arrangement or
grant, making any change in any welfare program or any employee
arrangement or grant, or entering into any employment or similar
agreement or arrangement with any employee working for the Business;
(iii) creating, assuming or permitting to exist any Lien on
any of the Company Assets or the assets of the Subsidiary, other than
Permitted Liens; or
(iv) selling, transferring, assigning, encumbering,
mortgaging, leasing or otherwise disposing of, or agreeing to sell,
transfer, assign, encumber, mortgage, lease or dispose of, any of the
Company Assets or assets of the Subsidiary other than the disposition of
excess, obsolete or worn-out items and sales of inventory in the ordinary
course of business.
Without limiting the generality of the foregoing, prior to the Closing,
the Seller shall not and shall not permit the Company or the Subsidiary to,
without the Purchaser's prior written approval, knowingly perform any act or
transaction of a type that would have been inconsistent with the
representations and warranties of the Seller set forth in Section 5.1 hereof
had the same occurred prior to the date hereof or that would have been
required to be set forth on a disclosure schedule hereto had such act or
transaction taken place prior to the date of this Agreement.
In addition, without limiting the generality of the foregoing provisions
of this Section 6.1, the Seller shall, and shall cause the Company and the
Subsidiary to, take all necessary action to:
(A) maintain its, the Company's and the Subsidiary's books,
records and accounts in accordance with GAAP;
(B) maintain all currently existing fire and extended
coverage, worker's compensation, general and product liability and other
property and casualty insurance with respect to the Business, the Company
Assets and the assets of the Subsidiary; and
(C) apply or reapply for any Licenses necessary for the
Business in the ordinary course of business.
6.2 Notice of Adverse Events. The Seller shall promptly notify the
Purchaser in writing of any event that could have an adverse effect on the
Business, the Company Assets, the Subsidiary's Assets or the performance by
the Seller of its obligations under this Agreement. In addition, the Seller
and the Purchaser each agree to notify the others promptly of (i) the
occurrence, or failure to occur, of any event which could result in the breach
of any representation or warranty contained in this Agreement, or (ii) the
failure on its part to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied prior to the Closing Date.
6.3 Right of Inspection; Access.
(a) The Purchaser's Access. Except as otherwise expressly provided
herein, the Seller shall afford to the Purchaser, its counsel, accountants,
employees, agents and other representatives full access, at any time during
regular business hours, to the Seller's and the Company's accountants (and
their workpapers and other materials) and to all of the Contributed Assets and
the Subsidiary's assets, wherever located, the facilities, premises,
buildings, books, records, documents and files relating to the Business, the
Company Assets and the Assumed Liabilities as the Purchaser may reasonably
request. The Purchaser shall be permitted to make extracts from, or copies
of, any books or records of the Seller, the Company and the Subsidiary in
connection with the rights of access herein granted. In addition, between the
date of this Agreement and the Closing Date, the Purchaser may, but shall not
be obligated to, conduct such appraisals and environmental audits and
inspections as it may deem appropriate, at the Purchaser's expense.
(b) The Seller's Access. After the Closing Date, the Purchaser shall
and cause the Company to permit the Seller and its representatives reasonable
access during normal business hours, upon reasonable prior notice, to any
records and files of the Business transferred pursuant to the Contribution
Agreement, relating to a period prior to the Closing Date, and to any
employees of the Company formerly employed by the Seller, as are appropriate
in connection with the preparation of any Tax returns and the prosecution or
defense of any tax audits or third party claims, suits or actions by or
against the Seller. The Purchaser shall cause the Company to retain such
books and records for a period of not less than five (5) years after the
Closing Date in order to afford the Seller such access, and the Seller shall
have the right at any reasonable time to make copies thereof, at the Seller's
sole cost. If the Company wishes to destroy any such books or records
following such period, the Purchaser shall cause the Company to give the
Seller not less than fifteen (15) calendar days' prior written notice thereof,
whereupon the Seller may elect to take possession of such books and records.
The Seller acknowledges and agrees that the Purchaser and the Company shall
have no liability or Loss with respect to the loss or destruction of any such
books and records, and the Seller hereby expressly waives all claims with
respect thereto.
6.4 Public Statements. Prior to the Closing Date, the Seller and the
Purchaser shall consult with one another before issuing any written
communications or otherwise making any public statements, disclosures or
announcements to employees or any Person relating to this Agreement, the
Contribution Agreement or the transactions contemplated by hereby or thereby,
except as may be required by applicable law or by obligations pursuant to the
rules and regulations of applicable securities laws or upon advice of legal
counsel.
6.5 [Reserved]
6.6 Consents and Approvals. The Seller and the Purchaser each shall
take or cause to be taken all acts reasonably necessary, and shall promptly
make all filings or submissions as are reasonably required (i) to obtain all
third party consents required pursuant to Article IV hereof, including,
without limitation, any and all consents required under the personal property
leases and the operating contracts, in order to consummate the transactions
contemplated hereby, and (ii) to obtain any approval, consent, license,
clearance, exemption, waiver or registration of or with any applicable
foreign, federal, provincial, state or local governmental authority necessary
in order to consummate lawfully the transactions contemplated hereby. Each
party hereto shall furnish to the other such reasonably necessary information
and assistance as the other may reasonably request in connection with its
preparation of any filing or submission which is necessary to obtain any
governmental approval, as applicable. The Seller and the Purchaser shall each
keep the other apprised of the status of any communications with, and any
inquiries or requests for additional information made by, any governmental
authority and shall comply promptly with any such inquiry or request. In
addition, to the extent not obtained prior to the Closing, the Seller agrees
to cooperate with the Purchaser and to use all reasonable efforts to obtain
all consents and authorizations described on Schedule 5.1(f) attached hereto
and any other consents and/or authorizations of third parties necessary to
complete the transactions contemplated hereby. To the extent that any such
consent or authorization is not so obtained, the Seller will use all
reasonable efforts to (i) provide to the Company, at the request of the
Company, the benefits (and the burdens) of the related contract, lease,
agreement or License, (ii) cooperate in any reasonable and lawful arrangement
designed to provide such benefits and burdens to the Company, without
incurring any obligation to any other person or entity (other than to
provide such benefits and burdens to the Company), and (iii) enforce, at
the request of the Company for the account of the Company, any rights of
Contico arising from the related contract, lease, agreement or License
(including, without limitation, the right to terminate in accordance with
the terms thereof).
6.7 Post-Closing Obligations of the Company. After the Closing,
Purchaser shall cause the Company to perform all of its post-Closing
obligations under the Contribution Agreement.
6.8 Allocation and Section 754 Election. For federal income Tax
purposes, the Final Purchase Price and the Purchaser's proportionate share of
the Company's liabilities on the Closing Date shall be allocated by the
parties in accordance with this Agreement. Seller and Purchaser acknowledge
and agree that, pursuant to Section 8.3 of the LLC Agreement, they shall cause
the Company to file a timely election under Section 754 of the Internal
Revenue Code of 1986, as amended from time to time, or any successor statute
(the "Code"), which shall adjust the income tax basis of the assets of the
Company in accordance with Schedule 6.8 attached hereto and the methodology
set forth therein. Those adjustments to income tax basis and any allocations
under Code Section 704(c) shall be determined with respect to the fair market
value of the Company's assets immediately after the effective date of the Code
Section 754 election. For purposes of determining fair market value,
Company's assets shall be valued in accordance with the procedure in Schedule
6.8. The Seller and the Purchaser further acknowledge and agree that,
pursuant to Code Section 704(c), any gain recognized by the Company as a
result of the Code Section 754 election, shall be allocated solely to the
Seller. In addition, the Seller and the Purchaser agree that they shall file
their federal, state, local and foreign income tax returns in a manner
consistent with this Section 6.8 and Schedule 6.8 attached hereto.
6.9Substitute Security for Letters of Credit. Schedule 6.9 attached
hereto sets forth a list of all outstanding letters of credit, standby and
commercial, currently outstanding and issued at the request of the Seller
and/or the Company in connection with the Business (the "Letters of Credit").
Concurrently with the Closing, the Purchaser shall cause its lender or lenders
to issue to the issuing financial institution of the Letters of Credit one or
more letters of credit in form and substance satisfactory to such issuer and
in an aggregate amount sufficient to satisfy any payment obligations incurred
by such financial institution pursuant to the Letters of Credit and any other
then outstanding letters of credit.
6.10 Payoff of Mercantile and NatWest Indebtedness. On the Closing
Date, the Seller shall pay, from its portion of the Purchase Price, all
outstanding indebtedness of the Company and the Subsidiary (as applicable) to
(a) Mercantile Bank N.A., other than indebtedness pursuant to letters of
credit, and obtain a release of the Company from any and all liability under
the Mercantile Agreement, and (b) National Westminster Bank, PLC, without
terminating the NatWest Agreement.
ARTICLE VII
-----------
Termination and Abandonment
---------------------------
7.1 Termination and Abandonment. This Agreement may be terminated
and abandoned at any time prior to the Closing Date:
(a) By mutual written consent of the Purchaser and the Seller;
(b) By the Purchaser, if the conditions set forth in Section 4.1
hereof shall not have been fulfilled in any material respect and cannot be
fulfilled on or before the Closing Date;
(c) By the Seller, if the conditions set forth in Section 4.2 hereof
shall not have been fulfilled in any material respect and cannot be fulfilled
on or before the Closing Date;
(d) By the Seller or the Purchaser, if any court action or proceeding
shall have been instituted by any party, or, to the knowledge of the Purchaser
or the Seller, shall have been threatened by any public or private authority
or third party, to restrain or prohibit the transactions contemplated by this
Agreement; or
(e) By the Seller or the Purchaser, if the Closing shall not have
occurred on or prior to January 29, 1999, or such later date as may be
mutually approved in writing by the Seller and the Purchaser.
7.2 Effect of Termination. In the event of the termination or
abandonment of this Agreement pursuant to the provisions of this Article VII,
this Agreement shall thereafter become void and have no effect; provided,
however, that the foregoing shall not be deemed to affect in any way any right
of action either party may have against the other for breach of its
representations, warranties or covenants hereunder. In such event, the
breaching party shall be liable to the non-breaching party for all Losses (as
hereinafter defined) arising as a result of such breach.
ARTICLE VIII
------------
Indemnification
---------------
8.1 The Seller's Indemnification.
(a) Notwithstanding the investigation by the Purchaser, its attorneys
or any of its agents or representatives, the representations, warranties and
covenants of the Seller set forth herein, and the indemnification obligations
of the Seller in this Article VIII with respect thereto, shall survive as
follows: (i) the representations, warranties and covenants set forth in (A)
Section 1.2, Section 1.3, Section 2.3(e), Sections 5.1(a), (b), (c), (g), (k)
(but only with respect to those Contributed Assets not consisting of Real
Property or interests therein), and (ee) and Section 5.3 hereof shall survive
the Closing without limitation of time and shall not expire, (B) Section
5.1(p) shall survive the Closing for a period of ten (10) years, at which time
they will expire, and (C) Section 5.1(q) shall survive the Closing for the
applicable limitation period with respect to the matters described therein, at
which time they will expire; (ii) covenants that by their terms survive for a
different period of time shall survive for such period and (iii) all other
representations, warranties and covenants contained herein shall survive the
Closing for a period of two (2) years, at which time they shall expire, and
thereafter no Claim may be asserted against the Seller on the basis of such
representations, warranties and covenants. Notwithstanding the preceding
sentence, any Claim asserted in writing against the Seller for indemnity with
respect to a surviving representation, warranty or covenant may continue to be
pursued after such time if written notice of the inaccuracy, breach or
nonperformance giving rise to such indemnity shall have been given to the
Seller prior to the time that such right of indemnity otherwise would have
terminated. The representations and warranties in the second, fourth and
fifth sentences of Sections 5.1(v)(i) and (ii) shall expire upon receipt by
the Company of surveys and Title Policies, in form and substance reasonably
satisfactory to the Company, for the Leased Real Property, the Contico Leased
Real Property and the Contributed Real Property in accordance with the
provisions of Section 8.6 of the Contribution Agreement, it being the parties'
intention that the Company's recourse with respect to the matters described in
such provisions, if any, shall be under the terms of such Title Policies and
the surveys related thereto.
(b) The Seller agrees to indemnify, defend and hold the Purchaser,
its subsidiaries and affiliates and its and their respective shareholders,
directors, officers, employees, agents, representatives, successors and
assigns (collectively, the "Purchaser Group"), harmless from and against any
and all Losses imposed on, accrued against, sustained or incurred by any of
them resulting from or arising out of or by virtue of any misrepresentation or
breach of warranty made herein by the Seller or ▇▇▇▇▇▇ or non-compliance with,
non-performance of or breach by the Seller or ▇▇▇▇▇▇ of any of the covenants
of this Agreement to be performed by the Seller or ▇▇▇▇▇▇ or otherwise set
forth in any instrument or document executed or delivered by the Seller or
▇▇▇▇▇▇ in connection with this Agreement.
(c) Notwithstanding any other provision hereof to the contrary, the
Seller shall have no obligation to indemnify the Purchaser or the Purchaser
Group for any Losses otherwise indemnifiable hereunder, unless and until the
aggregate amount of all such Losses after application of such reserves exceeds
One Million Dollars ($1,000,000) (the "Section 8.1 Basket"), whereupon the
Losses in excess of such amount shall be indemnified as aforesaid, subject to
Section 8.1(d); provided, however, that the Section 8.1 Basket shall not apply
to the failure of the Seller to pay the Excluded Liabilities and shall not
apply as the failure of the Seller or ▇▇▇▇▇▇ to make any payment to Purchaser
pursuant to Section 2.3(e).
(d) Notwithstanding any other provision hereof to the contrary, the
Seller shall have no obligation to indemnify the Purchaser or the Purchaser
Group for any Losses otherwise indemnifiable hereunder in excess of Thirty
Million Dollars ($30,000,000) (the "Indemnity Cap"); provided, however, that
the Indemnity Cap shall not apply to any failure of the Seller to pay the
Excluded Liabilities or the amounts, if any, described in Section 2.3(e)
hereof.
8.2 The Purchaser's Indemnification.
(a) The representations, warranties and covenants of the Purchaser
set forth herein, or in any document or instrument delivered in connection
herewith or pursuant hereto, and the liabilities of the Purchaser with respect
thereto, shall survive the Closing Date for a period of two (2) years, at
which time they shall expire, except for (i) covenants that by their terms
survive for different time periods, which shall survive for such periods, and
(ii) the representations, warranties and covenants set forth in Sections
5.2(a), (b), (e) and (k) hereof shall survive the Closing without limitation
of time and shall not expire. Notwithstanding the preceding sentence, any
representation, warranty or covenant in respect of which indemnity may be
sought under Section 8.2(b) below shall survive the time at which it would
otherwise terminate pursuant to such sentence, if written notice of the
inaccuracy, breach or nonperformance giving rise to such indemnity shall have
been given to the Purchaser prior to the time that it otherwise would have
terminated.
(b) The Purchaser agrees to indemnify, defend and hold the Seller,
its respective subsidiaries and affiliates and its respective shareholders,
directors, officers, employees, agents, representatives, successors and
assigns (collectively, the "Seller Group"), and harmless from and against any
and all Losses imposed on, accrued against, sustained or incurred by any of
them resulting from or arising out of or by virtue of any misrepresentation or
breach of warranty made herein by the Purchaser or non-compliance with or
breach by the Purchaser of any of the covenants of this Agreement to be
performed by the Purchaser.
(c) Notwithstanding any other provision hereof to the contrary, the
Purchaser shall have no obligation to indemnify the Seller or the Seller Group
for any Losses otherwise indemnifiable hereunder, unless and until the
aggregate amount of all such Losses exceeds One Hundred Thousand Dollars
($100,000.00) (the "Section 8.2 Basket"), whereupon all Losses in excess of
such amount shall be indemnified as aforesaid.
8.3 Losses. For purposes of this Agreement, "Losses" means all
claims (whether meritorious or not), actions, suits, proceedings, judgments,
causes of action, liabilities (whether fixed, absolute, accrued, contingent or
otherwise and whether direct or indirect, primary or secondary, known or
unknown), losses, demands, costs, assessments, fines, damages, interest,
penalties or expenses (including, without limitation, reasonable attorneys'
fees and expenses and costs of litigation).
8.4 Procedure for Indemnification.
(a) Upon becoming aware of a claim for any Losses for which a Person
is entitled to indemnity hereunder, the Person seeking indemnification under
this Article VIII (the "Indemnified Party") shall give prompt written notice
of such claim to the party from whom indemnification is sought (the
"Indemnifying Party"); provided, however, that no delay in giving notice
hereunder shall relieve the Indemnifying Party from its obligations hereunder,
except and to the extent either (i) that the Indemnifying Party demonstrates
that the defense of such action is prejudiced by the Indemnified Party's
failure to give such notice in a timely manner, or (ii) such notice is
delivered after expiration of an applicable survival period in Section 8.1.
(b) Within thirty (30) calendar days after such notice, the
Indemnifying Party may deliver to the Indemnified Party its written
acknowledgment that the Indemnified Party is entitled to indemnification
pursuant to this Article VIII for Losses arising out of such claim, suit or
action, together with evidence reasonably satisfactory to the Indemnified
Party that the Indemnifying Party has and will have the financial capability
to discharge any liability arising from such claim, suit or action. Upon
receipt by the Indemnified Party of such acknowledgment and evidence, the
Indemnifying Party shall, with counsel reasonably satisfactory to the
Indemnified Party, assume the defense of any such suit or action initiated by
a third party (a "Third Party Claim") including its compromise and settlement,
and the Indemnifying Party shall pay all costs and expenses thereof and shall
be fully responsible for the outcome thereof. If the Indemnifying Party so
assumes the defense of such Third Party Claim, (i) no compromise or settlement
thereof may be effected by the Indemnifying Party without the Indemnified
Party's consent (which shall not be unreasonably withheld) unless the sole
relief is monetary damages that are paid in full by the Indemnifying Party and
(ii) the Indemnified Party shall have no liability with respect to any
compromise or settlement thereof effected without its consent (which shall
not be unreasonably withheld). In the event that the Indemnifying Party does
not provide such acknowledgment and evidence, the Indemnified Party shall be
entitled to assume the defense of such Third Party Claim at the sole cost and
expense of the Indemnifying Party, with counsel reasonably satisfactory to the
Indemnifying Party; and in such event, all Losses resulting from the defense
settlement of such Third Party Claim shall be subject to the indemnification
provisions of this Article VIII. In such case, the Indemnified Party will
give the Indemnifying Party not less than twenty (20) calendar days' written
notice of any proposed settlement or compromise of any Third Party Claim. Any
settlement or compromise made or caused to be made by the Indemnified Party of
any such Third Party Claim of the kind referred to above, shall be subject to
the prior written consent of the Indemnifying Party, which shall not be
unreasonably withheld, and thereupon such settlement or compromise shall be
binding upon the Indemnifying Party in the same manner as if a final judgment
or decree had been entered by a court of competent jurisdiction in the amount
of such settlement or compromise.
(c) In case of any such Third Party Claim, the Indemnified Party will
cooperate reasonably with the Indemnifying Party, cooperate reasonably in the
defense thereof, including affording to the Indemnifying Party the right of
access, during normal business hours, to the personnel of the Indemnified
Party and all pertinent books and records for purposes of inspection and
making copies, but all reasonable out-of-pocket expenses incurred by the
Indemnified Party in connection with the foregoing shall be reimbursed by the
Indemnifying Party. If the Indemnifying Party assumes the defense or
settlement thereof in accordance with Section 8.4(b), the Indemnified Party
shall have the right to observe and consult in the defense or settlement of a
Third Party Claim and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Party. If the Indemnified Party
conducts the defense or settlement thereof after the Indemnifying Party has
declined to do so in accordance with Section 8.4(b), the Indemnifying Party
shall have the right to observe and consult in the defense of a Third Party
Claim and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnified Party.
8.5 Sole Remedy. The indemnification provisions, procedures and
limitations of this Article VIII shall be the exclusive remedies and
procedures relating thereto, available to any party following the Closing Date
as a result of breach or nonperformance of any of the representations,
warranties, covenants, agreements and obligations contained in this Agreement
or any Schedule attached hereto, or any liability or obligation of the
business. All other remedies at law or in equity (including but not limited
to common law and statutory rights of contribution) hereby are waived by the
parties, and to the extent a survival period contained in this Agreement
extends beyond an otherwise applicable statute of limitations, this Agreement
shall constitute a waiver thereof. Notwithstanding the foregoing, this
Section 8.5 shall not preclude a party from asserting a Claim (a) based on any
act of fraud perpetrated upon a party hereto by another party hereto, or (b)
for any equitable remedy to enforce the obligations of the parties contained
in this Agreement.
8.6 Single Recovery of Indemnifiable Losses. The parties to this
Agreement acknowledge that, pursuant to the Contribution Agreement, the Seller
has made certain representations and warranties to the Company with respect to
the Business of the Seller and the Subsidiary, and has undertaken to indemnify
the Company with respect to certain matters identified in the Contribution
Agreement. Such indemnification obligations, in many cases, are subject to
certain limits as to time and amount. The parties to this Agreement
acknowledge that a significant number of such representations, warranties and
indemnification obligations are also made in this Agreement by the Seller in
favor of the Purchaser. Following the Closing, it is understood that either
or both of the Purchaser and the Company may make a claim against the Seller
for indemnification with respect to the subject matter of a representation,
warranty or covenant that is contained in both agreements. In no event,
however, may the Purchaser and the Company make a recovery for the same Loss
with respect to the same matter, and it shall be a complete defense to a claim
for recovery of such Loss by the Company or the Purchaser that such Loss has
already been recovered from the Seller (or been the subject of a release) by
either the Company or the Purchaser. In all cases, the indemnification limits
in the Contribution Agreement and this Agreement (i.e., baskets, caps and time
periods), shall be deemed a single set of limits, and the amounts thereof
shall not be cumulated despite the fact that such limits are contained in two
separate agreements.
ARTICLE IX
----------
Expenses
--------
9.1 Professional Expenses. Except as otherwise specified in this
Agreement, each of the parties hereto shall pay all of its own respective
costs and expenses with respect to legal, accounting, consulting, appraisal
and professional fees, as well as printing and other related expenses,
incurred or to be incurred by such party in connection with the negotiation
and preparation of this Agreement and the consummation of the transactions
contemplated hereby; provided, however, that no such fees or expenses shall
be paid or payable out of, or in any manner constitute a Lien against, the
Common Units.
9.2 Transfer Expenses. All applicable sales, use, transfer,
documentary or similar taxes, filing and recording fees, title insurance
charges, survey fees, vehicle tax, intangible taxes, if any, and transfer fees
which are payable by reason of the transactions contemplated by this
Agreement, shall be paid by the Seller; provided, however, that no such
charges, fees or expenses shall be paid or payable out of, or in any manner
constitute a Lien against, the Common Units. To the extent that expenses are
allocated to and paid by the Seller under the provisions of Section 8.6(a) and
(b) of the Contribution Agreement, the Purchaser agrees to reimburse the
Seller as of or promptly after Closing for the portion of such expenses that
would be paid by a transferee of real property under local real property
custom in each relevant jurisdiction.
ARTICLE X
---------
Miscellaneous
-------------
10.1 Entire Agreement; Amendment. This Agreement (including the
agreements referenced herein) is the entire agreement and understanding of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous negotiations, undertakings and agreements, written
or oral, between the parties. No representation, inducement, agreement,
promise, understanding or waiver altering, modifying, taking from or adding to
the terms and conditions hereof shall have any force or effect unless the same
is in writing and validly executed by each of the parties hereto.
10.2 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of, and be enforceable by, the parties hereto
and their respective successors and permitted assigns. This Agreement shall
not be assignable by any Party prior to Closing without the prior written
consent of the other parties, and following the Closing no complete or partial
assignment by any Party of this Agreement or such Party's rights hereunder
shall operate to relieve the assigning Party of its obligations hereunder.
10.3 Notices. Any notice, request, instruction or other
communication to be given hereunder by any party hereto shall be in writing
and shall be deemed to have been duly given on the date of delivery, provided
delivery is actually tendered at the appropriate address, addressed to the
persons identified below (i) in person, or (ii) by overnight courier service
nationally recognized in the United States, or (iii) by facsimile copy (with
original copy mailed the same day), or (iv) five (5) calendar days after
deposit in the U.S. mail by first class certified mail, postage prepaid,
return receipt requested, all addressed as set forth below:
(i) If to the Seller or ▇▇▇▇▇▇ prior to Closing, to:
Contico International, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and after Closing, to:
Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
In each case, with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to the Purchaser, to:
Katy Industries, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Katy Industries, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or persons at such address or addresses as may be
designated by written notice to the other party pursuant to this Section 10.3.
10.4 Severability. If any provision of this Agreement is found
invalid, unenforceable or in violation of any law by a court of competent
jurisdiction, such provision shall be modified only to the extent necessary to
enable such provision to be valid and enforceable, without affecting the
remaining portions of this Agreement, which shall remain in full force and
effect; provided, however, that the severing of any such provision will not
materially change the substance of this Agreement. As so amended, this
Agreement shall be enforced to the fullest extent possible to give effect to
the intention of the parties expressed herein.
10.5 Mutual Contribution; No Third Party Beneficiaries. The parties
to this Agreement and their counsel have mutually contributed to its drafting.
Consequently, no provision of this Agreement shall be construed against any
party on the ground that such party drafted the provision or caused it to be
drafted, or the provision contains a covenant of such party. This Agreement
shall not confer any rights or remedies upon any person other than the parties
and their respective successors and permitted assigns.
10.6 Waivers. No delay on the part of any party in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
waiver of any right, power or privilege operate as a waiver of any other
right, power or privilege, nor shall any single or partial exercise of any
right, power or privilege preclude any other or further exercise thereof or of
any other right, power or privilege. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies which the
parties otherwise may have at law or in equity.
10.7 Operative Language; Currency. The English language shall
control the interpretation of this Agreement and all other writings and
communications between the parties. All references to currency and currency
amounts herein shall refer solely to United States Dollars.
10.8 Headings; Gender; Number. The headings of articles and sections
of this Agreement and of the schedules and exhibits hereto are for convenience
only and are not intended to limit, restrict, expand or otherwise affect the
meaning or interpretation of the provisions of this Agreement. The use of any
gender hereunder shall include all genders and the use of the singular shall
include the plural, and vice versa, in each case as the context may require.
10.9 Applicable Law. This Agreement is governed by and shall be
construed and enforced in accordance with the internal laws of the State of
Delaware without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction).
10.10 Forum Choice and Venue. Any judicial proceeding brought against
any party hereto with respect to this Agreement or any transaction
contemplated hereby shall be brought in the United States District Court for
the Eastern District of Missouri, or, if such court does not have
jurisdiction, then in the courts of the State of Missouri, and, by execution
and delivery of this Agreement, each of the parties hereto (i) accepts,
generally and unconditionally, the exclusive jurisdiction of such court and
any related appellate court, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement, subject, in each
case, to all rights to appeal such decisions to the extent available to the
parties and (ii) irrevocably waives any objection it may now or hereafter have
as to the venue of any such suit, action or proceeding brought in such court
or that such court is an inconvenient forum. Each party hereto hereby waives
personal service of process and consents that service of process upon it may
be made by delivery or by certified or registered mail, return receipt
requested, at its last known address and service so made shall be deemed
completed on the date of delivery or on the fifth (5th) business day after
such service is deposited in the mail, as the case may be. Nothing herein
shall affect the right to serve process in any other manner permitted by law.
10.11 Non-Binding Mediation. Any controversy or claim arising out of
or relating to this Agreement, its interpretation, the breach or the
consummation thereof, or the closing contemplated thereunder, or the
respective rights or obligations of the parties, shall be first subject to
non-binding mediation administered by the American Arbitration Association
(the "Mediator"). In the event that such controversy or claim cannot be
resolved pursuant to mediation within thirty (30) days after such matter is
submitted to the Mediator as provided above, such controversy or claim may be
settled by arbitration upon the written arbitration agreement made at that
time of all parties, and failing such arbitration agreement, by litigation.
10.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[Signature Pages Follow]
IN WITNESS WHEREOF, each of the parties hereto has caused this Unit
Purchase Agreement to be duly executed as of the date first written above.
PURCHASER: SELLER:
KATY INDUSTRIES, INC. CONTICO INTERNATIONAL, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------- ---------------------
Its: Executive Vice President Its: VP/CFO
▇▇▇▇▇▇:
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, solely for purposes of
Sections 1.1, 1.2, 1.3, 2.1, 2.2, 3.4,
4.2, 5.3 and Article X
Exhibit 2(c)
------------
MEMBERS AGREEMENT
THIS MEMBERS AGREEMENT (this "Agreement") is entered into as of
January 8, 1999, by and between NEWCASTLE INDUSTRIES, INC., a Missouri
corporation formerly known as Contico International, Inc. ("Newcastle"), and
KATY INDUSTRIES, INC., a Delaware corporation ("Katy").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Unit Purchase Agreement dated
as of December 31, 1998, by and between Newcastle and Katy (the "Purchase
Agreement"), Newcastle has sold to Katy as of the date hereof 10,000 Common
Units (the "Common Units") of Contico International, L.L.C., a Delaware
limited liability company formerly known as CII Acquisition, L.L.C. (the
"Company"), which constitute all of the Common Units currently issued and
outstanding;
WHEREAS, Newcastle owns 329 Preferred Units (the "Preferred
Units") of the Company, which constitute all of the Preferred Units
currently issued and outstanding;
WHEREAS, the Common Units and the Preferred Units constitute all
of the equity interests in the Company which currently are issued and
outstanding; and
WHEREAS, as a condition to closing the transactions contemplated
by the Purchase Agreement, Newcastle and Katy have agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of these premises, the
covenants and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged,
the parties hereto agree as follows:
Article I
Put and Call Rights with Respect to Preferred Units
1.1 Certain Definitions. Capitalized terms in this Agreement
shall have the respective meanings given to them in Exhibit A.
1.2 Basic Put Option.
(a) The Right. At any time during the period beginning
January 8, 2001, and ending January 7, 2009 (unless extended pursuant to
Section 2.1(b)(iv) hereof), inclusive (the "Basic Put Exercise Period"), the
Holders shall have the right to require Katy to purchase from the Holders in
accordance with this Section 1.2 all or any portion of their Eligible Units
(a "Basic Put Right"). The purchase price for each Eligible Unit required
to be purchased by Katy pursuant to the Basic Put Right shall be (subject to
adjustment pursuant to Section 1.8) the sum of (i) that number of shares of
Common Stock equal to the Conversion Amount (the "Stock Consideration"), and
(ii) cash in an amount equal to the aggregate accrued and unpaid Priority
Return and Profit Participation with respect to such Eligible Unit through
the date of the closing of the purchase of such Eligible Unit by Katy (the
"Priority Return Consideration").
(b) Notice. To exercise the Basic Put Right, the Holder
Representative shall notify Katy, in writing, within the Basic Put Exercise
Period of the Holders' intention so to exercise (the "Basic Put Notice").
The Basic Put Notice shall identify each Holder exercising the Basic Put
Right and the number of Eligible Units to be purchased from such Holder, and
shall certify that the Holder Representative has notified each Holder in
writing of the exercise of the Basic Put Right and of such Holder's
opportunity to participate in the exercise thereof. The Basic Put Notice
may also include a request for a Demand Registration with respect to all or
any portion of the Stock Consideration. Holders exercising the Basic Put
Right are hereinafter collectively referred to as the "Basic Put Selling
Holders" and the Eligible Units to be purchased by Katy from the Basic Put
Selling Holders are hereinafter collectively referred to as the "Basic Put
Units."
(c) Election to Pay Stock Consideration in Cash. Within
15 days after the date the Basic Put Notice is given, Katy shall have the
right, which it may exercise by giving written notice (the "Basic Put
Consideration Notice") to the Holder Representative, in lieu of delivering
the Stock Consideration, to pay each Basic Put Selling Holder cash in an
amount equal to the Market Value multiplied by the number of shares of
Common Stock constituting the Stock Consideration otherwise due such Basic
Put Selling Holder. If Katy fails to give the Basic Put Consideration Notice
within the time period required, Katy's right to pay the Stock Consideration
in cash shall lapse. If Katy timely elects to pay the Stock Consideration
in cash with respect to any Basic Put Selling Holder, (i) it shall be
obligated to pay the Stock Consideration in cash to all Basic Put Selling
Holders, and (ii) if the Holder Representative shall have requested a Demand
Registration with respect to the Stock Consideration, such Demand
Registration shall be deemed withdrawn and shall not constitute a Demand
Registration hereunder.
(d) Closing. At the closing of the purchase and sale of
the Basic Put Units (the "Basic Put Closing"), (i) Katy shall deliver to
each Basic Put Selling Holder for each Basic Put Unit sold by such Basic Put
Selling Holder (A) either (1) stock certificate(s) representing the Stock
Consideration described in Section 1.2(a) registered in the name of such
Basic Put Selling Holder if Katy has not exercised its rights pursuant to
Section 1.2(c), or (2) the cash payment described in Section 1.2(c), plus
(B) cash in an amount equal to the Priority Return Consideration, and (ii)
each Basic Put Selling Holder shall execute and deliver to Katy an
Assignment of Preferred Units in the form attached hereto as Exhibit B with
respect to the Basic Put Units to be sold by such Basic Put Selling Holder.
Any cash payment to be made by Katy to any Basic Put Selling Holder pursuant
to the exercise of the Basic Put Right shall be in the form of a certified
check or wire transfer of immediately available funds. The Basic Put Closing
shall take place (x) if a request for a Demand Registration of any of the
Stock Consideration has been made, whether in the Basic Put Notice or
otherwise, (A) if the Stock Consideration is to be distributed through a
firm commitment underwritten offering, immediately prior to the closing of
the firm commitment underwritten offering, or (B) in all other cases, on the
date that the Registration Statement applicable to such Stock Consideration
has become effective, or (y) in all other cases, on the 60th day after the
date that the Basic Put Notice is given or on such other date as Katy and
the Holder Representative may agree. Unless otherwise agreed by Katy and the
Holder Representative, the Basic Put Closing shall take place at the
principal office of the Company.
(e) Withdrawal of Exercise. If (i) Katy has not
exercised its rights pursuant to Section 1.2(c), and (ii) the Closing Market
Price as of the day immediately prior to the date of the Basic Put Closing
is less than 90% of the Closing Market Price as of the day the Basic Put
Notice is given, the Holder Representative may withdraw the exercise of the
Basic Put Right with respect to all or any portion of the Basic Put Units
upon written notice to such effect given to Katy on or prior to the date of
the Basic Put Closing, subject to the Holders' obligations under Section
2.2(e) with respect to the withdrawal of a Demand Registration.
1.3 Limitations on Exercise of Basic Put Right.
(a) The Basic Put Right may not be exercised more than
three times. If the exercise of a Basic Put Right is withdrawn with respect
to all Basic Put Units in accordance with Section 1.2(e), such exercise
shall not constitute an exercise for purposes of this Section 1.3(a).
(b) Katy shall not be obligated to purchase Eligible
Units pursuant to the exercise of a Basic Put Right within eighteen months
after the closing of a previous purchase of Eligible Units pursuant to the
exercise of a Basic Put Right.
1.4 Secondary Put Option.
(a)The Right. At any time during the period beginning
January 8, 2009 and ending January 7, 2010, inclusive (the "Secondary Put
Exercise Period"), the Holders shall have the right to require Katy to
purchase from the Holders in accordance with this Section 1.4 all or any
portion of their Eligible Units (a "Secondary Put Right"). The purchase
price for each Eligible Unit required to be purchased by Katy pursuant to
the Secondary Put Right shall be (subject to adjustment pursuant to Section
1.8) the sum of (i) $100,000, and (ii) cash in an amount equal to the
Priority Return Consideration.
(b) Notice. To exercise the Secondary Put Right, the
Holder Representative shall notify Katy, in writing, within the Secondary
Put Exercise Period of the Holders' intention so to exercise (the "Secondary
Put Notice"). The Secondary Put Notice shall identify each Holder exercising
the Secondary Put Right and the number of Eligible Units to be purchased
from such Holder, and shall certify that the Holder Representative has
notified each Holder in writing of the exercise of the Secondary Put Right
and of such Holder's opportunity to participate in the exercise thereof.
Holders exercising the Secondary Put Right are hereinafter collectively
referred to as the "Secondary Put Selling Holders" and the Eligible Units to
be purchased by Katy from the Secondary Put Selling Holders are hereinafter
collectively referred to as the "Secondary Put Units."
(c) Closing. At the closing of the purchase and sale of
the Secondary Put Units (the "Secondary Put Closing"), (i) Katy shall
deliver to each Secondary Put Selling Holder for each Secondary Put Unit
sold by such Secondary Put Selling Holder cash in an amount equal to the sum
of (A) the cash payment described in Section 1.4(a)(i), plus (B) the
Priority Return Consideration, and (ii) each Secondary Put Selling Holder
shall execute and deliver to Katy an Assignment of Preferred Units in the
form attached hereto as Exhibit B with respect to the Secondary Put Units to
be sold by such Secondary Put Selling Holder. Any cash payment to be made by
Katy to any Secondary Put Selling Holder pursuant to the exercise of the
Secondary Put Right shall be in the form of a certified check or wire
transfer of immediately available funds. The Secondary Put Closing shall
take place on the 60th day after the date that the Secondary Put Notice is
given or on such other date as Katy and the Holder Representative may agree.
Unless otherwise agreed by Katy and the Holder Representative, the Secondary
Put Closing shall take place at the principal office of the Company.
1.5 Control Put Option.
(a) The Right. Katy shall give notice to the Holder
Representative (i) of a Voluntary Change in Control with respect to Katy or
the Company within five days after the execution of an agreement to engage
in such Voluntary Change in Control or at least 60 days prior to the
occurrence of such Voluntary Change in Control, whichever occurs first, and
(ii) of a Change in Control other than a Voluntary Change in Control within
five days after the occurrence of such Change in Control. At any time (i) in
the case of a Voluntary Change in Control with respect to Katy or the
Company, during the period beginning on the date on which Katy gives notice
to the Holder Representative of the occurrence of the Voluntary Change in
Control and ending on the 60th day after Katy gives such notice, or (ii) in
the case of a Change in Control (other than a Voluntary Change in Control)
with respect to Katy or the Company, during the period beginning on the date
such Change in Control has occurred with respect to either Katy or the
Company and ending on the 30th day following the date on which Katy gives
notice to the Holder Representative of the occurrence of the Change in
Control, inclusive (the "Control Put Exercise Period"), the Holders shall
have the right to require Katy to purchase from all Holders in accordance
with this Section 1.5 all, and not less than all, of their Eligible Units (a
"Control Put Right"). The purchase price for each Eligible Unit required to
be purchased by Katy pursuant to the Control Put Right shall be, subject to
adjustment pursuant to Section 1.8, the sum of (i) at the selection of the
Holders, either (A) $100,000 (the "Cash Consideration"), or (B) the Stock
Consideration, plus (ii) cash in an amount equal to the Priority Return
Consideration.
(b) Notice. To exercise the Control Put Right, the
Holder Representative shall notify Katy, in writing, within the Control Put
Exercise Period of the Holders' intention so to exercise (the "Control Put
Notice"). The Control Put Notice shall also contain the Holders' selection
of either the Cash Consideration or the Stock Consideration; if the Control
Put Notice does not contain a selection, the Holders shall be deemed to have
selected the Cash Consideration. The Holders' selection shall be binding
upon all Holders. The Control Put Notice shall identify each Holder
exercising the Control Put Right and the number of Eligible Units to be
purchased from such Holder, and shall certify that the Holder Representative
has notified each Holder in writing of the exercise of the Control Put Right
and the obligation of such Holder to participate in Control Put Right. The
Control Put Notice may also include a request for a Demand Registration with
respect to all or any portion of the Stock Consideration. Holders exercising
the Control Put Right are hereinafter collectively referred to as the
"Control Put Selling Holders" and the Eligible Units to be purchased by Katy
from the Control Put Selling Holders are hereinafter collectively referred
to as the "Control Put Units."
(c) Election to Pay Stock Consideration in Cash. Within
15 days after the date the Control Put Notice is given, Katy shall have the
right, which it may exercise by giving written notice (the "Control Put
Consideration Notice") to the Holder Representative, in lieu of delivering
the Stock Consideration, to pay each Control Put Selling Holder cash in an
amount equal to the Market Value multiplied by the number of shares of
Common Stock constituting the Stock Consideration otherwise due such Control
Put Selling Holder. If Katy fails to give the Control Put Consideration
Notice within the time period required, Katy's right to pay the Stock
Consideration in cash shall lapse. If Katy timely elects to pay the Stock
Consideration in cash with respect to any Control Put Selling Holder, (i) it
shall be obligated to pay the Stock Consideration in cash to all Control Put
Selling Holders, and (ii) if the Holder Representative shall have requested
a Demand Registration with respect to the Stock Consideration, such Demand
Registration shall be deemed withdrawn and shall not constitute a Demand
Registration hereunder.
(d) Closing. At the closing of the purchase and sale of
the Control Put Units (the "Control Put Closing"), (i) Katy shall deliver to
each Control Put Selling Holder for each Control Put Unit sold by such
Control Put Selling Holder (A) either (1) stock certificate(s) representing
the Stock Consideration registered in the name of such Control Put Selling
Holder if the Holders have so elected in the Control Put Notice and Katy has
not exercised its rights pursuant to Section 1.5(c), (2) the cash payment
described in Section 1.5(c) if Katy has exercised its rights pursuant to
Section 1.5(c), or (3) the Cash Consideration in all other cases, plus (B)
cash in an amount equal to the Priority Return Consideration, and (ii) each
Control Put Selling Holder shall execute and deliver to Katy an Assignment
of Preferred Units in the form attached hereto as Exhibit B with respect to
the Control Put Units to be sold by such Control Put Selling Holder. Any
cash payment to be made by Katy to any Control Put Selling Holder pursuant
to the exercise of the Control Put Right shall be in the form of a certified
check or wire transfer of immediately available funds. The Control Put
Closing shall take place on (x) if a request for a Demand Registration of
any of the Stock Consideration has been made, whether in the Control Put
Notice or otherwise, (A) if the Stock Consideration is to be distributed
through a firm commitment underwritten offering, immediately prior to the
closing of the firm commitment underwritten offering, or (B) in all other
cases, on the date that the Registration Statement applicable to the Stock
Consideration has become effective, or (y) in all other cases, on the 60th
day after the date that the Control Put Notice is given, or, in any of the
above-mentioned cases, on such other date as Katy and the Holder
Representative may agree. Unless otherwise agreed by Katy and the Holder
Representative, the Control Put Closing shall take place at the principal
office of the Company.
(e) Withdrawal of Exercise. If (i) Katy has not
exercised its rights pursuant to Section 1.5(c), and (ii) the Closing Market
Price as of the day immediately prior to the date of the Control Put Closing
is less than 90% of the Closing Market Price as of the day the Control Put
Notice is given, the Holder Representative may withdraw the exercise of the
Control Put Right with respect to all or any portion of the Control Put
Units upon written notice to such effect given to Katy on or prior to the
date of the Control Put Closing, subject to the Holders' obligations under
Section 2.2(e) with respect to the withdrawal of a Demand Registration.
1.6 Call Option.
(a) The Right. At any time on or after January 8, 2012,
Katy shall have the right (a "Call Right") to require every Person to sell
to Katy all, and not less than all, Preferred Units then held by such
Person. The purchase price for each Preferred Unit required to be sold by a
Person pursuant to the Call Right shall be, subject to adjustment pursuant
to Section 1.8, the sum of (i) $100,000, and (ii) cash in an amount equal to
the Priority Return Consideration. If Katy exercises a Call Right with
respect to one Person, it must simultaneously exercise its Call Right with
respect to all Persons.
(b) Notice. To exercise the Call Right, Katy shall
notify the Holder Representative in writing of Katy's intention so to
exercise (the "Call Notice").
(c) Closing. At the closing of the purchase and sale of
Preferred Units pursuant to the exercise of a Call Right (the "Call
Closing"), (i) Katy shall deliver to each Person for each Preferred Unit
held by such Person cash in an amount equal to the sum of (A) $100,000, and
(B) the Priority Return Consideration, and (ii) each Person shall execute
and deliver to Katy an Assignment of Preferred Units in the form attached
hereto as Exhibit B with respect to the Preferred Units held by such Person.
Any cash payment to be made by Katy to any Person pursuant to the exercise
of the Call Right shall be in the form of a certified check or wire transfer
of immediately available funds. The Call Closing shall take place on the
60th day after the date that the Call Notice is given or on such other date
as Katy and the Holder Representative may agree. Unless otherwise agreed by
Katy and the Holder Representative, the Call Closing shall take place at the
principal office of the Company.
1.7 Piggyback Put Option.
(a) The Right. At any time during the period beginning
on the date Katy gives notice to the Holder Representative of a proposed
registration giving rise to the Holders' right to a Piggyback Registration
pursuant to Section 2.2 and ending on the 20th day following the date on
which Katy gives such notice, inclusive (the "Piggyback Put Exercise
Period"), the Holders shall have the right (a "Piggyback Put Right") to
require Katy to purchase from the Holders in accordance with this Section
1.7 all or any portion of their Eligible Units that may be included in the
Piggyback Registration. The purchase price for each Eligible Unit required
to be purchased by Katy pursuant to the Piggyback Put Right shall be,
subject to adjustment pursuant to Section 1.8, the sum of (i) the Stock
Consideration, and (ii) cash in an amount equal to the Priority Return
Consideration.
(b) Notice. To exercise the Piggyback Put Right, the
Holder Representative shall notify Katy, in writing, within the Piggyback
Put Exercise Period of the Holders' intention so to exercise (the "Piggyback
Put Notice"). The Piggyback Put Notice shall identify each Holder exercising
the Piggyback Put Right and the number of Eligible Units to be purchased
from such Holder, and certify that the Holder Representative has notified
each Holder in writing of the exercise of the Piggyback Put Right and of
such Holder's opportunity to participate in the exercise thereof. Holders
exercising the Piggyback Put Right are hereinafter collectively referred to
as the "Piggyback Put Selling Holders" and the Eligible Units to be
purchased by Katy from the Piggyback Put Selling Holders are hereinafter
collectively referred to as the "Piggyback Put Units."
(c) Election to Pay Stock Consideration in Cash. Within
15 days after the date the Piggyback Put Notice is given, Katy shall have
the right, which it may exercise by giving written notice (the "Piggyback
Put Consideration Notice") to the Holder Representative, in lieu of
delivering the Stock Consideration, to pay each Piggyback Put Selling Holder
cash in an amount equal to the Market Value multiplied by the number of
shares of Common Stock constituting the Stock Consideration otherwise due
such Piggyback Put Selling Holder. If Katy fails to give the Piggyback Put
Consideration Notice within the time period required, Katy's right to pay
the Stock Consideration in cash shall lapse. If Katy timely elects to pay
the Stock Consideration in cash with respect to one Piggyback Put Selling
Holder, it shall be obligated to pay the Stock Consideration in cash to all
Piggyback Put Selling Holders.
(d) Closing. At the closing of the purchase and sale of
the Piggyback Put Units (the "Piggyback Put Closing"), (i) Katy shall
deliver to each Piggyback Put Selling Holder for each Piggyback Put Unit
sold by such Piggyback Put Selling Holder (A) either (1) if Katy has not
exercised its rights pursuant to Section 1.7(c), stock certificate(s)
representing the Stock Consideration registered in the name of such
Piggyback Put Selling Holder, or (2) if Katy has exercised its rights
pursuant to Section 1.7(c), the cash payment described in Section 1.7(c),
plus (B) cash in an amount equal to the Priority Return Consideration, and
(ii) each Piggyback Put Selling Holder shall execute and deliver to Katy an
Assignment of Preferred Units in the form attached hereto as Exhibit B with
respect to the Piggyback Put Units to be sold by such Piggyback Put Selling
Holder. Any cash payment to be made by Katy to any Piggyback Put Selling
Holder pursuant to the exercise of the Piggyback Put Right shall be in the
form of a certified check or wire transfer of immediately available funds.
The Piggyback Put Closing shall take place on the date that the Registration
Statement filed in connection with the Piggyback Registration and applicable
to the Stock Consideration has become effective or on such other date as
Katy and the Holder Representative may agree. Unless otherwise agreed by
Katy and the Holder Representative, the Piggyback Put Closing shall take
place at the principal office of the Company.
(e) Withdrawal of Exercise. If (i) Katy has not
exercised its rights pursuant to Section 1.7(c), and (ii) the Closing Market
Price as of the day immediately prior to the date of the Piggyback Put
Closing is less than 90% of the Closing Market Price as of the day the
Piggyback Put Notice is given, the Holder Representative may withdraw the
exercise of the Piggyback Put Right with respect to all or any portion of
the Piggyback Put Units upon written notice to such effect given to Katy on
or prior to the date of the Piggyback Put Closing, subject to the Holders'
obligations under Section 2.2(e) with respect to the withdrawal of a Demand
Registration.
(f) Conditional Exercise. The exercise of the Piggyback
Put Right by each Holder is expressly conditional upon all of the Stock
Consideration due such Holder being sold in the Piggyback Registration. If
any of such Stock Consideration due such Holder is not sold in the Piggyback
Registration, such Holder shall be deemed not to have exercised the
Piggyback Put Right with respect to the Piggyback Put Unit(s) to which such
Stock Consideration relates.
1.8 Price Adjustment for Defaulted Obligation. Every other
provision of this Agreement notwithstanding, if Katy at any time fails
timely to perform its obligations to purchase any Eligible Unit for cash in
accordance with the exercise of a Basic Put Right, a Secondary Put Right, a
Control Put Right, a Call Right or Piggyback Put Right, then the cash
purchase price applicable to such Eligible Unit shall increase at the rate
of two percent (2%) per month, compounded monthly, from the date the Basic
Put Notice, Secondary Put Notice, Control Put Notice, Call Notice or
Piggyback Put Notice, as the case may be, was given, until the date Katy
actually performs all of its obligations to purchase such Eligible Unit for
cash.
1.9 Governmental Compliance. If, in connection with the
delivery of Stock Consideration by Katy under any provision of this
Agreement, the Holder to which such Stock Consideration is deliverable is
required to file a notification and observe the waiting period under The
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, or any
comparable or successor law ("HSR Act"), then such Holder and Katy (a) shall
use their best efforts to cause such notification to be filed in time for
the scheduled closing of the transaction in which the Stock Consideration is
to be delivered, (b) each shall furnish such information as the other may
reasonably request in connection with the preparation of such notification,
and (c) shall request early termination of the waiting period under the HSR
Act. If, prior to expiration or termination of the waiting period, any
governmental agency administering the HSR Act shall issue a second request
for information or shall file suit to enjoin the Holder's acquisition of the
Stock Consideration, then Katy shall proceed to the closing of the
transaction in question and shall deliver to such Holder Cash Consideration
and the Priority Return with respect to such Holder's Eligible Units. Any
fee imposed by the HSR Act with respect to a notification by a Holder to
whom Stock Consideration is receivable shall be borne one-half by Katy and
one-half by the applicable Holder.
1.10 Appointment of Holder Representative.
(a) Each Holder irrevocably constitutes and appoints
▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Holder Representative") as such Holder's true and lawful
agent, proxy and attorney-in-fact and authorizes the Holder Representative
acting for such Holder and in such Holder's name, place and stead, in any
and all capacities to do and perform every act and thing required or
permitted to be done in connection with the transactions contemplated by
this Agreement, as fully for all intents and purposes as such Holder might
or could do in person, including, without limitation:
(i) to deliver all notices required to be delivered by such
Holder under this Agreement, including, without limitation, any notice
in connection with the exercise of the Basic Put Right, the Secondary
Put Right, the Control Put Right or the Piggyback Put Right or any
Demand Registration or Piggyback Registration;
(ii) to receive all notices required to be delivered to such
Holder under this Agreement, including, without limitation, any notice
in connection with the exercise of the Basic Put Right, the Secondary
Put Right, the Control Put Right or the Piggyback Put Right or any
Demand Registration or Piggyback Registration;
(iii) to receive all payments and distributions made to such
Holder under this Agreement;
(iv) to take any and all action on behalf of such Holder from
time to time as the Holder Representative may deem necessary or
desirable to defend, pursue, resolve and/or settle claims under this
Agreement; and
(v) to engage and employ agents and representatives for such
Holder (including accountants, legal counsel and other professionals)
and to incur such other expenses as he deems necessary or prudent in
connection with the administration of the foregoing.
Each Holder grants unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing necessary or
desirable to be done in connection with the transactions contemplated by
this Agreement, as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that the
Holder Representative may lawfully do or cause to be done by virtue hereof.
Each Holder will, by executing this Agreement agree that such agency, proxy
and power of attorney are coupled with an interest, and are therefore
irrevocable without the consent of the Holder Representative and Katy and
shall survive the death, incapacity, or bankruptcy of such Holder. Each
Holder acknowledges and agrees that upon execution of this Agreement, any
delivery by the Holder Representative of any waiver, amendment, agreement,
opinion, certificate or other documents executed by the Holder
Representative or any decisions made by the Holder Representative pursuant
to this Section 1.10, shall bind such Holder as fully as if such Holder had
executed and delivered such documents or made such decisions.
(b) The Holder Representative shall not have by reason
of this Agreement a fiduciary relationship in respect of any Holder, except
in respect of amounts received on behalf of such Holder. The Holder
Representative shall not be liable to any Holder for any action taken or
omitted by him or any agent employed by him hereunder or under any other
agreement entered into in connection with the transactions contemplated
hereby, except that the Holder Representative shall not be relieved of any
liability imposed by law for gross negligence or willful misconduct. The
Holder Representative shall not be liable to Holders for any apportionment
or distribution of payments made by him in good faith, and if any such
apportionment or distribution is subsequently determined to have been made
in error the sole recourse of any Holder to whom payment was due, but not
made, shall be to recover from other Holders any payment in excess of the
amount to which they are determined to have been entitled. The Holder
Representative shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions
of this Agreement.
(c) Upon the resignation, death, disability or
incapacity of a Holder Representative, each Holder acknowledges and agrees
that a replacement Holder Representative shall be appointed as set forth in
a written list of successor Holder Representatives submitted to Katy by
▇▇▇▇▇▇ ▇▇▇▇▇▇, which list may be changed from time to time by ▇▇▇▇▇▇ ▇▇▇▇▇▇
by written notice to Katy and shall identify Persons to serve as Holder
Representative and the order of appointment. Any substituted representative
so designated who accepts such appointment in writing shall be deemed the
Holder Representative for all purposes of this Agreement. In the event that
at any time a successor Holder Representative shall not have been designated
in accordance with the foregoing provisions of this Section 1.10(c), then
the Holder Representative shall be the Holder then owning the most Preferred
Units (considering for such purpose, any Katy Common Stock then owned by
such Holder as representing the Preferred Units for which such shares of
Common Stock shall have been exchanged).
(d) Each Holder agrees that Katy shall be entitled to
rely on any action taken by the Holder Representative, on behalf of the
Holders, pursuant to Section 1.10(a) above (each, an "Authorized Action"),
and that each Authorized Action shall be binding on each Holder as fully as
if such Holder had taken such Authorized Action. Katy agrees that the
Holder Representative shall have no liability to Katy for any Authorized
Action, except to the extent that such Authorized Action is found by a final
order of a court of competent jurisdiction to have constituted fraud or
willful misconduct. The Holders jointly and severally agree to pay, and to
indemnify and hold harmless Katy from and against any losses which it may
suffer, sustain, or become subject to, as the result of any claim that an
Authorized Action is not binding on, or enforceable against, the Holders.
In addition, the Holders hereby release and discharge Katy from and against
any liability arising out of or in connection with Holder Representative's
failure to distribute any amounts received by the Holder Representative on
the Holders' behalf to the Holders.
1.11 Federal and Other Securities Laws.
(a) This Agreement is made with each Holder in reliance
upon such Holder's representation to Katy, that (except in connection with a
registered transaction) the Katy Common Stock to be received by it hereunder
will be acquired for investment for its own account, not as a nominee or
agent, and not with a view to the sale or distribution of any part thereof,
and that it has no present intention of selling, granting participation in,
or otherwise distributing the same. By executing this Agreement, each
Holder further represents that it does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer, or grant
participations to such person or to any third person, with respect to any of
such Katy Common Stock.
(b) Each Holder understands that Katy Common Stock is
not registered under the Act, on the ground that the sale provided for in
this Agreement and the issuance of Katy Common Stock hereunder should be
exempt from registration under the Act and that the Company's reliance on
such exemption is predicated on such Holder's representations set forth
herein. Each Holder realizes that the basis for the exemption may not be
present if, notwithstanding such representations, such Holder has in mind
merely acquiring the Katy Common Stock for a fixed or determinable period in
the future, or for a market rise or for sale if the market does not rise.
Each Holder confirms it has no such intention.
(c) Each Holder represents that it is an "accredited
investor" within the meaning of Rule 501 under the Act and that it is
experienced in evaluating and investing in companies such as Katy, is able
to fend for itself in the transactions contemplated by this Agreement, has
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment and has the
ability to bear the economic risks of its investment. Each Holder further
represents that it has had access, during the course of the transaction and
prior to its purchase of the Katy Common Stock, to the same kind of
information that would be provided in a registration statement filed by Katy
under the Act and that it has had, during the course of the transaction and
prior to its purchase of the Katy Common Stock, the opportunity to ask
questions of, and receive answers from, Katy concerning the terms and
conditions of the offering and to obtain additional information necessary to
verify the accuracy of any information furnished to it or to which it had
access.
(d) Each holder understands that the Katy Common Stock
may not be sold, transferred or otherwise disposed of without registration
under the Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Securities or an available
exemption from registration under the Act, the Katy Common Stock must be
held indefinitely. In particular, each Holder is aware that the Katy Common
Stock may not be sold pursuant to Rule 144 unless all of the conditions of
that Rule are met. Each Holder represents that, in the absence of an
effective registration statement covering the Katy Common Stock it will
sell, transfer or otherwise dispose of the Katy Common Stock only in a
manner consistent with its representations set forth herein and then only in
accordance with the provisions of Section 1.11(e) hereof.
(e) Each Holder agrees that in no event will it make a
transfer or disposition of any of the Katy Common Stock (other than pursuant
to an effective registration statement under the Act), unless and until
(i) such Holder shall have notified the Company of the proposed disposition
and shall have furnished Katy with a statement of the circumstances
surrounding the disposition and assurance that the proposed disposition is
in compliance with all applicable laws and (ii) if reasonably requested by
Katy, at the expense of such Holder or transferee, it shall have furnished
to Katy an opinion of counsel, reasonably satisfactory to Katy, to the
effect that such transfer may be made without registration under the Act;
provided, no opinion of counsel need be furnished for any transfer of the
Katy Common Stock to a shareholder of Newcastle or any beneficiary of such
shareholder which is a trust, who confirms the representations and
undertakings set forth in this Section 1.11.
(f) All certificates for the Katy Common Stock issued
to a Holder shall bear the following or a substantially similar legend:
"These securities have not been registered under the
Securities Act of 1933. They may not be sold,
offered for sale, pledged or hypothecated in the
absence of an effective registration statement as to
the securities under said Act or an opinion of
counsel satisfactory to Katy Industries, Inc., that
such registration is not required."
(g) The certificates for the Katy Common Stock may also
bear any legend required by any applicable state securities or other law.
(h) In addition, Katy shall make a notation regarding
the restrictions on transfer of the Katy Common Stock in its records and the
Katy Common Stock shall be transferred on the books of Katy only if
transferred or sold pursuant to an effective registration statement under
the Act covering such shares or pursuant to and in compliance with the
provisions of Section 11.1(e) hereof.
1.12 Holders' Information Rights.
(a) At such time as ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall not be serving
as a Director of Katy, the Holder Representative shall have the right to
receive, upon request, such regularly prepared internal financial statements
and reports as Katy makes available to its banks.
(b) In connection with the proposed sale by a Holder of
Katy Common Stock pursuant to a registration statement, Katy shall afford
such Holder access to the same due diligence information as shall be
furnished to the underwriters in connection therewith.
(c) From and after such time as ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall not
be serving as a Director of Katy, Katy shall deliver to the Holder
Representative such regularly prepared reports with respect to Katy as Katy
provides to its lenders. Katy shall deliver such information to the Holder
Representative at substantially the same time as it delivers such
information to its lenders. The Holder Representative shall keep such
information confidential, including without limitation from the Holders
(except to the extent required by law or regulations, by order of any court,
governmental agency or regulatory authority having jurisdiction, after
furnishing notice to Katy of the request therefor, or to the extent such
information becomes publicly available otherwise than pursuant to a breach
by the Holder Representative of its obligations hereunder) but shall be
permitted to counsel and advise the Holders on the basis of such information
without disclosing the same.
(d) (i) Holders agree to keep confidential, and not to
divulge or otherwise disclose any portion of, any information furnished by
Katy hereunder (and to cause their officers, directors, employees, agents
and representatives not to disclose such information), except to the extent
required by law or regulations, by order of any court, governmental agency
or regulatory authority having jurisdiction, after furnishing notice to Katy
of the request therefor, or to the extent such information becomes publicly
available otherwise than pursuant to a breach by a Holder of its obligations
hereunder.
(ii) Holders acknowledge to Katy that they are
aware, and will advise their representatives who are informed of any non-
public information regarding Katy received hereunder, of the restrictions
imposed by the U. S. securities laws on the purchase or sale of securities
by any person who has received material non-public information from either
party and on the communication of such information to any other person who
may purchase or sell such securities in reliance on such information. The
Holders will comply with all securities laws in connection with the purchase
or disposition, directly or indirectly, of securities of Katy for as long as
they or their representatives are in possession of material non-public
information concerning Katy.
Article II
Registration of Registrable Securities
2.1 Demand Registrations.
(a) Requests for Registration. At any time on or after
the date hereof, as set forth in this Section 2.1, the Holders of the
Registrable Securities may request Katy to register under the Act all or
part of the Holders' Registrable Securities (but in no event fewer than
100,000 shares of Katy Common Stock, adjusted proportionately for stock
dividends, stock splits and the like occurring after the date hereof) by
causing the Holder Representative to make such request in writing to Katy.
Each request for registration shall state that it is being made pursuant to
this Section 2.1 and shall specify the number of Registrable Securities
requested to be registered. Such request for registration shall identify
each Holder requesting registration of its Registrable Securities and the
number of such Holder's Registrable Securities requested to be registered as
well as certify that the Holder Representative has notified each Holder in
writing of the request for registration and of such Holder's opportunity to
participate in such registration. Upon a request for a Demand Registration,
Katy shall use its commercially reasonable efforts to effect as
expeditiously as possible the registration, in accordance with Section 2.3,
of all Registrable Securities which Katy has been requested to so register.
Each registration requested pursuant to this Section 2.1 is referred to
herein as a "Demand Registration." If Katy notifies the Holder
Representative in writing, prior to a request for a Demand Registration from
the Holders, of Katy's intent to register securities with the Commission,
and Katy effects a registration in accordance with Section 2.2, the Holders'
request shall be governed by Section 2.2 and shall not constitute a Demand
Registration.
(b) Limitations on Demand Registrations.
(i) Katy shall not be required to effect more
than two Demand Registrations; provided, however, that, if Katy has already
effected two Demand Registrations, Katy shall be required to effect one
additional Demand Registration upon the request of the Holder Representative
upon (A) the first to occur of Katy's giving of a notice of a Voluntary
Change in Control with respect to Katy or the Company or the 60th day prior
to the occurrence of such Voluntary Change in Control, or (B) the occurrence
of a Change in Control other than a Voluntary Change in Control with respect
to Katy or the Company.
(ii) Notwithstanding any other provision of this
Section 2.1, Katy shall not be obligated to effect any Demand Registration
within (A) six months after the effective date of a previous Demand
Registration, (B) within 90 days after the effective date of a registration
statement filed in connection with a public offering by Katy of its Common
Stock for cash on a firm underwriting basis, or within such longer period,
not to exceed 180 days after such effective date, as shall be requested in
good faith by the managing underwriter for such public offering or
(C) within three months after the Holders shall have withdrawn a request for
a Demand Registration in connection with the withdrawal of an exercise of:
(x) the Basic Put Right pursuant to Section 1.2(e), (y) the Control Put
Right pursuant to Section 1.5(e) or (z) the Piggyback Put Right pursuant to
Section 1.7(e).
(iii) If the Board of Directors of Katy, acting in
good faith, determines that the registration and distribution of Registrable
Securities (or the use of the Registration Statement or related Prospectus)
resulting from a Demand Registration would:
(A) materially and adversely interfere with
any business combination transaction announced prior to the date the request
for a Demand Registration is given, which transaction involves Katy and
pursuant to which Katy would issue, in connection with such transaction,
shares of Common Stock; or
(B) result in the premature disclosure of
any pending financing, acquisition, corporate reorganization or any other
corporate development involving Katy or any of its subsidiaries;
then, in either such event, Katy promptly shall give the Holder
Representative written notice of such determination. Katy thereupon shall
have the right to delay the filing or the effectiveness (but not the
preparation) of the Registration Statement for the Demand Registration for a
reasonable period of time, but in no event more than 180 days after the date
that the request for a Demand Registration was made; provided that in the
event of such delay, the Holder Representative shall be entitled to withdraw
such request and, if such request is withdrawn, such Demand Registration
will not count as a Demand Registration, and responsibility for Registration
Expenses incurred by the parties prior to such delay shall be allocated in
accordance with Section 2.1(e). ▇▇▇▇ ▇▇▇ not exercise this right to delay a
Demand Registration more than once during any period of twelve consecutive
months.
(iv) If any event described in Section 2.1(b)(ii)
or (iii) shall occur during the two-year period ending January 8, 2009, then
the Basic Put Exercise Period shall be extended to June 8, 2009.
(c) Underwriting Requirements. In connection with any
Demand Registration involving an Underwritten Offering, Katy shall (together
with all Holders proposing to distribute their securities through such
Underwritten Offering) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters of
recognized national or regional standing selected for such Underwritten
Offering by the Holder Representative and reasonably acceptable to Katy. If
a Demand Registration is for an Underwritten Offering and the representative
of the underwriters advises the Holder Representative in writing that
marketing factors, including, but not limited to, the price at which such
securities will be sold, require a limitation of the number of Registrable
Securities to be included in the registration and Underwritten Offering,
then, the number of shares of Common Stock that may be included in the
registration and Underwritten Offering shall be allocated among all Holders
in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities then owned by such Holders at the time of initial
filing of the Registration Statement. If the underwriters have not limited
the number of Registrable Securities to be underwritten, then ▇▇▇▇ ▇▇▇
include securities for its own account or for the account of others in such
registration if the underwriter so agrees in writing and if the number of
Registrable Securities that would otherwise have been included in such
registration and Underwritten Offering will not thereby be limited for any
reason, including but not limited to the price for which the Registrable
Securities will be sold.
(d) Expenses of Demand Registration. Except as provided
in this Section 2.1(d) or in Section 2.1(e), all Registration Expenses
incurred in connection with a Demand Registration shall be borne equally
between Katy, on the one hand, and the Holders, on the other hand.
Underwriting discounts and commissions relating to the sale or disposition
of Registrable Securities by the Holders, the fees and disbursements of
counsel for the Holders and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by the Holders, all shall be borne by
the Holders. The cost of preparing all documents incorporated by reference
or otherwise required to be prepared in the ordinary course of Katy's
business shall be borne by Katy. Expenses to be borne by the Holders shall
be allocated to each Holder in the same proportion which the amount of
Registrable Securities owned by such Holder which are included in the Demand
Registration bears to the amount of Registrable Securities owned by all
Holders which are included in the Demand Registration.
(e) Withdrawal of Demand Registration. Holders of the
Registrable Securities proposed to be registered in a given Demand
Registration may elect to withdraw such Demand Registration at any time by
causing the Holder Representative to give written notice thereof to Katy.
Any Demand Registration so withdrawn shall not constitute a Demand
Registration hereunder. The Registration Expenses incurred in any withdrawn
Demand Registration shall be borne solely by the Holders unless (i) the
Demand Registration was withdrawn as a result of information indicating a
material adverse change in the business or financial condition of Katy which
is made known to the Holders after the date on which the request for a
Demand Registration was made, in which case all such Registration Expenses
shall be borne by Katy, (ii) the Holders agree to forfeit their right to a
Demand Registration, in which case all such Registration Expenses shall be
borne equally between Katy, on the one hand, and the Holders, on the other
hand, (iii) the Demand Registration was withdrawn as a result of the
election of Katy to delay the registration in accordance with Section
2.1(b), in which case all such Registration Expenses shall be borne by Katy
and, in addition, Katy shall pay the fees and disbursements of counsel to
the Holders incurred prior to such delay, or (iv) Katy continues to pursue
such registration with respect to securities to be sold for Katy's own
account or the account of others, in which case all such Registration
Expenses shall be borne by Katy.
(f) Registrations Not Constituting Demand Registrations.
A requested Demand Registration shall not constitute a Demand Registration
hereunder if:
(i) such registration has not been declared
effective by the Commission within 90 days of the date the Registration
Statement with respect thereto is first filed with the Commission;
(ii) within 180 days after becoming effective, such
registration is interfered with by any stop order, injunction or similar
order or requirement of the Commission or other governmental agency or court
for any reason not attributable to any Holder and Katy fails to have such
stop order, injunction or other order or requirement removed, withdrawn or
resolved to the satisfaction of the Holder Representative within 30 days
after such interference commences;
(iii) the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such Demand
Registration are not satisfied or waived due to Katy's failure to act in
good faith; or
(iv) Holders of the Registrable Securities to be
included in the Demand Registration have withdrawn such demand pursuant to
Section 2.1(e).
(g) No Company Initiated Registration. After a notice
for a Demand Registration has been given, Katy shall not initiate, without
the prior written consent of the Holder Representative, a registration of
any of its securities for its own account (other than a Registration
Statement (A) on Form S-8 or any successor form relating to securities
issuable pursuant to any benefit plan, (B) on Form S-4, or any successor
form relating to an exchange offer or relating to a transaction pursuant to
Rule 145 or (C) on Form S-3 or any successor form with respect to securities
registered in connection with dividend reinvestment plans and similar plans
only) until at least 90 days after such registration has been effected or
such registration has been terminated; provided, however, that Katy shall be
permitted to sell securities for its own account in the Demand Registration
to the extent permitted by Section 2.1(c).
2.2 Piggyback Registrations. If Katy proposes to register any
of its Common Stock under the Act and the registration form to be used can
be used to register the resale of the Common Stock (other than a
Registration Statement (A) on Form S-8 or any successor form relating to
securities issuable pursuant to any benefit plan; (B) on Form S-4, or any
successor form relating to an exchange offer or relating to a transaction
pursuant to Rule 145, or (C) on Form S-3 or any successor form with respect
to securities registered in connection with dividend reinvestment plans and
similar plans only), Katy shall, each such time, promptly give the Holder
Representative written notice of such determination to effect such a
registration not later than 30 days prior to the anticipated date of filing
with the Commission of the Registration Statement. Upon the written request
of the Holder Representative given within 20 days after the date that Katy
gives its notice, as part of the registration to which such notice relates,
Katy shall use its best efforts to effect as expeditiously as possible the
registration of all Registrable Securities that the Holders have requested
to be registered as set forth in the Holder Representative's notice. Each
registration requested pursuant to this Section 2.2 is referred to herein as
a "Piggyback Registration."
(a) Underwritten Offerings. If the registration of
which Katy gives notice is for an Underwritten Offering, then Katy shall so
advise the Holder Representative as a part of such written notice. In such
event, the right of the Holders to registration pursuant to this Section
shall be conditioned upon the Holders' agreeing to participate in such
Underwritten Offering upon the terms and conditions as shall be negotiated
by Katy, and the inclusion of the Registrable Securities in the Underwritten
Offering to the extent provided herein. The Holders proposing to distribute
securities through such Underwritten Offering shall (together with Katy)
enter into an underwriting agreement in customary form with the underwriter
or underwriters selected for such Underwritten Offering by Katy.
Notwithstanding any other provisions of this Section, if the underwriter
determines in writing, in its sole and absolute discretion, that marketing
factors, including the price at which such securities will be sold, require
a limitation of the number of shares to be underwritten, then the
underwriter may exclude some or all Registrable Securities from such
registration and Underwritten Offering in accordance with the provisions of
this Section; provided, however, that if any securities are being offered
for the account of any holder of Katy's securities other than the Holders,
(i) with respect to the first registration of Registrable Securities
pursuant to this Section 2.2, securities held by all Persons other than
Holders shall be excluded from the Underwritten Offering before any
Registrable Securities are excluded, and (ii) with respect to any
registration of Registrable Securities pursuant to this Section 2.3 after
the first such registration, the reduction in the number of Registrable
Securities included in such registration shall not represent a greater
percentage of the amount of Registrable Securities originally requested to
be registered and sold in such registration than the lowest percentage
reduction imposed upon any holder of Katy's securities other than the
Holders. Katy shall so advise the Holder Representative, and the number of
Registrable Securities that may be included in the registration and
Underwritten Offering on behalf of the Holders shall be allocated among the
Holders in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities which the Holders requested to be included in the
registration. If the Holders disapprove of the terms of any such
Underwritten Offering, then the Holders may elect to withdraw therefrom by
causing the Holder Representative to give written notice thereof to Katy and
the underwriter. Any securities so excluded or withdrawn from such
Underwritten Offering shall be withdrawn from such registration.
(b) Expenses of Piggyback Registrations. In the case of
any registration effected pursuant to this Section 2.2, all Registration
Expenses incurred in connection therewith shall be borne by Katy, provided,
however, that those expenses directly attributable to the inclusion of
Registrable Securities in such registration (such as registration fees and
fees and expenses of counsel to the selling Holders), shall be borne by the
selling Holders pro rata. Underwriting discounts and commissions relating
to the sale or disposition of Registrable Securities by the Holders, the
fees and disbursements of counsel for the Holders and transfer taxes, if
any, relating to the sale or disposition of Registrable Securities by the
Holders, all shall be borne by the Holders. The cost of preparing all
documents incorporated by reference or otherwise required to be prepared in
the ordinary course of Katy's business shall be borne by Katy. Expenses to
be borne by the Holders shall be allocated to each Holder in same proportion
which the Registrable Securities owned by such Holder which are included in
the registration bears to the Registrable Securities owned by all Holders
which are included in the registration.
2.3 Registration Procedures. If and whenever Katy shall be
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Act as provided in this Agreement, Katy
shall (and, with respect only to Sections 2.3(n) and 2.3(o), the Holders
shall):
(a) prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities on any form for which
Katy then qualifies or that counsel for Katy shall deem appropriate, and
which form shall be available for the sale of the Registrable Securities in
accordance with the methods of distribution thereof intended by the Holders
participating in such registration, and use its best efforts to cause such
Registration Statement to become and remain effective;
(b) prepare and file with the Commission amendments and post-
effective amendments to such Registration Statement and such amendments and
supplements to the Prospectus used in connection therewith as may be
necessary to maintain the effectiveness of such registration or as may be
required by the rules, regulations or instructions applicable to the
registration form utilized by Katy or by the Act for a Shelf Registration if
requested by the Holder Representative in the case of a Demand Registration,
or otherwise necessary to keep such Registration Statement effective to
permit the methods of distribution intended by the Holders participating in
such registration for at least 180 days and cause the Prospectus as so
supplemented to be filed pursuant to Rule 424, and to otherwise comply with
the provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement in the manner requested by the Holder
Representative until (x) in the case of an Underwritten Offering, such time
as all of the Registrable Securities have been disposed of in accordance
with the intended methods of disposition, or (y) in all other cases, the
earlier of (1) the expiration of 180 days after the effective date of such
Registration Statement or (2) such time as all Registrable Securities
covered by such Registration Statement shall have ceased to be Registrable
Securities (it being understood that Katy at its option may determine to
maintain such effectiveness for a longer period, whether pursuant to a Shelf
Registration or otherwise); provided, however, that a reasonable time before
filing a Registration Statement or Prospectus, or any amendments or
supplements thereto (other than reports required to be filed by it under the
Exchange Act), Katy shall furnish to the Participating Holders, the managing
underwriter (if any) and their respective counsel for review and comment,
copies of all documents proposed to be filed;
(c) furnish to the Participating Holders and to any
underwriter in connection with an Underwritten Offering such number of
conformed copies of such Registration Statement and of each amendment and
post-effective amendment thereto (in each case including all exhibits) and
such number of copies of any Prospectus or Prospectus supplement and such
other documents as the Participating Holders or underwriter may reasonably
request in order to facilitate the disposition of the Registrable Securities
by the Participating Holders or underwriters (Katy hereby consenting to the
use (subject to the limitations set forth in Section 2.3(o) hereof) of the
Prospectus or any amendment or supplement thereto in connection with such
disposition);
(d) use its best efforts to register or qualify the sale of
such Registrable Securities covered by such Registration Statement under
such other securities or "blue sky" laws of such jurisdictions as the
Participating Holders shall reasonably request, except that Katy shall not
for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction where, but for the requirements of
this Section 2.3(d), it would not be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
(e) notify the Holder Representative, at any time when a
Prospectus relating thereto is required to be delivered under the Act within
the appropriate period mentioned in Section 2.3(b) hereof, of Katy's
becoming aware that the Prospectus included in such Registration Statement,
as then in effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing, and, at the request of the Holder Representative, prepare and
furnish to the Holder Representative a reasonable number of copies of an
amendment or supplement to such Registration Statement or related Prospectus
as may be necessary so that, as thereafter delivered to the purchasers of
such Registrable Securities, such Prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(f) notify the Holder Representative as soon as possible:
(i) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has
become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus or for
additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any order
preventing the use of a related Prospectus, or the initiation (or any overt
threats) of any proceedings for such purposes;
(iv) of the receipt by Katy of any written notification
of the suspension of the qualification of any of the Registrable Securities
for sale in any jurisdiction or the initiation (or overt threats) of any
proceeding for that purpose; and
(v) if at any time any representation or warranty of
Katy made in any agreement contemplated by Section 2.3(i) below ceases to be
true and correct in any material respect;
(g) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission and make
available to its security holders an earnings statement that shall satisfy
the provisions of Section 11(a) of the Act, provided that Katy shall be
deemed to have complied with this Section 2.3(g) if it shall have complied
with Rule 158;
(h) use its commercially reasonable efforts to cause all such
Registrable Securities to be listed on the NYSE, The Nasdaq Stock Market or
any other national securities exchange or automated quotation system on
which the class of Registrable Securities being registered is then listed,
if such Registrable Securities are not already so listed, and to provide a
transfer agent and registrar for such Registrable Securities covered by such
Registration Statement no later than the effective date of such Registration
Statement;
(i) enter into agreements (including an underwriting agreement
in the form customarily entered into by Katy in a comparable Underwritten
Offering) and take all other appropriate and all commercially reasonable
actions in order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, whether or not an
underwriting agreement shall be entered into and whether or not the
registration shall be an underwritten registration:
(i) make such representations and warranties to the
Participating Holders and the underwriters, if any, in form,
substance and scope as are customarily made by Katy to
underwriters in comparable Underwritten Offerings;
(ii) obtain opinions of counsel to Katy and updates
thereof (which counsel and opinions shall be reasonably
satisfactory (in form, scope and substance) to the managing
underwriters, if any, and shall provide the same opinions to the
Participating Holders as are provided to the underwriters)
addressed to the Participating Holders and the underwriters
covering the matters customarily covered in opinions requested
in comparable Underwritten Offerings by Katy;
(iii) obtain "comfort letters" and updates thereof from
Katy's independent certified public accountants addressed to the
Participating Holders and the underwriters, if any, such letters
to be in customary form and covering matters of the type
customarily covered in "comfort letters" by independent
accountants in connection with comparable underwritten offerings
on such date or dates as may be reasonably requested by the
managing underwriter;
(iv) provide the indemnification in accordance with the
provisions and procedures of Article III hereof to all parties
to be indemnified pursuant to such Article III; and
(v) deliver such documents and certificates as may be
reasonably requested by the Holder Representative and the
managing underwriters, if any, to evidence compliance with
Section 2.3(f) above and with any customary conditions contained
in the underwriting agreement or other agreement entered into by
Katy:
(j) cooperate with the Participating Holders and the managing
underwriter or underwriters to facilitate, to the extent reasonable under
the circumstances, the timely preparation and delivery of certificates
representing the securities to be sold under such Registration Statement,
and enable such securities to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or the
Participating Holders may request and/or in a form eligible for deposit with
the Depository Trust Company;
(k) make available to the Participating Holders, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by the
Participating Holders or underwriter (collectively, the "Inspectors"),
reasonable access to appropriate officers of Katy and Katy's subsidiaries to
ask questions and to obtain information reasonably requested by such
Inspector and all financial and other records and other information,
pertinent corporate documents and properties of any of Katy and its
subsidiaries and affiliates (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility; provided, however, that any Record that Katy determines, in
good faith, to be confidential and which it notifies the Inspectors in
writing is confidential shall not be disclosed to any Inspector unless such
Inspector signs a confidentiality agreement reasonably satisfactory to Katy
or either (i) the disclosure of such Record is necessary to avoid or correct
a misstatement or omission of a material fact in such Registration
Statement, or (ii) the release of such Record is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, provided,
further, that any decision regarding the disclosure of information pursuant
to subclause (i) shall be made only after reasonable consultation in good
faith with counsel for the applicable Inspectors; and provided, further,
that the Participating Holders agree that they shall, promptly after
learning that disclosure of such Record is sought in a court having
jurisdiction, give notice to Katy and allow Katy, at Katy's expense, to
undertake appropriate action to prevent disclosure of such Record;
(l) make available to the Participating Holders and any
underwriter participating in any disposition pursuant to such Registration
Statement appropriate officers of Katy to prepare for and participate in
such number of "road shows" and any other customary selling efforts as the
Participating Holders or any such underwriter may reasonably request in
order to expedite or facilitate such disposition;
(m) in the event of the issuance of any stop order suspending
the effectiveness of the Registration Statement or of any order suspending
or preventing the use of any related Prospectus or suspending the
qualification of any Registrable Securities included in the Registration
Statement for sale in any jurisdiction, Katy shall use all commercially
reasonable efforts promptly to obtain its withdrawal;
(n) the Participating Holders shall furnish Katy with such
information regarding the Participating Holders and pertinent to the
disclosure requirements relating to the registration and the distribution of
such securities as ▇▇▇▇ ▇▇▇ from time to time reasonably request in writing;
and
(o) the Participating Holders shall, upon the Holder
Representative's receipt of any notice from Katy of the happening of any
event of the kind described in Section 2.3(e) hereof, forthwith discontinue
disposition of Registrable Securities pursuant to the Prospectus or
Registration Statement covering such Registrable Securities until the
Participating Holders shall have received copies of the supplemented or
amended Prospectus contemplated by Section 2.3(e) hereof, and, if so
directed by Katy, the Participating Holders shall deliver to Katy (at Katy's
expense) all copies, other than permanent file copies then in the
Participating Holders' possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
2.4 Black-Out Period Agreement. In consideration for Katy
agreeing to its obligations under this Agreement, the Holders agree in
connection with any registration of Katy's securities (other than pursuant
to a Registration Statement (A) on Form S-8 or any successor form relating
to securities issuable pursuant to any benefit plan; (B) on Form S-4, or any
successor form relating to an exchange offer or relating to a transaction
pursuant to Rule 145 under the Act; or (C) on Form S-3 or any successor form
with respect to securities registered in connection with dividend
reinvestment plans and similar plans only) that, upon the request of the
underwriters managing any underwritten offering of Katy's securities, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any of the Common Stock (other than shares included in
the registration) without the prior written consent of such underwriters for
no more than 90 days after the effective date of such registration (the
"Black-Out Period"); provided, however, that if the underwriters have agreed
to a shorter or longer Black-Out Period (up to 180 days) with respect to
such dispositions of the Common Stock by any executive officer or director
of Katy or any shareholder holding at least 5% of Katy's then outstanding
Common Stock, such shorter or longer Black-Out Period (up to 180 days) shall
apply to the Holders; provided, further, that the time period during which
Katy is required to maintain the effectiveness of a Registration Statement
pursuant to Section 2.3(b) shall be extended by the length of the Black-Out
Period.
2.5 Rule 144 Reporting. With a view toward making available
to the holders of Common Stock the benefits of certain rules and regulations
of the Commission which may permit the sale of the Common Stock to the
public without registration, Katy agrees to use its best efforts to:
(a) make and keep current public information available,
within the meaning of Rule 144 or any similar or analogous rule promulgated
under the Act, at all times;
(b) file with the Commission, in a timely manner, all
reports and other documents required of Katy under the Act and the Exchange
Act; and
(c) so long as any party hereto owns any Registrable
Securities, furnish to such party forthwith upon request, a written
statement by Katy as to its compliance with the reporting requirements of
Rule 144, the Act and the Exchange Act; a copy of the most recent annual or
quarterly report of Katy; and such other reports and documents as such party
may reasonably request in availing itself of any rule or regulation of the
Commission allowing it to sell any such securities without registration.
2.6 Rule 415 Eligibility. Katy shall to use its best efforts
to maintain its eligibility to use Form S-3 to register its Common Stock
under the Act and to otherwise remain qualified to make a Shelf
Registration.
2.7 Limitations on Subsequent Registration Rights. Katy shall
not, without the prior written consent of the Holder Representative, enter
into any agreement with any holder or prospective holder of any securities
of Katy which would allow such holder or prospective holder the right to
register or cause the registration of, any securities of Katy, except for
registration rights which are not inconsistent with those provided to the
Holders under this Agreement and which could not cause a reduction in the
number of shares which could be included by the Holders in any registration
covered by this Agreement.
Article III
Indemnification
3.1 Indemnification Obligations. In connection with any
registration of the Registrable Securities under this Agreement, (i) Katy
shall indemnify and hold harmless each of the Holders, and each underwriter
for such Holder, including but not limited to each Person, if any, who
controls a Holder within the meaning of Section 15 of the Act, against all
losses, claims, damages, liabilities and expenses (including but not limited
to reasonable expenses incurred in investigating, preparing and defending
against any claim) to which a Holder, underwriter or such controlling person
may become subject under the Act, the Exchange Act or otherwise, insofar as
the same arise out of or are based upon or are caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (as amended or supplemented if Katy
shall have furnished any amendments or supplements thereto) furnished
pursuant to this Agreement or insofar as the same arise out of or are based
upon or are caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are ultimately determined to have arisen
out of or were based upon or were caused by any untrue statement or alleged
untrue statement or omission or alleged omission based upon written
information furnished to Katy by or on behalf of any Holder or any such
control person for inclusion in any Registration Statement or Prospectus
(and any amendments or supplements thereto), and (ii) the Participating
Holders jointly and severally, shall indemnify Katy, its affiliates, any
person who signed any Registration Statement, and their respective officers,
directors and control persons against all such losses, claims, damages,
liabilities and expenses (including but not limited to reasonable expenses
incurred in investigating, preparing and defending against any claim)
insofar as the same are ultimately determined to have arisen out of or were
based upon or were caused by any such untrue statement or alleged untrue
statement or any such omission or alleged omission based upon written
information furnished to Katy by or on behalf of any Holder, underwriter or
any such control person for the inclusion in any Registration Statement or
Prospectus (and any amendments or supplements thereto); provided, however,
that the liability of the Participating Holders under this Section 3.1 shall
be limited to the net proceeds actually received by such Holders pursuant to
a Prospectus included in a Registration Statement under this Agreement. In
the event that it shall have been finally determined by a court of competent
jurisdiction that a party which has received payments hereunder is not
entitled thereto, such payments shall be promptly refunded to the payor.
3.2 Notice of, and Procedures for, Collecting
Indemnification. Promptly upon notice being given to a party indemnified
under this Agreement of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be
sought against any indemnifying party under this Agreement, such indemnified
party shall notify the indemnifying party in writing of the commencement of
such action, but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may have to any indemnified party
otherwise than under this Agreement unless such failure shall materially and
adversely affect the defense of such action. In case notice of commencement
of any such action shall be given to the indemnifying party as above
provided, the indemnifying party shall be entitled to participate in and, to
the extent it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own expense, with
counsel chosen by it and reasonably satisfactory to such indemnified party.
The indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel (other than reasonable expenses incurred in
investigating, preparing and defending against any claim) shall be paid by
the indemnified party unless (a) the indemnifying party agrees to pay the
same, (b) the indemnifying party fails to assume the defense of such action
with counsel reasonably satisfactory to the indemnified party (in which case
the indemnifying party shall not have the right to assume the defense of
such action on behalf of such indemnified party), or (c) the named parties
to any such action (including any impleaded parties) have been advised by
such counsel that representation of such indemnified party and the
indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (in which case the indemnifying
party shall not have the right to assume the defense of such action on
behalf of such indemnified party). If either of the circumstances described
in clauses (b) and (c) of the sentence immediately preceding shall occur,
the indemnified party shall have the right to select a separate counsel and
to assume such legal defense and otherwise to participate in the defense of
any such action, with the expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred, provided, however, that the indemnifying
party shall not be obligated to bear the fees and expenses of more than one
separate counsel (other than local counsel) for all indemnified parties. No
indemnifying party shall be liable for any settlement entered into without
its consent, which consent shall not be unreasonably withheld or delayed.
Article IV
Miscellaneous
4.1 Notices. Each notice, request and other communication to
any party hereunder shall be in writing and shall be given to such party at
its address or facsimile number set forth on the signature page hereof, or
such other address or facsimile number as such party may hereinafter specify
for the purpose. Each such notice, request or other communication shall be
deemed to have been given as of (a) if given by facsimile, the date on which
such facsimile is transmitted to the facsimile number specified in this
Section 4.1 and the transmitting facsimile machine receives confirmation of
delivery, (b) if given by overnight air courier, the next business day after
the date of shipment, or (c) if given by any other means, the date delivered
at the address referred to in, or specified by such party pursuant to, this
Section 4.1.
4.2 Amendment and Waiver. The provisions of this Agreement
may be amended or waived only upon the prior written consent of Katy and the
Holder Representative.
4.3 Counterparts. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one
instrument.
4.4 Binding on Successors and Assigns.
(a) A Holder may assign freely any of its rights or
delegate any of its duties under this Agreement without the prior written
consent of Katy if such assignee agrees to be bound by the terms and
conditions of this Agreement; provided, however, that a Holder may not
assign the Basic Put Right or the right to obtain Stock Consideration in
connection with the exercise of the Control Put Right to any Person who is
not a member of the ▇▇▇▇▇▇ Group without the prior written consent of Katy.
(b) Katy shall not, directly or indirectly, enter into
any merger, consolidation or reorganization unless (i) Katy is the ultimate
surviving parent corporation or (ii) Katy is not the ultimate surviving
parent corporation and the proposed surviving corporation (or the ultimate
parent entity, in the case of a triangular merger) shall, prior to such
merger, consolidation or reorganization, agree in writing to assume the
obligations of Katy hereunder, and for that purpose references hereunder to
"Common Stock" shall be deemed to be references to the securities or other
property which the Holders would be entitled to receive in exchange for
Common Stock under any such merger, consolidation or reorganization if the
Holders had exercised the Control Put Right immediately prior to the
effective date of such merger, consolidation or reorganization; provided,
however, that the provisions of this Section 4.4(b) shall not apply in the
event of any merger, consolidation or reorganization in which Katy is not
the surviving corporation if all Holders are entitled to receive in exchange
for their Registrable Securities consideration consisting solely of (i)
cash, (ii) securities of the acquiring corporation which may be sold to the
public without registration under the Act within six months after the
closing of the merger, consolidation or reorganization, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to
register within 90 days after completion of the transaction for resale to
the public pursuant to the Act.
(c) This Agreement shall be binding upon, inure to the
benefit of and be enforceable by and against the parties hereto and their
respective successors and permitted assigns in accordance with the terms
hereof.
4.5 Headings. The headings in the sections and subsections of
this Agreement are inserted for convenience only and in no way alter, amend,
modify, limit or restrict the contractual obligations of the parties.
4.6 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
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
4.7 Non-Binding Mediation. Any controversy or claim arising
out of or relating to this Agreement, its interpretation, the breach or the
consummation hereof, or the closing contemplated thereunder, or the
respective rights or obligations of the parties, shall be first subject to
non-binding mediation administered by the American Arbitration Association
(the "Mediator"). If such controversy or claim cannot be resolved pursuant
to mediation within thirty (30) days after such matter is submitted to the
Mediator as provided above, such controversy or claim may be settled by
arbitration upon the written arbitration agreement made at that time of all
parties, and failing such arbitration agreement, by litigation.
4.8 Forum Choice and Venue. Any judicial proceeding brought
against any party hereto with respect to this Agreement or any transaction
contemplated hereby shall be brought in the United States District Court for
the Eastern District of Missouri, or, if such court does not have
jurisdiction, then in the courts of the State of Missouri, and, by execution
and delivery of this Agreement, each of the parties hereto (i) accepts,
generally and unconditionally, the exclusive jurisdiction of such court and
any related appellate court, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement, subject, in
each case, to all rights to appeal such decisions to the extent available to
the parties and (ii) irrevocably waives any objection it may now or
hereafter have as to the venue of any such suit, action or proceeding
brought in such court or that such court is an inconvenient forum. Each
party hereto hereby waives personal service of process and consents that
service of process upon it may be made by delivery or by certified or
registered mail, return receipt requested, at its last known address and
service so made shall be deemed completed on the date of delivery or on the
fifth (5th) business day after such service is deposited in the mail, as the
case may be. Nothing herein shall affect the right to serve process in any
other manner permitted by law.
4.9 Entire Agreement; Law Governing. All prior negotiations
and agreements between the parties hereto concerning the subject matter
hereof are superseded by this Agreement, and there is no representation,
warranty, understanding or agreement between the parties hereto concerning
the subject matter hereof, except as modified in writing concurrently
herewith or subsequent hereto. This Agreement shall be governed by and
construed and interpreted according to the internal laws of the State of
Delaware, determined without reference to conflicts of law principles.
4.10 Equitable Relief. Newcastle and Katy acknowledge and agree
that any breach of this Agreement by a party will cause irreparable injury
to the other party and that any damages will not provide adequate remedy to
the injured party. Consequently, each Holder and Katy each shall have the
right to seek and obtain injunctive or other equitable relief to enforce any
of its rights or the obligations of any of the other parties contained in
this Agreement.
4.11 Business Days. Notwithstanding any other provision hereof
to the contrary, if the date scheduled for the performance of any obligation
under this Agreement (or the final date on which such performance timely may
be made) is not a Business Day, then the performance of such obligation
shall not be required until the first Business Day following such scheduled
date.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the
day and year first above written.
NEWCASTLE INDUSTRIES, INC.
By
Name: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------
Title: Chairman
Address: Newcastle Industries, Inc.
C/o ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
KATY INDUSTRIES, INC.
By
Name: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Title: Exec. V.P.
Address: Katy Industries, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇,▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Katy Industries, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT A
(1) "Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations of the Commission issued
under the Act, as they each may, from time to time, be in effect.
(2) "Basic Put Closing" has the meaning set forth in Section 1.2(d).
(3) "Basic Put Consideration Notice" has the meaning set forth in
Section 1.2(c).
(4) "Basic Put Exercise Period" has the meaning set forth in Section
1.2(a).
(5) "Basic Put Notice" has the meaning set forth in Section 1.2(b).
(6) "Basic Put Right" has the meaning set forth in Section 1.2(a).
(7) "Basic Put Selling Holder" has the meaning set forth in Section
1.2(b).
(8) "Basic Put Unit" has the meaning set forth in Section 1.2(b).
(9) "Beneficial Owner" shall have the meaning set forth in Rule 13d-
3 under the Exchange Act or any corresponding provision of a
successor law.
(10) "Black-Out Period" has the meaning set forth in Section 2.4.
(11) "Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks located in Missouri or New
York are authorized or required to close under the laws of
either the United States,the State of Missouri or the State
of New York.
(12) "Call Closing" has the meaning set forth in Section 1.6(c).
(13) "Call Notice" has the meaning set forth in Section 1.6(b).
(14) "Call Right" has the meaning set forth in Section 1.6(a).
(15) "Common Stock" has the meaning set forth in Section 4.4(b).
(16) "Change in Control" means with respect to a particular Person,
and shall be deemed to have occurred upon, the first to occur
of any of the following events:
(a)Any Person (other than those Persons in control of the
subject Person as of the date hereof, or other than a trustee
or other fiduciary holding securities under an employee
benefit plan of such Person,or a corporation owned directly
or indirectly by the stockholders of such Person in
substantially the same proportions as their ownership of stock
of such Person) becomes the Beneficial Owner, directly or
indirectly, of securities of such Person representing thirty
percent (30%) or more of the combined voting power of such
Person's then outstanding securities; or
(b)During any period of two (2) consecutive years (not
including any period prior to the date hereof), individuals
who at the beginning of such period constitute the Board of
Directors of Katy (and any new Director, whose election by
Katy's stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office who
either were Directors at Katy at the beginning of the period
or whose election or nomination for election was so approved),
cease for any reason to constitute a majority thereof; or
(c)The owners of such Person approve: (i) a plan of complete
liquidation of such Person; or (ii) an agreement for the
sale or disposition of all or substantially all of such
Person's assets; or (iii) a merger, consolidation, or
reorganization of Katy with or involving any other
corporation, other than a merger, consolidation or
reorganization that would result in the voting securities of
such Person outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at
least fifty percent (50%) of the combined voting power of the
voting securities of such Person (or such surviving entity)
outstanding immediately after such merger, consolidation, or
reorganization.
However, in no event shall a "Change in Control" be deemed to
have occurred, with respect to a Holder, if the Holder is
part of a purchasing group which consummates the
Change-in-Control transaction. The Holder shall be deemed
"part of a purchasing group" for purposes of the preceding
sentence if the Holder is an equity participant in the
purchasing company or group (except for (i) passive ownership
of less than one percent (1%) of the stock of the purchasing
company; or (ii) ownership of equity participation in the
purchasing company or group which is otherwise not significant,
as determined in good faith prior to the Change in Control by
a majority of the nonemployee continuing Directors).
(17) "Closing Market Price" means, with respect to a given date, the
closing price of a share of Common Stock as reported on the New
York Stock Exchange Composite Tape (or the equivalent reporting
system if the Common Stock is listed on The Nasdaq Stock Market
or any other national securities exchange or automated quotation
system) for such date.
(18) "Commission" means the Securities and Exchange Commission, or
any other Federal agency then administering the Act.
(19) "Common Stock" means shares of Katy's Common Stock, $1.00 par
value per share, and any stock, securities or other property
issued in respect of such Common Stock by reason of a stock
dividend, stock split, combination of shares, recapitalization,
reclassification, merger, consolidation, corporate reorganization
or otherwise.
(20) "Common Unit" has the meaning set forth in the recitals to this
Agreement.
(21) "Company" means Contico International, L.L.C., a Delaware
limited liability company formerly known as CII Acquisition, L.L.C.
(22) "Control" means the ability to direct, through the ownership of
voting securities, by contract or otherwise, the management of a
Person.
(23) "Control Put Closing" has the meaning set forth in Section
1.5(d).
(24) "Control Put Consideration Notice" has the meaning set forth in
Section 1.5(c).
(25) "Control Put Exercise Period" has the meaning set forth in
Section 1.5(a).
(26) "Control Put Notice" has the meaning set forth in Section
1.5(b).
(27) "Control Put Right" has the meaning set forth in Section 1.5(a).
(28) "Control Put Selling Holder" has the meaning set forth in
Section 1.5(b).
(29) "Control Put Unit" has the meaning set forth in Section 1.5(b).
(30) "Conversion Amount" means Four Thousand Seven Hundred Sixty-Two
(4,762). Notwithstanding the foregoing, the Conversion Amount
and the shares or other property issuable upon exercise of a Put
Option shall be subject to adjustment as follows:
(a) If the outstanding shares of Katy Common Stock are
combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common
Stock, then the Conversion Amount in effect immediately
prior to such combination or consolidation shall be
proportionately decreased; and conversely, if at any time
or on or after the date hereof Katy shall subdivide its
outstanding shares of Common Stock into a greater number
of shares, the Conversion Amount in effect immediately
prior to such subdivision shall be proportionately
increased.
(b) In case at any time or from time to time after the date
hereof, the holders of any shares of Katy Common Stock
or other securities at the time receivable upon the
exercise of a Put Right shall have received, or on or
after the record date fixed for the determination of
eligible stockholders, shall have become entitled to
receive, without payment therefor, other or additional
stock of the Company by way of dividend, then and in each
case, the Conversion Amount shall be proportionately
increased.
(c) In case of any reclassification or change of the
outstanding securities of Katy or any reorganization
of Katy (or of any other corporation the stock or
securities of which are at the time receivable upon the
exercise of a Put Right), on or after the date hereof,
or in case after such date, Katy (or any such other
corporation) shall merge with or into another corporation
or convey all or substantially all of its assets to another
corporation, then and in each such case, the Holders, upon
the exercise thereof, at any time after the consummation
of such reclassification, change, reorganization, merger
or conveyance, shall be entitled to receive, in lieu of
the stock or other securities and property receivable upon
the exercise of a Put Right prior to such consummation,
the stock or other securities of such party to which such
holder would have been entitled upon such consummation if
such holder had exercised the Put Right immediately prior
thereto, all subject to further adjustment as provided in
clauses (a) and (b) above; in each such case the terms of
this definition shall be applicable to the shares of stock
or other securities properly receivable upon the exercise
of a Put Right after such consummation.
(31) "Demand Registration" has the meaning set forth in
Section 2.1(a).
(32) "Eligible Unit" means any Preferred Unit held by a member of the
▇▇▇▇▇▇ Group.
(33) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor statute, and the rules and regulations
of the Commission issued under the Exchange Act, as they each may,
from time to time, be in effect.
(34) "Holder" means any Person holding either (i) an Eligible Unit,
and/or (ii) any Registrable Securities.
(35) "Holder Representative" has the meaning set forth in Section
1.10.
(36) "HSR Act" has the meaning set forth in Section 1.9.
(37) "Inspector" has the meaning set forth in Section 2.3(k).
(38) "Katy" means Katy Industries, Inc., a Delaware corporation.
(39) "Majority Holders" has the meaning set forth in Section 1.10.
(40) "Market Value" means the average of the closing prices of a
share of Common Stock as reported on the New York Stock Exchange
Composite Tape (or the equivalent reporting system if the Common
Stock is listed on The Nasdaq Stock Market or any other national
securities exchange or automated quotation system) for each day
on which a trade was reported during the 30 trading days
immediately preceding the day on which the Basic Put Notice, the
Control Put Notice or the Piggyback Put Notice, as the case may
be, is given. If the Common Stock is not then listed on any such
exchange or quotation system, then Market Value shall mean the
fair market value of a share of Common Stock as determined in
good faith by the Board of Directors of Katy.
(41) "Mediator" has the meaning set forth in Section 4.7.
(42) "▇▇▇▇▇▇ Group" means (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇; (ii) the spouse, lineal
descendants and spouse of the lineal descendants of ▇▇▇▇▇▇ ▇▇▇▇▇▇;
(iii) the estate or legal representative of each Person identified
in clause (i) or (ii) above; (iv) each trust, custodianship or
other fiduciary arrangement in respect of which one or more of the
Persons described in clause (i) or (ii) above is a beneficiary;
(v) each corporation 100% (by number of votes) of the voting stock
of which is owned by or held for the benefit of one or more of the
Persons described in clause (i), (ii), (iii) or (iv) hereof; and
(vi) each partnership, limited liability company or other
association 100% of the capital of which is owned by or held for
the benefit of one or more of the Persons described in clause (i),
(ii), (iii) or (iv) above and such Person or Persons shall have
control of such partnership. The term "control" as used in clause
(vi) of the immediately preceding sentence means the possession
of the power to direct or cause the direction of management and
policies of such partnership, whether through the ownership of
an equity interest, by contract or otherwise. For purposes of
this definition, lineal descendants shall include adopted Persons
who are twelve years of age or under at the time of adoption.
(1) "Newcastle" means Newcastle Industries, Inc., a Missouri
corporation formerly known as Contico International, Inc.
(43) "Participating Holder" means any Holder of any Registrable
Securities included in a registration.
(44) "Person" means any individual, corporation, partnership, limited
liability company, trust or any other incorporated or
unincorporated entity or organization of any kind.
(45) "Piggyback Put Closing" has the meaning set forth in Section
1.7(d).
(46) "Piggyback Put Consideration Notice" has the meaning set forth
in Section 1.7(c).
(47) "Piggyback Put Exercise Period" has the meaning set forth in
Section 1.7(a).
(48) "Piggyback Put Notice" has the meaning set forth in Section
1.7(b).
(49) "Piggyback Put Right" has the meaning set forth in Section
1.7(a).
(50) "Piggyback Put Selling Holders" has the meaning set forth in
Section 1.7(b).
(51) "Piggyback Put Units" has the meaning set forth in Section
1.7(b).
(52) "Piggyback Registration" has the meaning set forth in Section
2.2.
(53) "Preferred Unit" has the meaning set forth in the recitals to
this Agreement.
(54) "Priority Return" has the meaning given to such term in the
Limited Liability Company Agreement of the Company.
(55) "Priority Return Consideration" has the meaning set forth in
Section 1.2(a).
(56) "Profit Participation" has the meaning given to such term in
that certain Amended and Restated Limited Liability Company
Agreement of the Company dated as of January 8, 1999 by and
between Newcastle and Katy.
(57) "Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the
Registrable Securities covered by any Registration Statement and
by all other amendments and supplements to the prospectus,
including post-effective amendments and all materials
incorporated by reference in such prospectus.
(58) "Purchase Agreement" has the meaning set forth in the recitals
to this Agreement.
(59) "Put Right" means the rights of the Holders pursuant to any
Basic Put Right, Secondary Put Right, Control Put Right or
Piggyback Put Right.
(60) "Record" has the meaning set forth in Section 2.3(k).
(61) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration
Statement in compliance with the Act and the declaration or
ordering of effectiveness of such Registration Statement.
(62) "Registrable Securities" means shares of Common Stock issued (or
to be issued in the case of an exercised Basic Put Right,
Control Put Right or Piggyback Put Right) to any member of the
▇▇▇▇▇▇ Group or its successors and permitted assigns in accordance
with this Agreement; provided, however, that Registrable Securities
shall cease to be Registrable Securities upon any sale pursuant
to a Registration Statement or Section 4(1) of the Act or
Rule 144 (or any combination thereof), and provided, further,
that, at such times as the entire block of otherwise Registrable
Securities may be sold by the holder thereof (assuming conversion
of convertible securities and exercise of warrants or other
rights) without any volume limitation, including without
limitation by reason of aggregation or attribution, pursuant to
Rule 144 or any successor rule, such block shall not be deemed
to be Registrable Securities.
(63) "Registration Expenses" shall mean all reasonable and customary
expenses of Katy incident to performance of or compliance with
this Agreement, including, without limitation: (i) all Commission,
stock exchange or registration and filing fees; (ii) filings
pursuant to the policy of the National Association of Securities
Dealers, Inc. with respect to the review of corporate financing;
(iii) all fees and expenses incurred in connection with compliance
with state securities or "blue sky" laws (including reasonable
fees and disbursements of counsel in connection with "blue sky"
qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum); (iv) all expenses of any
Persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, Prospectus,
certificates and other documents relating to the performance of
and compliance with this Agreement; (v) all fees and expenses
incurred in connection with the listing, if any, of any of
the Registrable Securities on any securities exchange or
exchanges or automated quotation system; and (vi) the fees and
disbursements of counsel for Katy and of the independent public
accountants of Katy, including the expenses of any special audit
or "comfort" letters required by or incident to such performance
and compliance. Registration Expenses shall specifically exclude
underwriting discounts and commissions relating to the sale or
disposition of Registrable Securities by the Holders, the fees
and disbursements of counsel for the Holders and transfer taxes,
if any, relating to the sale or disposition of Registrable
Securities by the Holders and the cost of preparing all documents
incorporated by reference or otherwise required to be prepared
in the ordinary course of Katy's business.
(64) "Registration Statement" means any registration statement of
Katy and any other entity required to be a registrant with
respect to such registration statement pursuant to the
requirements of the Act, including any Prospectus, and all
amendments and supplements to any such registration statement,
including post-effective amendments, and all exhibits and all
material incorporated by reference in any such registration
statement.
(65) "Rule 144" means Rule 144 under the Act (or any successor rule
that may be adopted by the Commission ).
(66) "Rule 145" means Rule 145 under the Act (or any successor rule
that may be adopted by the Commission ).
(67) "Rule 158" means Rule 158 under the Act (or any successor rule
that may be adopted by the Commission ).
(68) "Rule 415" means Rule 415 under the Act (or any successor rule
that may be adopted by the Commission ).
(69) "Rule 424" means Rule 424 under the Act (or any successor rule
that may be adopted by the Commission ).
(70) "Secondary Put Closing" has the meaning set forth in Section
1.4(c).
(71) "Secondary Put Exercise Period" has the meaning set forth in
Section 1.4(a).
(72) "Secondary Put Notice" has the meaning set forth in Section
1.4(b).
(73) "Secondary Put Right" has the meaning set forth in Section
1.4(a).
(74) "Secondary Put Selling Holders" has the meaning set forth in
Section 1.4(b).
(75) "Secondary Put Units" has the meaning set forth in Section
1.4(b).
(76) "Shelf Registration" means a "shelf" registration statement on
an appropriate form pursuant to Rule 415.
(77) "Stock Consideration" has the meaning set forth in Section
1.2(a).
(78) "Underwritten Offering" means an offering in which securities of
Katy are sold to an underwriter for reoffering to the public
pursuant to an effective Registration Statement under the Act.
(79) "Voluntary Change in Control" means a Change in Control with
respect to Katy or the Company which Katy or the Company, as
the case may be, agrees to enter into or facilitate.
EXHIBIT B
ASSIGNMENT OF PREFERRED UNITS
FOR VALUE RECEIVED, __________________________ ("Seller"), hereby
sells, assigns and transfers to Katy Industries, Inc., a Delaware
corporation ("Purchaser"), __________ Preferred Unit(s) (the "Units") of
Contico International, L.L.C., a Delaware limited liability company (the
"Company"). Seller hereby represents and warrants to Purchaser that Seller
is the sole owner of the Units, free and clear of all liens, claims and
encumbrances whatsoever, other than those imposed by the limited liability
company agreement of the Company and applicable securities laws.
Dated: January 8, 1999.